Monday, March 8, 2010

Thinking About Entitlements

I have been thinking about entitlements for the last couple of days. I've written about them before but well, I'm thinking about them and blogs are somewhat redundant. I went back through my posts on these matters and the first of my relatively recent ones sums up my core views nicely. I think that picture is accurate, for at least a decade.

I was watching Tom Brokaw on some news type show. He made a very interesting point. My generation are going to screw older people. Those under 40 (and doubly so under 30) realize social security is a Ponzi scheme. More importantly (older folks aren't stupid, they know it's a Ponzi scheme too) we realize we are at the point in the pyramid where enough new contributors can't be found so it falls apart. Right now we aren't an important demographic for anything but beer, clothing and electronics sales, we are largely ignored in politics. However when 20 and 30 somethings become 30 and 40 somethings we get pretty important pretty fast. I think the likelihood of us adjusting social security benefits to fix a dysfunctional budget are pretty high. Look at what big corporations and nations do when they are broke, they cut the pensioners because aside from ill will by that group it is a darn easy thing to get rid of. Maybe we will screw you guys, at best we will pay you in highly inflated dollars.

In any case I think retirees and those approaching that age need to think about a stance based more on making the program viable and something my generation can have some trust in than getting their 2.5% this year. Also if I was anywhere close to retirement I would do some looking at where I would be without these entitlements.

When it comes to medicare. This is a bit more complicated because the benefits are far less clearly defined and the costs are booming. More people are going to start drawing SS but more people will start drawing medicare and each of them will cost more. We can figure the cost of SS for a given retiree is X plus a couple points a year. Medicare doesn't work that way. First I think we need to make it so retirees with access to other medical care must use it first, not visa versa as it is now. I had two grandparents, both of whom retired with good reasonably priced medical insurance for life. Instead of that insurance paying for their medical needs our government paid. In what world does that make any sense? Also some sort of a means test would make sense to me. Someone who is worth 3 mill in total assets (just to toss out a number) can realistically afford to buy their own insurance.

Also as unpleasant as it sounds we need to really talk about end of life care. I am not a socialist and I do not want to control peoples medical care. I believe people should be free to spend as much money as possible to prolong their life or their quality of life. If Warren Buffet thinks taking a bath in a tub full of diamonds then throwing them away every day will cure cancer then good luck. However I do think an articulate discussion needs to be had about how much money I AM GOING TO BE FORCED TO PAY to keep a 75 year old morbidly obese man with stage 4 cancer who just had a massive stroke hanging on to life for the next week. We spend an obscene percentage of the total cost of health care at the very end of peoples lives and it needs to be looked at. Back to Social Security to close.

To be honest I think it is going to get ugly. Maybe the whole thing will collapse and we will go all hyperinflation. More realistically things will just be bad and we will pay seniors with highly inflated dollars. Maybe my generation will radically change benefits and just shove the old folks under the bus. I see several potential outcomes, all of them bad. It is more a question of how bad and for whom than if it will be bad.

Upon reflection I just can't see the Ron Paul way out working. The first reason is that if there is an example of our government massively slashing expenses in order to pay for an already existing benefit I can't think of it. Secondly I think we are just talking about too many people getting too much money to meet those obligations without a massive dedicated tax. Third I think the "stop gap" concept fails to really recognize how long it would take. I think that in order to not screw over/ honor the contract with seniors we are going to have to pay most of them a high percentage of what they had been promised for the rest of their lives.  I do not have an actuary table for the population we are talking about handy but this plan would have us coming up with a whole lot of money for at least a couple (more likely 3.5-4) decades. We aren't talking about sending these folks 4 more checks and calling it good.

There are just too many retirees getting too much money from the government to be able to have my garnished waged go into my own privatized account (or just stay in my pocket?) and Granny to keep getting checks. I just don't think the math works out.

 In closing, buy silver and ammo. Not that silver and ammo have anything to do with the above, just that I wanted to close on some good advice which everybody can agree upon.

8 comments:

Wyn Boniface said...

I say pull the plug and let the wheat separate from the chaff.

Anonymous said...

You left out public sector pensioners, federal, state and local governments. Bankruptcy is in the wind.

Bitmap said...

Unlimited immigration is one way of propping up SS for a while longer.

Unlimited illegal immigration followed by amnesty is another means to that end.

Chris said...

Cutting entitlements requires a politically unpopular vote.

Raising taxes requires a vote too, although it might be palatable for some (esp if its something that only hits "the rich," like making the payroll taxes progressive).

Inflation does NOT require a vote and can be done with no accountability, although its probably most destructive to the middle class.

Hrm. I see higher taxes combined with inflation to deal with this...

On a personal level, as a 20-something professional, I never count on seeing a dime back from social security. I view it as my charitable donation/tithe. I am saving for my own retirement and I plan on using my social security check (if there is such a thing) for pure charity when I retire because I hopefully won't need it. Even so, I think its high -- payroll taxes are ~16%, the medieval tithe was only 10%!

Conservative Scalawag said...

I agree with Boniface. Pull the plug on Medicare, Medicad,SS, and alike.

We need to return to personal responsiblity,and have less nanny state involvement.

After all, out grandparents and their parents did just fine without it,so will we. We just need to re-learn how, or something I like to call saving your money,avoid debt, and buy with in your means.

Mechanic in Illinois said...

I'm with Wyn,stop the checks and we will find out who has the most ammo.

Anonymous said...

One thing to consider about pyour "end of life", most patient's in today's ICUs would have been dead already 50years ago.

Good, say the budget minded! Ok, I'm not for giving all my money to a losing cause, but there are benefits to science of medicine!

I'm not suggesting free healthcare...nothing of the sort. However, those "end of life" folks truly challenge the medical community to improve medicine!

Just a thought...

Anonymous said...

Years ago I read a book by Lee Iaccoca,about how to fix the country.He was complaining about getting his SS check!! As if he,or other millionaire's need it! Why not cut off SSI to those with over a half million in the bank?And medicare! If you have a comfortable retirement stashed away,why do you need a few extra buck's? Yes,you paid into it all those yr's,but I'm sure they figured out every tax dodge on earth!
Dean in az

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