Facts Are Stubborn Things .... Entitlements and Affordability

We're hearing lots of talk these days about fairness and income inequality.

What we're not hearing are ways to address these seemingly insurmountable financial mountains in a common sense long term manner.

We've promised ourselves (through our elected representatives) benefits which are unaffordable. Thus, talking about their fairness must be preceded by how we're going to pay for what we promise ourselves.

Simply pretending that all is well and then passing along the responsibility to future generations of taxpayers is not a plan. It's a scam.

Economic Populism Is a Dead End for Democrats contains some interesting information which needs to be part of the national conversation about "generational fairness." It says this in relevant part:

"The political problems of liberal populism are bad enough. Worse are the actual policies proposed by left-wing populists. The movement relies on a potent "we can have it all" fantasy that goes something like this: If we force the wealthy to pay higher taxes (there are 300,000 tax filers who earn more than $1 million), close a few corporate tax loopholes, and break up some big banks then—presto!—we can pay for, and even expand, existing entitlements. Meanwhile, we can invest more deeply in K-12 education, infrastructure, health research, clean energy and more.

Social Security is exhibit A of this populist political and economic fantasy. A growing cascade of baby boomers will be retiring in the coming years, and the Social Security formula increases their initial benefits faster than inflation. The problem is that since 2010 Social Security payouts to seniors have exceeded payroll taxes collected from workers. This imbalance widens inexorably until it devours the entire Social Security Trust Fund in 2031, according to the Congressional Budget Office. At that point, benefits would have to be slashed by about 23%. . . .

Even more reckless is the populists' staunch refusal to address the coming Medicare crisis. In 2030, a typical couple reaching the eligibility age of 65 will have paid $180,000 in lifetime Medicare taxes but will get back $664,000 in benefits. . . .

As for the promise that unrestrained entitlements won't harm kids and public investments like infrastructure, public schools and college financial aid, haven't we seen this movie before? In the 1960s, the federal government spent $3 on such investments for every $1 on entitlements.

Today, the ratio is flipped. In 10 years, we will spend $5 on the three major entitlement programs (Social Security, Medicare and Medicaid) for every $1 on public investments."

Summing Up 

When it comes to affordability over the long term concerning Social Security, Medicare and Medicaid, facts are indeed stubborn things.

Add in other items such as public sector pension unaffordability, new entitlement programs like ObamaCare and many others which aren't even yet on the books, then throw in a slow moving U.S. and world economy which is becoming more government driven and dominated with each passing day, and it's easy to get discouraged about our nation's future.

My bet, however, is that we'll soon come to grips with the moral obligation of needing to properly fund and pay for what we give ourselves instead of passing the bill along to our kids and grandkids.

And when, not if, we do face that reality, we'll seriously and as a fair society and free market based economy go about doing just that.

At least that's my hope, and I sincerely believe that it's not an unrealistic one, even though it sure seems that way today.

Time will tell.

Thanks. Bob.