A Word On Three Programs

Yes, Madame, yes!  We HAVE mentioned those before.  We’ll keep it up though.  Sometimes things have to be mentioned a lot and be around for quite a while before they stick.

I know I’m probably supposed to mention something about last Thursday’s VP debate.  Ok.  Both men performed adequately for what their “side” sent them up to do: Biden to be the more assertive/aggressive, and Ryan to be foreign policy savvy and “vice-presidential” in his first big debate.  Both men along the way threw out deflections, “screens,” and a lot of other manipulative debating/politicking points.  Mostly so we wouldn’t know the R/R ticket largely doesn’t have realistic plans and specifics and the O/B ticket doesn’t want to take a black eye over an obvious bad show (death of ambassador Stevens) before the election.

Turning to JC’s comments of September 8^th (here: http://www.facebook.com/ProfessorandHousewife?sk=notes):

I’m an Independent.  I don’t drink anyone’s Kool-Aid.  I don’t like or put much faith in Democrats, but their “opposites,” the Republicans, have largely abandoned rationality and reasonable cooperation in favor of the most petty and often bizarre obstructionist stances.  I actually respect and heed thoughtful Republicans like David Stockman, Mike Lofgren, or Olympia Snowe.

While I have disagreements with Paul Krugman’s stands at times, I don’t categorically dismiss him or disparage his credentials.  Labeling him a “socialist/economist” is painting a picture that plays well to American rabid politics, but is not very meaningful.  He might be considered a fan of the socialist/capitalist hybrid on the Scandinavian model, but that doesn’t make him a socialist.  And your use of the word indicates a bias that can cloud appraisal.  You’ll also have to be more specific about such blanket ideological assertions that Dr. Krugman is not competent in macro-economics.  You may disagree with his positions and conclusions, but the analytical tools he uses are classic in nature, and just as macro as other economists.

And now to the first of the specific points, the assertion that the prime reason for the problems of Medicare, Medicaid, and Social Security is that those who never paid into these “accounts” took money from them.  First, there are no “accounts”; that is a common misconception that plays into the hands of those who want to privatize these programs.  They are just that: programs.  They are all three, in effect, insurance, from those presently working, supplied to the elderly who have ceased work (for Medicare and Social Security), to those who have become disabled (Social Security), and to those who are too poor to afford care or who are on the verge of extreme poverty (Medicaid and Supplemental Social Security).

Social Security is funded by workers and employers.  Those are inadequate to continue benefits as at present, although even if there were no “trust funds” and taxes were never raised, the system could go on in perpetuity if it only paid out 70-80% of the stated benefits.   Social Security, at least, is not “going broke.”  Its problems are very addressable.

Medicare is funded from three sources (workers, employers, and premiums on recipients).  All three of those sources are inadequate.   Medicare has severe funding problems, and with the rise of both medical costs and numbers of elderly, it is a train wreck in the making unless something is done (refer to my previous post as to why the “Ryan Plan” is not that something).

Medicaid is not separately funded at all, and comes from general federal and state revenues.  It too has seen its costs rise, as more people slip into poverty, and more people attempt to get it.  It is one of the drivers of state budgets becoming hard to manage.

Illegal aliens are not entitled to any of these benefits, although fraudulent obtaining does occur.  It’s just unknown what the rate of that fraudulent obtaining is. 

The first point needs to be worded more carefully.  Saying “People drawing from Medicare, Medicaid, and Social Security who have never put anything into these accounts” implies use of the actual programs by freeloaders.  This can easily be used as deceptive, manipulative language.  Words matter. 

It is also largely incorrect even in the subsequent explanation.  Yes, the yearly surpluses in Social Security and Medicare were foolishly and selfishly squandered by a people and their politicians who irresponsibly delayed hard decisions or even emplaced selfish ones.  That part is true.  But the yearly surpluses in those programs, surpluses used to mask the true size of the deficits, were not spent on non-taxpayers—unless your professor means the foreign beneficiaries of our military’s posture and actions.  No, the diverted yearly “surpluses” were spent on  a mixture of misplaced allocation on contractors, on subsidies and corporate welfare, on defense, intelligence, security, etc. and also, in one form or another, directly or indirectly, on the citizens who were largely already paying the Social Security and Medicare taxes.   Was that spending often misplaced allocation of resources?  Yes.  And it helped us cover our underfunding of the government to go along with our overspending on the above.  Was it largely spending on the non-working?  Yes and no, often no.

Point two is simply incorrect (see here: http://www.factcheck.org/2009/03/social-security-for-illegal-immigrants/).  It has never been legal to pay Social Security, Medicaid, or Medicare to illegal aliens.  Has fraud sometimes occurred?  Yes, and so has a lot of Medicare and Medicaid fraud unrelated to illegal aliens.  Has all that been enough to be a root cause, let alone THE root cause, of our fiscal problems?  No.  Calculations of pay ins and pay outs in the 3 mentioned programs generally run along actuarial expectations, with the margin of error in calculation generally no more than 7% or so.  Is 7% too much?  Yes.  But that’s the high end of the estimate.  And it’s not determinative exactly WHAT is causing that variance.

Even children born here of illegal immigrants, children who eventually receive “benefits,” usually enter the work force and begin paying, yes, payroll taxes—Social Security and Medicare.  Even many illegals pay these taxes—even though they may never qualify for them.

Do we have a problem with the poor from elsewhere wanting to get the “good life” in America?  Yes, another problem that comes with marked disparity—and desperation—between next door neighbors (if Mexico became more prosperous like Canada, much of the illegal immigrant difficulty would go away—we don’t have an illegal Canadian immigration problem).  Does this problem manifest with some illegally or loophole obtaining of benefits?  Yes.  Once again, it’s not the driver.  More likely a kid in the back seat.

Social Security and Medicare should not be compared to IRAs or 401ks.  First because those programs are primarily insurance, not investments, and function largely as transfer payments between generations.  Second, because those investment vehicles you name have been abused by Wall Street to deceive Americans that those Americans could “control” their “own” money rather than having it “locked away” with “no control” in a pension plan.  When, in reality, those average investors were at the mercy of traders and funds managers, while pension trustees usually got better deals and better results because of their greater collective leverage.  So this idea of “accounts” is more privatization code-talk by those beholden to a greedy Wall Street.  A Wall Street that salivates at the prospect of more large amounts of money they can make big profits on and leave the ill-informed and near-powerless small investor depleted and whipsawed.  You can almost see the subliminal “sucker” message.

As for whether those who paid into Social Security and Medicare may not get what they paid for, because much of the money was diverted:  There’s a great amount of truth to that.  But once again, the people—a largely apathetic people, a people with poor knowledge about, or valuing of, civics, politics, or history—let it happen.  While their politicians did do them a leaderless disservice, it is just as much true, in a way, that the people largely only have their own willful ignorance, uncaring attitudes, and selfishness to blame.  They devote most of their energies to things other than how their government and their society functions (or doesn’t).