Download - AMERICANS and the Entitlements Dilemma
AMERICANS AND THE ENTITLEMENTS DILEMMA
1. ENTITLEMENT
COST GROWTH
– A THREAT TO
OUR
PROSPERITY
a. ELEMENTS OF WELFARE
b. WHAT IS AT RISK?
c. WHY IT’S GROWING
d. SOME APPROACHES TO REDUCE THE
THREAT
2. WORKFARE
AND THE
SOCIAL SAFETY
NET
a. AN ELEMENT OF THE “SOCIAL SAFETY
NET”
b. WORKFARE HAS A HISTORY OF SOME
SUCCESSES
c. WHO IS HELPED?
d. WHAT IS CURRENT STATUS?
e. NON-GOVERNMENTAL SUPPORT
GROUPS
3. GRIDLOCK - -
OR IS THERE
ROOM FOR
COMMON
GROUND?
a. SAFETY NETS: A VIEW FROM THE
RIGHT AND FROM THE LEFT
b. RIGHT vs LEFT VIEWS ON SOME OTHER
RELATED ISSUES
4. A PLAN - -
COULD YOU GO
ALONG WITH
THIS ?
a. MOVING FORWARD WITH A PLAN
b. CONSIDER THESE ELEMENTS
c. RE-ASSERT WORKFARE AS A KEY
SOLUTION ELEMENT; HELP
CHARITABLE GROUPS TO HELP
d. CONCERNED ABOUT GIVING UP
PRINCIPLES ?
e. BUT WHAT ABOUT THIS PRINCIPLE ?
TOPICS
The growth of welfare spending is unsustainable and will drive the United States into bankruptcy if allowed to continue. President Barack Obama’s fiscal year 2011 budget request would increase total welfare spending to $953B — a 42 percent increase over welfare spending in FY 2008, the last full year of the Bush Administration.
THE CURRENT “SAFETY NET” ENTRAPS THOSE IT “SAVES”
The federal government runs over 70 different MEANS-TESTED anti-poverty programs , including food stamps, public housing, low-income energy assistance, and Medicaid - - to meet the physical needs of tens of millions of low-income families. However, the historical record of these programs gives evidence to their failure to aid recipients from a position of dependence on the government to being able to provide for themselves. In fact dependency on government is demonstrably growing.
The programs need to be reformed to achieve the following: 1. Rein in the out of control spending; 2. Set a path whereby a more sustainable financial footing is achieved and is less able to be thrown out of kilter in the future; 3. Re-structure the Programs so the monies applied serve the Needy and offer a hand up towards more self-sufficiency and much reduced (and sometimes abused) government dependency
THE CURRENT “SAFETY NET” NEEDS SOME REFORM
This article summarizes some data and thoughts
related to the reforms noted.
Our nation’s long-term fiscal outlook is unsustainable. Publicly held debt currently nears 70 percent of gross domestic product, the most common measure of an economy’s size. Our current policy path leads to debt of nearly 200 percent of GDP over the next 30 years.
In all likelihood, such high and rising levels of debt will have a disastrous impact on the U.S. economy long before they reach that level.
This figure shows Federal spending over the period 1990 to 2007 has averaged about 3% of GDP over revenues collected. The overage in 2008-2010 reached about 10%. This is certainly a poor situation in itself, but it’s the projected, steadily growing deficits starting around 2018 that causes the true concern.
Despite broad awareness that the country must address its fiscal problems, lawmakers have made scant progress toward addressing our true long-term budget challenges. Those challenges are rooted in the aging of the population and fast growth of health care costs, which will push expenditures on Medicare, Medicaid, and Social Security far above the levels of federal revenues over the next 25 years.
As we’ll discuss
shortly,
the concerns we
face are these
The figure records 1st half
of 20th Century with total
gov’t debt averaging 35%
of GDP. In the last half of
the 20th Century, the debt
averaged about 55%.
Today our debt runs about
60% GDP and we face
heading into the
uncharted territory of
200% GDP.
Social Security accounts for more than 20 % of total federal spending. But our population is aging, and Social Security’s costs under current law will increase by about 20 % over the next 25 years — from 5 percent of GDP in 2012 to 6.2 percent of GDP in 2035. Social Security has been financed chiefly on a “pay-as-you-go” basis, which means that current workers pay for current beneficiaries.
This arrangement worked well as long as there was a consistently high ratio of workers-to-beneficiaries. But, as shown in the Figure with our aging population, this ratio will decline from 3 workers per 1 beneficiary now, to about 2 to 1 in 2035. This is one of the key reasons for the trend in funding shortfall.
SOCIAL SECURITY
The federal gov’t spends around $1T a year on health care programs. Different communities: the elderly; the disabled; military and civilian federal employees; low-income individuals and their families; and others - - benefit from these programs. The two largest programs are Medicare and Medicaid. As shown in the Figure health care costs are large and getting larger.
Why the rapid cost growth? There are many reasons. A major factor is that a significant portion of health care in the U.S.A. is financed through “fee for service” payments, which pays health providers for services they deliver but not necessarily for quality of health achieved. But this process can encourage unnecessary, ineffective, or even harmful care.
Healthcare
Higher income Nations tend to spend more on
health care, and as the Figure shows, the
U.S.A. has the highest per capita
Health Care costs in the world.
OTHER COST CAUSES:
When the budget is being managed so that a service cost associated with borrowed money is larger than such needed National funding as Education or product R&D, then clearly the overall management focus needs to be questioned. Education and R&D are both critical seed corn for the future of our Nation.
We need involved Citizens. A good sense of priorities seems to be AWOL.
When costs rise faster than revenues taken in, the Government is accumulating further debt plus the associated interest costs paid for the borrowed money. Some perspective is given in the Figure.
Having discussed some of our financial challenges, it might be helpful to conclude this portion of the discussion with a broader view that puts the quantitative picture of government REVENUES and SPENDING in perspective. The Figure does just that.
Using data for year 2011, we see that REVENUES
were $2.3T. The major
contributors are:
Individual income taxes (47 %); payroll taxes (36 %); corporate
taxes (8 %); Estate taxes ( .2 %) and a compendium of various
‘Other’ taxes ( 8.8%).
Using data for year 2011,
we see that EXPENDITURES were
$3.6T. an OVERAGE of
nearly 57%. The major
contributors are:
Major Healthcare Programs (25 %); Social Security (20 %); Defense (19 %); Interest On the Debt(6 %) and a collection of All Other Spending (30 %).
The preceding financial perspective is critical as we now turn to some current policies and potential solutions for our Entitlements including the “Social Safety Net”.
1. ENTITLEMENT
COST GROWTH
– A THREAT TO
OUR
PROSPERITY
a. ELEMENTS OF WELFARE
b. WHAT IS AT RISK?
c. WHY IT’S GROWING
d. SOME APPROACHES TO REDUCE THE
THREAT
2. WORKFARE
AND THE
SOCIAL SAFETY
NET
a. AN ELEMENT OF THE “SOCIAL SAFETY
NET”
b. WORKFARE HAS A HISTORY OF SOME
SUCCESSES
c. WHO IS HELPED?
d. WHAT IS CURRENT STATUS?
e. NON-GOVERNMENTAL SUPPORT
GROUPS
3. GRIDLOCK - -
OR IS THERE
ROOM FOR
COMMON
GROUND?
a. SAFETY NETS: A VIEW FROM THE
RIGHT AND FROM THE LEFT
b. RIGHT vs LEFT VIEWS ON SOME OTHER
RELATED ISSUES
4. A PLAN - -
COULD YOU GO
ALONG WITH
THIS ?
a. MOVING FORWARD WITH A PLAN
b. CONSIDER THESE ELEMENTS
c. RE-ASSERT WORKFARE AS A KEY
SOLUTION ELEMENT; HELP
CHARITABLE GROUPS TO HELP
d. CONCERNED ABOUT GIVING UP
PRINCIPLES ?
e. BUT WHAT ABOUT THIS PRINCIPLE ?
TOPICS
THE SAFETY NET - - PRO & CON
In the broadest terms, “SOCIAL
SAFETY NET” (SSN) programs provide
assistance for low-income households,
and help insure individuals against the
risk of falling into poverty.
PROPONENTS OF THE SSN SAY: “ SSN
alleviates the impact of poverty, and
gives income security to those
individuals who, through no fault of
their own, are at economic risk.
CRITICS OF THE SSN SAY: “ SSN
income assistance creates a cycle of
dependence on gov’t , dampens work
force participation, and is ineffective.”
The first components of the contemporary SSN were created in 1908, as a response to increases in workplace injury and demands from reformers. These WORKERS’ COMPENSATION (WC) programs provided cash benefits for medical care, or payment for worktime lost. In 1935, President Franklin Roosevelt’s New Deal policies, during the widespread unemployment and poverty of the Great Depression, established two important social insurance programs:
1. Old Age Social Security (OASS)
2. Unemployment Insurance (UI)
THE SAFETY NET: SOME HISTORICAL PERSPECTIVE
Today, Old Age Social Security provides retirement benefits to individuals age 62 and over, their dependents, and survivors.
Social Security was expanded in 1954,
under President Eisenhower, with the
addition of Social Security Disability
Insurance (SSDI) to cover disabled
individuals who are unable to work.
Benefits for OASS, Survivors’ Insurance,
and SSDI are financed through federal
payroll taxes on current workers.
Unemployment insurance provides
temporary benefits for recently laid-off
workers and is primarily run at the state
level.
The Social Security Act of 1935 also
created a new means-tested program:
(AFDC)
THE SAFETY NET: SOME HISTORICAL PERSPECTIVE
MEANS-TESTED programs provide benefits to those individuals and families with income and assets below a determined level. These programs may also provide direct financial support to specific groups (such as workers, the elderly, the disabled, or single mothers and their children) or for specific expenditures (such as nutrition, housing, or health care)
THE SAFETY NET: SOME HISTORICAL PERSPECTIVE
In the mid-1960s, aiming to raise the basic welfare of the poor. President Lyndon Johnson enacted two of today’s largest MEANS-TESTED programs:
1. Food Stamps (now called SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM, “SNAP”) 2. MEDICAID
Unlike the AFDC program, SNAP and Medicaid do not provide cash assistance to low-income families but instead provide in-kind benefits of food and health care. Medicaid provides health insurance for low-income individuals. States set the eligibility requirements for specific “covered groups” including the elderly, the disabled, children, parents, and pregnant women.
In 1996, President Clinton replaced AFDC with the TEMPORARY AID TO NEEDY FAMILIES (“TANF”) program. With growth, increased taint of fraud across many of these programs has been reported.
The Earned Income Tax Credit (EITC) was added to the social safety net by Presidents Ford and Reagan. The EITC provides cash benefits to low-income families but only to families with working members. All of the ‘SOCIAL INSURANCE’ programs (e.g. Social Security, Medicare, Unemployment Insurance), and the largest MEANS-TESTED programs (e.g., Medicaid, SNAP) are “ENTITLEMENTS”. All people who meet the eligibility requirements are “entitled” to benefits if they choose to participate. Non-entitlement, or “DISCRETIONARY” programs can only serve as many people as budgets allow. TANF is the largest discretionary program by expenditures. Since the 1960s, reforms to social safety net programs have focused on: encouraging employment and job skills (often referred to as “WORKFARE”). But progress has been uneven.
The core concept of welfare reform under Pres. Clinton (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996): TANF able-bodied adults would be required to work or prepare for work as a condition of receiving welfare aid. Under the old, pre-reform AFDC program, the Gov’t mailed checks to recipients, who were not required to do anything in return. Citizens should oppose any return to the old way.
Under the TANF “Workfare” reforms, some 30–40 percent of adult recipients were required to engage in “work activities”, defined as: unsubsidized employment; subsidized employment; on-the-job training; attending high school or a GED program; vocational education; community service work; job search; or job readiness training. Participation was part-time: 20 hours per week for mothers with children under six and 30 hours for mothers with older children.
Despite claims from opponents that welfare reform would lead to disastrous outcomes, the reform “Workfare” law had several successes. E.g.,
• Prior to the reform, AFDC caseloads had not declined significantly since World War II. Within five years of welfare reform, the caseload promptly dropped by close to 50 %.
• As welfare dependence fell child poverty among the affected groups also fell dramatically.
“WORKFARE” HAS DEMONSTRATED SOME PAST SUCCESSES
However, since 1996, TANF work requirements have been weakened, as Congress and the States have used loopholes to circumvent some of the stronger work requirements.
1. ENTITLEMENT
COST GROWTH
– A THREAT TO
OUR
PROSPERITY
a. ELEMENTS OF WELFARE
b. WHAT IS AT RISK?
c. WHY IT’S GROWING
d. SOME APPROACHES TO REDUCE THE
THREAT
2. WORKFARE
AND THE
SOCIAL SAFETY
NET
a. AN ELEMENT OF THE “SOCIAL SAFETY
NET”
b. WORKFARE HAS A HISTORY OF SOME
SUCCESSES
c. WHO IS HELPED?
d. WHAT IS CURRENT STATUS?
e. NON-GOVERNMENTAL SUPPORT
GROUPS
3. GRIDLOCK - -
OR IS THERE
ROOM FOR
COMMON
GROUND?
a. SAFETY NETS: A VIEW FROM THE
RIGHT AND FROM THE LEFT
b. RIGHT vs LEFT VIEWS ON SOME OTHER
RELATED ISSUES
4. A PLAN - -
COULD YOU GO
ALONG WITH
THIS ?
a. MOVING FORWARD WITH A PLAN
b. CONSIDER THESE ELEMENTS
c. RE-ASSERT WORKFARE AS A KEY
SOLUTION ELEMENT; HELP
CHARITABLE GROUPS TO HELP
d. CONCERNED ABOUT GIVING UP
PRINCIPLES ?
e. BUT WHAT ABOUT THIS PRINCIPLE ?
TOPICS
THE NATIONAL DEBT CLOCK - -
@ 7:10am 9-9-2012
Meanwhile, back at the ranch - - GRIDLOCK doesn’t seem to be
helping the Citizen to address the problem !
DEMOCRATS REPUBLICANS
LIBERALS CONSERVATIVES
LEFT RIGHT
THE
NATIONAL
GRIDLOCK
A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
1. ENTITLEMENT
COST GROWTH
– A THREAT TO
OUR
PROSPERITY
a. ELEMENTS OF WELFARE
b. WHAT IS AT RISK?
c. WHY IT’S GROWING
d. SOME APPROACHES TO REDUCE THE
THREAT
2. WORKFARE
AND THE
SOCIAL SAFETY
NET
a. AN ELEMENT OF THE “SOCIAL SAFETY
NET”
b. WORKFARE HAS A HISTORY OF SOME
SUCCESSES
c. WHO IS HELPED?
d. WHAT IS CURRENT STATUS?
e. NON-GOVERNMENTAL SUPPORT
GROUPS
3. GRIDLOCK - -
OR IS THERE
ROOM FOR
COMMON
GROUND?
a. SAFETY NETS: A VIEW FROM THE
RIGHT AND FROM THE LEFT
b. RIGHT vs LEFT VIEWS ON SOME OTHER
RELATED ISSUES
4. A PLAN - -
COULD YOU GO
ALONG WITH
THIS ?
a. MOVING FORWARD WITH A PLAN
b. CONSIDER THESE ELEMENTS
c. RE-ASSERT WORKFARE AS A KEY
SOLUTION ELEMENT; HELP
CHARITABLE GROUPS TO HELP
d. CONCERNED ABOUT GIVING UP
PRINCIPLES ?
e. BUT WHAT ABOUT THIS PRINCIPLE ?
TOPICS
A LOT OF WORDS ARE NOT A PLAN
HERE ARE SOME PLAN ELEMENTS
A GOOD PLAN STARTS WITH: WHERE DO WE WANT TO GET TO ?
SUCCESSFUL BIPARTISAN SOLUTIONS CANNOT BE AT THE EXTREME ENDS OF THE SPECTRUM AND ARE DISREGARDED:
PRIVATE + GOV’T ADMINISTRATION
FOCUSING ON THE “WORKFARE” APPROACH, I’VE PUT TOGETHER A LITTLE ALGORITHM TO HELP ILLUSTRATE A SOLUTION APPROACH I THINK MANY COULD ACCEPT . • THE NUMBERS USED AND CALCULATED ARE BY NO MEANS OPTIMAL; THEY ARE SIMPLIFIED AND JUST USED TO INDICATE THE CONCEPT. • GOVERNMENT FUNDING TO THE POVERTY LEVEL IS ASSUMED AS THE BASELINE CASE. • THE ALGORITHM USE ALSO HELPS ASSURE IMPARTIAL APPLICATION FOR ALL BENEFICIARIES. RESULTS ARE GIVEN IN THE NEXT 2 CHARTS.
AN INVENTED HERE ALGORITHM
• THE BENEFICIARY, WITH
WORK, WILL TOTAL MUCH
BETTER THAN JUST
BEING ON WELFARE.
• THE GOV’T PAYS OUT
LESS BECAUSE THE
BENEFICIARY’S
EARNINGS ARE ADDED
IN.
• IN OTHER WORDS,
EVERYONE IS
INCENTIVIZED IN A
GOOD DIRECTION.
AN ALGORITHM FOR ‘WORKFARE’
A SIMILAR ALGORITHM IS
APPLIED TO HELP OFFSET
GOV’T HANDOUTS WITH
THE HELP OF VARIOUS
CHARITABLE GROUPS
• AGAIN, THE BENEFICIARY IS
LIFTED ABOVE THE POVERTY
LEVEL.
• AGAIN, THE GOV’T EXPENSE
IS REDUCED, ASSUMING IT IS
BEARING THE FULL BURDEN
OF AID TO REACH THE
POVERTY LEVEL.
AN ALGORITHM FOR CHARITABLE GIVING
Senator J. WILLIAM FULBRIGHT, “In Need of a Consensus,” Penrose Memorial Lecture, delivered to the American Philosophical Society, Philadelphia, Pennsylvania, April 20, 1961.—Proceedings of the Society, August 1961, p. 352.
“To me, (an increasingly important issue is) the inability of so many Americans to identify themselves with something as vast as the United States. Left to wither is the national purpose, national educational needs, literature and theater, and our critical faculties. The national dialogue is gradually being lost in a froth of misleading self-congratulation and cliché. National needs and interests are slowly being submerged by the national preoccupation with the irrelevant.”
A RELEVANT QUOTE FROM FORMER
SENATOR J. WILLIAM FULBRIGHT
• OUR RUNAWAY ENTITLEMENTS PROGRAMS ARE A SERIOUS
NATIONAL ISSUE.
• COSTS ARE OUT OF CONTROL AND WE’RE HEADING FOR
MAJOR NATIONAL PROBLEMS UNLESS WE ADDRESS THEM.
• BUT POLITICAL DIALOG AND ACTION HAVE BEEN
GRIDLOCKED, RESULTING IN NO REAL MOVEMENT TOWARD
SOLUTION.
• A PRIVATE-PUBLIC PARTNERSHIP TO INTEGRATE THE
EFFORTS OF PRIVATE BUSINESS / CHARITABLE GROUPS /
GOV’T IS AN APPROACH MOST AMERICANS CAN SUPPORT.
• SOME SIMPLIFIED ALGORITHMS SHOW THAT WITH SUCH A
PARTNERSHIP, THE NEEDY CAN COME OUT AHEAD, WHILE
THE GOV’T CAN REDUCE ITS CURRENT AND PROJECTED
OUTLAYS.
• AMERICA COULD APPLY SOME OF THOSE SAVINGS TOWARD
OTHER SERIOUS ISSUES SUCH AS EDUCATION, JOB GROWTH,
ENERGY R&D, MANUFACTURING AND PRODUCT INNOVATION
AND OTHERS.
CONCLUSIONS
So those are some elements of a plan to move
forward.
What are your thoughts ?
I know some are concerned that compromise too
often equates to not standing by Principles.
But what about the Principle of: Citizens working
together to keep America Strong, Free and
Prosperous?
BIBLIOGRAPHY FOR THIS ARTICLE
“Confronting the Unsustainable Growth of Welfare Entitlements..”, Katherine Bradley and
Robert Rector, Heritage Fndn Backgrounder # 2427, June 24, 2010,
“Ending Work for Welfare: An Overview”, Robert Rector and Rachel Sheffield, Heritage
Fndn Issue Brief # 3712, August 29, 2012
“State of the Union’s Finances”, The Peter G Peterson Foundation, PGPF.org, 2012
“Poverty and the Social Safety Net”, Dustin A. Cole and Rebecca M. Tippett, Weldon
Cooper Center for Public Service, U. of Virginia, Feb 2012
“George Will Argues Against ‘Spreading Web of Dependency”, Jennie McKee quoting
George Will, American Academy of Orthopaedic Surgeons, Aug 29, 2012
“Liberal vs Conservative Values”, News-Basics.com/2010/liberal-vs-conservative-values,
2010
“Heritage Charts”, www.heritage.org/federalbudget/national-debt-skyrocket
“Clueless About Medicare”, Bryan R. Lawrence, The Washington Post, May 30, 2012
THE END
ACTUALLY, IT’S NOT THE END - - YOUR VOICE IS IMPORTANT TO OUR NATION. CITIZEN INTEREST, DIALOG AND DATA ARE CRITICAL TO GOOD CIVIC OUTCOMES. AND THAT INCLUDES OUTCOMES WHICH SIMPLY ASSURE PROPER CONDITIONS FOR THE FREE MARKET TO WORK.