Sunday, May 5, 2013

A thought for Sunday: the best jobs program = allow Medicare eligibility at age 55

- by New Deal democrat

Regular economic blogging will resume tomorrow (and I know, because the post is already cued up). In the meantime, consider the following thoughts over my Sunday morning coffee, which hopefully aren't too incoherent....

One of the many ranting points I see on progressive blogs is against "the top 20%" who are apparently presumed to be the functional equivalent of Jamie Dimon. Not so. Many of "the top 20%," in terms of wealth as opposed to income, are also known as "mom and dad." If you look at the Census Bureau's breakdown of average wealth by age group, the most prosperous are those on the verge of retirement. They've had 30 or 40 years to gradually build up savings. For example, a couple who each have $50,000 jobs (in today's dollars) and live frugally by spending half of their net earnings and saving the other half (roughly giving them $30,000 savings per year) will become millionaires in about 25 years (thanks to compounding and return on investments). Obviously this isn't the majority - the median wealth of people in the 55 - 64 cohort is something like $200,000 - but a non-trivial percentage of middle class workers ultimately reach this milestone.

And you know what they would like to do more than anythings else? Retire! I know this not only from personal conversations with my fellow fossils, but also through a discussion with an accountant recently in which he told me that the number one reason most of his older clients haven't retired yet is because they are afraid to before they are eligible for Medicare. Or they have to continue to work after age 65 themselves because they need their health insurance to cover their spouse until their spouse reaches age 65.

Meanwhile, people like David Leonhardt in the New York Times are writing about Today's Idled Youth," describing how the ongoing Hard Times have hit the young perhaps harder than any other group. They bought into the American Dream of studying for a degree, becoming a professional of some sort, and hoping for a decent middle class existence. Instead, they are taking clerical or entry level service jobs, or even worse, unable to find a job.

You can see where I'm going with this now, right? Here we have the older workers, hobbling to the finish line, but unable to end the race. And here we have young workers, itching to get started, and they can't because there are no jobs, or no middle class jobs, for them.

And the one thing that would cause the many older workers who have saved for retirement to be able to leave the workfoce, and clear the way for those frustrated younger workers, is guaranteed medical care.

Fortunately, we have a program that provides exactly that: it's called Medicare, and according to those already on it, it works really really well. And it works at much lower administrative costs than for-profit private coverage (If I recall correctly, Medicare's administrative costs are something like 3%, vs. 15% for for-profit plans)(UPDATE: According to the CBO, Medicare's administrative costs are 2%, vs. 17% for for-profit plans. And Medicare premiums have consistently risen less than private health insurer premiums) . And also unlike for-profit plans, in Medicare there's no incentive to deny coverage. As in, yes you can buy into a private plan at age 60 for example, but it will be very expensive and you'd better pray they don't come up with an exclusion if a disease of age catches up with you.

Atrios has written a number of times about increasing Social Security payments. Balderdash, say I. If you really and truly want to make a dent in the persistent employment problem facing younger workers, allow anyone age 55 or above to buy into Medicare. Charge them annual premiums equal to what they would have to pay into Medicare at their same wage or salary until age 65 if they continued to work. You would be amazed to see how quickly Boomers can still move, cleaning out their offices and cubicles, when properly motivated. And then younger workers could move right in.

It'll never happen, of course, because it smacks of the New Deal, not the "21st Century" privatized solutions Barack Obama has touted since 2009. And of course the GOP will never allow it, not just because it smacks of the New Deal, but because if Obama came out in favor of it, they would oppose it for the simple reason of opposing everything Obama wants.

But that doesn't mean we shouldn't acknowledge that it is a real solution to a real problem, and collectively rub Washington's Very Serious People's noses in it.