Entitlement Programs: A Plan to End Them

America’s financial situation is precarious. Over the past eight years our national debt has doubled to $14.5 trillion, and our total unfunded liabilities now exceed an astonishing $114 trillion. That’s $1,115,000 per federal income taxpayer.

Even the most unrepentant spendthrift understands that these debts and liabilities are unsupportable, nor can they be solved by immorally targeting the rich. Instead, we must enact immediate, across-the-board spending cuts, with special emphasis on the biggest components of our financial wreck: Social Security, Medicare and Medicaid. These entitlement programs constitute the majority of our unfunded liabilities, because despite being labeled “trusts” they’re not actually savings plans.

Rather, the programs are essentially pay-as-you-go schemes. (What little surplus the trusts did accumulate was used to fund other government programs, such that nothing’s been saved[1].) Operating this way has two terrible consequences. First, because funds aren’t saved and invested, they don’t generate returns. Thus there’s no compounding effect for any of the money that’s been withheld. Second, for every year that the programs are in existence, their total future liabilities increase.

Moreover, the programs have grown inexorably over time, partly because they were deemed good in principle, and partly because it takes nothing but a vote to increase benefits.

When Social Security was first rolled out in 1936, the promise was that the program would be very limited, both in terms of contributions and of payout. The most anyone would contribute was $360 per year, including the employer’s contribution. By 2010 entitlement programs cost employees up to $12,648 for Social Security and an unlimited amount for Medicare (at a rate of 2.9% of salaried income). Promised -- but unfunded -- benefits grew even faster, with payouts exceeding inflation and the years of retirement coverage continuously increasing. By some estimates, a typical 66-year-old couple today will get back double what they paid in. It’s no wonder that our entitlement programs are often compared to criminal Ponzi schemes.

In the past, a myopic focus on the short-term may have allowed some to gloss over the long-term insolvency of the programs, but that’s no longer possible. For we’re now rapidly approaching the time when the money deducted from employees’ paychecks is much less than payouts promised to program participants. Already today, approximately half of Medicare’s funding comes from general tax revenues.

Clearly then, our entitlement programs are an unmitigated financial disaster. But if we’re to properly deal with them, we mustn’t limit our analysis to economics alone. For after all, the deepest arguments underlying the programs aren’t financial -- they’re moral. Indeed, much of the reason that there’s never been any reform of the programs is that until recently, few would question the moral views of man’s nature upon which they’re justified.

What are some of these questions?

As recently discussed here and at length here, one fundamental question pertains to whether men are ends in themselves or means to others’ ends. I won’t recap the arguments, but suffice it to say that when the Founders created this land of opportunity (not of entitlements), they clearly enunciated a new -- American -- ideal in which each of us pursues our own happiness. This put them squarely in the camp of treating individuals as ends in themselves. It’s a camp to which more and more of us are proud to belong.

Another crucial question is whether, in general, men are capable of thinking and fending for themselves.

This question is best answered by observing people throughout history. Compare the success and can-do attitude of citizens living under freedom to those living under any form of statism, and one has to conclude that -- when left alone -- men are eminently capable of thinking and fending for themselves. It’s only when the state removes and restricts incentives and choices that men become dependent.

For nearly two centuries, Americans, including millions of penniless immigrants, eloquently proved the point. The world marveled at the typical American’s self-reliance, be it his ability to earn a living, build his house, fix his car, or move up the social ladder. In every domain, when left free to think, act, and enjoy the rewards of hard work, Americans surpassed themselves and the rest of the world.

But advocates of entitlement programs deny this. They view man (except perhaps that special breed which constitutes the governing class) as feeble and incapable. He can’t think or plan for himself. He must be forced to act for his own “good.” Indeed, as we saw with the passage of Obamacare, there’s no longer even a pretense of persuasion; we childlike peons are to find out what’s in store for us when the laws have been passed. Ever since the New Deal, it’s this paternalistic view that’s guided government policy.

Tragically, however, the paternalists have the causation backwards. In actuality, it’s their myriad of forced redistribution programs that has fostered a mentality of dependence among the populace. With each new program they implement, they further sever the link between personal action and personal outcomes. Slowly people lose the idea of individual responsibility, and begin to believe that somehow they’re “entitled to” or have a “right to” the products of other people’s efforts. As a result, America’s independent spirit is waning.