Will Social Security and Medicare Remain Viable as the U.S. Population is Aging? An Update

Henning Bohn ()

No CESifo Working Paper No. 1062, CESifo Working Paper Series from CESifo Group Munich

Abstract: Yes, subject to concerns about Medicare inefficiencies and potentially self-confirming skepticism. The U.S. social security system-broadly defined to include Medicare-faces significant financial problems as the result of an aging population. But demographic change is also likely to raise savings, increase wages, and reduce interest rates, and up to a point, a growing GDP-share of medical spending is an efficient response to an aging population. Thus viability is more a political economy than an economic feasibility issue. To examine the political viability of social security, I focus on intertemporal cost-benefit tradeoffs in a median voter setting. For a variety of assumptions and policy alternatives, I find that social security should retain majority support.

JEL-codes: E60 H55 J10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea
Date: 2003

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