A Note on Entitlements

The WSJ has an editorial today entitled “Entitlement Nation” in which it outlines America’s political history that has led to so many millions of us today receiving, even living off, payments of money, goods, or services from the government. The numbers are shocking: “50.5 million Americans are on Medicaid, 46.5 million are on Medicare, 52 million on Social Security, five million on SSI, 7.5 million on unemployment insurance, and 44.6 million on food stamps and other nutrition programs. Some 24 million get the earned-income tax credit, a cash income supplement.”

The Journal rightly argues, “Congress has made so many promises to so many Americans that there is no conceivable way those promises can be kept.” It is because the current debt-ceiling negotiations are not even discussing the drastic changes to Medicaid, Medicare, and Social Security that would be needed to keep us fiscally afloat that they are really just playing pretend. We are still looking for the proverbial Adult In The Room. 

When the subject of reforming the Big Three entitlement programs arises, one often hears, especially from people receiving payments from them, some version of: “I paid into those programs, so I’m entitled to get my money back.” It seems like a reasonable position: people should get what they paid for, especially when they were promised to get what they paid for.

The problem is that what you paid is long gone. The money you paid over your working career was spent immediately on all manner of government cornucopia—programs, benefits, bureaus, agencies, institutes, centers, initiatives, divisions, projects, expenditures, studies, commissions, summits, departments, and on and on. You may not have noticed, or may not have been paying attention, but every single penny that was taken from your paychecks was spent. Not saved, not invested: spent. So it is now gone. Indeed, it is more than gone, since what has been spent is a lot more than what came in—which means that not only was every penny they took from you spent, but they’ve promised others a lot more of your, or someone’s, pennies.

The obvious question must now be asked aloud: If all that money, and then some, has already been spent, what is funding those entitlement programs right now, today? Answer: it is being extracted from other people’s paychecks, and financed by debt that other people will have to pay in the future. People receiving entitlement payments now are living off the money taken, or promised to be taken, from other people.

Should it be this way? Should the government have made promises it could not keep? Should it be the case that the government actually spent the money they took from you instead of saving or investing it? No, no, and no. Alas, what should be often is not.

The moral status of some people living off wealth taken from others, as so many millions of us Americans now are doing, is a separate question. I have my own view about it, but coming to a correct moral judgment about it requires first coming to a proper understanding of the situation.

It might well have been your money that was taken from you all those years, and, especially in retrospect, it might well have been wrong of the government to take it from you. But the money you are receiving now is not that money: it is someone else’s, someone who no doubt also would claim ownership of it. If you accept the money, you have to face that fact squarely.

3 thoughts on “A Note on Entitlements

  1. I never understood the various programs of Medicare, Medicaid, Social Security, and so on to be investment programs into which I paid and for which I would receive interest or a dividend, or even what I paid at some future point. I always understood them to be transfer payments, and believed they were intended to help those in need that could not help themselves. As you say, we have to stop calling them the former and acknowledge them as the latter. Only then will we be able to establish proper goals for these programs and structure them to meet those goals, including balancing against the available funding.

  2. For years the government took in more money in Social Security than it paid out in benefits, leading to large balances in the so-called trust fund. Some use this fact to claim that there is no Social Security crisis and that only small adjustments need to be made to keep the program solvent for some time.

    In a narrow sense, that argument is correct, in that the Social Security Administration does not need authorization from Congress to redeem the bonds in the trust fund in order to pay out benefits. Yippee!

    But just because Congress doesn’t have to authorize the SSA to redeem those bonds, Congress still has to take money from future taxpayers (or borrow yet again) to pay for those redemptions. This is the great chicanery that most ordinary voters don’t understand (or don’t care about because they receive more in benefits than they paid). They don’t understand it because big government and its media advocates try very hard to get them not to understand it.

    What if as part of debt negotiations Congress were to institute a transparancy in government finance requirement? This would require that in order to vote in federal elections, the voter would have to read and sign the following statement: “I understand that the federal government has never, ever saved any money from any tax payments I or my fellow citizens have paid in the past in order to provide health and retirement benefits to us in the future. I understand that all those tax collections have been spent by Congress and that the government must pay for all benefits it gives me in the future taxes and borrowing.”

    Aren’t the political parties supposed to believe in voter education. Let’s really educate them. We could probably think of lots of truth telling that could be added to the above text.

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