Economist James K. Galbraith of the University of Texas made the argument in early 2011 that if anything, we should be talking about lowering the retirement age.
We talked to Galbraith on the phone today to discuss this idea, as well as his assessment of the Fiscal Cliff talks and entitlement (a word he hates) situation in general.
He still likes this idea. With unemployment near 8%, he still thinks that it makes sense, at least temporarily, to reduce the retirement age, to let people get benefits earlier, and to clear up the job market.
My argument is that you have a phenomenon which is very well known called the Baby Boom which is out there and the Baby Boom is a portion of older workers who are approaching, but in many cases are not at, the retirement age. They are, particularly those who have been working in real jobs, I’m not talking about professors or journalists, but people who actually - you know, move boxes, inventory, or stand at checkout counters for a living. When unemployed, they have a very difficult time getting a new job and early retirement is intrinsically attractive.
Why aren’t they taking it? Possibly because it’s not attractive enough, possibly because they’re a little too young. So the solution is to make the early retirement available for a limited period, let’s say three years…and let the people who take it at 62 get a better deal than they get now so that a higher fraction of the working population will take it at 62.
But what about the general entitlement problem, and all the debt we’re drowning in?
Galbraith calls this “propaganda” that’s been pushed for decades by the same people, who have made predictions that have never come true. He specifically called out old writings (from the ’80s and ’90s) of anti-debt activist Pete Peterson.
The whole notion that there’s this great deficit crisis which can only be dealt with by cutting SS, Medicare, and Medicaid, that’s just - it’s a relative recent front in a very old propaganda war. People who have been, for decades, blathering on about the disaster in SS, Medicare, and Medicaid. I highly recommend the back issues of the New York Review Of Books, which lists Peter G. Peterson, who prowled on about this.
If there is a problem, he says, it’s not the government’s expenses per se, but that costs for covering the elderly’s healthcare are expensive regardless of who’s paying for them:
If you’re asking whether there are problems with Medicare and Medicaid, the standard answer on that is health care costs are the problem, and that is not dependent upon whether or not you are on a private or public insurance scheme. In fact, Medicare pays less to providers than private insurance does. The reason doctors accept Medicare patients is that unlike private insurers, Medicare actually writes the checks and pays people, which doctors like. I suppose you’ve encountered doctors who have had problems getting cash out of insurance companies, if you haven’t, I’ll say you haven’t encountered a doctor.
The key point which he emphasized over and over again is that changing who pays for people doesn’t change the burden. And if anything, if you’re worried about generational dependency, you should be in favor of the current structure of Social Security, which makes workers set aside money for their retirement, so that they’re not dependent on their children.
Galbraith also has a great rebuttal to those scary CBO charts showing entitlement costs surging, and swamping GDP, putting the US on a Greece-like debt-to-GDP ratio. Bunk says Galbraith. Those aren’t macroeconomic forecasts, but just “CBO baselines” that are used for scoring laws. The reality, he says, is that there’s no way for healthcare costs to surge and get so big while not also boosting nominal GDP significantly, meaning that the ratios can’t actually get that bad.