The grandfather clause*

I saw a reference to (US Representative) Paul Ryan’s plan to kill Social Security and Medicare, but only for people currently under 55 (he doesn’t say “kill” of course, but if it was going to make things better he wouldn’t need to exempt everyone likely to care directly about the issue) and it reminded me to post this.

A policy like this has what economists like to call a time-inconsistency problem. To get the policy approved, Ryan needs the votes of people currently over 55 (hence the exemption) and in the current US situation, any Republican majority has to rely heavily on older voters. Say the plan passes. Sooner or later, the combination of demographics and the electoral pendulum means that the Repubs will be out, and the new primarily majority will face three choices (a) Repeal the whole thing if they can do so before it comes into force (b) Keep on paying high taxes to fund benefits they will never receive for the benefit of the selfish old so-and-so’s who voted to cut the rope once they had reached the top; or (c) extend the same cuts to the (as of 2011) over 55’s, and claw back some money for themselves.

If I were an over-55 Republican, I don’t think I would want to count on (b)

 

* The original grandfather clause was a Jim Crow rule limiting the franchise to people whose grandparents had held it before the Civil War. The UK adopted something similar in relation to immigration in the 1970s. These examples give some good reasons why grandfather clauses (exempting existing participants in a system from unfavorable rule changes)  are bad policy in general, though there may sometimes be exceptions 

32 thoughts on “The grandfather clause*

  1. @Ikonoclast

    this education qustion is something i have been wondering about for ages.

    in Australia.

    when the ability to obtain higher education occurred,heaps of people who would not have been able to obtain qualifications and skills did so.

    these people took those qualifications and skills into the market and productivity consequently rose more than it would have without their contribution.

    how much was that contribution worth to the nation compared to the cost of facilitating it?

    i spose the accounting would be not easy to quantify.

  2. Ikonoclast: my parents got free university education (C’wealth scholarships, just a little pre-Whitlam) but I did not. I actually think the system that we have now is about right.

    The reason is that higher education is analogous to an arms race: the benefits are diminishing (now a lot of fairly dumb jobs expect postgrad quals) but the costs of this process are socialised.

    In any event, university for Australian citizens is so cheap in the scheme of things and HECS such a progressive and forgiving system that anyone who seriously thirsts for knowledge but subsequent to their degree wants to spend their life working in a bookshop is entirely able to do so. And that’s leaving aside the increasingly vocational (as opposed than liberal) nature of much university education, which partially renders this paragraph moot 😛

  3. TerjeP :
    @Ikonoclast
    I paid for my higher education via HECS. I don’t want to pay for the higher education of the next generation.

    As usual, TerjeP replies with no substantive points. We simply learn the fact that TerjeP paid (not even the true cost) for his education and this emotionally predisposes him to not pay for the education of others. No other analysis is necessary apparently.

    I’ve finally learnt the real meaning of a free market to libertarians. It saves them from thinking; no need to think out anything as the market will automatically handle everything correctly.

  4. Paying for teritary education is about right, as universities can use their income to invest in education equipments. However, with that being said an education system that cost too much will be bad as well. If I really need to point out an example it would be the US, their university costs about as much as ours (excluding big brands like Harvard), but their median wage level is much too low compare to Australia which had discouraged a lot of youths from studying teritary education. This would be the reason why so many of the capitalist claiming that the lower/middle income earners pays are low is due to low educated workforce (which I don’t believe is the case). Situations like these is extremely bad for the future society as the US population gets more and more pessimistic as days go by about the future state of their economy they will forgo teritary education as they see no hope in repaying their debt. This will virtually create a poverty trap and a low educated future workforce (maybe thats what the capitalist likes to see so they can officially pay them low wage?).

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