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Medicare and Social Security are unfair to the young

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According to the Urban Institute, older cohorts have underfunded their retirement's massively, and younger cohorts and generations will be left to foot the bill.

Urban Institute Study

Medicare, and to a lesser extent Social Security, have been transferring wealth from the young and giving it older cohorts for half a century. Generation after generation has taken out more money then they put in. The Urban Institute has run the numbers. As can be seen from the tables, some retiring cohorts will take out over two times as much as they paid in. For example, the average married couple with one worker earning an average wage and turning 65 in 2020 are expected to have paid in $438,000 over their lifetimes, but to receive $993,000 in benefits. The ratios for older cohorts are even worse. These numbers have been adjusted for the time-value of money.

The Baby Boom puts in a lot

This was temporarily supportable because of the demographic bulge caused by the baby-boom. If there are a lot more people putting into the system then are taking out, the system generates excess cash. That cash should be saved to meet the future obligation to pay all those younger people inputting into the system. But of course, that money was being used to pay older people's benefits and indirectly to finance this country's budget deficits (budget deficits - those huge numbers we have been hearing since 2008 - those numbers do not include unfunded mandates like Medicare and Social Security)

The Baby Boom will take out much more and this will have perverse macroeconomic effects

Since the real "bulge" of boomers is just starting to turn 65, this scheme will not remain viable for too much longer. One has to realize that there are tipping points, and once foreign countries really start to feel we are not creditworthy, it could create a downward spiral that we would not be able to stop.

Unfairness compounded by Obamacare

While this is problematic, it is especially so given that Obamacare is surcharging younger people while giving breaks to older cohorts.

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