Economist John Goodman never disappoints. And this book is no exception. This volume combines concepts that he's researched and discussed for three decades into an integrated reform plan to make retirement more financially secure and protection during our working years more flexible and accessible.
In New Way to Care, Goodman looks at our country's tangled web of safety-net programs: Social Security, Medicare, Medicaid, unemployment benefits, long-term disability protection, and long-term care coverage. He points out that we have a very inefficient system because each program exists in a vacuum. Far better, he argues, to allow people to create and fund accounts that can provide whatever protection they need at various stages of life, with a limited federal back-stop for those who fall below the poverty level even with these accounts.
A serious problem with Social security and Medicare inpatient services (Part A) is that they are pay-as-you-go programs. Today's workers fund the retirements of today's retirees. When the ratio of workers to retirees shrinks (as it has for several decades), the program runs at a deficit (as it has for years, tapping reserves built up since 1935 to cover the annual deficits until the early 2030s, when every penny ever collected from payroll taxes will have been spent).
Far better, Goodman argues, to allow American workers to open regulated individual retirement accounts and have a portion of the payroll tax fund those accounts. The balance of the payroll tax would pay current (and soon-to-be) retirees' benefits. This process of shifting from pay-as-you-go to individual accounts will swell deficits temporarily (perhaps three decades), but unlike today's deficit spending, the consistent revenue from a portion of the payroll tax and lower public funding of the system as workers build their personal accounts will allow for complete repayment of this investment. At that point, payroll taxes can be reduced, or a greater portion can go to funding personal accounts.
But why stop there? Medicare Part A has the same funding stream. Why not allow people to start saving for their medical needs in retirement, then let them spend it on whatever type of coverage they desire. The private market will respond positively to this development, as it has in stocking the Medicare Advantage market with attractive alternatives. Traditional Medicare could remain in place, but the federal treasury would no longer subsidize premiums, as it does today (except for the very poor).
Goodman's model is more flexible for participants, since they can manage their retirement nest egg (or shift that responsibility to private investors or annuities), with appropriate government regulation. it's also more secure, since future benefits won't be subject to the whims of politicians as are today's Social Security and Medicare systems. And they're good for government and taxpayers, as each generation pays for its own benefits, rather than leaving retirees' financial and health statuses at the mercy of a Ponzi scheme (a term Goodman doesn't use).
The idea of abandoning the pay-as-you-go model isn't new. The George W. Bush Administration considered it, but then world events and later a financial crisis shifted focus. Every year, it becomes more expensive to make the transition as more and more retirees are supported by relatively fewer workers. But the concept is still viable. And every day that we don't act leaves retirees (and future retirees) that much more vulnerable to a system that consists of only politicians' promises rather than individual Americans' financial assets.
Goodman takes very complex topics and breaks t hem down into bite-size servings. His clear writing makes his ideas accessible to people with no background in how these programs work today. That's one of his gifts as a writer: explaining concepts in a way that the average person can understand.
If you're open to new ideas, you won't be disappointed by Goodman's latest book.
ISBN-13:
978-1598133172
ISBN-10:
1598133179
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