I found this article funny. Indeed, some people seem to think that we shouldn’t worry about Social Security because the Medicare & Medicaid problems are so much worse. But all social welfare programs seem to have the same problem.
You can design a payout program with defined benefits or defined contributions. In one case, you adjust the contributions of current earners to match the benefits being paid. In the other case, you adjust the benefits to match the incoming funds. Most systems try to do define both the benefits and the contributions, which means that the definition’s parameters must be perfect. There is zero probability of this happening. Our systems use the worst of all possible definitions: the inputs and outputs are defined by politicians who are heavily lobbied by special interest groups. When the inputs and outputs don’t match, all hell breaks loose because there is no agreement about who should sacrifice and what is fair.
This is why public welfare programs are so often technically bankrupt, while it is quite rare for a private welfare program (insurance companies) to go bankrupt.
Tags: Medicaid, Medicare, Social Security
