MediScare, Part “O”, The Entitlement Bomb
Early during his second term, President George W. Bush declared he would spend his accumulated political capital on reforming Social Security. Democrats immediately lambasted the president, falsely claiming that his reform ideas were “radical” and would leave the elderly penniless and laying in the streets. They claimed Bush would gamble the life savings of our parents and grandparents on the stock market, and that his Wall Street buddies would grow rich while swindling granny out of everything she owned.
Of course, the truth was nowhere close. Bush’s “Strengthening Social Security for the 21st Century” plan was actually quite timid. It made no changes, zero, in the Social Security program for those 55 and over. Under Bush’s plan, personal retirement accounts would be phased in, with annual contribution limits gradually increased to a staggering…4%…yes 4%…of workers’ payroll taxes allocated to their personal accounts, with annual contributions initially capped at $1,000 per year in 2009, rising over time by $100 annually, plus growth in average wages. In other words, a measly 4% of payroll taxes would have been invested in private accounts, with the other 96% staying in the Social Security Trust Fund.
And yet due to this “radical” plan, this blindingly fast weaning of Americans from the government teat, Democrats successfully terrified Americas seniors and Bush’s political capital was eviscerated. He would end up abandoning the effort and Republicans would crawl back into their shells, unwilling to again touch this third rail of American politics.
Enter Congressman Paul Ryan, House Budget Committee Chairman and resident daredevil. Last year, Congressman Ryan introduced his budget bill, called “The Path to Prosperity”. Initially, there was fear by some Republicans to embrace the budget. Democrats had used demagoguery of the bill as a bludgeon to defeat a Republican in a special election. Former House Speaker and then-presidential candidate Newt Gingrich would refer to it as “right wing social engineering,” before back-tracking his comments when conservatives took umbrage. It was considered political suicide to dare touch Social Security, and above all, politicians want to get re-elected. They enjoy the perks and the prestige. Few are willing to risk all that to promote changes to a popular entitlement program.
Luckily, Congressman Ryan is a bit of a visionary, certainly compared to his political colleagues. Realizing that the growth of entitlement spending is on an unsustainable trajectory, he did the unthinkable…he told the truth. He explained how, absent reform, entitlement spending would eventually devour every penny of federal taxes, leaving nothing for defense, infrastructure, education, or any of the other things we consider priorities. Every other politician with a functioning brain cell knew this as well, but they were willing to engage in a game of “hot potato,” betting they would not be the one standing there when the system collapsed.
And collapse it will. In 1940, Social Security had 159 workers for every beneficiary. In 1960 the ratio had plummeted to five workers for every beneficiary, and in 2010 that ratio had been cut to 3:1. To make matters worse (actuarially speaking), life expectancy was ever increasing, meaning that not only were there fewer and fewer workers to fund the retirement of every beneficiary, but the duration of the retirement was lengthening. Social Security was and is a house of cards, and the winds of demography are blowing hard. Even noted liberal economist and NYT columnist Paul Krugman, lover of all things Keynesian, predicted more than a decade ago that “the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).” The other dirty secret is that there is no “lock box,” no Social Security Trust Fund. All of the Social Security contributions over the last few decades not paid out to beneficiaries have been spent by politicians on vote buying schemes. What we have is the world’s largest pile of IOU’s. And they are worthless. We are basically promising to pay ourselves.
So back to Mr. Ryan. When Mitt Romney tapped him as his Vice Presidential nominee, Democrats immediately began salivating, thinking of all of the fear-mongering they could engage in with America’s most reliable voting bloc, the senior citizens. Like sadistic little sugar plum fairies full of bile, they dreamed of more ads like that produced last year by the Agenda Project Action Fund which showed a Ryan look-alike literally rolling an elderly woman in a wheelchair over a cliff, a visual representation of the claim that Ryan’s Medicare reform plans would kill seniors. Ah, yes, nothing like honest debate on one of America’s most important issues.
The problem is that we are dealing with two separate realities, the political reality and the economic reality. The political reality is that Americans love their entitlement programs, and any politician that even hints at cutting any benefits does so at his or her own peril. The economic reality is that we are broke; 2009 was the last year that Social Security ran a very slight surplus, and in 2010 the program deficit was $49 billion. The long term prospects are grim, with a projected Social Security deficit of $344 billion by 2035.
Medicare is even worse. According to the April 2012 Medicare Trustees Report, Medicare Part A alone ran a cash deficit of $28 billion in 2011, and the Medicare Trust Fund is projected to be insolvent in a mere eleven years, possibly sooner when we factor in the hundreds of billions of dollars that ObamaCare has siphoned from Medicare to disguise the actual expense. Even factoring out the cost of ObamaCare, the long term unfunded liability for Medicare is just under $43 trillion. By the year 2050, Medicare will consume nearly 10% of GDP, double what we spend on defense. The long term unfunded liabilities for all entitlements (not including ObamaCare) is $100 trillion dollars, more than one and a half times the total gross domestic product of every nation on Earth…COMBINED!
On the bright side, we only have to worry about this for another fifteen years, or so said the Congressional Budget Office earlier this year. That is the year where deficit spending will collapse the entire U.S. economy. If you don’t believe me, just ask the tax cheat, Obama’s Treasury Secretary “Turbo Tax Tim” Geithner. Earlier this year, under questioning from House Budget Committee Chairman Paul Ryan, Geithner admitted that the Obama plan is to stabilize the debt in the next few years, after which it begins to skyrocket, leading to a complete economic meltdown. Geither, trapped, condescendingly and childishly retorted, “You are right to say we’re not coming before you today to say ‘we have a definitive solution to that long term problem.’ What we DO know is, we don’t like yours.”
And that, my friends, is the choice we face in this election. We face a choice between Obama and the Democrat Party, who promise to continue spending us into oblivion, borrowing forty cents of every dollar spent, to be repaid with interest, until we become the United States of Greece. Or we can vote for Romney and Ryan, who recognize the eminent danger we are in and promise to start making modest reforms to take us back from the brink of destruction.
It is a choice between the fairy tale of a nanny state that promises to provide for our every need, or a long, gradual return to a republic in which free men and women accept personal responsibility for their lives, live within their means, and don’t enslave their children and grandchildren with massive debt from the time they take their first breath. The choice could not be more stark.