Why Medicaid and Social Security Were Always Doomed
Pretend for a second that all retirement pensions were perfectly funded. Pretend for a second that politicians didn’t raid Social Security and Medicaid funds for pet projects, or that business owners didn’t pretend that their employee’s group pensions were always going to generate 10%+ a year and fund accordingly. Let’s pretend for a second that we put all of this money away, nice and thriftily, so that every single retired person on the planet had a fully funded pension with a fully funded social medical entitlement. What would that look like?
The answer? Much, much worse than it looks now.
In order to understand why, it’s important to understand what money is. Money, by itself, no matter what form it takes, has almost no intrinsic value. It doesn’t matter if it’s gold, silver, wampum, or “fiat” money. By themselves, each of these monetary objects are about as useless. Can you grow food on a gold coin? No. Can you build a house on a gold coin? Not unless it’s freakishly huge. Can you build a house out of gold coins? Probably not - it’s rather malleable, so it’ll probably collapse under its own weight. To be honest, gold excels at being an electrical conductor and, frankly, not much else. The same could be said for silver, though it’s actually hard enough to make easily tarnishable utensils out of; its worth as a weapon against the undead is, at present, somewhat limited. Wampum… well, you can make belts out of it, I guess. Paper money can be used for most of the same things that every other kind of paper can be used for, though, in my experience, it’s not particularly absorbent, so that limits its usefulness somewhat. The reason any of this stuff has value in the first place is because it’s common enough where everybody can get some, scarce enough where everybody can’t get a truckload whenever they want, it’s useless enough where we don’t want to use it for something else, and money is a heck of a lot more convenient than bartering.
Unfortunately, it’s that last bit that kills entitlements. See, we’re still bartering - we’re just bartering with something that we all want, instead of trying to barter with various disparate goods of varying worth. In order to barter, though, there has to be something to barter. If you don’t have land and I don’t have land, it doesn’t matter how much money or cows or whatever either of us have - we can’t trade for land with each other. If you don’t have wood and I don’t have wood, it doesn’t matter what either of us have - neither of us can trade for a log cabin. Similarly, if we suddenly have a bunch of people needing medical care and fewer people able to provide it, it doesn’t matter how much money we have set aside or how responsible we were forty years ago - there’s only so much medical care to barter for in the here and now and there is nothing we can do to change that. Worse yet, if we suddenly have a bunch of people that aren’t working and aren’t providing anything but money to trade, it doesn’t matter how much money they have - there’s less stuff to barter for, so either they’re not going to be able to buy as much stuff or we’re not going to be able to buy as much stuff. The amount of stuff is finite. No amount of money ever changes that.
This brings us to why fully funded pensions, Social Security, and Medicaid would be diastrous to everyone under the age of, say, 55. If our politicians were prudent, the elderly would have enough money to purchase a disproportionate share of every single good that we consume and would be able to do so from when they were 55 until they were dead, on average, about twenty years later, all without having to add a single thing to barter with other than money. The result would effectively be “stagflation” - a steadily increasing money supply released by every retiree burning through their pensions while the labor pool and the economy shrinks. This would erode the value of the pensions while simultaneously pricing the producers out of the economy. If you think going to the doctor is expensive now, imagine how expensive it would be if the biggest consumers of medical care could pay twice as much.
Fortunately, in a “blind squirrel finds a nut” fashion, our politicians and corporate leaders have lucked out. Thanks to nearly criminal mismanagement of pensions and a ridiculously expansionist monetary policy, it’s much more difficult for the elderly to hoard enough money to disproportionately consume the products of our economy without providing anything in return. By inflating the money supply, we ensure that those that produce get their fair share - after all, they’re the ones receiving new money, not the pensioners. Meanwhile, by kneecapping elderly pensions, we ensure they don’t hoard enough money to jack the price of medical care, leisure, and housing any higher than they already have. Best of all, by the combination of these effects, we encourage the elderly to continue producing and adding to the economy long after they would like to; instead of retiring at 55 or even 65 like they thought, they’re instead going to have to contribute well into their 70s to make ends meet, in much the same way that their grandparents had to work nearly to their grave.
So, if you’re under the age of 55 and can afford anything, thank a spineless politician or a greedy capitalist! Without them, your grandparents would have priced you out of existence a long time ago.
monetary policy, rants | David Colborne | 
February 17, 2009 10:29 am
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