Thursday, October 14, 2010

Bloomberg poll on Social Security/Medicare reform options

Hot Air points to a new Bloomberg poll regarding the budget deficit, highlighting several results that seem to indicate that – despite everything Americans have been through regarding the economy and financial markets – that they want "privatization" of Social Security and Medicare to be "on the table." For instance, Bloomberg says:

Almost three in five say privatization of the Medicare program, with assistance for low-income seniors, should be considered when lawmakers discuss how to close the budget gap. A majority, though, oppose raising the age at which people can start receiving Medicare benefits. Americans are narrowly against lawmakers considering Social Security privatization as a means to reduce the deficit. Forty-eight percent say that should be off the table versus 44 percent who want the possibility looked at. Almost three in four favor lawmakers studying removal of the Social Security tax cap so wages over $107,000 a year are taxable.

Some caveats. First, as Hot Air points out, the most popular option is to have someone else pay for it all, through an increase in the maximum taxable wage for Social Security. But since that won't be enough to fix the whole problem and comes with some pretty negative side effects, it's worth considering other options. But second, "privatization" of Social Security won't fix the program's funding gap. It might better help us build assets to pay for future benefits and it would allow low-earners to better diversify their retirement savings, but the underlying funding gap for Social Security is the same whether you have personal accounts or not. "Privatization" of Medicare – if it means shifting to a premium support model in which the government supplements the purchase of private health insurance -- has more potential because it would shift incentives to increase cost-effectiveness and, in any case, the government could place a limit on the growth of the supplements it pays.

And third, the poll's options – "strongly considered," "considered" and "off the table" – may not be the optimal ones for getting at these choices. But it is fair to say that if someone says a given option should be strongly considered or considered that it's at least "on the table."

Better measurement of public opinion would be really helpful in figuring out how to fix the entitlement funding gap. The government and the budget don't really "care" how these programs are balanced so long as it's done. But individuals care a lot about whether to pay higher taxes, receive lower benefits, or work longer. The more we know about what they want, the better we can tailor reform plans to meet their needs.

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