Social Security, Medicare and public investments have one thing in common: They make us richer
Remind me again why I’m supposed to be dismayed about the federal government providing insurance much more efficiently than the private sector?
Josh Bivens calls out New York Times columnist David Brooks for setting up a false choice for voters: Social Security/Medicare vs. public investment:
Yesterday, David Brooks channeled a deeply flawed presentation by the Third Way to argue that while the federal government used to spend money on things that improved national “dynamism” it now just spends on “entitlements.”
…[Brooks] spends most of his time, and, Third Way spends all their time, arguing that there is something deeply damaging about the fact that federal spending on Social Security, Medicare, and Medicaid is now a bigger part of the budget than public investments. There’s little economic basis for this angst.
You’d have to look hard to find a bigger fan of public investments than me. But, the economic benefits of Social Security, Medicare, and Medicaid are absolutely enormous. They provide a service (insurance against risk, and people value insurance quite highly) much more efficiently than do private-sector providers. In the case of Social Security, this efficiency is mainly in low administrative costs and the government’s ability to provide actuarially fair insurance without needing the compensation that private-sector insurance providers would demand.
… In short, the really salient choice isn’t between social insurance versus public investments—as Brooks and Third Way would have it—it’s really between those who believe the substantial evidence showing that a mixed economy (one where governments weigh in when they can do something more efficiently or set rules that rule out socially-destructive behavior) can make us richer and those who don’t. And there’s no reason why we can’t have both well-run social insurance and public investments.
You can read the whole thing on Working Economics »