Fareed Zakaria wrote in the March 8th Newsweek, “Defusing the Debt Crisis.” I addressed one of his ideas yesterday in the post, “End the Market Distorting Subsidies.”
Another idea of Fareed’s I support is to get realistic on the entitlements. Regardless of many promises made decades ago, and many were more assumed that made, we simply cannot afford to give generous entitlements to voters who do not need them. It seems inevitable that Social Security and Medicare will be means tested. Otherwise the share of these bills will drive the taxes on the young so high they will refuse to pay them.
What Social Security is doing with participants is little different than what Bernie Madoff did with his investors; he paid off current withdrawals with other people’s money. But the irresponsible management of Social Security does not hide the fact that these entitlements are killing us. We must do what we need to do and take the medicine.
At the same time we should encourage the young to save more and younger to relieve further dependency by giving more generous deductions and credits for their own retirement savings. New accounts should be segregated and the Madoff type fraud should cease.
The retirement age must be raised, gradually but substantially, and the benefits must be means tested. It will be a bitter pill for many, but it is inevitable.