In The Fight For Entitlement Reform, We’re All Thieves


In the debate over how to deal with America’s looming budget problems, liberals and conservatives have starkly different solutions to entitlement reform. Necessary for the financial security of America, entitlement reform is difficult for a myriad of political, ethical and financial reasons. As Michael Linden of the liberal Center for American Progress stated last year: “It’s true in the long run…the major drivers of the federal deficit are an aging population, which means higher costs for Social Security, Medicare and Medicaid, and also rising health care costs generally…we are going to have to have some really serious conversations about how to get those things under control.”

How serious will these conversations have to be? Social Security and Medicare spending alone totaled about $1.217 trillion in 2011, or one-third of the federal budget, according to the Center for Budget and Policy Priorities. This budgetary impact will reach 50% of federal spending in the next 20 years, as Veronique de Rugy calculates here. By 2020, according to the Government Accountability Office, 92% of the federal budget will be taken up by Medicare, Social Security, Medicaid and interest on the national debt. Lastly, Social Security and Medicare alone will eventually require 100% of federal tax revenues to cover their costs.

So what is the solution to our growing Social Security and Medicare cost problems? Regardless of one’s political leanings, it boils down to one word: stealing. Despite having taxed employers and workers at a combined 15.3% of each employee’s paycheck at the point of a gun (AKA the rule of law), reforms are discussed primarily with the following four politically-viable options in mind:

  1. Raise taxes on some or all earners. Given payers into the Social Security and Medicare programs were initially given a promise of sorts from the federal government that they would receive a certain level of benefits for a certain level of taxation, this is theft.
  2. Directly cut benefits for current and/or future seniors. This is similar to Point 1 except benefits are being directly diminished instead of increasingly taxed.
  3. Means-test Social Security and Medicare. While a popular option for both Republicans and Democrats, it would take away retirement monies from wealthier seniors who were promised the same benefits as everyone else.
  4. Raise the retirement age for those receiving Social Security and Medicare. Average life expectancy for 65-year old Americans is over 40% greater than that of 65-year old Americans in 1940, yet the retirement age has yet to increase by even one year since that time. Unfortunately, raising the retirement age for anyone who has paid into the program — and especially for older workers — is to change the unwritten promise around which people organize their retirement plans.

 

(Note: Other options are available, and popular in certain circles, for reform. One of these is the partial or full privatization of Social Security to be received by seniors. This would not be stealing, but it is for all intents and purposes very politically difficult, if the 2005 failure of then-President Bush’s partial privatization plan to get through a GOP-controlled Congress is any indication. Payment reform related to greater efficiencies in Medicare is also often discussed and would not be stealing. This was included in the Patient Protection & Affordable Care Act, but those reforms are still in the experimental stage and thus their impact is as of yet unknown. Medicare voucher proposals such as those in the House-passed budget proposal are also of somewhat experimental value, and so far have received little Democratic support.)

Given the fiscal impossibility of maintaining retirement benefits as they currently stand, how should this theft be enacted? Is it right to take from current seniors, who are in the middle of retirement but who are also much wealthier as compared to younger people? Is it right to take from middle-aged people, who are years from retirement but have spent decades preparing for it with expectations of certain levels of federally-funded retirement dollars? Or should the focus of reforms be on young Americans, who have more time to change personal habits and prepare financially for lower benefits…but who as the Debt-Paying Generation are likely to face dire employment and other financial challenges that could prevent them from having the kinds of financial means in retirement today’s seniors possess?

Options abound for how to fix the programs, but in the final calculation stealing is likely to be most or all of the answer. Whether it be the financial collapse of Social Security and Medicare with no changes (thus stealing from all citizens), raising taxes on the wealthy or means-testing benefits (thus targeting the most successful of us for doing nothing intrinsically wrong or illegal) or increasing the retirement age for all recipients (thus forcing people to work for more years before receiving benefits), the federal government’s retirement promise to America’s citizens is going to significantly change in the next two decades. The only question that remains is to whom that promise will be broken, and how drastic the break will be.

To clarify: from a strictly legal perspective, the federal government is not actually stealing from seniors by doing any of the above. The original language of the legislation which created Social Security, for example, stated “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” Additionally, the 1960 Supreme Court case Flemming vs. Nestor declared that American taxpayers are indeed not legally entitled to the dollars they think they are. However, the implicit promise still exists, if the language of politicians and special interest groups is to be believed, and most Americans believe they are indeed entitled to receiving retirement dollars for which they have been taxed. Use of the word “stealing” is thus applied more from a moral, ethical and “if it weren’t Congress it would be illegal” perspective.

Dustin Siggins is a policy and politics blogger, and is the co-author of a forthcoming book on the national debt with William Beach of The Heritage Foundation

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