Plunder and Deceit (6 page)

Why was age 65 chosen . . . ? According to Robert Myers, who worked on the creation of the Social Security program beginning in 1934 and later served in various senior and appointed capacities at the Social Security Administration, “why not?” Myers wrote, “Age 65 was picked because 60 was too young and 70 was too old. So we split the difference.”
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Moreover, when Roosevelt signed the Social Security Act in 1935, he boldly proclaimed his utopian ambition thusly:

This law . . . represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions.
It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy.
The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.
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(Italics added)

Of course, many have benefited from Social Security over the decades, especially the elderly. But the overall structure, which as Roosevelt insisted at the outset, put politics before economics, was and is, in the end, economically and fiscally irrational and irresponsible. Recently, another warning was issued by the Congressional Budget Office (CBO) in its 2014 annual budget outlook, in which it announced that Social Security (and other entitlement programs) is “unsustainable” and will drive federally held debt to historic levels, thereby threatening the overall economy.
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Top elected officeholders in the nation have been repeatedly and specifically warned about the coming upheaval. As compelled by law, on July 28, 2014, Social Security's trustees issued their annual letters to both House Speaker John Boehner and Senate President (Vice President) Joe Biden on the financial state of, among other things, the Social Security system. They wrote, in part: “Estimates in the 2014 Trustees Report show that although the Old-Age and Survivors Insurance (OASI) Trust Fund and the theoretical combined OASI and Disability Insurance (DI) Trust Funds are adequately financed . . . through the next 10 years under intermediate assumptions, the DI fund alone is not. Under the intermediate assumptions of the 2014 Trustees Report (those representing the Trustees' best estimate of future economic and demographic trends), the DI Trust Fund reserves steadily decline, falling below 20 percent of annual cost by the beginning of calendar year 2016 and becoming
depleted in the fourth calendar quarter of 2016.
”
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(Italics added) If anything, the trustees understate the overall and looming Social Security disaster.

Predictably, the statists cling zealously to their utopianism and dogmatically reject virtually every suggestion to restructure Social Security. On October 15, 2010, 101 Democratic members of Congress wrote President Obama, insisting that any proposals by the National Commission on Fiscal Responsibility and Reform to modify Social Security benefits, adjust age requirements, or introduce private investment options would be blocked in Congress. They declared, in part: “We write today to express our strong support for Social Security and our view that it should be strengthened. We oppose any cuts to Social Security benefits, including raising the retirement age. We also oppose any effort to privatize Social Security, in whole or in part. . . . If any of the Commission's recommendations cut or diminish Social Security in any way, we will stand firmly against them.”
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Rather than exploring even modest but still meaningful options and alternatives to the current “unsustainable” Social Security system—such as ensuring that workers age fifty-five and over remain covered under the traditional Social Security system with no change in promised benefits, while allowing younger workers to opt out of Social Security and invest in private sector retirement alternatives—statists demand greater federal centralization and control, this time over the individual's
private
retirement plans, as an increasingly desperate federal government looks for ways to expand its reach and confiscate more earnings from the rising generation.

For example, 401(k) plans have enabled approximately 52 million American workers to own stocks and bonds as part of their private retirement portfolios. But there is a growing movement to eliminate these tax and savings benefits in order to further fund federal “insurance.” As explained by the Cato Institute's Michael D. Tanner: “Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School in New York, has argued before Congress that 401(k) plans should be abolished, and replaced by an expanded social-insurance system. Representative Jim McDermott (D., Wash.), who sits on the tax-writing Ways and Means Committee, has pronounced himself ‘intrigued' by Ghilarducci's ideas. And [former] Congressman George Miller (D., Calif.) has called for eliminating or reducing the tax break for 401(k) contributions. The Obama administration has also sought to limit tax breaks for 401(k)s, although primarily for wealthier participants. In a speech calling for the expansion of Social Security, Senator Elizabeth Warren (D., Mass.) criticized private retirement accounts like 401(k) plans ‘that leave the retiree at the mercy of a market that rises and falls, and, sometimes, at the mercy of dangerous investment products.' ” Tanner points out that “No policy proposed in recent years would have done more to expand capital ownership than allowing younger workers to invest a portion of their Social Security taxes through personal accounts. One of the unsung benefits of such Social Security reform is that it would enable even the lowest-paid American worker to benefit from capital investment. Indeed, since the wealthy presumably already invest as much as they wish to, lower-income workers would be the primary beneficiaries of this new investment opportunity.”
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The American people are facing some very unpleasant realities about the nation's financial vulnerabilities. The federal government is deeply in debt; the largest federal program, Social Security, is hemorrhaging money; the national birthrate does not provide enough working people from whom money can be transferred to subsidize beneficiaries; and most individuals do not have enough personal savings to get them through severe economic times. As the late economist Dr. Herbert Stein once wrote, “If something can't go on forever, it will stop.”
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And in this case, the federal government's biggest program will stop with a crash, taking down the older recipients and the younger payers alike.

ANOTHER IMPENDING FIASCO FOR
America's younger people and future generations involves the federal government's control over health care. In the United States, trillions of dollars are spent each year on health care. The Centers for Medicare and Medicaid Services (CMS), a federal agency within the Department of Health and Human Services (HHS), estimated that national health expenditures were $2.8 trillion in 2012, or about 17.2 percent of America's Gross Domestic Product (GDP).
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Others have noted that there are hundreds of billions in hidden costs that should be added to that number, such as costs to families who serve as home caregivers and money spent on vitamins, bringing the total to over $3 trillion annually.
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But the amount spent on health care is not, by itself, the key. North Korea's tyrannical regime spends a lot less per person on health care than the United States and no one in his right mind would advocate switching systems. Similarly, Bangladesh, also among the world's poorest nations, spends a far lower percentage of GDP on health care, a mere 3.6 percent.
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Most Americans would agree that there are few human and moral priorities more important than the mental and physical health of an individual or family. The key problem in America is the increasingly centralized role of government in the provision of health-care services, which does, in fact, become administratively unmanageable and financially unsustainable over time. Top-down command-and-control decision-making, combined with political and social engineering and redistributive subsidies, destroy the application of genuine insurance practices; distort and eventually contract the marketplace; hugely inflate costs; generate widespread economic inefficiencies, unpredictability, and scarcity; and, severely diminish the quality of health-care services and their availability to countless patients.

The federal government provides health insurance, funds to state health-care programs, or direct care to the elderly (Medicare), the poor (Medicaid), the children of those not poor enough for Medicaid (Children's Health Insurance Program or CHIP), the military (TRICARE), and veterans (the Veterans Administration). The largest of the programs, Medicare, provides health-care coverage to nearly all seniors over the age of sixty-five. In 2014, about 54 million individuals were eligible for Medicare (45 million seniors and 9 million disabled individuals) for a total cost of $612 billion.
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As with Social Security, the scope of covered individuals and services has grown significantly since Medicare's inception in 1965. And like Social Security, it has required ever greater federal taxes and subsidies to support it. Meanwhile, the number of individuals retiring and becoming eligible for Medicare is soaring. Once again, the ratio of younger workers to older beneficiaries is declining. Moreover, Medicare's financial condition is even worse than Social Security's, as its expenses are growing at a faster rate. Nonetheless, in 2010 the federal government's role in health care hugely expanded in depth and scope with the adoption of the mammoth Patient Protection and Affordable Care Act, or Obamacare. One indication of the size of this new program is that the original statute was well over two thousand pages in length. By 2013, tens of thousands of pages of related regulations were issued, totaling almost 11,600,000 words.
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The time is not far off when federal health-care programs, combined with Social Security, will actually consume the vast majority of the federal budget, leaving little room for much else. In fiscal year 2013, 41 percent of the federal government's expenditures supported just Social Security and Medicare.
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The Congressional Budget Office's (CBO's) long-term budget projections, using a baseline of current spending, concludes that by 2039 federal spending for Social Security and the country's major health-care programs (Medicare, Medicaid, the Children's Health Insurance Program, and Obamacare) will grow to 14 percent of GDP. That is twice the average over the past forty years.
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In addition, state budgets are now swamped by health-care spending, in particular Medicaid. Medicaid consumes almost 26 percent of total state expenditures. It is administered by the states with partial financial support from the federal government.
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One of the major provisions of Obamacare was an expansion of Medicaid, in which states were enticed with initial federal subsidies to cover even more individuals. Though Medicaid was once considered a program solely for the poor, the eligibility requirements were loosened to cover those making 138 percent of the poverty line—that is, an annual income of $16,105 for an individual and $32,913 for a family of four.
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Since the expansion went into effect, 9.1 million people have been added to Medicaid.
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In return for covering more people, the federal government agreed to pay the states 100 percent of the additional costs for the first three years, which decreases to 90 percent by 2020.
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Thereafter, which level of government is responsible for funding and for how much cannot be known. However, already Medicaid enrollment and spending under Obamacare are soaring.
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But in the end, younger people and future generations will bear the brunt of the financial hardship.

Again, the CBO has declared that the size and growth of the federal debt, most of which is owing to unfunded entitlement liabilities—especially Medicare and Social Security—is a threat to the future viability of the nation. “The large amount of federal borrowing would draw money away from private investment in productive capital in the long term, because the portion of people's savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income than would otherwise be the case, all else being equal . . . ; [f]ederal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt; [t]he large amount of debt would restrict policymakers' ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises.”
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“As a result, those challenges would tend to have larger negative effects on the economy and on people's well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country's ability to prepare for such a crisis.”
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As many younger people have no idea how Medicare works and do not have much interest in the subject, despite its ominous drag on their future, a short tutorial may be useful.

Medicare was signed into law in 1965 by President Lyndon Johnson. He described it as another insurance system: “[T]hrough this new law . . . every citizen will be able, in his productive years when he is earning, to insure himself against the ravages of illness in his old age.”
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Today Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). It originally worked through two components: Part A, Hospital Insurance (HI), which covers costs associated with stays at hospitals, hospices, and nursing facilities; and Part B, Supplementary Medical Insurance (SMI), which covers doctors, outpatient treatment, and durable equipment.