Imagine you’re out in the jungle and that in front of you is a steep, miles-long cliff on either side of your location. You see a stampeding herd of elephants coming your way. Unless something very unlikely happens, they will soon be trampling you. Should you act on that information now or wait until the elephants are on top of you? Easy answer, right? You should act now.

The coming shortfall in revenues to pay for Medicare and for Social Security is like that herd of elephants. We can see it coming and if we do nothing, it will be here. Our one big advantage over the elephant scenario is that we have approximately one decade to make reforms so that we don’t get “trampled.”

This is from David R. Henderson, “Medicare and Social Security: Tackle Them Now,” Defining Ideas, April 6, 2023.

In the piece I lay out why it is much better to cut Medicare and make it into a system of per-capita subsidies than to cut Social Security. Here’s a flavor:

If you had to choose between cutting the growth of Medicare spending and cutting the growth of Social Security spending, which would be the better choice? You might think there’s no way to tell. But if we accept the idea that people are, on average, better judges of their own welfare than the federal government is, then there’s a clear answer: cut Medicare spending and, at the same time, make it a program of per capita subsidies.

Here’s why. When Medicare beneficiaries use the program, they are spending other people’s money. The co-pays and deductibles they pay are typically a small fraction of their medical bills. And we spend other people’s money much less carefully than we spend our own.

Also I correct a common misconception about the Greenspan Commission on Social Security and give due credit to a Texas Democratic Congressman named Jake Pickle.

Finally, I lay out why raising the FICA tax on the most-productive people in the economy is a particularly bad idea.

Read the whole thing.