The grandfather clause (repost)

With the announcement of the Romney-Ryan ticket, I decided to repost this piece on the most striking (to me) aspect of Ryan’s plans, namely the exemption of those currently over 55 (or maybe those who were over 55 in 2010 or 2011, when the plan was first announced. If everything goes to plan for the Repubs, Ryan would be the presumptive candidate after Romney’s second term in 2020. Coincidentally or not, that’s just about the point when the exemption runs out. People retiring after that will have spent a decade or more paying taxes to support benefits for those grandfathered in, but won’t be eligible themselves.

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 younger 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 

30 thoughts on “The grandfather clause (repost)

  1. Interesting. Didn’t know Romney-Ryan were running in Australia. The coalition’s deputy prime minister is usually a Nat so why would anyone care. Otherwise, the deputy position, even with labor, in no way means the person is prime minister if the current one is dispatched.

    Nothing like reading the daily Rose magical sermon.

    US commentators seem to think running mate is relevant. But what would they know?

  2. I seem to recall the Howard campaign running ads against Julia Gillard as a dangerous leftist in 2007. If only they’d known!

  3. So seems Howard “was wasting his time” as well. Just on the small ((as it appeared then) chance that Gillard would soon replace Rudd.

    Do these folk not read the Rose sermons?

  4. I think the problem is that when they read the Rose they edit them to agree with their own opinions or to confect conclusions that are not in the original sermon. Then they add a generic hat tip on the off chance anyone is interested enough to check the levels of plagiarism and fabrication.

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