Biden’s Medicare plans look like they came straight out of the playbook of the AARP. His plans demonstrate that the Democratic Party doesn’t care about young Americans.
On Tuesday (March 7) President Biden announced his plan to save Medicare. His plan disinherits the young: it sacrifices the interests of young Americans to benefit the old. That may be good politics. Young people have little political power in America. But it’s bad for the future of our country.
Here’s a quick roundup of three ways that Biden’s plans harm young Americans:
First, Medicare is going bankrupt because it provides the elderly with benefits that cost far more than the amount of taxes that they out into the system. But Biden wants to make Medicare even more generous and thus more costly to younger taxpayers.
Biden wants to reduce the age of eligibility from 65 to 60. That means that millions more will become eligible for government benefits. That costs the system in two ways. First, more people will be part of the program which means benefit costs go up. Second, Medicare and Social Security payroll tax revenues are going to go down since people will take advantage of the benefits by retiring earlier.
The responsible thing is to raise the age of eligibility from 65 to 70. The average life expectancy of Americans has increase by 9 years since Medicare started in 1966 so retirees in America are already collecting benefits far longer than originally intended. Reducing the age to 60 means that the average retiree would get 25 years of taxpayer subsidized health care.
Second, Biden wants to hike taxes on Americans earning more than $400,000 a year. Currently, Americans in this range already pay an extra 3.8 percent on top of the existing federal income tax rate of 37 percent. Biden wants to increase the rate to 5 percent which means that the top federal rate is now 42 percent. Then add state taxes on top of that. So high earners in California are going to be taxed at the astounding rate of 55 percent (47 percent in Massachusetts, 50 percent in Wisconsin).
High taxes reduce economic activity. Hiking taxes on the most productive, hard working and entrepreneurial Americans will only these people to do three things: (a) become less productive; (ii) not work as hard; and (iii) be less entrepreneurial. The result: slower growth and fewer career opportunities for young Americans in a stagnant economy.
Third, Biden wants to force down process for prescription drugs. That sounds good in the present. But lower prices mean less incentive for the development of new drug treatments. Economists Tomas Philipson and Troy Durie of the University of Chicago estimate that price controls for prescription drugs would lead to a 29 to 60 percent decline in the number of new drug treatments brought to market by 2039. As a result Millennials and Gen Z will have fewer treatments available when they need them in later life.
It true that Medicare is going bankrupt. But is it doing so because of political myopia and the craven desire of Washington politicians to channel benefits to the politically influential (the elderly) while stock the costs to the politically weak (the young).
What America needs is statemen that think of the next generation, not politicians like Biden that only think of the next election.
A statesman would acknowledge that life expectancy has increased dramatically since the program began. Therefore, rather than lowering the age of eligibility to 60, a statesman would raise it to 70.
A statesman would recognize that Medicare is a very good deal for current retirees. Economists C. Eugene Steuerle and Karen Smith estimate the even high earning individuals are getting more out of the program in terms of benefits than they paid in in taxes. It shouldn’t be too much to ask for them to pay a little more in premiums to support the program.
Unfortunately for young Americans, statesmen are in short supply. Washington is full of politicians. And that’s why you are routinely fleeced by the likes of Joe Biden.