THEY AREN’T ENTITLEMENTS!

I have been absent from my post here for too long. Some personal obligations and health concerns have been occupying too much of my time. There are, of course, several topics of current interest begging for my wisdom. I am going to wade into the budget battle from a different perspective.

In almost all the talk about curtailing federal spending, the so-called entitlements keep popping up in the crosshairs of those targeting specific programs.

What are these entitlements? Well, the most popular ones under attack are Social Security and Medicare with Medicaid spending not too far behind. I will deal with the first two only.

Folks, these programs are not entitlements, at least not in the sense implied by many that has engendered perjoratives by the ton not only for the programs themselves but for the folks who benefit from them.

Social Security is the common term, but in reality the program is known as OASDI and that stands for Old Age Survivors and Disability Insurance. Get that? It is insurance. It is not a handout. It is INSURANCE!

The benefits paid out under Social Security—er—OASDI, are merely a return on the insurance premiums paid into the program during their working years by the vast majority of Americans, even Congressmen.

What are they insuring? Well survivors of workers who paid in are guaranteed a level of benefits. Those workers who have paid into the system long enough and then become unable to continue working are eligible for benefits.

And of course the old age part is represented by the millions of Americans who have reached retirement age, or the eligibility age established by Congress and who have elected to draw on their benefits. Many accept a discounted payout in return for not waiting until they reach the age when the maximum benfits kick in.

Well geez, you say, why don’t these folks have private pension plans that pay them a tidy sum in retirement?

Well, geez, I say that a goodly number of them do, whether it be company or government pension plans or an array of investment vehicles available which may or may not carry tax advantages.

Two facts about these other retirement plans you may not think to consider.

The first is that private company pension plans have been known to go broke. Just ask thousands of steelworkers. And government pension plans can sometimes be altered and cut at the whims of legislators.

The second is that these investment vehicles usually come without any protections against a decline in the very markets that support them. My brother and some friends moaned with despair when the recent recession took an axe to their 401k’s. Some have recovered to their previous level but without the anticipated gains during that period. In other words, they’re still behind where they were.

It is possible for folks to entirely lose their retirement investments either through market calamities or their own foolishness.

But we have this wonderful INSURANCE program, under the auspices of the federal government, that provides a safety net of hopefully an income allowing them to sustain their lives if not economically thrive.

My own monthly payments provide me with food and shelter and the few luxuries I feel are necessary for me to do more than merely exist. I could not write this blog without my high speed internet service, for instance. And my Hi-Def TV with cable gets a good workout. Luring in the dancing girls with caviar and champagne is a little dicier.

Now you take all those firm believers in the capitalist system, in free enterprise, who happen to lose or experience severe diminution of their private retiremnt funds, and if they’ve paid their insurance premiums into OASDI, they will still enjoy that safety net on the third of each month.

But, you ask, you call these premiums when we are actually taxed for these benefits?

Of course I do. You can call the 6.2% that comes off the top of every paycheck to fund SS a tax. It certainly is not voluntary. But it is a premium nonetheless. If it looks like a duck, …etc.

As you might suspect, I view Medicare in the same light. The 1.45% “tax” is for health insurance, so when you attain the age of eligibility you will have coverage regardless of your medical history or pre-existing conditions or any other impediments you might meet when trying to obtain coverage through private insurers.

Again I am Exhibit A, having nothing to complain about in my coverage or treatment for several conditions since I qualified for Medicare. In fact, Medicare operates so much more efficiently than private insurance, even given the waste inherent in government programs and the occasional news-making fraud, that it is at least one good argument for universal health care. But I will leave that particular topic for another time.

Now you have politicians, throughout the ideological spectrum, who seek to cut or reform or drastically change both Social Security and Medicare. While doing so they call them entitlements with a sneer giving the impression that the recipients or beneficiaries are taking everything out while putting nothing in.

HOGWASH!!!

One plan offered to change Medicare for future enrollees would eliminate the coverage that is currently in effect and require those folks, having paid their premiums for their entire working lives, to now go out and seek a private health insurance policy at a much higher premium that may or may not be subsidized/fully funded by the government.

Now, let’s see. You paid x amount of premiums for coverage under, say, Humana, that was to be in effect when you reached a threshold age, and your birthday came and Humana told you, “Thanks for your premiums. We’ll keep them, but instead of covering you ourselves you have to go to Highmark and pay additional premiums at a much higher level. Oh, and while we wouldn’t reject you for pre-existing conditions, they very well might. And don’t worry about the extra premiums. We may find a way to pay at least part of them for you, but we won’t promise anything.”

Or, think of these programs in this way. Workers, to be accurate, have bargained an insurance contract with America, the same as one who obtains car insurance from Allstate and is duly enraged when he suffers a loss and Allstate decides it will no longer pay, but still keeps collecting the premiums.

If that scenario occurred wouldn’t you be pretty  pissed? Well, in essence that’s what Paul Ryan’s Medicare overhaul plan would do.

Other variations on this scenario are no more fair or palatable.

Back to Social Security. The minimum age to draw benefits has been toyed with and the “premium” raised from time to time. Realtively minor adjustments compared to the desire to allow workers to put their “premiums” into private investments if they opt to do so.

Well that’s fine until that money disappears down the shithole surrounding Wall Street. What the nation will be left with is a bunch of oldsters truly looking for a handout instead of drawing benefits based on their premiums that should have been going into the SS Trust Fund.

Now I will not insult you by claiming that there are not financing problems with these programs either immediately or farther into the future. But there are two main reasons for these dollar woes.

The first is actuarial. That is how I express the fact that the aging of the population, together with longer life spans, means fewer workers paying these premiums to support many more beneficiaries.

The second is that while Medicare costs are swiftly rising, this in no way is a sign of fatal flaws in the program itself. Besides the actuarial effect, medical costs in general are rising faster than the overall rate of inflation.

I don’t have an easy answer to these problems. I do know the answers commonly espoused are mean-spirited if not downright sadistic.

Elsewhere in this forum I have propounded a series of cuts in the federal budget that in no way touch my favorite “entitlements”. Implementing them rather than attacking the less fortunate will not solve all our fiscal woes. But doing so will buy time to take a thorough, more reasoned approach to ensuring the future solvency of my babies.

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