Entitlements
An Opportunity For America To Remain Great
Social Safety Net Basics
In it's simplest form, the entitlement debate can be boiled down to the following key points:
FIrst, entitlements aren't government spending, not in the conventional sense of the word. Entitlements are not a grand redistribution of wealth from the hard working and wealthy to the lazy and poor. These programs are our money. We pay into these programs, the money is put into trust funds so that it will be available to us when we retire.
Second, the rise in the costs of entitlements are not government waste. In the case of Social Security, the rise in the cost of the program is primarily attributed to the increase in the number of retirees as a result of the baby boomers entering retirement. In the case of medicaid and medicare, the growth of the programs is the result of the rapid growth in healthcare costs. In fact, the government is actually far more efficient at distributing benefits than the private sector. Government costs are going up too fast, but they are going up much more slowly than private sector health insurance costs.
Third, our entitlement programs are not bankrupt, we are not "broke" as a country. Social Security has a small deficit over the next 75 years. Medicare and Medicaid have much more significant funding issues, but these problems are not the result of government inefficiency, but rather the combination of rising healthcare costs and the large increase of beneficiaries with the retirement of the baby boomers. At the same moment we find ourselves considering reform for these programs, we have record amounts of cash and profit in the hands of corporations and the wealthiest Americans. We most certainly are not broke.
Fourth, any funding issues that currently exist have been foreseeable for decades. Because programs like Social Security are mandated to look ahead and report on program viability within a 75 year window, we have known for decades that this day would come. Somehow we failed to prepare as a nation and now the modern right is using this opportunity not to solve the problem, but to kill ideological targets that 56 million Americans rely on to avoid a life of poverty.
Forgotten Facts About The Entitlements Debate
The facts above provide a useful framework when discussing current suggestions for reform. Again, before getting mired in the details, here are some helpful points to keep in mind:
First, changing or eliminating these programs will not eliminate the need for these programs. If we were to privatize Social Security and Medicare for example, if we were to eliminate the programs entirely, the same number of retirees would require some form of retirement income. The same number of retirees and disabled would require healthcare. The question is not whether or not we retain or eliminate the program, but rather how we can meet the very real need of our citizens.
Second, we are the wealthiest, most powerful, and greatest nation in the world's history. Are we also a nation that refuses to take care of our elderly and our sick? How can a nation this great make such a decision? How can we look at each other and say the money you paid into social security for your retirement is no longer yours? America is greater than this, we are exceptional precisely because we have established a safety net that protects all of our citizens. We must not forget our history or our character. We agreed as a nation, as FDR put it in 1935, "to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-stricken old age" I think the overwhelming majority of Americans still agree with this ideal.
Proposed Solutions
Solutions to our Social Security and Medicare trust fund shortfalls fall largely into two categories, raise additional revenue and cutting benefits combined with privatization. While it is likely that some blend of these measures will be the ultimate outcome, we should at least take a moment to consider our options.
Those who oppose increasing revenue argue that the wealthy and the corporations should not have to bear the burden. Yet the simple fact is that the wealthy and the corporations have benefitted most from Social Security and Medicare. With the advent of these programs, the burden of providing pensions and healthcare to employees and retirees has essentially evaporated. Since the creation of these programs, we have seen the wealth and income of corporations and wealthy individuals increase to historic highs. It's also worth mentioning, that we had an opportunity to use our budget surplus from the Clinton administration to secure these programs. The Bush administration opted instead to give tax cuts, the majority of which went to the wealthiest Americans. Furthermore, these tax cuts squandered the last decade before baby boomers started retiring. Rather than leverage the larger baby boomer tax base to anticipate the future baby boomer beneficiaries, the Bush administration opted instead to enact tax cuts.
Those who seek to cut benefits and privatize these programs should understand two basic points. First, as mentioned above, cutting benefits does not cut need. Doing so simply adds more burden and in many cases more suffering on the backs of America's middle class.
Second, privatization is not the solution for this problem. Medicare, the program with the biggest shortfall, is primarily the victim of rising healthcare costs. This is a private sector issue. In fact, Medicare and other government healthcare programs have much lower rates of cost increases than does the private sector. Privatizing programs like medicare would only increase our costs while reducing the benefits provided. In short, privatization would make the problem worse. We need to find a solution to the rising healthcare costs, not reduce the benefits we provide to the elderly. For Social Security's part, retirement should be a guarantee, not a gamble. Efforts to privatize should be tempered with a minimum guarantee of benefits equal to Social Security. Those who talk of privatization praise the upside, but seldom mention the downside. Social Security has been a guarantee, and any solution provided should guarantee benefits. Any attempt to privatize should be tempered with the reality that Social Security only requires a modest funding adjustment to overcome the one time baby boomer bubble and then it will be stable for the foreseeable future. Put simply, Social Security’s problems are not chronic or structural, it simply faces a one time historical period where the largest generation in our nation's history will be entering the system. Once this problem is solved, it is solved for all time.
Our Social Safety Net As Economic Stimulus
But what of the benefits of our entitlement programs? Not just the basic fact that millions of retirees and disabled americans receive benefits, but rather the economic benefits that Social Security and Medicare provide to our nation's economy? As we debate the future of the programs in this era of cuts we seldom hear about the positive impact of these programs on our economy.
Our social safety net plays a vital role in helping to stabilize our economy during economic downturns like the one we are currently experiencing. The fluctuations in our economy would be much greater if not for the stabilizing affect of our social safety net programs. Even during economic downturns millions of retirees receive their benefits and so are relatively unaffected by the downturn. This means they continue to spend just as they always have. Likewise for programs like unemployment insurance. These programs help to dampen the effects of downturns and recessions and help to quicken our recovery by providing much needed injection of consumer activity into the economy. How far might this recession have fallen if in addition to millions of unemployed, we also had 50 million retirees without a means to support themselves?
The social safety net is not just a stabilizer, but also an economic stimulant. Some have pointed out that our social safety net removes some of the burden placed on private companies to provide healthcare and retirement benefits to their employees. This effectively reduces the cost of labor allowing our companies to better compete with companies from around the world whose governments provide healthcare, education and retirement benefits to their citizens. We need look no further than Ground Zero and the World Trade Center to see how this can work. Many are unaware that the steel for the World Trade Center is coming from Germany. Many also are unaware that the average hourly rate for German workers is $48/hr while the American worker only earns $32/hr. German workers and German companies benefit from a national healthcare system which helps to keep prices of German products down while paying German workers higher wages than their American counterparts.
It’s A Choice, Not A Problem
The simplest point of all is that the decision to preserve our social safety net is just that, it is a choice. If we choose not to preserve Social Security and Medicare, it is is not because of any inherent flaw in the system. It will not be because of any inherent flaw in government or mismanagement, it will simply be because we have chosen not to. According to the CBO, we need just 0.6 percent of GDP to fix Social Security forever. The CBO notes that in 2010 0.6% of GDP would amount to $90 billion. That is our choice, spend 0.6% of GDP so that all Americans, now and in the future can rely on Social Security, or we can choose not to spend the money. In contrast, we chose to spend between $3.7 Trillion and $4.4 Trillion on the wars in Iraq and Afghanistan. We did this in just 10 short years. That was a choice. What choice will we make about the future of our social safety net, and the future of our citizens?
