Sometimes I think if Jamie Galbraith were as heterodox in the conservative direction as he is in the liberal direction he would be mercilessly skewered in the econ-blogosphere. What is the conservative equivalent of “deficits never matter”? It’s probably somewhere between “cutting taxes always raises revenues” and “FDR caused the Great Depression”.

That, again, was my initial reaction when I read his proposal (via Mark Thoma) that we shouldn’t be cutting medicare and social security, but expanding them. Then, much to my surprise, somewhere about halfway down the page I found myself somewhat convinced, or at the very least intrigued and open to persuasion, by part of it.

He argues that we should lower the social security age to 62 for three years. This would allow older workers to leave the workforce, and would open up job vacancies for younger workers. You can see some appeal to this. If you have to subsidize the unemployment of some workers, it should be the older ones who no longer need to accumulate skills.

Right now one thing we are witnessing is older people hanging onto their jobs longer, and so younger people can’t begin climbing up the ladder. Younger people are thus suffering from decreased work experience and bouts of unemployment or very low-skilled work. This is at best delaying the accumulation of human capital and so lowering the present value of their lifetime earnings, but also likely causing them to forego investing in, or even destroy, human capital. Giving old people the cushion to leave their jobs like they otherwise might have can help prevent some of this. If you think hysterisis is a serious threat, this plan looks even better.

An alternative plan is to directly subsidize human capital accumulation of young people by paying for more education or training. But this involves the government making many decisions and creating many (more) marginal distortions in human capital investments of young people. In contrast, lowering social security age creates much less of these distortions.

There’s a cleanness and a simplicity to lowering the social security age that I find very compelling. Maybe Jamie Galbraith isn’t crazy, and this is a reminder of the value of having heterodox thinkers like him around to come up with ideas like this that conventional economists wouldn’t dream up. Or maybe I’m just crazy too, and this is a terrible idea. Somebody talk me out of this.