Monday, February 28, 2011

QOTD: The means-testing mirage

Quote of the Day:
Every once in a while people start suggesting that we save money by means-testing Medicare and Social Security — hey, Bill Gates doesn’t need them.

But Atrios is exactly right: there’s no money in it.

Remember that we’ve just been through a ferocious debate over whether $250,000 a year makes you rich, with $400,000 a year working stiffs crying poverty, declaring that they couldn’t possibly afford to pay Clinton-era tax rates; do you imagine that we’ll be able to set a lower bar on denying Medicare benefits?

So maybe, maybe, we’d end up means-testing for the top 2 percent or so of the population.

But while there’s some money to be gotten by taxing the top 2 percent — they have more than 20 percent of the income — they account for roughly their pro-rata share of benefit costs — that is, the richest 2 percent account for around 2 percent of Medicare expenses. (Maybe a bit less because they’re healthier than the average American, maybe a bit more because they live longer.) Social Security is more complicated, but bear in mind that high earners get bigger benefits, but also get taxed on those benefits; so again, we’re talking about savings not very different from their share of the population.

So we’re talking very small savings here. This is more anti-Wille Suttonism, going where the money isn’t. - Paul Krugman

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