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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: GraceZ who wrote (21702)1/18/2005 9:39:16 PM
From: CalculatedRisk  Read Replies (1) of 116555
 
If you read my post, I advocate lowering the safety net and increasing the means test; not raising the payroll tax. In fact I think the payroll tax is already too high; it is a punitive tax on labor in America.

But the key point is not removing the "financially healthy" from the insurance pool. That, in economic terms, is adverse selection. In English, it is plain crazy.

Think of Health Insurance. If you win on the insurance (get out more than you pay in), you have encountered an unwanted event. OTOH, if you lose, you are healthy - my choice. Now remove the healthy from the pool. What happens? The premiums for the "winners" (i.e. the sick) goes through the roof. Is that what we want?

It works the same for retirement insurance. If you win, that means you are very poor. If you lose, you did well (my choice again).
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