Wayne O’Leary

You’re Not Entitled

The term “entitlements” has, at the instigation of conservatives and inconstant liberals who want to cut them, taken on a rather negative connotation lately. The implication is recipients are getting something for nothing, something they don’t deserve, something provided at great cost by a burdened public Treasury that just can’t afford to do it anymore. Time out!

Here’s why they’re called entitlements: the persons receiving them are entitled to them by virtue of having contributed what amount to premiums (dedicated payroll deductions) over a working lifetime, as they would to an insurance policy. Social Security and Medicare, the primary American public entitlements, are, in fact, a form of social insurance and were intended as such from the very beginning; they are neither welfare payments nor government subsidies, but rather something contractually owed to beneficiaries.

Franklin D. Roosevelt, father of the entitlement system, pointedly explained the logic behind it some years after the 1935 passage of the Social Security Act: “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.” Perhaps not, but they’re certainly trying, and if actually scrapping the entitlements outright is unlikely, nickel-and-diming them to death is a definite possibility, as is changing their fundamental character by means of privatization.

The wildly exaggerated deficit crisis has given the American Right, which has always hated the entitlements as a wasteful and subversive form of socialism, the opportunity it has awaited for decades. Barely a day goes by now without utterance of the refrain “Entitlement spending is out of control.” Usually, it’s accompanied by the assertion that only by cutting Social Security and Medicare expenditures can the deficit be reduced. This ignores, no doubt deliberately, the fact that these self-funded programs have nothing whatever to do with the deficit, since they’re not part of the federal government’s yearly operating budget; they stand alone and do not depend on contributions from income-tax receipts, as every deficit hawk knows full well.

Furthermore, they’re not in economic jeopardy over the near term, having sufficient monies to fully pay recipients well into the 21st century — 2037 in the case of Social Security. Even after that date, Social Security, in particular, will still be able to cover nearly 80% of its obligations — and that’s assuming no relatively minor fiscal adjustments (raising the cap on taxable income, for instance) that would easily make it solvent indefinitely. As of now, the program maintains a surplus of $2.5 trillion, which will grow to well over $4 trillion by 2023 before leveling off, hardly a prescription for impending bankruptcy. That won’t give even momentary pause to the sworn enemies of Social Security and Medicare — fiscal hawks, libertarians, tea partiers, movement conservatives — whose concerns are less economic than ideological; they’ll have to be stopped by organized public outrage.

It won’t be easy. The customary political opponents of the entitlements, who despise them as “big government,” will be joined by business types whose latent fears about their employer share of FICA taxes rising will prompt a knee-jerk acceptance of alarmist predictions that a crisis exists in entitlement funding — a precursor to support for preemptive benefit cuts to address the imaginary problem. Also signing on to the anti-entitlement crusade and lending it a veneer of establishment respectability will be well-meaning intellectual airheads like New York Times columnist and pundit David Brooks, whose proposal for patriotic bipartisanship (offered at December’s “No-Labels” leadership conference) is that seniors should give up their Social Security cost-of-living adjustments (COLAs) as a gesture of solidarity with the troops in Afghanistan.

Brooks, privileged possessor of an extravagant media salary, has probably never met any of the millions of seniors who desperately depend on those periodic COLAs to keep their heads financially above water. Congresswoman Jan Schakowsky (D-Ill.), one of the few members of President Obama’s grim-reaper fiscal commission with a grasp on reality, points out that for two-thirds of retirees, Social Security provides over 50% of their income; for one-quarter of them, it provides 100% of it. On average, Social Security recipients get an annual government allotment of just $14,000 on top of the modest $4,000 they receive yearly from other sources of income (private pensions, part-time work, criminally meager savings interest). These are the people being told they must sacrifice to “save” a Social Security program that is not in any real danger — except from conservatives intent on crippling it.

The sacrifice varies according to who’s drawing up the austerity plans. Rep. Paul Ryan (R-Wis.), budget czar for the new Republican House majority, wants to tie future Social Security benefits to the inflation rate rather than to wage growth, effectively cutting them over time; his Medicare “fix” would convert the program to a privatized voucher or tax-credit scheme, under which recipients would purchase their retirement medical plans on the open health-insurance market.

The mainstream proposals of the president’s center-right fiscal commission (Simpson-Bowles, Domenici-Rivlin) are only slightly less draconian; they focus on things like dramatically raising Social Security’s eligibility age and reducing its benefits according to longevity and income formulas, while increasing co-pays and premiums for Medicare, and gradually shifting it to a publicly funded private-insurance system. All of the blueprints would shrink Social Security COLAs by changing the way they are calculated.

An obvious question is why the fiscal commission is messing with the entitlements at all, since its presidential charge was to address the unrelated budget deficit. A better question still is why it is arbitrarily avoiding corporate and upper-end tax increases as a deficit-reducing and entitlement-stabilizing alternative, a fair and sensible approach advocated by both the Economic Policy Institute and token liberal commission member Schakowsky.

Apparently, the US is becoming another California: no tax increases allowed without legislative supermajorities. That new mode of governance truly does imperil Social Security and Medicare because the partial, one-year FICA-tax holiday negotiated in December will seriously deplete the retirement trust fund in the short run. It remains only to see if President Obama has fully bought into the current anti-entitlement mindset perpetrated in part by his own fiscal commission. We’ll know soon enough.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy.

From The Progressive Populist, March 1, 2011