Typically, the first response by Congress for controlling budgets and deficits is to raise taxes. We are seeing that in 2010. Raising taxes is not appealing, but it is more appealing than taking away the promises made over the years through various entitlements. Why is that? Perhaps because many Americans see the other guy as paying the taxes, because taxes are tailored to specific situations such as owning stocks, or selling property and because there are so many credits and exceptions that Americans cannot relate to the overall impact of tax increases.
On the other hand, entitlements hold out benefits for nearly every American, especially Medicare and Social Security and now the Patient Protection Affordable Care Act.
This promise and tax and spend scenario gets you; well it gets you to Europe. It gets you to massive government programs and to dependency on those programs by citizens of a country. It also gets you into a state where policy decisions are not made with prudence or a long-term strategy but with politics in mind. Politicians create the dependency and then must respond to ever-growing demands for more while avoiding any appearance of a reduction in the promises made. Someone or some group can rationalize every government program; every program is “good” for someone but that is not the point. The point is that the illusion of affordability is never ending until it builds to a point of crisis.
Witness the various states that for years provided generous retirement and other benefits to state workers and teachers. Rarely did anyone pay much attention, yet in many cases the states underfunded or did not fund these costly obligations. Even when crisis comes, rationalization hits like a sledgehammer, you cannot harm hard working teachers, or firefighters and police officer who risk their lives on the job, they are all underpaid. Even if all that were true, does it matter if you cannot pay the bill? You may be hard working, honest and have the best of intentions, but if you buy a house you cannot afford, you will lose it.
Medicare and Social Security are major elements of the federal budget and together with defense comprise the predominate cause of the growing federal deficit. If any policy maker seriously proposed adjusting either of these entitlements, they are politically tarred and feathered. On the other hand, they have little trouble raising taxes that any reasonable person can see does not solve the problem, but merely masks or extends it until another tax increase is needed. The fact is thast both these programs have to change.
It all boils down to one simple (although apparently it is not simple) thing, do not make promises you cannot afford to keep.
Let us take Social Security as an example. Americans have come to rely on this program for a major and in some cases sole source of retirement income. On average, Social Security makes up 40% of total retirement income. The program had grand goals from the start. Here is the preamble to the 1935 law:
“An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.”
Over time, succeeding Congresses tinkered with the law and “improved it”. For example:
From the history of Social Security:
“The original Act provided only retirement benefits, and only to the worker. The 1939 Amendments made a fundamental change in the Social Security program. The Amendments added two new categories of benefits: payments to the spouse and minor children of a retired worker (called dependents benefits) and survivors benefits paid to the family in the event of the premature death of the worker. The 1939 Amendments also increased benefit amounts and accelerated the start of monthly benefit payments from 1942 to 1940.”
“In 1972, the law was changed to provide, beginning in 1975, for automatic annual COLAs based on the annual increase in consumer prices. No longer do beneficiaries have to await a special act of Congress to receive a benefit increase and no longer does inflation drain value from Social Security benefits.”
In the ensuing years Congress apparently forgot Roosevelt’s Address to Congress introducing the Social Security legislation. Note especially the words I have highlighted in red.
“It is overwhelmingly important to avoid any danger of permanently discrediting the sound and necessary policy of Federal legislation for economic security by attempting to apply it on too ambitious a scale before actual experience has provided guidance for the permanently safe direction of such efforts. The place of such a fundamental in our future civilization is too precious to be jeopardized now by extravagant action. It is a sound idea – a sound ideal. Most of the other advanced countries of the world have already adopted it and their experience affords the knowledge that social insurance can be made a sound and workable project.”
“In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.”
[picapp align=”none” wrap=”false” link=”term=fdr&iid=2756884″ src=”http://view4.picapp.com/pictures.photo/image/2756884/roosevelt-returns/roosevelt-returns.jpg?size=500&imageId=2756884″ width=”380″ height=”274″ /]
It seems things have gotten a bit out of control
We have lost our way, despite populist opinion we cannot be we all things to all people, we cannot help every American buy a house, or a car or a washing machine or guarantee a job or unlimited health care or full retirement income. The idea that you can squeeze more and more out of the “wealthy” does not hold water because sooner or later there will be far fewer wealthy and the benefits their wealth provides society will be gone. If you continue to foster a “don’t worry, the government will take care of you”, mentality you will breed mediocrity and complacency and you will further poison the political system as it seeks only to respond to these demands.
There are many well meaning people who wish to help the less fortunate in our society, to assure that the middle class has a fair chance to thrive and that is all good, but achieving those goals through massive government spending and endless entitlement obligations sure doesn’t seem like the best way to be a real “progressive.”
QUINNSCOMMENTARY 
One comment