-
The Loss of Trust
June 18, 2013 | 32 comments
-
Sex and the Military
June 12, 2013 | 58 comments
-
Economics vs. ‘Need’
June 11, 2013 | 29 comments
-
Historic Rescuers
June 5, 2013 | 48 comments
-
Abstract Immigrants
June 4, 2013 | 31 comments
The Public Policy
Entitlement Reforms
If nothing is done, it’s today’s young people who are going to be dumped over a cliff.
For those of us who like to believe that human beings are rational, trying to explain what happens in politics can be a real challenge.
For example, that segment of the population that has the least to fear from a reform of Medicare or Social Security is the most fearful — namely, those already receiving Medicare or Social Security benefits.
It is understandable that people heavily dependent on these programs would fear losing their benefits, especially after a lifetime of paying into these programs. But nobody in his right mind has even proposed taking away the benefits of those who are already receiving them.
Yet opponents of reforming these programs have managed repeatedly to scare the daylights out of seniors with wild claims and television ads such as one showing someone — who looks somewhat like Paul Ryan — pushing an elderly lady in a wheelchair toward a cliff and then dumping her over.
There are people who take seriously such statements as those by President Barack Obama that Republicans want to “end Medicare as we know it.”
Let’s stop and think, if only for the novelty of it. If you make any change in anything, you are ending it “as we know it.” Does that mean that everything in the status quo should be considered to be set in concrete forever?
If there were not a single Republican, or none who got elected to any office, arithmetic would still end “Medicare as we know it,” for the simple reason that the money in the till is not enough to keep paying for it. The same is true of Social Security.
The same has been true of welfare state programs in European countries that are currently struggling with both financial crises and riots in the streets from people who feel betrayed by their governments. They have in fact been betrayed by their politicians, who have promised them things that there was not enough money to pay for. That is the basic problem in the United States as well.
We are not yet Greece, but we are not exempt from the same rules of arithmetic that eventually caught up with Greece. We just have a little more time. The only question is whether we will use that time to make politically difficult changes or whether we will just kick the can down the road, and keep pretending that “Medicare as we know it” would continue on indefinitely, if it were not for people who just want to be mean to the elderly.
In both Europe and America, there are many people who get angry at those who tell them the truth that the money is just not there to sustain huge welfare state programs indefinitely. But that anger might be better directed at those who lied to them by promising them benefits that were inherently unsustainable.
Neither Social Security nor Medicare has ever had enough assets to cover its liabilities. Very simply, there has never been enough money put aside to do what the government promised to do.
These systems operate on what their advocates like to call a “pay as you go” basis. That is, the younger generation pays in money that is used to cover the cost of benefits for the older generation. This is the kind of financial pyramid scheme that got Charles Ponzi put in prison in the 1920s and got Bernie Madoff put in prison in our times.
A private annuity cannot play these financial games without its executives risking the fate of Ponzi and Madoff. That is why proposed Social Security and Medicare reforms would allow young people to put their money somewhere where the money they pay in would be put aside specifically for them, not used as at present to pay older people’s pensions, with anything left over being used for whatever else politicians feel like spending the money on.
It is today’s young people who are going to be left holding the bag when they reach retirement age and discover that all the money they paid in is long gone. It is today’s young people who are going to be dumped over a cliff when they reach retirement age, if nothing is done to reform entitlements.
Yet the young seem not to be nearly as alarmed as the elderly, who have no real reason to fear. Try reconciling that with the belief that human beings are rational.
COPYRIGHT 2012 CREATORS.COM
About the Author
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
Letter to the Editor View all comments (43) | Leave a comment
More Articles by Thomas Sowell
More Articles From The Public Policy
http://spectator.org/archives/2012/08/29/entitlement-reforms
Follow us:
ADVERTISEMENT
SPONSORED LINKS
FLASHBACK TO: 1995
-
Pope Culture
A man of faith in a godless age is hitting Americans where it hurts.
-
Why the GOP Does Not, Like, Totally Suck
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
-
Dames at Sea
-
In the Absence of Guns
In Britain, defending your property can get you life.
-
The Metaphysical Martini
-
Counting the Costs of Clintonism
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
-
Chuck McHagel
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
-
The Legacy of Old John and Mother Fresh-Roasted
-
It’s the Best Time of the Year
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
-
The Bush Crack-Up
Was the President done in by the economy, or by the politics of the economy?
Clip of the Day
ADVERTISEMENT
Appleby| 8.29.12 @ 7:12AM
I can explain the disinterest of the "young people" as to the fate of Medicare and SSI: "young people" believe they personally will never be "old people." Young people believe in their hearts that they will always be young people. That's why so many of them say they plan to retire in their fifties (a million years from now) but admit that they are not saving any money or making any plans past next semester -- except perhaps looking with sneaking covetousness at what their parents have and planning to inherit it. (That trick frequently doesn't work. I have a cousin who has not spoken to her mother who is now 102, when she realized that her mother was going to outlive any inheritance she might have provided.) They believe that they can loot the neighbourhood store and burn it to the ground, and that tomorrow "someone" will rebuild and restock it and life will go on just as if nothing had happened.
And they believe against all evidence that no matter what happens in the world around them, they will never wake up one morning and find out that The Man is not their parents any more -- it's THEM.
Slacker| 8.29.12 @ 11:23AM
Give the young people a break. There is no historical precedent for grandparents purposefully screwing their grandchildren. How are young people supposed to process something this abnormal? This isn’t supposed to happen.
Baby boomers surely challenge the premise that human nature does not change. Maybe we really are postmodern.
JD| 8.29.12 @ 11:31AM
I am young people, and I can tell you the problem - young people are not politically aware. There are a few who think they are, and they vote for the likes of Obama based on the worst of rationales. They are extremely gullible. But they are not truly aware, and they are a minority.
Most live by a simple mantra: "politics sucks". They don't want to talk about it, hear about it, or deal with it. It's not that they think entitlements are stable. They just don't want to think about them at all.
Slacker| 8.29.12 @ 12:49PM
For the young, political engagement hardly matters because the country is too far gone to save. They are behaving rationally when you consider where they are in the Ponzi scheme.
JD| 8.29.12 @ 3:17PM
I don't see enough awareness to call the behavior rational, even if it's the same behavior that might result from awareness.
Slacker| 8.29.12 @ 5:12PM
A rigged game draws little attention. Keep in mind anyone under 25 has been told, again and again, not to expect social security. This is their paradigm.
MK48| 8.29.12 @ 11:41AM
I say if young people believe in this wealth exchange it's the PARENTS fault.
and they deserve everything they get.
Butch| 8.29.12 @ 5:32PM
Well, you're right, MK48. My kids are now in their early 30s, but they were raised as Rush Babies and they are both still conservative. I even carefully screened their colleges to minimize the left-wing propaganda exposure, and strongly recommended that they study accounting and finance (business administration is very conservative).
Two girls, now a financial analyst and a C.P.A., they both understand that I, and they, got screwed as a result of Social Security. They both understand that I will never get back the value of what I paid in had I plowed that same money into private investments, and they will never inherit the balance upon my and my wife's demise.
Parents matter. I made mine conservative to KEEP THEM SAFE; it was my duty as a father.
Alan Obama Fan Brooks | 8.29.12 @ 9:12PM
America will never reform its institutions because it can only do business-- nothing more. It is too large a nation for adequate institutional reform.
Your skools will always be substandard, and your prisons will always be atrocious; your Justice System recidivist.
MelvinNC| 8.29.12 @ 7:26AM
There has to be a common good and a common goal for this Nation to follow. Yes there has to be entitlement reform, but that reform just can't be focused on the lower incomes, this reform must also include corporate entitlement reform.
The Financial Sector, the Agricultural Sector, the Manufacturing Sector, and others. The millionaire News Presenter Tom Brokaw gets farm subsidies from the Federal Government.
Tom Brokaw is a gentleman farmer. He doesn't do it for a living, he does it for a hobby and a tax haven.
It's easy to go after the lower incomes because they don't have a direct line the politicians as is the norm with Crony-Capitalism. This is both sides of the political isle. Democrats like to pin Crony-Capitalism on the Republicans but fact is, the Democrats own Crony-Capitalism.
We desperately need reform, but it has to start at the top and work it's way down.
jothepro| 8.29.12 @ 9:01AM
Hey Melvin, You ever hear of "Dodd-Frank?
MelvinNC| 8.29.12 @ 9:24AM
I sure have, that piece of Legislation was written by two of the biggest benefactors of Crony-Capitalism that have ever slimed the earth.
Besides having reform that most of us desire, cannot come about when it is written by two Congressmen that should be in prison for corruption.
Thats like having a fox who has just eaten his fill of chickens, draft an essay, of how to stop foxes raiding the hen house.
There is one quick fix though and that is term limits. Limit Congressmen and Senators to two consecutive terms. This alleviates the,
"Little Kingdom mentality."
TLP| 8.29.12 @ 4:40PM
Do you know that President Apocolypse is INTENTIONALLY DEFUNDING SOCIAL SECURITY?
The only Tax that he Continually Cuts, is FICA.
The only means of Funding Social Security.
Maybe somebody can tell me how this is a Good Idea.
That Lying B*tch Evelyn, for example.
Von Mises Jr| 8.29.12 @ 7:30AM
Obama stole $716 billion from Medicare that were paid in as "Premiums" and he redistributed it to buy votes from the poor, sick and illegal aliens.
If you are just retiring after 30 years and earned $50K in current inflation adjusted dollars, then you paid in $43,500 to Medicare. Hey grandma, Obama just took your premiums paid over a lifetime to fund his socialist health care plan.
But as the great Dr. Sowell points out, if you have recently graduated from High School or college and you can get a job paying $50K, you will pay $186K over 30 years into Social Security. But it will be broke in 25 years or less. So if you vote for Obama and the (P) Regressives, you need to have your head examined. Either you are insane, or you graduated "Stupid."
Al Adab| 8.29.12 @ 9:35AM
Just imagine what that 186K would be worth if invested in a privately owned 401 or IRA. Gosh, people would have the cash to cover their own expenses, health care, mortgages etc. and could control their own futures rather than being hostage to a fixed stipend from on high. What is the definition of those forced to work to better others and then dependent on others for their very existence?
Von Mises Jr| 8.29.12 @ 10:35AM
That's why liberals are afraid of people who can take care of themselves and know it.
DRed| 8.29.12 @ 10:28AM
Obama stole 726 billion? Oh, you mean the planned future savings in Medicare. Yeah, well, that's a bit different than stealing. But I know, I know, Rush told you it was stealing, so you don't need to actually bother with the facts. It's odd that so many conservatives who allegedly want to shrink the federal budget are so opposed to saving money, though, isn't it? I mean, don't you want to reduce spending on Medicare? Especially since super serious Paul Ryan's plan also proposes to cut 700 billion from Medicare to use to buy votes from the rich and the healthy.
Tom Kyba| 8.29.12 @ 12:31PM
Blah blah blah rich Republicans blah blah blah Rush tells evryone what to think blah blah blah.
DRed| 8.29.12 @ 1:13PM
The Affordable Care Act caps the rate of increase in Medicare spending over 10 years to GDP growth plus 0.5 percent. This is where 700 billion that Obama is 'stealing' from Medicare comes from. Let's look at Paul Ryan's Roadmap and see what he thinks Medicare voucher spending should be. "“The per capita cost of this reformed program for seniors reaching eligibility after 2023 could not exceed nominal GDP growth plus 0.5 percent.”
Obama's plan is to cut spending by spending more efficiently. Ryan's plan is to cut spending by cutting benefits in order to help maintain the revenue neutrality of his massive tax cuts for the rich.
Slacker| 8.29.12 @ 3:31PM
Oh, you actually think this mess can be fixed. Hahahaha.
Both plans are pure fiction. Why on earth do you care and how many fairies can Zeus fit into Mt. Olympus?
Drunken Sailor| 8.29.12 @ 3:35PM
Read carefully.
Social Security and Medicare are the two largest federal programs, accounting for 36 percent of federal expenditures in fiscal year 2011. Both programs will experience cost growth substantially in excess of GDP growth in the coming decades due to aging of the population and, in the case of Medicare, growth in expenditures per beneficiary exceeding growth in per capita GDP. Through the mid-2030s, population aging caused by the large baby-boom generation entering retirement and lower-birth-rate generations entering employment will be the largest single factor causing costs to grow more rapidly than GDP. Thereafter, the primary factors will be population aging caused by increasing longevity and health care cost growth somewhat more rapid than GDP growth.
http://www.ssa.gov/OACT/TRSUM/index.html
So Obama's idea to save money is tie the cost of medicare to the GDP even though the trustees say it will increase beyond the GDP due to more people retiring, correct?
So if you have more demand but are expected to get paid less and less for your services doctors will quit seeing Medicare patients, as is already happening. Result less safety net for the elderly.
Doesn't matter how cheap it is if no one can use it or find a doctor willing to take it.
Tell me again who is pushing granny off the cliff?
DRed| 8.29.12 @ 3:52PM
You meant to say Obama and Ryan's plans tie Medicare expenses to GDP. Medicare can't keep up with increasing medical costs. Republicans seem to understand this, except when a Democrat has a plan to reduce Medicare expenditures. Then you start screaming about death panels and telling the government to keep it's hands off your Medicare.
Jacob McCandles| 8.30.12 @ 12:55PM
You should love Ryan's plan. It uses means testing to determine how much premium support a person receives. This is income redistribution. What his plan also does is give those under 55 an option to CHOOSE a plan that fits their needs. One size fits all Medicare will be one of these choices. The reason the libs fear this plan is this: they know that those who opt for the private system will have easier access to care, shorter lines, more choice in doctors, etc.
JD| 8.29.12 @ 4:00PM
DRed, there is literally no difference between the plans as you described them, yet you inferred a big difference out of nothingness. It is nothing more than your desire for it to be true that says that Ryan would reduce benefits while Obama demands more efficiency.
You ask us to join you in reading their minds, to read minds as you would have us read them, and then to imagine that intentions become reality absent anything that would actually make them so.
DRed| 8.29.12 @ 4:32PM
There are differences in the plans, but as you say, there is no difference in what they claim their plans will cost. So-if Obama is 'stealing' 700 billion from Medicare, why is the Ryan/Mittens plan not also stealing 700 billion?
CJW| 8.29.12 @ 7:22PM
"Cap the rate of increas" means that Medicare will pay less to doctors and hospitals. Doctors and hospitals cannot "cap" the increases in costs they will have to pay for rent, employee salaries, malpractice insurance, etc.
Only in the make believe of Obama economics believed by the brain dead obamadolts is this not a cut. There is no question Medicare will pay less to doctors and hospitals.
Von Mises Jr| 8.29.12 @ 3:15PM
Ignore the troll. MoveOn is wasting $10 per hour but it doesn't mean you have to waste your time, Tom.
DRed| 8.29.12 @ 3:26PM
Hey, look who can't counter an argument of mine again! $10 an hour sounds good to me-do you earn that much, Von? You have a job, right?
TLP| 8.29.12 @ 4:51PM
Douchebag omits the FACT that The Muslim's own HHS B*tch, Frau Sebelius Killer of Babies, ADMITTED to a House Committee, that the Money that was Stripped from Medicare to Fund Soviet Care, was DOUBLE COUNTED, thus putting the Lie, to everything this Leftist Communist Operation, at 1600 Pennsylvania Ave. has insisted, since Day 1.
Everything out of their mouths, is a Lie.
By any means necessary.
Don't waste your time with him.
He's nobody.
DRed| 8.29.12 @ 5:03PM
Hello Timothy. This is what the government has been doing for decades. Money saved on Medicare is sometimes spent on other things. It's like if you didn't buy beer this week, and bought your kids an xbox game. You would have saved money on beer, right? Or would that be DOUBLE COUNTING?
Indy| 8.29.12 @ 7:54AM
Please fix the typo at the top. Sowell deserves better. It should be young people, not "youn"
TeaPartyNow| 8.29.12 @ 10:26AM
I believe that America would be better off without universal welfare programs like S.S. and Medicare. What we are saying when we continue is that every person in America needs to be on welfare after a certain age. To me that in and of itself is insane. So obviously we have to ween America off of it. But the make a fatal mistake if they refuse to reform disabilities benefits too. I bet that more than 90% of adults who receive S.S. disabilities, do it fraudulently, and are working on the side because they are not really disabled. I personally know of four men in their late forties who get S.S. disabilities, and each of them work under the table and they do things that a disabled person would not be able to do. And I have reported these people. S.S. does not respond to reports of abuse anymore. I just believe that America would be better, if so many weren't hand fed welfare by our current welfare mentality.
And no, I don't believe Romney would do it. He already threw the whole of his party platform under the bus, just after it was sworn to. As reported on C-span. He won't fight for anything.
Louis Jenkins| 8.29.12 @ 11:40AM
Mr. Sowell, another great article. You were on key the entire time. And yes, the young people today do not worry, afterall, once, and if they have a job, the money used to fund social security, medicaid, etc., is taken off the top before they even get their take home pay. It's great to have that option, which is wrong, and it's required by Federal law. They don't see the price, and therefore, do not miss it. We should be paid in cash, and then go to windows marked SS, medicare, medicaid, etc. Then the youngsters would see what the price is for a secure "old age." I have paid in all my life, since 16 years of age, and if the ponzi scheme goes bust, I'm out of luck. Roosevelt, you are a bastard for this program.
TLP| 8.29.12 @ 4:54PM
"Thomas Sowell, another great article."
Of course.
He's Dr. Thomas Sowell.
An American Treasure.
Stkman| 8.29.12 @ 11:58AM
A big point was missed in this article. Minorities vs whites and those who work vs those who refuse to work.
White kids are already being screwed and have been for years. Minorities, and lets be honest, blacks in particular take advantage of every opportunity to scam the system. This will continue until things change.
First we should pass a law, a very simple law that states that if you quit high school for any reason you are not entitled to any social benefits unless you left high school because of an injury that affected your brain. There is no excuse for quitting high school when you live in a society as advanced as ours.
Second, the Government must live up to the Constitution and refuse to see anyone's skin color.
Third, before any welfare is handed out means testing of a family should occur. If you are unwed and have a child why should you get a voucher for rent if your parents have an extra room in their house? Why should you get free medical from the county if you are under 26 and one of your parents could insure you?
It's time we evened the playing field and told everyone no matter their color what is expected of them as an adult.
TLP| 8.29.12 @ 4:59PM
The Big Ag Companies, in California, are complaining that they're gonna have to let their Crops rot in the fields, because they can't find enough people to pick it, at $12 an Hour.
Meanwhile, The Muslim has gutted the Welfare Reform LAW, of its Work Requirement.
Hello?
Ian Cognito | 8.29.12 @ 2:17PM
Other Entitlement are unconstitutional, racist, and costly - directly and indirectly. Affirmative action, AA, entitlements were enacted to provide advantage for minorities/sex. Primarily, blue collar white men were the target. Racism is not institutional, unalterable or race specific. AA laws targeted one race, and one sex. The prejudice in America is ameliorated. No law or goal is ever accomplished absolutely. Racists of all skin colors cannot be swayed. AA rules devalue merit as a goal. Rewarding race based opportunity (not merit) cheapens achievements honestly earned, and precludes meritorious achievement. AA rules have direct and indirect costs-lost productivity, efficiency - due to a less capable hire - can be directly compared. The indirect costs that arise from a consuming, race based perspective deliver a poor work ethic, perpetual focus upon racial slights, prejudice, et al, is a cancer that negatively infests the workplace. Human nature and behaviors can be compelled when the punishments are high. These too have a price. They follow an analogous fixation on race, a reactionary work ethic, and punishments. The goals of AA rules are fulfilled; as much as possible. AA must end; an expiration date set. Fundamental Civil Rights are indentured to a well meaning but impossible policy that promulgates divisiveness and pits merit against bribery.
aware| 8.29.12 @ 3:03PM
How anybody could still believe that career criminals and their schemes could be "reformed" defies explanation.
Thom| 8.29.12 @ 5:04PM
Try finding Americans that can do simple compound math ..... The lower 1/3rd of SS recipients have nothing but SS as an income. SS pays a minimum wage existence on average. A life time minimum wage earner will receive 6% of their life time payments each year while a middle class earner will receive about 2/3rd that. The upper 1/3rd can't live long enough to get the "capped" income taken for SS. Warren Buffet would get a little more than I if a portion of his was not taxed away each year. He paid several times what I will have paid into SS.
Ida May Fuller and millions of others receiving their first SS checks paid into SS about one month's benefit. Ida received 420 times her contributions to the system. The average was only 84 times what was contributed. The unfunded liabilities of SS and Medicare were both front loaded and the first generation to receive benefits made out like bandits. An elementary understanding of compound math marked both government programs as Ponzi schemes from day one. Supporters of these programs are thieves dressed in pin stripe suits.
Thom| 8.29.12 @ 5:05PM
To bring SS back to the conditions that existed when SS was passed would require the minimum SS retirement age being raised to at least 72 years old now or finding about 300 million more workers in the US to pay that promised 6% tax max. There are no jobs for the tens of millions what would have to work to that age. Finding enough workers to pay the bill is simply a mathematic impossibility. Morons say SS can be fixed with "means testing". Wrong. SS is already "means tested". The more your means the less you get from the system. Improving upon this would simply be thief from those that worked and saved for retirement along with paying over 15% of their incomes into these Ponzi schemes while rewarding those that produced little to nothing over their life and already get more from SS than they pay into the system.
Thom| 8.29.12 @ 5:05PM
The selling lie of SS was that everyone would get benefits and that the tax rate would not rise above 6% or incomes above what today is around $42,000 would be taxed. Truman delayed the jump from 3% to 6% that was to occur in 1950 till 1960. It would have hurt his re-election chances in 1948 to raise taxes.... Go figure. That contributed to the rapid rise in rates starting in the 1970s and beyond to where they are today and SS is already running a permanent deficit that only grows worse with each passing year. Over 4 Trillion of National Debt is owed to SS. That amount is often excluded from the National Debt figure because it is "special". There is no backing for that debt just like the rest of the soon to be 16 trillion total. Someone has to earn the income to pay the SS and Medicare unfunded liabilities. The Marxist¬Democrat solution is always the same which is what got us to where we are today. You don't have to be Einstein to grasp the insanity that got us here.
Most Americans can handle elementary school math but reject the results because "government" enables them to through lies. The "fleecing" is coming to an end. What's wrong with future generations paying twice the current SS/Medicare tax rates I did over my working life? I paid more than twice the tax rates my parents did. Most don't want to deal with the truth of the matter.
The math wins every time.
Thom| 8.29.12 @ 6:40PM
66% of those aged 18-29 that voted in 2008 voted for King Obama. Most of those have or are attending a college or university and will pay only a fraction of the actual cost of such. Most of their life into their late 20s or early thirties is “free” or “subsidized” to a large extent. This group doesn’t act concerned about things like entitlements because they are functionally ignorant of the facts of how these entitlements are paid for just like they have no idea how much of their “education” is actually paid for by someone else. One would think one of the purposes of an “education” would be to educate.
Ask a group of these wonder children why the cost of “education” has an average 8% annual inflation rate for as far back as the 70s and be prepared to see a whole family of deer looking back….
Carroll | 8.29.12 @ 11:22PM
thank you for you sharing...
If you make any change in anything, you are ending it "as we know it." Does that mean that everything in the status quo should be considered to be set in concrete forever?