Truth About Entitlements

‘In the 2012 Obama campaign, the future of American “entitlements”, Medicare and Social Security, is avoided’

On the Contrary US Politics

One weakness of democracy is that you can’t get elected telling people what they don’t want to hear, even if — or especially if — it’s the truth. In the 2012 Obama campaign, on no point is there more dodging of reality than the future of American “entitlements”, Medicare and Social Security.

A demographic I join in a decade, Americans over 65 will swell from under 50 million today to 80 million by 2030. Medicare (health insurance for the elderly) and Social Security (the state pension system), consuming 33.5 per cent in 2010, will eat half the federal budget by 2030 — more than double the cost of defence. Medicare will require Congressional refunding by 2024. In 2037, Social Security will run at a steady 25 per cent deficit a year. Meanwhile, 4.5 working-age Americans — that doesn’t mean actually working — currently support one senior, but by 2030 the ratio will be 3:1. (FYI UK, your figures don’t look any better.) When I consider the scale of rational resentment my boomer friends and I will draw from overtaxed younger people in the years ahead, I envision euthanasia booths every few blocks where there used to be postboxes.

Particularly if Medicare is still forbidden to consider cost in its coverage, the US government will never be able to finance the healthcare for 80 million seniors. This same enormous cohort cannot draw full Social Security — free ride for 35 years. Something’s got to give. The retirement age will have to rise, and anyone who’s earned anything is not going to get much back. In the decades to come, American entitlements are sure to be means-tested-i.e., no longer be “entitlements”.

Look, I’m an Obama supporter, but do the Democrats ever say this? No. In his convention speech, Obama vowed to protect Medicare purely by reducing the cost of healthcare (how?), and to “strengthen” Social Security, whatever that means. Last summer, Obama admitted in an interview to being “open” to means-testing Medicare (it already is means-tested, a little — the thin end of the wedge), but you won’t hear him repeating that slip on the stump. The Democratic platform addresses the sucking black hole of Medicare merely by promising to crack down on fraud. It claims, “We will find a solution to protect Social Security for future generations,” without making the barest indication how.

So Republican VP candidate Paul Ryan’s “vouchercare” solution to Medicare may not be the answer, but at least it’s brave-brave enough to potentially lose electorally crucial, retiree-heavy Florida in November. Given the recent history of the stock market, Republicans’ plan to privatise Social Security also seems dubious, but at least they have a plan, and thereby concede the problem.

Conceptually, I like entitlements, like the NHS, which extend to an entire nation. The folks who keep the state afloat can point to these few tangible benefits in order to justify their involuntary investment. When all benefits are reserved for “the vulnerable”, as right-on Brits now call people who don’t or can’t earn a living, countries cleave brutally into givers and takers, and each camp resents the other. But between top-heavy age structures and the ongoing sovereign debt crisis, few Western governments will be able to afford the unifying nicety of generous entitlements for the elderly. That means I’m likely to pay so much for Medicare that I might as well buy private insurance, and I will lose most of the funds I’ve “contributed” (it’s hardly a choice) to Social Security. But what the hell — worse things could happen.

Still, woe to any politician who withdraws or restricts an entitlement once universal. Remember the unholy row about means-testing child benefit in Britain? That’s nothing compared to the outrage that would meet means-testing of these programmes in the US. (Fortunately, most over-65s are not given to burning police cars.) Despite American horror of “socialised medicine”, offloading your skyrocketing hospital bills onto the state at 65 is now considered a right. And it will come as a shock that all along Social Security “accounts” have been funded under false pretences: these are your earmarked retirement savings, growing and growing, waiting for you to get old. In truth, Social Security has always been just more taxes, and the statements of their “accounts” sent to working Americans periodically are no different than the paper fictions mailed to Bernie Madoff’s clients. There are no accounts. The feds have already spent the money.

Cameron is likely to be punished at the polls for sensibly means-testing child benefit. Were Obama to utter a peep about means-testing both entitlements, he would deep-six his chances of re-election in a New York minute. Electorally, we reward people who lie to us. We ask to be condescended to. So maybe we can’t blame politicians when that’s what they do.