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Lifetime Taxpayer Contributions and Benefits of Medicare and Social Security

Many criticisms of Medicare and Social Security have suggested that beneficiaries get more than they paid into the system over their lifetimes and these entitlement programs may be unsustainable if they are insufficiently funded. But studies do not always use appropriate assumptions for estimating lifetime values. Our simulation model properly aligns the financing sources with the benefits received by making consistent comparisons and using a more appropriate inflation adjustment. Our study suggests that using different assumptions can dramatically change the balance between contributions and benefits as compared with other analyses. Choosing the appropriate assumptions is essential for a reasoned debate on the important issues about the future and financing of Medicare and Social Security. (JEL I13, H5, H24)