The World Needs More Ninjas

A good article about what’s at stake with Social Security and health care, as well as thoughts on how to fix it ( BugMeNot login for the article).

The authors take both Republicans and Democrats to task. For Republicans:

First, diverting money into individual accounts would have turned the Republican line on Social Security into a self-fulfilling prophecy, pushing the system into deficit much sooner than would happen otherwise. Second, individual accounts would have done away with one of the biggest advantages of a state pension system, namely economies of scale and reduced risk. (It’s a sobering thought that Jeremy Siegel of the Wharton School–as the author of Stocks for the Long Run, the equity sell-side’s favorite academic–is now predicting a stock market slump as baby boomers sell off their portfolios to finance year-round vacations and plastic surgery.) Third, as a consequence, the president’s scheme would have made an already bad position even worse for younger Americans, making them reliant on a risky, costly, and inadequate private-account alternative. Finally, and most importantly, it would have done nothing to address the much deeper fiscal imbalance between all the projected revenues of our government and all its existing commitments–not just Social Security, but a whole raft of other nondiscretionary expenditures, of which the Medicare system is by far the biggest.

And for Democrats:

For their part, the Democrats are quietly exultant. Their Nancy Reagan-inspired strategy–”Just say no!”–has helped stymie the president. It looks like a classic victory for the political opposition.

Yet, as Bob Dylan wisely observed in “Just Like Tom Thumb’s Blues,” “[N]egativity don’t pull you through.” Sure, it may work as a short-term political strategy. But, in the long term, it won’t save the United States from the very real fiscal crisis it faces. Just because the president’s proposal deserved to be junked doesn’t mean there isn’t a fiscal problem that urgently needs addressing.
…
Unless they believe in the Leninist principle–”the worse, the better”–Democrats need to come up with a better strategy than just waiting for one of these things to happen to Republicans. Instead of being relentlessly negative, Democrats need to recognize the magnitude of the problem we face and come up with some credible solutions of their own, sooner rather than later.

I think the authors have some very good thoughts about the problem. Maybe a Value-Added Tax (VAT) would be more effective than a sales tax (see this article for a discussion on the topic). I like the idea of combining the revenue-raising process for most all government spending into one consumption-based tax with a rebate to help those with a low-income. I think the consumption-based tax is going to become a necessity in the future (hopefully sooner rather than later). It would actually provide an incentive for saving rather than spending, greatly simplify the tax code, avoid unfairly sheltering the wealth of those with larger incomes, and provide a more stable source of revenue for the government. It’s also probably the only politically feasible way to tax the retiring baby boomers at a level that will be necessary to keep the deficit from going sky-high.