Demographics, Health Care, and the Welfare State - Politics Forum.org | PoFo

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#13134822
The one thing I don't see being debated in the recent US health care spat is demographics, and this is a pretty big gap as demographics is by far the most important issue in health care policy at this point.

We've all heard the statement demographics is destiny. This is not completely accurate, but it reveals the fundamental truth that demographics is, aside from naked force (which is so powerful largely for its ability to fundamentally alter demographic balance), the most powerful political force.

The one thing this debate misses is that in North America, as in most of the West, demographics is strongly positioned against the sustainability of the welfare state. Two basic factors cause this:

1) The boomers - The baby boomers are the largest cohort, and they are aging. The simple fact is that old people are a drain on resources. They generally retire, making themselves economically unproductive, and they use a lot of resources from old age security, to pensions (which they consume from their investments lowering the pool of available capital), and most relevant to this debate, and the most economically draining, health care. Old people are, well, old, and require massive amounts of health care and drugs to help them live comfortably with the side effects of aging. When the boomers retire, which is going to start happening in the next decade, the resource cost of keeping old folks not dead, is going to skyrocket.

2) Declining birth rates - The birth rates of Western countries has been steadily declining for decades. The only Western country that does not currently have a birth rate below population sustenance levels is the US, which is barely at the level of maintaining it's population. What this means is the ratio of productive workers/taxpayers to old people is declining across the Western world. So the ratio of productive workers in society is going to decrease, while at the same time taxes to support the unproductive old people are going to have to increase, further reducing the productivity of the productive workers.

The thing is that everybody within public policy circles knows this crisis is occuring, at least on an intellectual level, but nobody will say or do anything about it because it would be politically disastrous for them to.

So we have the problem, what are the solutions:

1) We can remember the 20-80 rule (which, to simplify, is a generalization that 20% of the people using a program use 80% of the resources of the program) and simply not serve the 20. The classic "no man, no problem" solution. This would require strict rationing based upon rulings and policies set by a (hopefully) neutral arbitration body. But as the reaction to Palin's "death panels" comments shows, there is no way this would fly, Americans, at least, are simply not ruthless enough just to let the unproductive die. This is probably be for the best, as this solution, while exceedingly effective, is somewhat monstrous.

2) We could import immigrants to work. This solution can help mitigate the problem, but is not a long-term solution. Importing productive immigrants and assimilating them can help increase productivity. But the problem is that there are a limited number of productive immigrants to import and Western nations have already reached well beyond this limited number. Even the productive immigrants being imported are often due to the myopic and self-interested credentialist policies of white collar unions and regulatory bodies, causing such inanities as a Polish nuclear scientist who works as a mechanic or an Indian engineer driving cab. On the other hand unproductive immigrants tend to be a drain on resources. Throw into it this the fact that Western nations, for some rather stupid multicultural reason, tend to refuse of assimilate immigrants and the problems add up farther. For these reasons, immigration could not work as a solution.

3) The best solution is not a solution at all, but rather a hope; the hope that advances in technology will progress at a rapid enough pace to increase the productivity of the productive citizens to allow them to support a greater proportion of unproductive citizens. This is a strong possibility, but is not a solution, simply a hope. It's main problem is that the looming crisis is going to happen in the period of a few years when the boomers begin to retire en masse. It is unlikely that technology will burst that rapidly in time with the crisis, but you never know.

4) Breed. This solution is the simplest long-term solution, we just increase our breeding rates so that population growth keeps up. But this would require a major cultural shift away from our current hedonistic attitudes to a more traditional societal model, either that or the effective, but somewhat inhuman, possibility of growing children in vats. But this seems unlikely to happen any time soon, and even if this shift occurred tomorrow, it would not help with the looming crisis, which would occur before the generation grew to the age of economic productivity.

5) Increase taxes. A simple solution, but unlikely. The problem with this though is that at a certain point this simply becomes economically unsustainable and will have a negative impact on prductivity; it is likely that we are approaching the edge of this already. This is not to mention the political inviability of the sharp increase in taxes that this crisis would require.

6) Decrease entitlements. Another simple solution, but one this is politically infeasible before the crisis hits. Too many voters and special interest are attached to their welfare, public pension, public health, public entitlements, bailouts, and such and on. Taking enough of them away to matter would require a strong political will that I don't think is going to happen this side of the crisis.

7) Nothing. A possible answer is to simply do nothing and deal with the crisis when it hits. This is not really a solution and is probably the worst thing we could do long-term, but I think this is the most likely to occur. Maybe #3 will happen and we'll get lucky.

8) We could increase the retirement age and keep citizens in the workforce longer, but this might run into some opposition from seniors. It is also based on the rather callous logic that they'll hopefully they'll die before they retire, and statistically a certain proportion of them will, so if it was calculated correctly it might work. But try explaining this logic to the public, and without that logic this plan makes little sense. Also, there is only a certain amount we can push the retirement age before the old simply become incapable of working. But at the very least this could buy a few years to implement something else.

9) There are a number of minor things we could do to mitigate the problem. We could cut at the edges of entitlements. We could make small, gradual tax increases and hope that we don't go over the edge and ruin our productivity. We could structure regulations in such a way to help out. There are probably dozens or even hundreds of little things that various policy experts have cooked up, which on there own they might not do much, but if we implement enough of them it might add up to something, or not. But even if we could, would fighting hundreds of small battles be easier then fighting one of the major battles.

Hopefully, people will become aware of this problem and take it into consideration in the health care debate and public policy in general. If enough people take heed, maybe something will happen. We can hope.
By Smilin' Dave
#13134992
Random thoughts:

1. Leave old people alone, they're all shrunken and forgetful and can't defend themselevs ;) . In all seriousness the elderly arn't the simple drain you portray. For a start they represent a repository of cultural knowledge, and a people which loses it culture could be considered poor indeed. The elderly may not contribute now, but to a great degree the wealth of today is thanks to work/wealth they invested (which was part of the social contract of the time).

2. Welfare for the retirees has an impact on the workers of today. If you thought you wouldn't be looked after in your old age, I suspect you would tend to save your money rather than spend it. If you placed those savings in a pension fund I suppose that benefits some sectors of the economy, but it does nothing for the local economy (which again also impacts culture). You might also be less likely to take risks, for fear of being retired early. You might also have to spend your money of caring for aging parents, which might effectively put you back to square one with less benefit to yourself.

3. You don't seem to mention the working poor, people who are productive but can't afford health care. Neglect this demographic too much and you'll throw a spanner into the economy.

4. The do nothing option might seem like the worst option, but doesn't the resulting crisis make it easier to adopt the more ruthless solutions you suggested?
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By Dan
#13135740
1&2) I'm not blaming old people. They've worked hard and done their share, but the simple fact is that, barring the sudden appearance of some revolutionary rejuvination technology, they will be an economic drain and this potential crisis is economic in nature, not cultural.

As for public pensions, they are, I think, a generally good thing if run right. But that means that they have to act exactly like a retirement fund and surpluses can not be used for general funds.

The goal though is to plan so that when they retire, it's not an all-of-a-sudden, 'we don't have any more social security funds, you're all on your own.'

3) As for the working poor, I'm not necessaily opposed to a public option of some sort, as long as it is well-run and sustainable.

4) It would, but by that point the worst effects would already be occuring and would be inescapable. I'm hoping that people will begin to plan now, so that the impact is minimal then.
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