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Uncle Sam Continues to Stick His Head in the Sand on Entitlements

America needs to rethink unsustainable programs that send so many taxpayer dollars to well-off seniors.

350jb/Dreamstime.com350jb/Dreamstime.comSocial Security and Medicare are the two biggest programs driving the growth of our debt. What's more, they provide benefits for senior Americans generally, without regard to need. It's time to change the way we think about these programs.

It's difficult to overstate how much of our budget goes toward these programs. Numbers from the Congressional Budget Office show that in the past 10 years, 70 percent of real spending increases have gone to Social Security and Medicare. In fiscal 2017, the federal government spent $4 trillion. Of that, 40 percent—$1.5 trillion, or 8 percent of our gross domestic product—went to Social Security and Medicare. These two programs will consume $3 trillion in the next decade, and that doesn't include the interest charged on Uncle Sam's credit card.

In an article for National Review titled "The Entitlement Crisis Ignored," the Manhattan Institute's Brian Riedl reports that within three decades, the Social Security and Medicare systems will run a cash deficit of $82 trillion—including interest. "The rest of the federal budget roughly balances over 30 years," he told me in an email detailing his research. He added: "In other words, the entire long-term deficit comes from these two programs' shortfalls. The national debt would reach 150 percent of GDP" at the current rate.
We have known for a long time that these programs are unstainable. Yet no one elected to office seems to have the political courage the state the obvious—that these programs are insolvent and in need of reform.

As Riedl wrote to me, "popular solutions will not work. Doubling the 35 percent and 37 percent tax rates to 70 percent and 74 percent would close just (one-fifth) of the long-term Social Security and Medicare shortfall. Cutting defense to European levels would close just (one-seventh) of it. Nor can economic growth or inflation fix the gap."

The main beneficiaries from Social Security and Medicare—meaning the main beneficiaries of most of our budget—are seniors. Only about 30 percent of Social Security benefits are not paid based on age. (That's the money going to disabled workers, dependents and survivors.) The same is true of Medicare, though to a smaller degree. It's also worth noting that about 28 percent of Medicaid's $400 billion in spending—federally provided health care payment for low-income Americans—goes to seniors. That's because seniors are poor, right? Not all of them.

Back in the day, not working meant becoming poor. As a result, seniors were overrepresented in the bottom income quintile. But this isn't the case anymore. According to combined data from 15 federal agencies in 2011, older Americans are in remarkably good financial shape compared with those of previous generations, as they've seen their net wealth go up by 90 percent since the 1980s. Older Americans are also doing well relative to younger Americans. According to the Pew Research Center, in 2009 the typical household headed by someone 65 or older had $170,494 in net wealth, compared with just $3,662 for the typical household headed by someone younger than 35. Not surprisingly, today's seniors are overrepresented in the top income quintile.

Yet those seniors as a group receive the largest and a growing share of our budget, funded by taxes on the relatively meager wages of younger Americans. The direct outcome is that as demographic trends progress, we're about to witness the most massive and growing redistribution from the relatively younger and poor Americans to their relatively older and wealthier neighbors.

From any serious fiscal or moral viewpoint—and particularly for the sake of helping those truly in need—Social Security and Medicare should be replaced with social welfare programs that cover all citizens, regardless of age, but only those who are too poor or incapacitated to take care of themselves. In other words, we should transition from a system based on age to one based on need. This is the best way to avert looming fiscal catastrophe and restore some sensibility to an indefensible system.

Photo Credit: 350jb/Dreamstime.com

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  • Tony Cr||

    Consider that almost all the income seniors derive from SS goes right back into the economy. Mine certainly does. There aren't too many of us who depend on SS (and who paid our taxes for, in my case, 50 years) that save a lot of it.

  • Art Gecko||

    I work all day for a dollar, the government takes the dollar from me and gives it to you, you come into my store and spend it ***ON THE CONDITION THAT I WORK ANOTHER DAY,*** and you act like you're doing me a favor? Dude, I don't owe you a dime.

  • Eman||

    Youre getting too hung up on the means and losing sight of the ends. If you cared about people the way tony cr does youd be willing to make other people make sacrifices for them too.

  • Elias Fakaname||

    Social security and Medicare are shitty inefficient programs. If any private programs were structured and administrated this way, the people behind it would all be in prison for a very long time. No wonder the costs of these programs are killing us.

  • Rat on a train||

    Marge: Where'd you get all the money?
    Grampa: The government. I didn't earn it, I don't need it, but if they miss one payment I'll raise hell.

  • Elias Fakaname||

    So do you give the money to the poor people who never paid in all that much on a needs basis (welfare)? Or do you give it to the affluent people who actually paid in most of the money in the first place? My father paid in a huge amount of money over a fifty year period, and receives relatively large SS benefits for it. At 84 he has still paid in far more than he has gotten out. Should he not be eleiblemto withdraw his own money?

  • Netizen_James||

    Do you really not understand how 'insurance' works?

    I've paid many thousands of dollars to my homeowners insurance company over the last 30 years, and never gotten a dime back. Shouldn't I be able to withdraw my own money when I sell the house?

    See how silly that sounds?

  • Nom de Sobriquet||

    "We have known for a long time that these programs are unstainable..."
    I know what the author meant, but the word "unstainable" is going into my political lexicon.

  • SQRLSY One||

    Monica Lewinski could have used an unstainable dress, dammit!

  • m.EK||

    Right after "interests". Really, we allow our children to fight wars over "interests"? We bribe other countries corrupt leaders for "interests"?
    I really enjoy seeing our troops in Afganistan marching through poppy fields, so I really understand what an "interest" is.

  • SQRLSY One||

    If they are going to means-test your Social Security benefits (more than they do already), then all pretense of it being a "retirement program" as opposed to a "welfare program" go out the window. And THERE goes a HUGE chunk of the support for it!!!

    WHY should richer folks pay into this "retirement" system, if they are NOT going to benefit from ?!?!?

  • SQRLSY One||

    Another way to put this is, bear with me…
    The illegal humans are paying for your and my Social Security paychecks when we retire, is the actual facts. They pay in, but have virtual zero chance of getting paid back. See…

    See "The Truth About Undocumented Immigrants and Taxes" (in quotes) in your Google search window will take you straight there, hit number one... AKA http://www.theatlantic.com/bus.....es/499604/

    Illegal humans can support SS, but not get bennies from SS, and all that is swell, 'cause they can't vote. When you ADD to them, RICH Granny and Grandpa are gonna hafta pay in, and NOT get bennies… THEY VOTE, dammit! Watch political support vanish, or watch revolution in the streets, on THAT one!!!

  • Elias Fakaname||

    Please stop with that bullshit.

  • Art Gecko||

    Social Security and Medicare are self-correcting problems. Eventually the money will run out and they will end.

  • SQRLSY One||

    Likely that the same could honestly be said of the entire fed-guv...

  • TrickyVic (old school)||

    Yep, it could be said for decades and decades.

    Over 20 Trillion and no end in sight.

  • Brendan||

    Any sort of reform will have to include a phase out. People of a certain age will never contribute and never be eligible to receive benefits.

    I don't know how to handle young people who've already contributed. Perhaps they can opt out with some sort of lump sum, or halt contributions with the understanding that future benefits will also be capped lower than they would have been.

    Simply telling any group that's contributed that they will get nothing after contributing for 10-30 years is as nonstarting as one gets.

  • the other Jim||

    You are probably right in general. But personally, as a 35-year-old who has been paying some degree of SS tax since I was 15, I would waive my right to any benefit whatsoever if I could be exempted from SS taxes from now on. Granted, I make more money now than I did when I was 15, but it would still be a fairly large amount of money I'd be forfeiting. I really don't want to wait around for several decades to see if the government gives me anything back, and pay much more into the system while I wait, if I could just start pocketing the payroll tax I pay now. Seems clearly better to me.

  • NotAnotherSkippy||

    3% phaseout of payments based on retirement year and 2% phaseout of contributions every year for 30 years and then close the programs. Everyone feels a bit of pain but the liability is capped. Then hold the budget balanced for the next 30-50 years and the debt isn't an issue.

    This is the only fair way given that we can't go back in time and kill the fuckers who made this monster.

  • Diane Reynolds (Paul.)||

    America needs to rethink unsustainable programs that send so many taxpayer dollars to well-off seniors.
    Social Security and Medicare are the two biggest programs driving the growth of our debt.

    Pro tip, Social Security isn't just for seniors. My nephew, healthy teen boy has been receiving SS payments since he was an infant as a dependent because his mother (working age, healthy, but partial paralysis -- fully able to work) receives SS payments.

  • Elias Fakaname||

    When I sold consumer mortgages,, it was astounding the number of people I encountered that were young, fully able to work, that were collecting a variety of SS and other disability related income. I know a guy with less severe back problems than my own, which do not prevent me from most work, that gets over $3500 per month from WA state. The lazy fucker sits in his recliner all day watching trash talk shows and reality TV.

    People like him should be euthanized, and have their organs harvested. So should the people who allow that.

  • NotAnotherSkippy||

    SS and Medicare spending were over 1.7TT in 2017, not 1.5TT. Net Medicare spending after premiums was 609BB.

    So exactly how many ppl should be covered by needs-based? Is there any amount of personal responsibility required of them, i.e. is there any proposed limit on the size of the welfare state?

    The rest of the post is a refreshing change, though. Finally some admission that we can't fix the entitlement crisis by cutting fighter jetz.

  • BYODB||


    Finally some admission that we can't fix the entitlement crisis by cutting fighter jetz.

    Amazing, isn't it? Mostly because it's almost like they're parroting the idiot talking points from the progressive leftist media, which makes me suspect (among other reasons) that Reason is either filled with mental midgets or lying. Not all the authors, and not all the time, but often enough to notice.

  • NotAnotherSkippy||

    Well they're the self-styled smart ones, so what does that leave you with?

  • gad-fly||

    FICA contributions from employees and employers go directly into the general fund which means they are spent for every known and unknown government outlay. So we need to quit analyses which project that Social Security and Medicare will run out of money - there simply isn't money available today to cover social security and medicare payments - let alone the sizable disability "unfunded" giveaways administered by the Social Security Administration.

    Congress keeps talking about getting "real" by combining all taxes into some kind of one-rate fair tax system - because payroll taxes punish low income taxpayers but in the end, special interests have their way and nothing gets done.

  • NotAnotherSkippy||

    Low income taxpayers get far more back than they pay in. Payroll taxes are the fairest taxes we have.

  • m.EK||

    "Payroll taxes" are fair? This is stealing! Theft! Armed robbery (try not paying and see who shows up and with what type of "tool")
    NO WHERE has Congress ever changed the definition of "income" (dividend, interest, investment ) . Swapping time for money or skills for money is barter. Congress has never changed this. Only the IRS with some fancy "mis-handling" and re-naming in their voluminous code BOOOOOKKKKKKSSSS has done this. Frankly, that Americans have put up with this nonsense for so many generations speaks loudly about the "education system" and the corruption in government.
    Sorry, but payroll taxes are theft.

  • ||

    From any serious fiscal or moral viewpoint—and particularly for the sake of helping those truly in need—Social Security and Medicare should be replaced with social welfare programs that cover all citizens, regardless of age, but only those who are too poor or incapacitated to take care of themselves.

    Social security doesn't exist to help "those truly in need", the program exists to help the person it was taken from. As someone who has every intention of being a well-off senior let me just offer a hearty fuck you if you are so depraved as to think it is moral to redistribute my benefits to someone who didn't plan for their retirement without my consent.

    I have been against the shit show that is OASDI/HI for my entire working life but it is the fruit of my labor that the government has been taking for lo these last 35 years. Against my will. I have lived within my means and deferred gratification. If you then expect me to get even less back than I am already expecting (an order of magnitude less than what I put in) then expect a fight.

  • General_Tso||

    Hear hear!

  • NotAnotherSkippy||

    It will happen. The most likely scenario is either a significantly lower benefit cap or a uniform benefit regardless of payment history.

  • ||

    It will happen.

    To borrow a popular phrase of the times, molon labe.

    FFS George W. Bush offered lip service to doing something 15 years ago and was crucified by both sides of the political aisle. The esteemed officials in Washington have been kicking the can down the road since this disgraceful program started, they can keep kicking it until the country implodes or I am dead, whichever comes first.

  • Jim Logajan||

    With a median of $170,494 in net wealth, the 65+ senior is in zero fiscal shape to fund retirement. That figure includes equity in any home they own, so liquid assets are typically nil. Median annual expenses for retired households is around $40k. With no other source of income, one needs net assets (excluding their home) of ~$1M. The median two-retiree household on SS (assume ~$1300/mo/retiree) nets ~$32k, meaning they need assets of ~$200k to make up the difference.

    Everything you need to know about the political foundation of SS is in the above. Most retirees do need income from SS because they don't have the savings to retire, and many were forced to retire.

    Yes, there are well-to-do seniors for which SS is mere icing on their cake. Those outliers pull the average wealth of retirees up quite a bit, but not the median wealth.

    Read "The Cold Equations" by Tom Godwin for possible solutions to the political problem. ;-)

  • Big Ed's Landing||

    The simple fact is that we've been paying into this program for decades with the promise of payments when we retired. I guarantee you we would have voted differently if our payments were going to become optional. The only to make this work is to start allowing new workers options to pay into SS or a private account, and stick to those choices.

  • m.EK||

    Veronica;
    While your understanding of the crushing debt Americans are faced with is almost inadequate to what is really on the books and we are on the hook for. I have to call Bull Shit to your conclusion that the "well to do" should get shafted.
    I have NEVER expected the government to last this long as corrupt as it is. However, it has. I had to pay into both "social security and medicare". That money in SS was supposed to be collecting interest.
    You are looking in the wrong direction to make sure the "entitlements" are paid. BS!! entitlements! When we are forced to pay that money at gun point, the money we get back is not an entitlement.
    The United States is supposed to be a Constitutional Republic under Law. None of which is true nor has it been since probably the 1840's if the attack on Mexico and subsequent stealing of the South West is any indication. The central bank and their 4% guaranteed "interest" is not Constitutional (Congress has NO authority to force Americans to pay interest on their money. And, debasing the currency is a capital crime according to the Constitution). We have an empire, it is monumentally expensive. This is not authorized by the Constitution. We send bribe money to other governments by way of "foreign aid". This is not authorized Constitutionally. We give all kinds of ENTITLEMENTS to people that have never paid into the ponzi scheme.
    Really my friend, don't pick on the people that actually produce in society!

  • Jacks61||

    The system was wrecked in the early 80's when the Reagan Administration started "borrowing" from the Social Security trust. That door was opened and has never been shut. That money was never paid back.

    And the authors use of the word "entitlement" is a GOP catch word meant to degrade anyone that's drawing from the system.

    Let's say someone began working at age 18, paid into the system for the next 47-50 years. They are getting ready to retire, but suddenly keels over and dies. They never draw a penny of SS, or get on Medicare. Or someone only draws for a short time then dies. Who is "entitled" to claim the remainder of this money that has been paid into system? The Govt sure as fuck ain't giving it back. The above happens every single day in the US.

    The system WOULD work, if the greedy politicians would keep THEIR hands off of it.

  • Charles Barr||

    How is it remotely possible that the system WOULD work, when it was set up by greedy and power-hungry politicians in the first place?

  • Jacks61||

    The system was wrecked in the early 80's when the Reagan Administration started "borrowing" from the Social Security trust. That door was opened and has never been shut. That money was never paid back.

    And the authors use of the word "entitlement" is a GOP catch word meant to degrade anyone that's drawing from the system.

    Let's say someone began working at age 18, paid into the system for the next 47-50 years. They are getting ready to retire, but suddenly keels over and dies. They never draw a penny of SS, or get on Medicare. Or someone only draws for a short time then dies. Who is "entitled" to claim the remainder of this money that has been paid into system? The Govt sure as fuck ain't giving it back. The above happens every single day in the US.

    The system WOULD work, if the greedy politicians would keep THEIR hands off of it.

  • Barry Gold||

    We already have too many means-tested programs. These increase the effective cost of earning more money to much higher than the nominal income-tax rate. If the boss offers you a raise of $100/week, in some cases you're better off saying, "No thanks. Just keep paying me the same amount."

    Cut the maximum pension, yes.(*) Maybe raise the retirement age a year or two. But please don't add yet one more means-tested program.

    Also, in discussing the size of the national debt (and deficit), de Rugy ignores the huge deficit piled up by GWB -- spending on two wars while cutting taxes. Obama's budget would have been nearly in balance except for the cost of servicing the debt that GWB saddled us with. [Not saying Obama was all that good, just that not everything is his fault].

    (*) And, lest you say I'm playing, "Don't tax you, don't tax me, tax that fellow behind the tree", I'm retired and receiving the maximum Social Security pension. 150% of it, because I'm married. OTOH, I will admit that I also have significant other savings, so that a means-tested change will hit me harder than somebody with the same earnings but who didn't save as much for retirement.

  • Elias Fakaname||

    "Obama's budget would have been nearly in balance except for the cost of servicing the debt that GWB saddled us with"

    Nope, not even close. Not saying it was a good thing, but.......no. The annual interest cost on roughly $5.5 trillion is a tiny fraction of the $10 trillion Obama heaped on the debt pile.

  • swampwiz||

    How about taxing estates over a certain amount? There's a ton of cash there!

  • Elias Fakaname||

    I'm sensing saracask there, but even if taken seriously, it wouldn't come close. I read somewhere awhile back that counting our spending,plus the cost of unfounded liabilities, that It would take approximately 20% of the entire planet's GDP to pay for all our spending.

    It isn't sustainable. Period.

  • Tom Beebe||

    Disclaimer: I'm on Social Security and Medicare.
    Like most recipients I believe these programs are no different from any annuity or health care insurance in that we contributed for years to fund them through targeted taxation. What annuity or health care insurance program is means tested? Yet I believe we, the nation, can do better.

    Why not:
    Set the personal exemption equal to what some call a "Basic Income" or others say should be the minimum wage" ?
    Exempt from taxation the cost of all health care and health care insurance, FREELY CHOSEN?
    Exempt from taxation the cost of all education, FREELY CHOSEN?
    Exempt from taxation all money set aside for emergencies or old age, FREELY CHOSEN, taxing it only when used?
    Tax highly, but at the same rate for all, income above these amounts.
    Replace all transfer payments with a negative income tax at the same rate, applied to shortfall of income below these amounts.
    End all other taxes, particularly those on any group.
    End any other payment, except for what government consumes.

    The last three lines of this plan are the most critical; among other things they eliminate the "all or nothing" aspect of present plans (not just those for seniors). Yes, this represents redistribution BUT it is "transparent " to use a popular term for something open to inspection.

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