The Tyranny of Numbers

On the subject of Social Security, I think people sometimes get tripped up by over-emphasis on numerical quantities when thinking about this kind of issue. Obviously at some point you have to get down to dollars and cents. But at an initial phase, it's helpful to think of this as more of a geometry problem than a algebra problem.

Here's what we think we know about the geometry of the future of America:

One: There will be more people overall.

Two: There will be more stuff overall.

Three: The overall ratio of stuff to people will be higher.

Four: The share of elderly people to in the overall population will be higher.

Now think of the country as composed of two kinds of people, the retired and the non-retired both of whom consume some stuff. Fact four leaves us with the following choices:

One: A larger share of elderly people can be non-retired.

Two: We can import additional non-retired people to prevent the ratio from shifting.

Three: The average retired person can consume a smaller share of stuff.

Four: The average non-retired person can consume a smaller share of stuff.

Proposals to accomplish number one are frighteningly common in Washington and normally go by the name "raise the retirement age." This is very regressive and I don't like it at all. Proposals to accomplish number two I like a lot, but seem to have been arbitrarily ruled off the table as an option. This leaves us with three and four. The point here is that if a larger slice of the population pie is composed of old people, then either the elderly consumption pie needs to be sliced thinner or else the non-elderly consumption pie needs to be smaller.

Since we're talking about a higher overall quantity of stuff per person, nobody actually needs to be worse off in the future but if the share of elderly people in the population grows then the consumption shares need to adjust one way or the other. Then in terms of programs to assign slices to old people, who have two big ones. One, Social Security, gives money to retired people which they use to buy stuff. The other, Medicare, buys health care (which is a kind of stuff) on behalf of retired people. You can fiddle with retired people's share of "stuff" by fiddling with either program but the implications are quite different. For example, if you're a hospital administration you really really really want the government to keep buying lots of health care for old people but don't really care about old people's ability to buy stuff. If you're a nutritionist, you probably think that old people's ability to buy healthful food has really important implications for their level of health and well-being.