Sunday, December 6, 2009

Entitlements: Good or Not So Good

All of the current distress over government control over American health care has brought up the subject of entitlements in general. Prior to FDR we had only a few. During his term Social Security was very controversial. Now it is expected as an entitlement and not controversial at all. We simply MUST have it.  It no longer seems to matter that it was poorly drawn and funded. Today, Social Security is essentially broke. The current government is expected to fix it. There is nobody considering just doing away with it.

I have a question. From 1776 forward it was expected that a wage earner would put aside a tithe to the church and a bit for his old age.  It sounded good but it did not work very well. Way too many people ended their work days with no savings for their non-working old age. The government said they could step in and fix the problem. Everyone paid taxes to the government and the government could subtract their salaries and expenses and then pay back an appropriate amount of the taxed money to the old timers. Eureka! They solved the  old folks problem and in a sense purchased their votes. A success all round.

As a side effect of their magnanimous give away to the old voters, the government needed more people so they could manage the program. Government grew and grew. As more and more people came of retirement age, Social Secuity expanded to provide everyone the expected riches. Of course it took more beaurocrats to administer the program, so government employment increased some more. Question: What happened to the idea that a working person should put aside a bit for his old age? Gone with the winter wind. Blown to sea. Now everyone was entitled.

I don't want to even think about why the American worker should ever expect the to have his old age finances paid for by some young kid just hired yesterday. This is what has happened to Social Security. Despite the amount of money an individual worker has paid into the program his or her entire working life, all of it is gone. Spent by the government on something else. The only way the government's Social Security entitlement can be paid to those qualified and expecting it, is to tax the new wage earner enough to pay what has been promised. Does this make sense?

Some folks believe that it does. They say that the burden doesn't fall on the new wage earner because all the government has to do is to print more money. Politicians have been doing this for years to pay for their spending of money they didn't have. They have treated our national treasury as if it was a limitless credit card. Certainly, someone is going to come along and say "whoa, you can't do that". But unfortunately, so far no one has done that, and the national debt has increased so much that it almost can't be measured and more. Trillions and trillions are difficult to grasp.

There are two major causes of America's national debt. The first is military spending to support real or possible wars. The second is the public's growing illusion that the government can do a better job of managing the national treasury than private, profit making, free market enterprises.

There is a third. Entitlements. Getting someone else to pay your bills. Getting the entire taxed society to pay for your old age, healthcare, and etc.,  as well as life insurance, home insurance, flood insurance, earthquake insurance, and more.

More later . . .


Rain said...

The problem with your logic, in my view, is you are assuming people today are making sufficient money to cover housing, insurance, food, transportation and will end up only using 'fun' money as savings. Since real income for the Middle Class has not gone up in over 30 years and yet costs have continually gone up, a lot of people have no 'fun' money and they are borrowing to do even the basics.

In the days before Social Security, old people went to poor houses or lived with their family-- assuming family would take them in. Their living conditions were often not very good but if you don't care about that as an argument, how about that Social Security has been money that continually was out there as a way to keep our economy going through bad economic times.

When Reagan raised SS taxes to the equivalent of many state taxes, the argument was that it would be a trust fund which the government could use when someday the SS tax wasn't enough to cover current retirees. That money got used to cover other programs. You have a lot of leaders, who call themselves conservatives, but who put this entire war with Iraq on the cuff. No taxes, all borrowed and the end result is now the right is going after the elders and their families for something that wasn't their fault.

One thing about how many political factions work is they have to have an enemy to get what they want passed. We are seeing this war on the elders through SS and Medicare as just one part of what is being done. Education has been hit also. My personal belief is that it is a war on the middle class. If we aren't careful, it won't exist and you won't have a SS tax, but you also won't have elders able to live with dignity. Not a big deal to some.

There are some simple fixes for SS but unless the government stops taking the excess, they will all be used to pay for government programs (like the enlarged Afghan war) while hiding their true cost from the American people. It's how they have operated. What would change it?

Incidentally, the average SS check runs about $850 or so. It's amazing that anyone begrudges that to people who mostly worked hard their whole lives...

The Grey Geezer . . . . . . . said...

Hi Rain . . . For once I think we are not far apart. I agree with almost everything you say, perhaps from a different view, but never the less, agree. (1) The middle class has always covered more thn their share. When were they not being attacked? (2) I think SS was originally meant as a supplement to improve the quality of life in retirement (a good idea), and never meant to be the sole source of elder income (bad idea), but today SS has become the ONLY income for a huge number or retired Americans. Without it they would starve. (3) Our elected politicians and their appointees have a lousy record of representing the needs of the citizens. It matters not whether Republican or Democrat, Conservative or Liberal. Too many of these birds never deserved to be elected. (4) I can't think of even one of our WARS that was paid for as it happened. Even the Revolutionary War was "financed" by borrowing. Why should the war in Iraq be different? (5) I'd like to explore your "simple fix" for SS. In my mind a complex program like SS will not be easy to fix. The main stumble is the question of financing it. Our political leadership can hardly fix SS without shooting themselves in the foot. (6) I don't know of anyone who "begrudges" the SS checks for retired folks, what ever the amount. Significantly, those checks are actually a small part of the problem. The interest paid on the money borrowed to pay them is more directly the problem.

Keep the grey matter churning. It's an education for us brain challenged people to read.


Rain said...

Well i enjoy your opinion pieces and I do think we come from the same place as we are looking for solutions. My opinion on SS would be to have taxes go further up the income scale and to actually put the money into an investment account instead of having the government borrow it and not repay. Even bonds would at least be there. We could also up the age where people can receive SS; but with jobs in short supply and especially for older people, that isn't necessarily going to work. More folks are having to sign up for it as early as they can and it's not because they want to.

It really irks me that the taxes were raised so much to supposedly create that trust fund and they just used it-- both parties. They act as though it's not theft but it clearly has been and because the ones doing it are the ones who could investigate it, they get away with it.

My folks were hard working people and when they retired, SS was about all they figured they would have. Dad had a small pension for years as a Teamster but not a high income member; so not much and Mom only got a small portion of that after he died. My husband's folks were better off as both had government pensions in addition to SS but still they none had much in their senior years. My folks put a mobile home on our farm and that helped them economically but it's just hard to be old and today more than ever with the high cost of insurance.