Last Updated:October 30 @ 05:57 pm

Sowell: Entitlement Reforms

By Thomas Sowell

For those of us who like to believe that human beings are rational, trying to explain what happens in politics can be a real challenge.

For example, that segment of the population that has the least to fear from a reform of Medicare or Social Security is the most fearful -- namely, those already receiving Medicare or Social Security benefits.

It is understandable that people heavily dependent on these programs would fear losing their benefits, especially after a lifetime of paying into these programs. But nobody in his right mind has even proposed taking away the benefits of those who are already receiving them.

Yet opponents of reforming these programs have managed repeatedly to scare the daylights out of seniors with wild claims and television ads such as one showing someone -- who looks somewhat like Paul Ryan -- pushing an elderly lady in a wheelchair toward a cliff and then dumping her over.

There are people who take seriously such statements as those by President Barack Obama that Republicans want to "end Medicare as we know it."

Let's stop and think, if only for the novelty of it. If you make any change in anything, you are ending it "as we know it." Does that mean that everything in the status quo should be considered to be set in concrete forever?

If there were not a single Republican, or none who got elected to any office, arithmetic would still end "Medicare as we know it," for the simple reason that the money in the till is not enough to keep paying for it. The same is true of Social Security.

The same has been true of welfare state programs in European countries that are currently struggling with both financial crises and riots in the streets from people who feel betrayed by their governments. They have in fact been betrayed by their politicians, who have promised them things that there was not enough money to pay for. That is the basic problem in the United States as well.

We are not yet Greece, but we are not exempt from the same rules of arithmetic that eventually caught up with Greece. We just have a little more time. The only question is whether we will use that time to make politically difficult changes or whether we will just kick the can down the road, and keep pretending that "Medicare as we know it" would continue on indefinitely, if it were not for people who just want to be mean to the elderly.

In both Europe and America, there are many people who get angry at those who tell them the truth that the money is just not there to sustain huge welfare state programs indefinitely. But that anger might be better directed at those who lied to them by promising them benefits that were inherently unsustainable.

Neither Social Security nor Medicare has ever had enough assets to cover its liabilities. Very simply, there has never been enough money put aside to do what the government promised to do.

These systems operate on what their advocates like to call a "pay as you go" basis. That is, the younger generation pays in money that is used to cover the cost of benefits for the older generation. This is the kind of financial pyramid scheme that got Charles Ponzi put in prison in the 1920s and got Bernie Madoff put in prison in our times.

A private annuity cannot play these financial games without its executives risking the fate of Ponzi and Madoff. That is why proposed Social Security and Medicare reforms would allow young people to put their money somewhere where the money they pay in would be put aside specifically for them, not used as at present to pay older people's pensions, with anything left over being used for whatever else politicians feel like spending the money on.

It is today's young people who are going to be left holding the bag when they reach retirement age and discover that all the money they paid in is long gone. It is today's young people who are going to be dumped over a cliff when they reach retirement age, if nothing is done to reform entitlements.

Yet the young seem not to be nearly as alarmed as the elderly, who have no real reason to fear. Try reconciling that with the belief that human beings are rational.

---

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com.

COPYRIGHT 2012 CREATORS.COM

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23 Comments

  1. inluminatuoComment by inluminatuo
    August 28, 2012 @ 9:32 am

    Those legitimate citizens on welfare entitlements, those designed by nature and the hand of providence to be the recipients of the 10% tithe need have no worry about being abandoned by a righteous government who cares. It is the extra unnatural 35% Federa; plus state and local that has created the 37% of illegitimate moochers and Democrat designed derelicts of dependency who pay NO FAIR SHARE of federal taxes who are about to get compelled to grow up and start contributing that need to worry. The seduction of the free lunch for those able to earn their own must be withdrawn or the laws and balance of nature will enforce the laws of the unbalanced budget and bring bankruptcy in fact to match our current administrations bankruptcy in ideology. American economic chaos has never been caused by those who produce and pay taxes. The problems began when un-entitled people began thinking they were entitled to the honest labor and personal property of others adding new cogent meaning to the warning “ Thou shall not covet thy neighbors anything.” We have all seen the consequences of ignoring that scriptural warning, and others like “lead us not into temptation.” Now do you understand why they must remove God from state, church from school. Just when did the school become part of the government and a place of removal of working ideas? When the unions took over our teachers and our politicians got taken over by the unions, and the basic Christian American principles got taken over by the secular socialist religion of the self god whose religion is now preached daily to our children.

    Just like Money is not the root of all evil, just the love of money, Education is not the root of our evil, just the love of socialist education which is the wrong kind of education which the corrupt socialist union people are foisting upon the undeveloped minds of our kids, destroying the concepts of sustaining individual freedom in the brains of our children. If we do not defund the department of education send the corrupting power of these funds to work for good or evil back down to the local level where it can be held accountable, America will be lost as the land of Liberty where its concepts are no longer taught and the new generations who never learned these lessons continue to fail until they do learn them. It’s time to re-boot the government computer and change the corrupted disk operating system back to the basics from failed socialism to successful individual freedom.

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  2. wildfireComment by wildfire
    August 28, 2012 @ 10:16 am

    Professor Sowell, I have to disagree with you. There is no point in getting angry at the politicians who lied. That’s like blaming the rain for being wet. Politicians lie. WE are to blame for believing in fairy tales. Well, not we. I knew 20 years ago that that Social Security was bankrupt. I have never planned on it being available to me in any form. The gov’t takes my money and I do not now nor will I ever in the future see a ‘return’ on my ‘investment.’

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    • inluminatuoComment by inluminatuo
      August 28, 2012 @ 12:04 pm

      Its the old game of the offer of immediate gratification of people who think they know better how to collectively invest and spend your money than you as an individual do. He who lives by the integrity of the collective, dies or goes broke by the integrity of the collective. That is why our founders edified individual freedom and responsibility because they studdied their history and understood that the collective heart of men are after power, where individuals are just busy investing and creating their own souls, which when accomplished individually collectively lifts men above the animals who just hunt their fellow men in packs. As you collectively sow, so you collectively reap, and if Obama is placing his personal salvation on the performance of his collective of losers as he has said, he may find that he just lost his soul and his salvation. Three years of their ideology has not proved them to be very reliable Czars or Gods.

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  3. BrampsComment by Bramps
    August 28, 2012 @ 11:14 am

    Dear wildfire;
    Please look back in history, I know in todays world that is never brought into the subject, however, when Social Security and Medicare were originally proposed in their respective years, reputable economists predicted the outcome of each program. In 1955 a professor of mine in accounting and taxes gave us the reasons why it had to fail and called it the biggest Ponzi scheme created by man or government. Politicians all lie is incorrect. Only those selling snake oil must lie. Some Republican congressmen and Senators have in the past submitted, time after time, solutions to the problems that would have eleviated the condition but were constantly defeated by the same scare tactics. Democrats in order to strengthen their stance of scare tactics have consistently caused market turmoil in various forms to show how insecure the private investment market would be for retirees. The final straw on the economy was created by the Democrats, led by Barney Frank and Chris Dodd of Ct. when they led the defeat in 2003 of proposed regulation of Fannie and Freddie by the Bush administration and stated they were both fine. When they took over the congress in 2006, they removed restrictions on mortgages and allowed the condition to exist that brought the real estate market crashing down. These facts are facts and there is strong evidence to prove my allegation. The New York Times had a lengthy article in their September 2003 edition calling attention to the Fannie and Freddie proposed amendment and quotes from Barney and the boys stating it was a shell game by the Republicans and Fannie and Freddie were just fine. In addition go back to the Savings and Loan disaster. The same type of situation existed then.
    So in final analysis, the voter get what they deserve. Unfortunately in a democracy the good suffer with the bad, if not worse. No good deed goes unpunished. That is the Democratic motto. I was a very committed Democrat and thought Harry Truman and JFK were two of the greatest Presidents ever. Johnson, Carter and Clinton took me right out of the party. The media in this country is the biggest violator of it’s first amendment rights. I wouldn’t change the first amendment, just the media that lies or neglects to write and produce the facts, all the facts, all the time. We would be on the right track if that happened.
    Prof Sowell is my favorite journalist. His facts are very hard to dispute if you have an independent open mind.

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  4. jburrisComment by jburris
    August 28, 2012 @ 11:15 am

    The reason old people are worried is because they are finishing up the working years or already retired. They do not want to try something new, and I don’t blame them. I am approaching my 40′s and most people I talk to do not plan on there being social security. This is why we are not worried. If it is there when I retire it will be a bonus, not a must.

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    • BrampsComment by Bramps
      August 28, 2012 @ 11:32 am

      You and the retired are not listening or reading the proposal. That is the problem. Over 55 doesn’t change. That is pretty simple I thought. Over 55 doesn’t change. Over 55 doesn’t change. Keep repeating it. You’ll soon get it.
      Your alternative whatever it is will be attacked by the Democrats when time to retire, believe me. Your not a history major I presume. What makes you think your investments or retirement plans will hold together???

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    • bna42Comment by bna42
      August 28, 2012 @ 12:09 pm

      Bramps, I don’t think it’s the fact that we are not listening. It’s more like we have been lied to so long by politicians that we do not trust anything they say. We also are wise enough to understand that politicians have been warned for years that there needs to be some changes made, but all they have done is give lip service. With a national debt of $16 Trillion, spending more than $1 trillion more than revenues every year, operation without a budget, etc. makes us aware that we are very close to total financial collapse. When that happens, even those over 55 will be affected.

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    • inluminatuoComment by inluminatuo
      August 28, 2012 @ 4:00 pm

      It’s the old Socialist bait and switch creeping socialism. It always starts out as your money going into your account, then when your back is turned becomes our money funneled into the general account on account of the fact that the 33% of the general public who always vote Democrat never pull their weight in society so they get hung like albatrosses around the neck of the responsible citizens who do pull their weight.

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  5. bna42Comment by bna42
    August 28, 2012 @ 11:16 am

    “Very simply, there has never been enough money put aside to do what the government promised to do.”

    I’m not sure I agree with this comment. At one time there was money “put aside” until the Democrats decided to use it for other projects, which violated the original promise. I think if the money had been “set aside” and those who never paid into Social Security were not allowed to benefit from it, the program would be sustainable. It’s difficult to excuse the mess by saying “all politicians lie” because they were not elected to lie; they were elected to represent the people and take care of the nation’s business.

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    • CarmineComment by Carmine
      August 28, 2012 @ 12:03 pm

      But they lied to get the job. Why do you think politicians are ranked down at the bottom with lawyers and used car salesmen?

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    • nmleonComment by nmleon
      August 28, 2012 @ 9:51 pm

      It’s definitely true bna. It’s been a ponzi scheme from the beginning. Ida May Fuller was the very first SS recipient. She paid a total of $24.75 over three years. Her very first check was for $22.54, just $2.26 less than the total she had contributed. During her lifetime she collected a total of $22,888.92. That’s a return of 92,500%

      That’s a ponzi scheme, where the first “investors” make out big time on the backs of later “investors”.

      http://www.ssa.gov/history/idapayroll.html

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  6. BrampsComment by Bramps
    August 28, 2012 @ 12:28 pm

    I ask all of you who have blamed the politicians for lying to them. Why do you think they get away with their lies??? #1 answer, their getting something for nothing, #2 answer, if they don’t agree with the politician they do nothing, #3 answer, they aren’t told by the media it’s a lie unless it someone the journalist or editor doesn’t like, #4 they are just plain stupid.
    Finally, my last comment, how many of you have called your congressmen when they aren’t telling the whole story correctly, i.e., do you get involved??? Don’t forget, they still get elected. How does that happen????

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    • bna42Comment by bna42
      August 28, 2012 @ 12:53 pm

      Bramps, your grasp for the obvious is amazing. However, you need to give us “old folks” a little credit. Most of us know when we are being lied to and don’t need the media to tell us because they are biased and slant all their remarks to serve their agenda. If we don’t agree with the politicians we take action, but there are not as many of us as there are of the people like Obama who think we are meaningless and have past our usefulness. We are even betrayed by organizations such as A.A.R.P. who are supposedly in business to give voice to the seniors’ concerns.

      Your last comment is insulting. We stay in contact with our “congressmen”, and what we get for our phone calls, letters, and emails are a bunch of form letters written by a staff member. I have a file filled with communications between myself and my “congressmen”. We are the reason that a lot of these politicians stopped holding town hall meetings because they didn’t want to face us. We vote more than any other group in this country, but in case you haven’t noticed lately, this nation is divided into several groups by race, income, special interests, unions, etc.

      We don’t need a lecture from anyone about how stupid we are.

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  7. BrampsComment by Bramps
    August 28, 2012 @ 2:02 pm

    Hello bna42;
    I wasn’t lecturing. I’m stating facts. I admire your attention to politics and find it difficult to understand why you of all people feel I’m lecturing to you. If the shoe fits, wear it, it not, what’s the problem. You see, I’m going to bet I’m as old if not older than you. It is my experiences that I’m relating and LECTURING. I’ve done something in my little way to express my dislike for the politicians elected and continue to be elected. I’m from Massachusetts, who was I or should express my anger towards, John Kerry, Deval Patric, Ted Kennedy, or any of the House of Reps, all dems???. No, I stopped supporting the Boston Globe 20 years ago and any an all affiliation with the networks that spread the bs and lack of printing facts. I do not support any business that has shown the tendencies of liberalism, i.e., Ben & Jerry’s. This is precisely the tack that the liberals are taking to combat any criticism of their viewpoints, i.e. Chic-fil-A. I have watched over the course of years, since Harry Truman, the dumbing down of this countries population from media actions and the educational system. I challenge my local school board only to face backlash to my family. And you think I’m lecturing??? Yes I’ve noticed what has been happening in this country. My Grandmother, Mother, and Father immigrated to this country from Turkey. You know why?? An unannounced Genocide. I love this country for the manner in which it took them in and delivered them from evil. They taught me the evils of various methods used by governments to craze the population to do what they do. We are being led by someone who has used these methods to whip up the divisions in the groups you claim. I stopped my membership in AARP 20 years ago. I go it alone. Finally, as a young man who was very interested in politics at an early age, these politicians would never have been elected.
    In conclusion, the most damaging action that was ever taken, in my opinion, that has caused the tremendous shift in the liberal power is never discussed to any extent. It has happened in all the states except the Republican controlled ones and we don’t pay attention to it. If it were debated and discussed I think it’s the only avenue to a normal representation and an end to the lies and give aways. Who ever I ask this question of, hasn’t the slightest idea what I’m asking. Do you??
    We get what we vote for.
    I’m sorry to have offended you. I didn’t mean to lecture. I thought I was only stating facts.

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  8. bna42Comment by bna42
    August 28, 2012 @ 2:33 pm

    “If the shoe fits, wear it, it not, what’s the problem.”

    The problem is that no one likes to be called stupid or accused of doing nothing. The people who get what they vote for are the ones who get their political information from 30-second TV ads, or vote based on skin color or a promise of more entitlements rather than researching the candidates and holding them accountable.

    “I didn’t mean to lecture. I thought I was only stating facts.”

    Your “facts” are basically opinions. Do you think you are any more frustrated than the rest of the people on this GOP website? Of course the same politicians keep getting re-elected, but you can’t change that by preaching to the choir, so to speak. The people who keep voting for them are the ones who expect the government to provide their existence, those who pay no federal income taxes to help support the government, those who have been indoctrinated by government schools and liberal teachers, etc. However, I don’t think you will find very many of those types on this website.

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  9. moonshineComment by moonshine
    August 28, 2012 @ 3:05 pm

    If you paid into Social Security and Medicare for the duration of your career, then what you receive in return at retirement cannot be considered an entitlement, as it has been paid for with your tax dollars. You paid for it, and now you expect to collect what you are rightfully due.
    If you paid nothing into Social Security and Medicare, and expect to collect something for it, what you receive is an entitlement – a bribe from our benevolent career politicans seeking reelection by using your tax dollars to buy votes. They really don’t care who receives these entitlements (your tax dollars); only that they vote, and that they get that vote to win and remain in power.
    We need to be clear about the use of the word “entitlement”, as politicians tend to ignore the differences between those who have contributed, and those who have not. After all in this politically correct environment, we all have one vote, and their objective is to buy that vote with your tax dollars.
    Don’t let them get away with putting taxpayers in the same class as government welfare recipients. This is truly reprehensible, and why we need Term Limits across the board if we are to survive as a nation.

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    • mrwilsonComment by mrwilson
      August 28, 2012 @ 5:37 pm

      My offer to SS still stands. I will accept 50 cents on the dollar and they can be done with me forever. If they refuse this kind offer I promise to live to 125.

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    • nmleonComment by nmleon
      August 28, 2012 @ 9:59 pm

      SS and Medicare are entitlement precisely BECAUSE we pay into them. We have paid into them, so we are ENTITLED to the benefits we have paid for.

      It’s the various government welfare programs that are misnamed, they are not entitlements, they are charity.

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  10. BrampsComment by Bramps
    August 28, 2012 @ 3:41 pm

    bna42

    What wasn’t fact? Where did I say I was anymore frustrated than the rest??
    Get a life man.

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    • bna42Comment by bna42
      August 28, 2012 @ 4:18 pm

      Your #2 answer is not necessarily a fact because most of those who disagree with a politician DO something.

      My point is that you are stereotyping and painting everybody with a broad brush.

      I didn’t imply that you “said” you were more frustrated. I simply asked you a question: “Do you think you are any more frustrated than the rest of the people on this GOP website?”

      You are the one making all the accusations. Perhaps you are the one who needs to “get a life”.

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  11. JDZComment by JDZ
    August 28, 2012 @ 4:00 pm

    I have commented before about California where I live which has been run by liberal Democrats in the legislature for decades. Arnold Schwartzeneger, who is a Republican, tried to make some changes in policies and union agreements and the legislature basically handed him his head, and from then on his term was done. Jerry Brown, who was Governor in 1973 is now the Governor once again, and is finding out that it is a much harder job then when he left it 40 years ago. California has major financial problems, which are forecasted to get much worse, the school system is a mess, the infrastructure is falling apart, companies and tax payers are leaving the state in droves and being replaced by illegal immigrants many of which are getting subsidies from the government but pay no taxes. The state begged for and got billions of dollars from Obama from his stimulus funding which went to pay bills and avoid public service layoffs, but that money is gone. Brown wants to raise taxes even more to reduce the deficit. The unions represent the single largest operating cost and the largest financial liability (union salaries and benefits) looking ahead.

    The city, county, and state governments are all run by liberal uDemocrats who are in their positions because the unions want them there. The CTA (California Teachers Association) considers themselves the fourth leg of the state government and basically control who gets nominated and elected or appointed to key government positions. The CTA contributed 47 million dollars to help Brown beat Meg Whitman in the Governor’s race in 2010.

    FDR and George Meany both warned about allowing public service/government workers to unionize and have collective bargaining rights because they knew how human beings can behave and how power hungry and greedy union leaders can be, and they were right. Their worst fears have manifested themselves as our governments at the local and state governments, which are being controlled by unions through the liberal politicians they helped elect, and Obama, has now opened the doors of the Whitehouse to these same union leaders.

    The larger government at all levels grows, the more members the public service unions have which gives them more money (union dues) which gives them more money to spend on campaigns for politicians they support, and this “circle of power” continues to get stronger.

    The taxpayers are on the outside looking in and have little control of union agreements negotiated in the incestuous relationship that exists between unions and the politicians they helped elect. The CTA, for example, controls public education in California and it is failing our children, but nothing can be done about it as he CTA, along with other unions control the legislature.

    A “reboot” of our government(s) cannot be accomplished unless there is a national mandate to also totally renegotiate all union agreements, or eliminate public service unions totally, as a part of the process.

    Sorry gang, for getting so carried away.

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  12. crunchemComment by crunchem
    August 28, 2012 @ 11:58 pm

    “SS and Medicare are entitlement precisely BECAUSE we pay into them. We have paid into them, so we are ENTITLED to the benefits we have paid for.”

    No, what you and I paid in to the system over the years paid for the benefits of the then-older people receiving the benefits THEN. THEY were “entitled” to your contributions because that’s how the system is structured (at least since Johnson). YOU are now receiving benefits (if you’re retired) only because the younger working generation is still employed and taxed enough to “pass on the favor” (forced) to pay YOUR benefits. When they get older, it will be their children paying their retirement, and so it goes…

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    • bna42Comment by bna42
      August 29, 2012 @ 9:17 am

      “No, what you and I paid in to the system over the years paid for the benefits of the then-older people receiving the benefits THEN.”

      That is the way it is NOW, but that’s not the way it was designed. Social Security was self-sufficient UNTIL the early 1960′s when the Democrats decided the funds could be used as their personal ATM. At one time there were 16 people paying into Social Security for every ONE person drawing benefits, but now that the baby boomers are beginning to retire there are only 2.6 people paying into the system for every ONE person drawing benefits. Now with the Obama fiscal policies that have helped 23 million people remain unemployed and receiving unemployment benefits, none of them are paying into the Social Security system. The people who sat around and drew unemployment for 99 weeks are going to be shocked when they find out how that affected their Social Security benefits. You can also add to the problem the number of people who are receiving benefits yet they never paid one dime into Social Security. That wasn’t part of the original plan either.

      The younger people are saying they don’t expect Social Security to be there for them, but that same belief was being circulated 40 years ago. The only way the government can stop Social Security will be to allow a complete financial collapse of the economy.

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