How to Control Runaway Entitlement Spending

At the Becker-Posner blog, Richard Posner offers some ideas for amending the entitlements programs that are “threatening the long-term solvency of the federal government”:

Which leads me to the first of the only two practical ideas that occur to me for slowing the increase in entitlement expenditures relative to the size of the economy: a shift in emphasis in medical research from length of life to ability to live independently. Independent living means living without home care (whether by relatives, thus taking time from them that they could use more productively in other activities, including paid employment, or by paid care—paid by the government in many cases) and being able—and wanting—to work. Independent living can be fostered by focusing medical research on problems of vision, musculoskeletal problems (which impair mobility), obesity, and dementia, in preference to research on curing and preventing cancer, heart disease, and stroke. 

My second proposal is to means-test social security and Medicare. About 7 percent of American households have incomes above $150,000. Most of these people are not wealthy (even people with incomes of $250,000, which places them in the top 1.5 percent of the household income distribution, are not wealthy by modern standards), but they are comfortable. They can afford to finance their retirement through savings, and to buy decent health insurance. In my opinion they should not be eligible to receive either social security or Medicare benefits. Taking them off the social security and Medicare rolls would produce an immediate substantial savings in federal entitlements expenditures.

Becker’s ideas for the same problem are a bit less radical.

Matt K

Posner's second point is spot on, and too silly how it hasn't been implemented yet. As for shifting emphasis on cancer and heart disease research, to my mind, life saving research doesn't constitute nearly the lion's share of the entitlement problem. Truly, the main impetus for the ballooning Medicare problem may be companies' response to govt. subsidized medicine; when a medical devices or services company knows Medicare will cover a certain portion of something, they're much more likely to charge exorbitantly. My level of expertise on this, though, is nothing compared to Alan Simpson; can we elect the Bowles-Simpson commission instead of a president next cycle?


The main problem with taking them off the social security and medicare rolls would be that this is their money that they have put into the system. This is their money. If after they reach a certain wage and would like to opt out that would be one thing. Then have options as to how to deal with the money that they have put in to the system. Maybe receive a smaller lump sum payment of what they have put in, like the lottery, for early payment.

Enter your name...

This is NOT "their money". This is tax money that they are required to pay no matter what, and their taxes were used to pay for someone else's retirement. This notion of having made "contributions" to an "insurance" or "savings" program is mere publicity intended (deliberately) to deceive voters and ensure the political future of the program.

See for what FDR said about his design.


"They can afford to finance their retirement through savings"? So someone who worked hard to save for their future should take a hit on the Social Security benefit that they've paid into, because the guy next door chose to go to Europe every Summer and buy a new Vette instead of save like a responsible adult? Wow, what a great message to send: "We think it's great that you achieved financial independence, but because you sacrificed, we're going to take money from your pocket and reallocate it to the guy who chose not to save". Wonderful idea.

Joe j

Standard Dem party line, punish the successful reward your base. As long as there is other peoples money to spend, people fall for it.

Brian C Briody

If the government hadn't been taking Social Security from my paycheck and an equal amount my employer for the last 35 years I could have enough (with my own retirement savings) to pay for my own retirement (and much more comfortably than getting a negative return on Social Security). Either get me a time machine or pay me what I am owed. They already want to tax me on income that I have already paid income taxes on when they pay out on Social Security.


Your second proposal will become law. Social Security is not a retirement plan. Government is not capable of running a successful pension fund. They like bashing wall street but I feel more comfortable with my 401k than with my Social Security.


These are bad ideas in so many levels it's hard to know where to begin. 150k combined salary in Los Angeles, while raising kids, paying for the high costs of living (we cannot afford to own our own home anywhere near where we live now) and living a very modest lifestyle, is not at all a large amount of money. We could never retire with our current income and savings. It's also important to note that not everyone maintains the same income year over year. We both make substantially less than we did 10 years ago working in the same professions.

Enter your name...

People on Social Security aren't usually raising kids, and so have none of those expenses. They also often qualify for subsidized housing for seniors. Couples often discover that one car is enough when nobody needs to get to work, and that they don't need to spend so much on clothes (no "professional" wardrobe) or food (lunch is cheaper at home than at a restaurant or deli shop). Taxes are down, too, since their taxable income is lower. Except for healthcare, everything costs less for retirees.


We already know how to do #1: eat less, exercise more. The problem is that most people refuse to do it, and when confronted with evidence, come up with all sorts of excuses. See e.g. Maria Kang.


Terrible ideas. We already have plenty of medical literature that shows a lifetime of exercise, fitness, and healthy eating prevents most obesity, musculoskeletal problems, heart disease, stroke, and several cancers. Instead invest the money towards exercise incentive programs, making healthier food more available and recognizable, and healthy urban redevelopment.
If an individual and employer pay into SSI and Medicare their entire career, they most certainly deserve to cash out their investment! The upper class already contributes more than they get back in these programs.


I lived in a smaller house, I invested heavily in my education and career, I worked long hours, I took cheap vacations, I drove very used cars and I saved....A LOT. And for my delayed gratification....the government takes 15% of my lifetime earnings and gives me nothing in return? Only to give that money to someone who didn't make these sacrifices? I will be the first in line to collect ZERO Social Security and Medicare benefits when the government pays me back for all of my (and my employers) contributions over the last 31 years and I get to cease further contributions. Until then, the government has a contract that they need to honor with their citizens.


The problem with means testing is that (a) just as the rich are a relatively small percentage of society, they are a small percentage of entitlement recipients and so means testing doesn't really save that much money, and (b) means testing turns people against the entitlement programs because they believe (accurately or not) that they won't benefit from it.

Psychologically, the difference between 100% of those contributing to social security getting something back and 93% getting something back is big. If you deny entitlement benefits to the top 7%, you'd probably have at least 20-25% who fear that they won't receive the benefits. After all, most people's income fluctuates over time and people don't know their exact percentile. The loss of support would lead to decreased willingness to fund the program through payroll taxes. Over time that would probably erode the funding of those entitlements more than the small gains from means testing.


Joe J

There is also the problem that it won't stay at 7%. As was done with the Alternate minimum tax, the government will often start this as a set dollar value which when passed will claim to not affect any but the very rich. However, 150,000 may sound like a lot now, but in 20 yrs, or 40 yrs, the dollar will shrink with inflation. 40 yrs ago the dollar was worth 5 times as much.
If in the next 40 yrs it did the same that 150,000 would be the equivalent of 30,000 today. Hardly rich.

Voice of Reason

I loved the first suggestion: that we spend more medical capital on developing techniques to lengthen productive, healthy life, and not worry so much about expensive, unproductive machine dependent life.

Hated the second suggestion though. The war on prosperity in America is baffling. If anything, to reform Medicare and Social Security and make it solvent, the government needs to pay back the money that it borrowed from it over the years, and the age that people start drawing benefits needs to be delayed. When the scheme first started, at least people were collecting benefits when they were mathematically expected to be dead or destitute. Now, we pay benefits out so early that it just gives middle aged people the incentive to retire early, work on their golf game, and live a majority of their life off of other people. Index it so that people start receiving benefits five years before the average life expectancy is.


Mike S

$250K in a metropolitan area for a family is not wealthy. It is square in the middle. We earn slightly more than that-- live in a 2000 sq foot house, drive Hondas and Mazdas, and have two kids. We don't use full time daycare (we go part time)-- but if you go full time here; it runs around $2500 -$3000 a month. Some of my peers have 2 kids in daycare and shell out $72,000 a year. This is mostly after tax money-- so in before tax dollars it costs over $100,000. Add in the extra taxes for cities (NYers pay 10%), mortgage, insurance and property taxes-- and most of the money is accounted for.

Why does this guy want to punish the middle class?


Correct me if I'm wrong. But it seems like the aim of Posner's first point is to help people die sooner. Depersonalize the death panel and it's not really a death panel anymore, but it's still just as horrible.


Wow, really Mr. Dubner?

The posting title, "How to Control Runaway Entitlement Spending" is click-baiting hyperbole that is as much a red herring fallacy as it is factual.

As for Mr. Posner, he may have indeed offered some ideas, but how valuable are these ideas? By his account, taking American households making $150K and above " the social security and Medicare rolls would produce an immediate substantial savings in federal entitlements expenditures." That's about as lazy a claim as I've seen in all of 2013. No mention of how much of a difference this 'change' would produce in Social Security and Medicare costs, nor consideration of other, more equitable approaches (as others mentioned) such as raising the OASDI taxation limit from $117,000 in 2014 forward to a more progressive limit of between $200,000 and $350,000.

How about something really novel, like compromise? Consider raising the OASDI taxation limit; coupled with Chained CPI for SSA benefits beginning in 2020; AND an Adjusted Gross Income (AGI) means-test reducing SSA income for individuals whose annual income exceeds $100K in retirement? For every $10K of annual income in retirement beyond $100K, their SSA income would be reduced by ten percent. Thus, for individuals earning $200K or more in AGI in retirement, they would essentially have achieved self-insured status. However, since SSA is a 'safety new' program, if their AGI evaporated, they would retain the right to collect SSA income.

The real upshot here is that the vast majority of individuals receiving SSA rely on it as their sole source of income. And with the near-eradication of pension plans in America, the number of retirees who will rely on SSA for subsistence will only increase in the coming decades.

Lastly, for all the free-market believers who think that tax-deferred accounts such as 401(k) and IRA's are the only proper way out of the Social Security quandary, please take an hour to view, "The Retirement Gamble" produced by PBS's FRONTLINE ( You'll see how Wall Street has stacked the deck against individual "retail" (read: middle-class) investors even without the presence of the REAL alpha wolves such as Bernie Madoff, Jon Corzine, Dick Fuld, and on and on and on...



Note that Medicare will claw back any expenditures from the estate of the deceased.

The deal with Social Sec and Medicare/Medicaid was everyone pays, everyone plays. If that changes then we get to change that assumption as well.