[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

A second adjustment often mentioned is to raise the age at which one can start
collecting retirement benefits. Currently, that age is being gradually increased. For
example, anyone born before 1937 could start receiving full benefits at age sixty-five.
Someone born in 1947, however, has to wait until she is sixty-six years old, an individual
born in 1957 must wait until they are sixty-six and a half, and anyone born in
1967 must be sixty-seven. The argument in favor of increasing the retirement age is
that because people live much longer now than they did when the Social Security
program was first established, they might reasonably expect to retire somewhat later.
A third proposal is to raise Social Security taxes, in one (or both) of two ways.
First, the basic tax rate, currently 12.4 percent, could go up. It is estimated that an
increase of 1 to 2 percent would cover the projected shortfall. There seems to be little
political support for this approach, but somewhat less hostility toward the second:
raising the income cap. Now the tax is paid only on the first $90,000 of income; taxing
incomes instead up to $125,000 or $150,000 would bring in more revenue.
A fourth possibility is to accept a reduction in the level of benefits that future
retirees will receive. Analysts estimate that if no adjustments are made, the system
will be able to pay about 70 percent of what is now promised. This option, like an
increase in the basic tax rate, lacks political support.
The Social Security program is often called the “third rail” of American politics,
threatening a fatal shock to any politician who dares to propose any changes.
Until some reforms are made, however, its fiscal stability will remain in doubt.
HEALTH CARE
There has long been dissatisfaction with certain aspects of the U.S. health care
system, and yet it has proven hard to reform. The United States spends a larger
fraction of its GDP on medical care than any country in the world, but its health
indicators (such as child mortality and life span) are lower than those in many other
countries of comparable income. (This outcome is explained in part by the relatively
high level of inequality in the United States. Poverty and poor health are closely
associated, as low income leads to poor health and poor health leads to low income.
Most other countries also do a better job than the United States in making sure that
all citizens have access to health care.) Health care costs have been rising faster
than the cost of living in general. The federal government has two major programs:
Medicaid, which provides health care for the poor, and Medicare, which provides
health care for the aged. Both have become increasingly expensive.
Not only do Americans spend more, with seemingly poorer results, than do residents
of other countries, but they also have a greater sense of insecurity. In most
advanced industrialized countries, everyone is guaranteed the right to a reasonably
high level of health care; that is, there is effectively some form of comprehensive
insurance. While most Americans receive health care coverage from their employers,
many lack any insurance. For them a major illness can be a financial disaster. Most
Americans do manage to receive health care in one way or another, but it is a major
source of anxiety, especially for middle-income Americans who are too well-off to
receive Medicaid.
398 ∂ CHAPTER 17 THE PUBLIC SECTOR