Entitlements: Answering the Critics Part 2

In my last article, I tackled several arguments that are commonly used to defend entitlements, or at least change the subject away from entitlement reform. I showed that defense spending, illegal aliens, and "the rich" are red-herring distractions that would make no difference in our looming debt crisis. There is still one last nugget that I commonly hear that needs to be addressed, and on its face it makes sense, which is why it's so attractive, but like other arguments it simply shifts the subject. Unlike the subjects in my last article, more of my arguments are going to be based on philosophy and history and less on charts and numbers, but they are no less valid.

A common suggestion made in the debate on entitlement reform is to "grandfather" those who are already in retirement, or near the age of retirement. Those seniors (or near-seniors) will receive full benefits, while younger workers will pay their FICA taxes, but receive fewer benefits. After several decades, the programs will be phased out as retirees pass away, and then the FICA tax can be eliminated. It sounds like it could work in theory, but there are several obvious flaws in this plan that I believe will ensure it will fail.

THE “ROLLING” STANDARD

Historically, whenever entitlement reforms have been proposed it is the current recipients who fight the reform, and the current workers who are paying for the benefits who are fighting FOR the reform. However as the decades roll by, the workers who fought for reform change their position as they begin receiving benefits, and fight for the status quo, beginning the process anew.
So let’s say that we “grandfather” in people 56 and older into the current system, while asking people 55 and younger to pay their FICA taxes but receive less benefits. What will happen in 10 years when those 55 year old turns 65? They paid into the system “their whole working lives” and now the government is taking away their earned benefits. They’ll use the exact same arguments in 10 years that current seniors are using now, and they will be just a politically active as current seniors. If we’re unwilling to hold current seniors accountable, why would anything change in 10 years? You’re just “punting the ball down the field” for another 10 years, but the debate will simply pick up again then. Seniors will still accuse you of hating them, trying to kill them, etc.



Seniors are the largest active voting bloc, and when these “new” seniors turn 65, you can bet the law will be changed, and they’ll be able to get their full benefits too. They’ll come up with some excuse like maybe saying that 10 years is simply not enough time to save for your own retirement, and they’ll kick the can down the road again by allowing another group to keep their benefits while throwing a younger group under the bus; repeat ad infinitum.

THE CONSTITUTIONAL STANDARD

The Equal Protection Clause, part of the Fourteenth Amendment to the United States Constitution, provides that "no state shall ... deny to any person within its jurisdiction the equal protection of the laws". This clause is currently being used to argue in favor of gay marriage rights, and you can bet that it will be used to argue for equal entitlements in the future is one group is receiving more benefits than another. It’s inherently unfair and arbitrary to say that this group will get benefits, but that group won’t get benefits when both groups have paid equal FICA taxes for their benefits. In fact, some are arguing that that FICA taxes need to be raised, which means that younger workers will pay MORE TAXES and receive LESS BENEFITS. If you think that they won’t challenge that in court or that the government won’t side with this new batch of seniors out of political expediency, you’re sadly mistaken.

THE DEBT STANDARD

Ronald Reagan warned America in 1964 that Social Security was a Welfare program and that the FICA taxes that were collected were for the “general use of the government” and that there was so fund. That was almost 50 years ago, and the “fund” is now broke and hemorrhaging money. So what will be different in 10 years? Nothing will be different except we’ll have more debt, and the funds will be even more broke. However, you can’t argue that the needs of future seniors have to be ignored because of our debt crisis, but the needs of CURRENT seniors can’t be ignored because these entitlement programs are a “sacred trust” as many politicians are calling it. WE ARE BROKE RIGHT NOW! In fact, technically we went broke in 2010 when the fund first went bankrupt, so if debt is the standard, the programs need to be reformed for everyone. You can’t say that needs outweigh debt for one group, but not for another group.



Reforming these programs, but “grandfathering” current seniors (and near seniors) makes the reform unfair, and will ensure that the reforms will be repealed at a later date. If we reform these programs for everyone (including current beneficiaries) many seniors will suffer negative consequences, but in 10 years, other seniors will suffer negative consequences instead. You’re simply trading the suffering of one group for another, and you’re ensuring that we have 10 more years of hemorrhaging entitlement programs before we even BEGIN to attempt to address the problem. I believe that we can’t afford to wait 10 years to address the problem, and we needed reform 50 years ago, but since we don’t have a Time Machine, NOW will have to be good enough.

Haven’t we learned yet that politicians always push off important decisions to “the next guy”? The GOP wants to push off reforms for 10 years, when none of them will be in office, and someone else will have to make the hard decisions. We need real leadership, and that requires tough decisions to be made now, not in 10 years when we’re already borrowing Trillions a year, with skyrocketing gas prices and double-digit unemployment.

Things are going to be hard for seniors, but things are going to be hard for everybody, that’s what “living within your means” is all about. For generations we’ve been told how irresponsible this or that generation was being, and that “our children and grandchildren” are going to be paying for it. I’m here to tell you that WE ARE THE CHILDREN AND GRANDCHILDREN that are going to have to pay the collective bill from the 1930s to today. We can no longer put off the hard decisions because the “funds” are broke. It happened 20 years earlier than expected, but the result is that we can no longer pay lip service to entitlement reform, we must reform entitlements, and we must reform them for everyone.

 

MIRRORED ON MORGUE'S TOE-TAG BLOG

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Comment by Morgue on May 16, 2011 at 9:31am

Hugh Akston,

Sometimes Leftists twist the figures by removing "mandatory spending" (i.e. entitlements and interest on the debt). Defense is the largest discretionary item in the budget, but anyone who twists the figures about the debt to attack defense by removing entitlements obviously has an agenda that has nothing to do with solving the problem.

Comment by Hugh Akston on May 16, 2011 at 9:14am

Thanks for the Info. I just used some of the information to "Correct the News Director" on national spending. He said that the highest portion of government spending was national defense. I used some of your sources to show him his error and he had to admit to it, when he saw it was not Rush that said it but a Leftist “Green” outfit on Federal spending “KPCB.com”. You never know how you can use some good info.

 

Thanks and Good work.

 

Ps. so much for my next eval...

Comment by Morgue on May 16, 2011 at 5:27am

Jerseygal,

I'm fresh out of points from the critics, so this may be the end of the series. I'll do some research and see if there are any other points raised during entitlement reform debates, but I may have already hit on all of them.

Comment by Hugh Akston on May 12, 2011 at 11:38am
 

Ignore the first paragraph of my earlier answer. that was electronic residue from a different question. Sorry about that I did not see it when I posted the longer response.

 

God bless.

Comment by Morgue on May 12, 2011 at 9:44am

I suppose if you divide people into smaller groups (penalizing them in matters of months rather than decades) you limit the potential political fallout. My worry is that if we throw the people 55 and younger under the bus, in 10 years 55 will be the "new" victims, and we'll continue to kick the can down the road.

 

the problem is that there's no more "road" to kick the can down, it's the end of a broken bridge over a vast gulf of debt.

Comment by Hugh Akston on May 12, 2011 at 8:15am

You are right the message must be taken into our community. And my solution is a long term one; years in the process. However we take the message when we take time to say thanks to the Lord for our food and ask his blessing on it in a public place, even the food court of the mall or McD’s. We take the message into the public when we return the excess change the cashier handed us. People see how we lead our lives and even when we are alone someone is always watching us.

 

 

The currant standard of scheduled lower payments on Social security are a good example of the problem you are discussing. Those born in 1955 must wait to 66 and 2 months for full benefits and those born in 1956 must wait until 66 and 4 months. And those born in 1960 or later must wait until age 67. However everyone can receive reduced benefits at age 62, or disability at full rate at any age.

The difference is you might as well take the reduced rate at 62. The amount you will receive for the 4 years before full benefits take effect is well worth it. To take the benefit at full retirement age and get as much money you would have to live to be 82 to break even in most cases.

 

 

Age To Receive Full Social Security Benefits

Year of Birth

Full Retirement Age

1937 or earlier

65

1938

65 and 2 months

1939

65 and 4 months

1940

65 and 6 months

1941

65 and 8 months

1942

65 and 10 months

1943--1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

http://www.ssa.gov/pubs/retirechart.htm

 

The chart below lists age 62 reduction amounts and includes examples based on an estimated monthly benefit of $1000 at full retirement age. Click on your year of birth to find out how much your benefit will be reduced if you retire between age 62 and full retirement age.

Note: If your birthday is on January 1st, we figure your benefit as if your birthday was in the previous year.

 

Full Retirement and Age 62 Benefit By Year Of Birth

Year of Birth 1.

Full (normal) Retirement Age

Months between age 62 and full retirement age

At Age 62 2.

 

A $1000 retirement benefit would be reduced to

The retirement benefit is reduced by 3.

A $500 spouse's benefit would be reduced to

The spouse's benefit is reduced by 4.

 

1937 or earlier

65

36

$800

20.00%

$375

25.00%

 

1938

65 and 2 months

38

$791

20.83%

$370

25.83%

 

1939

65 and 4 months

40

$783

21.67%

$366

26.67%

 

1940

65 and 6 months

42

$775

22.50%

$362

27.50%

 

1941

65 and 8 months

44

$766

23.33%

$358

28.33%

 

1942

65 and 10 months

46

$758

24.17%

$354

29.17%

 

1943-1954

66

48

$750

25.00%

$350

30.00%

 

1955

66 and 2 months

50

$741

25.83%

$345

30.83%

 

1956

66 and 4 months

52

$733

26.67%

$341

31.67%

 

1957

66 and 6 months

54

$725

27.50%

$337

32.50%

 

1958

66 and 8 months

56

$716

28.33%

$333

33.33%

 

1959

66 and 10 months

58

$708

29.17%

$329

34.17%

 

1960 and later

67

60

$700

30.00%

$325

35.00%

 

  1. If you were born on January 1st, you should refer to the previous year. 
  2. If you were born on the 1st of the month, we figure the benefit as if your birthday was in the previous month. You must be at least 62 for the entire month to receive benefits.
  3. Percentages are approximate due to rounding.
  4. The maximum benefit for the spouse is 50% of the benefit the worker would receive at full retirement age. The % reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding.

 

 

http://www.ssa.gov/retire2/agereduction.htm

 

Assuming a $1000 retirement income for Social security.

Where is the real savings?

Taking early retirement at age 62.

37050 before age 66

177840 total earnings by age 76

214890 total earnings by age 86

 

Waiting for full retirement age

120000 total earnings by age 76

-57840 less income by age 76 while waiting for full retirement age

240000 total earnings by age 86

25110 more income by age 86

 

Guess what I would take?

 

The only solution is to eliminate it all together.

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