click on graph to enlargeRecently a long time subscriber to RTE, who specializes in sending me such messages, sent a very informative edition of the Heritage Foundation's newsletter The Foundry – Morning Bell that described many of the problems people have experienced with ObamaCare. Although the newsletter was very good I did not think it was as complete an analysis as ObamaCare's Shoes Keep Dropping that was posted on RTE in November.
Putting that aside I was very surprised & sorry to see that a significant percentage of the comments to the online newsletter by Heritage subscribers focused not on the ObamaCare points that are in the process of subjecting us to the tyranny of bodily dependence through government healthcare but rather in taking offense that the Heritage writer stated in the newsletter that Social Security & Medicare are entitlements.
The offensive language was "Entitlements—like the big three of Social Security, Medicare, and Medicaid—are the biggest causes of America's spending and debt crisis. And ObamaCare creates a new entitlement program while expanding another." How true.
I read every comment to the online Heritage newsletter like I usually do in all of these matters because that is how you really get a pulse on what people think. In this case the Heritage subscribers were offended because they had paid into the two programs (without saying how much) over their working lives & resented the word "entitlement." Now I know RTE subscribers know better because I have featured the correct documented answers several times regarding Social Security & Medicare – but here we go again.
It is discouraging to think this is the level of understanding of people who subscribe to the Heritage newsletter. Not a good sign for you & me.
The Social Security benefit formula is steeply graduated in favor of lower contributions meaning that the program is a partial redistribution of income from beneficiaries who earned high wages to those who earned low wages – i.e., a welfare transfer system. Establishment of each person's Primary Insurance Amount (PIA) is based on their lifetime earnings adjusted to the wage index. The 2012 benefit formula calls for 90% of the first $767 earned, plus 32% of the amount over $767 to $4,624, plus 15% of amounts over $4,624 per month up to the maximum payment.
The above benefit formula clearly shows the bias toward lower earners meaning higher earners pay for some portion of the benefits received by lower earners. Two thirds of our seniors depend on Social Security as the main source of their income & for one in five it is the only source of income but paying into the system is not something that in & of itself should make you proud or offended by the term entitlement.
Without Social Security half of all seniors would be living in poverty so naturally seniors love Social Security. If possible seniors love Medicare even more. Today's retiring baby boomers are the only people who have paid into Medicare their entire working lives. Medicare Part A is primarily paid for by the 2.9% payroll tax plus co-pays & deductibles paid for by the recipient while Medicare Part B is primarily paid for from funds taken out of the general tax revenues taken from the U.S. Treasury plus monthly premiums & shared co-pays & deductibles paid for by the recipients. The portion of Medicare Part B paid by seniors amounts to only 25% of the program's cost. Medicare Part D is under a similar arrangement as Part B & is 75% funded by the U.S. Treasury meaning that the drug plan constitutes a public subsidy of 75% of the cost of the program. Source Economics Of Social Issues by Sharp, Register, & Grimes.
So what's not for seniors to like – except that these programs are not financially sustainable? See above graph from Forbes. How unkind is it for our elected reps to let this continue until total collapse of the programs? It is the elderly & people over 55 who are dependent on these entitlement programs who will be hurt the most when the programs collapse. Just what will these people do then?
Accordingly, Social Security & Medicare along with Medicaid form the cornerstone of the American welfare state no matter how many times people claim they have paid into the programs over the years.
Hi Doug - On May 1, 1997, George Pearson a senior consultant to the Cato Institute published an article titled “Social Security a Permanent Fix” below is an excerpt from that piece.
ReplyDelete“In 1983, Allan Greenspan, now chairman of the Federal Reserve Board, and former Kansas Sen. Bob Dole, among other prominent and influential people, served on a commission that recommended repairs that were supposed to fix the Social Security system. Their recommendations were passed, Social Security taxes were raised and Congress declared that the problem was fixed until the year 2058.”
Doug - Why would you be surprised? Politicians, of all political persuasions have been buying votes for years via handouts (the "47%") and federal jobs. I just drove through Washington and VA and the urban sprawl is a sure sign of the housing of an ever growing bureaucracy.
ReplyDeleteAnd I fear it is not going to change until we hit the tipping point where the private sector can not or will not support the government anymore. The only question is when will be the exact moment we hit the iceberg?
I am certainly not surprised @ the politicians. I was surprised that people who took the time to subscribe to the Heritage newsletter had such a poor understanding of entitlements as shown by their being offended that the writer of the newsletter said Social Security & Medicare were entitlements. It is getting harder by the day to find people who understand the issues they are fighting for or should be fighting against.
DeleteTrue. I wish I had a dollar for every time I was making a speech about the FairTax and someone in the audience, usually a senior, would state that they could fix all our problems by cutting spending, then go on to tell me that everything except Social Security, Medicare and National Defense should be cut.
DeleteRemember one man's recession is another man's depression.
Two things. 1) We the People have to learn and understand that the $$ sent to SS recipients is subject to the whims of Congress. They can change the rules at any time. RTE, didn't they do this during the Reagan Administration? So We the People have to assume Personal Responsibility and realize that only the individual can do what is necessary to ensure a financially safe retirement. Forget relying on what "government owes you!" 2) DC talks about the tipping point. I agree. This country will self-destruct because of belief in false promises of being taken care of. We only hope that John Galt will be there and we have the intelligence to understand finally the importance and meaning of personal responsibility, free market capitalism, and the rule of law.
ReplyDelete