Posted on 03/31/2008 3:14:00 PM PDT by KeyLargo
Entitlement Mentality Is Wrecking Economy
By Jonathan Hoenig March 31, 2008
FROM WELFARE TO food stamps to Medicare, Medicaid and Social Security, our country now marshals a massive network of trillion-dollar entitlement programs colloquially known as the "social safety net." Many Americans, including a few of those running for president, see these bureaucracies as defining achievements of a nation where "nobody is left behind."
Forget the fact that the entitlements, many of which began with the goal of providing "basic minimum benefits" have grown into a gargantuan burden costing over $1.5 trillion a year and careening toward total collapse. For example, payouts will begin to exceed the revenues into Social Security in just nine years and current estimates have the entire system going belly up1 in 2041.
The fundamental problem with the social safety net, however, isn't bankrupt economics but bad philosophy.
A government can only provide a safety net insofar as the wealth that net consists of — food, clothing, shelter, medical services — has been created by productive individuals. The freebies government is so eager to expropriate don't grow from the ground, but must be produced by entrepreneurial individuals who create corporations, raise cattle, invest in financial markets, run restaurants, develop pharmaceuticals, and so on. From the creation of kidney dialysis to the transportation of affordable food, it's the reasoning mind that produces the wealth that makes our lives secure, not a bloated government bureaucracy.
As I've written2 before, it is America's historical commitment to capitalism and individual rights that has differentiated our prosperous economy from the socialist3 basket cases of North Korea, China and communist Cuba. When economic freedom is protected, societies see vast increases in productivity that result in higher-quality, lower-cost products.
One only need look at the least-regulated sectors of our economy — electronics, computers and food, all of which have declined in price — to see that phenomenon occur. Yesterday's luxuries, like huge flat-panel TVs from Best Buy (BBY4), become affordable mass-market items in just a few years.
This is true even in health care, which proponents of the entitlement safety net argue is uniquely vital enough to require governmental interference. Procedures like laser eye surgery that are not part of the government safety net have dropped in price and improved in quality in a short period of time. This is precisely what would happen if our entitlements were eliminated: Less-wealthy individuals would not go without care, but would become the eager focus of entrepreneurial businessmen competing to offer them cheap, quality health care...or education...or anything else.
In reality, skyrocketing health-care costs are a government-created phenomenon, where someone besides the patient (usually the government) pays the bills and insurance is assumed to be infinite. So there's no need for the producers of advanced medical devices to cut costs because such treatments quickly become a "right" under government-regulated health plans. If an innovative chemotherapy or AIDS treatment immediately has a huge, state-provided market, why focus on cutting costs? You'll note that the producers of notebook computers5 or hamburgers6 have no such disincentive.
Most disturbing is the reality that the "security" promised by the safety net is anything but secure. Unlike a mutual fund or checking account, there's no actual investment or savings when it comes to Social Security. It is, at its core, a Ponzi scheme in which the government loots your money today for the benefit of retirees and promises to do the same to future generations on your behalf.
So there is no real account with your name on it. In fact, the Supreme Court has ruled that the government does not owe us Social Security benefits by law, meaning that Congress is perfectly able to modify or cut benefits, which it has already done well over a dozen times since the program began.
At the heart of the social safety net is the moral belief that the government is responsible for our lives, and that, as Barack Obama has often said, "We are our brothers' keeper7." Under this altruist sensibility, we are duty-bound to serve the needs of others, meaning that anyone needy has an inherent claim on anyone better off. The wealthy aren't merely able to deal charitably with those in need, but are legally obligated to sacrifice their earnings for the benefit of those they might not voluntarily wish to support.
As entitlements grow, so does regulatory authority. As I wrote8 a few weeks back, the Federal Reserve is now getting explicitly in the business of being the de facto risk manager of the nation's largest banks. Treasury Secretary Henry Paulson's new mandate to overhaul oversight of U.S. financial markets moves us more toward a controlled society where individual choice is subordinate to "the public good," whatever the ruling class believes that to be at the time.
Moral bankruptcy eventually leads to financial collapse as well, and the evidence is growing more obvious with each passing day. As noted in Barron's9 over the weekend, the future obligations of Medicare are now so staggering that liquidating all the residential real estate in the country — a sum of almost $12 trillion dollars — wouldn't even cover the costs. The Social Security tax rate, which began at 2% in 1935, has been raised consistently since, with the system's trustees suggesting the payroll tax will need to be increased to 16% by 2041 in order to maintain benefits — higher if life expectancy rates continue to climb. The same suffocating scenario will inevitably play out for insurance, health care, housing or any other government-controlled efforts to redistribute wealth from those who've earned it to those who haven't.
It's more than evident that a government "safety net" is anything but safe. Instead of the altruist philosophy that only the needy matter, our country desperately needs to return to the notion of rugged individualism under which we are each responsible for and capable of achieving our own security without the immoral coercion of publicity-seeking politicians. Any alternative leads to dependency, stagnation and economic despair.
Jonathan Hoenig is managing member at Capitalistpig10 Hedge Fund LLC.
URL for this article: http://www.smartmoney.com/tradecraft/index.cfm?story=20080331-stock-investing
We must be near the point of no return, when more than half of American voters are now net tax takers, not payers.
Don’t forget government bail outs of Wall Street!
While this is a good read, the author casts a lot of doubt on his conclusion by mentioning that food has been decreasing in price. It hasn’t, and we all know this to be true.
it’ll never run out! we’ll just print more!
**Money for Illegals’ Care Runs Out(AZ-250 million/year)**
http://www.ktar.com/?nid=6&sid=765971
People faced with the prospect of no health care after retirement and no retirement fund are going to demand these entitlements continue. And so will most of their relatives. We are talking about tens of millions of people and an awful lot of them vote. The government can tweak these things but I doubt they can ever do much more than make minor changes. Not if the politicians want to keep their jobs.
Gone are the good old days of “you don’t work you don’t eat”. The liberal’s nanny state mentality has fostered generations of welfare families who have relied on the guvmint to pay their way. I am sure that there are some people that truly need these programs but the abuse far outweighs the legitimate cases.
Maybe we NEED to leave some people behind. Maybe then they will have to go out and get a job. McDonalds and the car wash are always hiring.
BUMP!!!!
The last figure I saw was 41%. That’s too close for comfort.
Great comments by John. I listen to him on WLS AM 890 out of Chicago sometimes in the morning.
The Great Society is truly a terrible example for a country.
Throw the old folks to the wolves if they can’t chew their meat.
Nice.
Yes. And George Bush has added prescription drug entitlements to this staggering load. And just when Social Security teetered on the brink of insolvency, he decided to extend benefits to Mexico. Let’s hope McCain has better sense. You can bet you last dollar that neither of the Democrat contenders has.
I think we are past the point of no return.
The “entitled” AKA, liberals/democrats, consider themselves children. They may think they are adults, but what kind of adult requires so much supervision over their lives? What kind of adult worries so about who will take care of them and their needs? What kind of adult hands over so much responsibility for their own care to another?
In reality, skyrocketing health-care costs are a government-created phenomenon, where someone besides the patient (usually the government) pays the bills and insurance is assumed to be infinite
Uh no. The majority of insurance is paid through private companies.
Yes we are. Entitlements have become a self-fulfilling prophesy.
Entitlements are a life style that is generational,handed down from mother to daughter, father to son. Encouraged by the liberals in return for thier vote and support have strangled cities, states and government. All we here is the liberal dems stating they will increase these entitlements, they are not enough, and we will pay for this by taxing the rich. The only problem with this is the RICH is me and you, middleclass Americans who have to pay for thier sons and daughters college education, put food on thE table and a roof overhead, pay these gas prices to make it to work to earn this money, pay for daycare, healthcare and a million other things we do not have the privelege of getting for free BECAUSE WE PAY FOR THEM! I SAY, WHERE IS OUR BREAK? WHEN DO WE GET A LITTLE OF WHAT WE PUT IN? We don’t! Thanks to the skunks we elect to office who use us and abuse us!
I do not see that getting my SS for retirement constitutes any sort of entitlement. I had no choice and would rather have invested it.
But unless you are in the ruling class, you pay.
hmmm... $110,000
Hi, we’re from the government and we’re here to help (you right into an early grave; bankrupt, insolvent and poor). Look at all this free stuff we’re going to give you.
Back in the late 30's, my Grandpa... a WWI vet... had suffered mustard gas poisoning. Before the war, he was a promising medical student; afterward, he had severe memory deficits and finally a nervous breakdown.
With 8 children to support, they went on "relief"... as they called it then. It was highly embarrassing to him.....but in order to get the food allotments, he had to work 40hr weeks washing windows.
The kids all took jobs selling papers and shining shoes....giving the money to my grandparents to help the family. Grandma finally landed a job with SWB telephone as an operator and they celebrated the day they could get off public assistance. You don't find that mentality anymore.
Whether government, or private insurance, the effects, and the basic premise of his argument is correct. Medical providers have no need, when others are paying, to lower costs.
That and trial lawyers chasing ambulances, and hanging out in hospitals.
Oh you think not? Well I beg to differ. Just ask the millions my age that are still supporting our parents. I am almost retired. And there are plenty like me.
Folks just ought not spout off so easily.
Like illegal immigrants?
Don’t get yer britches in a wad. The topic was about being on welfare and trying to get off of it.....not about those of us who accept our responsibilities.
Insurance companies, particularly HMOs, regularly deny payment for expensive procedures.
I know there are lots of dead beats out there, and entitlement queens and such.
One only need look at the least-regulated sectors of our economy — electronics, computers and food, all of which have declined in price — to see that phenomenon occur. Yesterday’s luxuries, like huge flat-panel TVs from Best Buy (BBY4), become affordable mass-market items in just a few years.
Anyhow, I couldn't stand using food stamps at the grocery store, and I couldn't stand being at the mercy of the govt for money for my bills. I was able to get public housing assistance in lived in a dump for a year.
I didn't want that kind of life so I borrowed money from my grandmother and bought a junk of a car and a computer so I could teach myself computer skills.
It took me an additional 4 months to work the computer and find a job, but I did it and went off of welfare. I am happy to say that it has been 14 years and I now am a tax paying citizen who pays all of her bills and am even a homeowner.
What is interesting about all of this is yes I was a Democrat until the second Bush term. I didn't vote for either Bush or Gore in 2000 because I didn't like either of them, but the more money I made, the more conservative I became from a fiscal standpoint.
Yes, there are quite a lot of people who make this a way of life, but there are some who use the system as a safety blanket and then make it on their own. I have more than made up for the tax burden in assistance I got through my own taxes. ;0)
It was the hard work that made me strong. When on welfare I felt like a slug and it embarrassed me. Working every day is what helped to develop my character and made me a winner, not a quitter.
That is what is wrong with the welfare society. They have created a bunch of dependent adults that have the same mentality of children and are devoid of responsibility.
I would NEVER go back.
How will the Government cope? The endgame is already happening. Medicare payments to doctors are already so low that few, if any, doctors will take them. Also, the delta between the official and actual inflation rates will mean that SS obligations will rise slower than revenues.
So you assume I don't know what I'm talking about...and you lash out with a knee-jerk of your own? C'mon.
Alot of us didn't grow up with much....but worked hard to get where we are. No one owns the market on self-sacrifice. Most responsible people do more than their fair share of that.
DING DING DING!!! We have a winner. Too bad no-one is willing to give up those “entitlements”. And the bulk of those receiving the handouts VOTE....
Lets not forget the money handed out to Wall Street Bankers.
Absolutely not and God bless all of them.
Nowadays it’s easier to live off the guvmint and there is no shame in it whatsoever. Back in your grandparents time there was a huge stigma to get pregnant out of wedlock. Nowadays, 3 out of 4 black and 1 out of 2 hispanic kids are illegitimate and again, there is no shame associated with it whatsoever.
They will do what they've always done. Make those who can afford their own pay for those who can't until everyone has the same thing. Nobody gets left behind because nobody gets to move forward.
I grew up dirt poor.....got married to dirt poor when I was 17. *chuckle* I went back to HS and got my diploma while pregnant with my son. Went to college and got my nursing degree when the kids were both in school.
Before that.... I helped my husband start a successful business.... while working as a lowly bank clerk. (He was a grease monkey before starting the biz.) It CAN be done. You just have to have vision...and the willingness to work yourself to exhaustion to get it done. lol
Proverbs 12:24- The hand of the diligent will rule,
while the slothful will be put to forced labor.
Proverbs 12:27 - Whoever is slothful will not roast his game,
but the diligent man will get precious wealth.
Proverbs 19:15 - Slothfulness casts into a deep sleep,
and an idle person will suffer hunger.
Of course not....especially if you can use the kid as a permanent anchor to apply for benefits. I see this all the time. Young hispanic/black/white girls......get pregnant... have all their schooling, daycare for the baby, medical/dental, food and housing paid for. What a jackpot!
To take it a step farther - Social Security and Medicare might be more likely to survive if we were not handing out entitlements to over 50% of the US population.
I posted the following on the Arkansas board a couple of weeks ago:
Front Page of ArDemGaz today - “List for child-care help grows as funds fall short”
You finally read, after the blame game (six years since an increase in federal funding...), that the main reason for the backlog of 5K names on the waiting list - The state chagned the eligibility standards.
In 2007, the income standard changed from $29K for a family of 4, to $41K for a family of 4. Heck, if I didn’t have a 2nd job, I would have been eligible this year (might it be more than what my 2nd job pays? And that aid isn’t taxable....hmmmm).
Seriously. I know a BUNCH of families with 4 or more who live on less than $40K per year with ZERO help from fat-daddy gubmint.
My wife is a teacher in a private high school. Although it is rare, some of the students there get pregnant. Without exception, they forsake college and wind up living on the edge of poverty with deadbeat dads who could care less about taking responsiblity for the kids much less pay any child support. One minute of bad jusgement and it affects them for the rest of their lives.
I am sure you do know what YOU are talking about. BUT so many do not seem to know. I grew up poor as well so I do understand. My point is that folks here are very quick to generalize. Years ago, there used to be reasoned responses that was characteristic of conservatives. This seems to be missing now.
We are poorer for that.
We USED to have an affordable means of insuring the elderly were taken care of. It was called “family”. . .
Which, in turn, the Government allows the companies to deduct as an expense. . .
...and your point?
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