Biden’s Medicare plans look like they came straight out of
the playbook of the AARP. His plans demonstrate
that the Democratic Party doesn’t care about young Americans.
On Tuesday (March 7) President Biden announced
his plan to save Medicare. His plan
disinherits the young: it sacrifices the interests of young Americans to
benefit the old. That may be good
politics. Young people have little
political power in America. But it’s bad
for the future of our country.
Here’s a quick roundup of three ways that Biden’s plans harm
young Americans:
First, Medicare is going bankrupt because it provides the
elderly with benefits that cost far more than the amount of taxes that they out
into the system. But Biden wants to
make Medicare even more generous and thus more costly to younger taxpayers.
Biden wants to reduce the age of
eligibility from 65 to 60. That
means that millions more will become eligible for government benefits. That costs the system in two ways. First, more people will be part of the
program which means benefit costs go up.
Second, Medicare and Social Security payroll tax revenues are going to
go down since people will take advantage of the benefits by retiring
earlier.
The responsible thing is to raise the age of eligibility
from 65 to 70. The average life
expectancy of Americans has increase by 9 years since Medicare started in 1966
so retirees in America are already collecting benefits far longer than originally
intended. Reducing the age to 60 means
that the average retiree would get 25 years of taxpayer subsidized health care.
Second, Biden wants
to hike taxes on Americans earning more than $400,000 a year. Currently, Americans in this range already pay
an extra 3.8 percent on top of the existing federal income tax rate of 37
percent. Biden wants to increase the
rate to 5 percent which means that the top federal rate is now 42 percent. Then add state taxes on top of that. So high earners in California are going to be
taxed at the astounding rate of 55 percent (47 percent in Massachusetts, 50
percent in Wisconsin).
High taxes reduce economic activity. Hiking taxes on the most productive, hard working
and entrepreneurial Americans will only these people to do three things: (a)
become less productive; (ii) not work as hard; and (iii) be less
entrepreneurial. The result: slower growth
and fewer career opportunities for young Americans in a stagnant economy.
Third, Biden wants to force down process for prescription
drugs. That sounds good in the
present. But lower prices mean less
incentive for the development of new drug treatments. Economists Tomas Philipson and Troy Durie of
the University of Chicago estimate
that price controls for prescription drugs would lead to a 29 to 60 percent
decline in the number of new drug treatments brought to market by 2039. As a result, Millennials and Gen Z will have
fewer treatments available when they need them in later life.
It true that Medicare is going bankrupt. But is it doing so because of political
myopia and the craven desire of Washington politicians to channel benefits to
the politically influential (the elderly) while stock the costs to the
politically weak (the young).
What America needs is statemen that think of the next generation,
not politicians like Biden that only think of the next election.
A statesman would acknowledge that life expectancy has
increased dramatically since the program began.
Therefore, rather than lowering the age of eligibility to 60, a statesman
would raise it to 70.
A statesman would recognize that Medicare is a very good
deal for current retirees. Economists C.
Eugene Steuerle and Karen Smith estimate
the even high earnings individuals are getting more out of the program in terms
of benefits than they paid in in taxes. It
shouldn’t be too much to ask the elderly to pay a little more in premiums to
support the program.
Unfortunately for young Americans, statesmen are in short
supply. Washington is full of
politicians. And that’s why you are routinely
fleeced by the likes of Joe Biden.
