As our country spins fiscally out of control, I tackled the National Budget and Entitlement programs in my government paper. Considering how long it is, I figure it's be fair to include a disclaimer: The answer to all our problems isn't in there:
The Federal Budget and the Issue of Entitlements
Statement of Purpose: The purpose of writing this paper was to explore the debate over the federal budget, and more specifically entitlement programs. As entitlement and other social programs constitute a significant portion of the national budget every year, and they have recently come under scrutiny and suspicion, it is important to consider the possibility of making modifications, whether by streamlining them or finding another method to provide the services they offer to citizens.
The United States of America is the sole global superpower in the world today. Given the steady rate at which this world grows smaller everyday, this statement is even more significant now than it would have been only a hundred years ago. The ramifications of our actions have become an even bigger factor for politicians and people alike to consider as they make decisions. We continue to be a country to which the global community often turns for leadership and precedent. With this in mind, one must consider the debate over the national budget and entitlement programs, not only in terms of how they affect the average American citizen, but also in terms of how they influence the ever growing populous of the world outside our walls. The typical American has grown up with the notion that there is value and honor to being American. However, as we reap the benefits of the hard work and dedication of past generations, we must be weary of developing too intense of an adult friendly, carpe diem attitude and conscious of our responsibility to the future. As the budget deficit reaches into the trillions, one must consider fiscal policy with an objective eye, in order to save ourselves the humiliation that the bankruptcy of the nation would cause. There are problems in America, from the car factories of Detroit, to the plains of Kansas, to the beaches of Florida. How we interact and cope with these problems, in the face of skepticism over the lack of discretionary spending and an enormous military payroll, will influence astronomically the American legacy of the not-to-distant future.
Two of the more significant problems are the issues of medical benefits and of retirement. The mechanisms that have been put in to place to deal with the medical and retirement crises, such as Social Security, Medicare and Medicaid, are referred to as entitlement programs. These programs emerge every year from the budget process, a long and extensive journey.
This process begins every year on the first Monday of February, when the President presents his budget to the Congress, thus performing one of his most important duties. In addition to his proposal, each independent agency and cabinet department also submits its own, which will be assimilated into the final draft that will eventually surface months later. In April, both the House and the Senate present a budget resolution, which their respective budget committees have prepared. After a conference report has reconciled the differences between the two, the final budget resolution is voted on and eventually passed by way of a concurrent resolution (“US Budget Process”).
The budget, as noted before, contains many entitlement programs. These programs are also referred to as “mandatory” or “non-discretionary” programs, as oppose to those aspects of the budget that the Congress of the day gets to decide upon. Discretionary spending requires annual appropriation through corresponding legislation and is dealt with by the U.S. House Committee on Appropriations (“US Budget Process”). Unfortunately, since Social Security, Medicare and Medicaid have inflated, thus becoming notorious, this is only a small portion of the budget. After the finances necessary for these programs have been considered, and accepting the fact that the situation of the times usually calls for a large amount of military spending, in many cases the only economic changes left to make in Washington concern reforming tired policies, rather than creating, inventive new ones. Social Security, Medicare and Medicaid accounted for more than $1 trillion in the 2004 budget year, out of 2.2 trillion. “I think it’s absolutely essential and inevitable that we are going to reform those programs,” said Rudolph Penner, a senior fellow at the Urban Institute, a social issues research organization (“Fed Entitlement Programs More Costly”). Many people agree with this sentiment, but few know how to go about doing so. To better understand the three programs and the services they provide a brief overview is necessary.
The Social Security Administration (SSA) was first incarnated as the Social Security Board (SSB). It was a brainchild of President Roosevelt, who signed its inception into law on August 14, 1935 at 3:30 p.m. The Social Security Act began as an independent entity but soon became a sub-cabinet agency in 1939. In 1995, it returned full-circle to independent status. The first man to receive a benefit was Ernest Ackerman, in 1937. Three years later, in 1940, 222,448 people received benefits. In contrast, the 2003 program reached 47,038,486 people (“Social Security”). In theory, the program is designed to provide a monthly check of retirement or disability benefits to a covered person, or their spouse and children, in the event of their death. This grant is meant to be taken as an “addition” to their own retirement plans, a concept that has become distant to an American population with the lowest rate of savings of any industrialized nation in the world (It is estimated that the average person saves about one percent.). Social Security is fund
ed through the Federal Insurance Contributions Act, which is a payroll tax. A pay roll tax is paid equally by the employee and the employer (Social Security Debate (US)).
Medicare first started to permeate during the Truman years, when he suggested a national health care plan. Although many were scared at the idea of “socialized medicine,” they did recognize the need to provide medical assistance for the social security participants in their efforts to stay healthy and happy. Before they knew it, President Lyndon Johnson was signing Medicare, along with its companion program Medicaid, into law. Part of his "Great Society," the American people had had thrust upon them two programs that took federal involvement in civilian life to an unprecedented high, and aided in the encouraging of government dependence by citizens (“Medical History”). Medicaid, which insures the indigent, aims especially to help those that cannot help themselves, but unfortunately, like many other benefit programs, is taken advantage of by those who can.
Now that the programs have been explained two of the more prevalent suggestions for solving them will be discussed. A column from The National Debt, which states, “Social security and Medicare are two of the biggest problems when it comes to cutting a budget,” understands well the dilemma that each side tries earnestly and honestly to tackle. The sentiment of the book, however, then leans towards the first option, reduction in funds, “Most people feel they are ‘entitled’ to these benefits and most balk when anyone suggests cutting them.” This view, one that is of particular stature in the public debate, epitomizes the beliefs of the first school of thought on this issue. This group maintains that streamlining the programs and spending the money to eliminate fraud is the best way to increase efficiently and free up more federal money for other programs, or to put towards the deficit. In contrast to this argument, and that of the book, is the view that we must keep entitlement programs exactly as they are, at least until a time comes when the government is able to lay more of the burden for the worker upon the corporation. First, this paper will discuss the prior.
The idea that the government should refrain from “intruding” into the lives of its citizens, that “that government is best which governs least,” is typically a conservative one. This version of reality, although some still maintain it is a significant force in modern culture, has really only been more of a superficial afterthought in the minds of most representatives since the New Deal. The sweeping changes of the presidency of Franklin D. Roosevelt changed forever the nature of government. Ever since then the government as buttress has been an accepted notion, the most socially and economically conservative of today being the most liberal of the past. All of this relates to the discussion of entitlements in the sense that it offers a certain degree of perspective, that those tending to favor independence on the part of business, and government reduction in terms of social programs are not also in favor of monarchies and no safety standards, ignorant to progress and smothered by antiquity. Mr. Henaghan, teacher and devout Republican, put their ideology into a few words: “The government must come up with a more stringent list of criteria that a person must meet to qualify for entitlements. To put it frankly: Are you ‘disabled?’ Or are you really disabled?”
This view stems from a sense of justice certain people feel for John Q. Citizen, as he struggles against inflated insurance costs and the possibility of harder conditions were he ever to be in need. The way to streamline the programs, and that is what must be done, is to eliminate those who are just along for the ride, those able to work and provide for themselves, but just not willing to do things that might not be their first choice of action had they all the advantages in the world. In terms more specifically of Social Security, the problem lies with under funding, spawned by the fact that the ratio of worker to benefactors has shrunk dramatically over the decades. The most important thing for the government to do, in the eyes of the first school, is to be responsible not for those who cling, but for those who do their honest-to-God best and are hurt by corruption and fraud. “Anyone caught perpetrating a fraud should be forever banned from receiving any government benefits,” lamented Mr. Henaghan. This party of people does not devote themselves to business, but rather believes that business cannot be the victim because it seems from the outside to be an impersonal entity. The truth is that, “forcing companies to bankroll pension plans or retirement forces many companies to go out of business and then the employee loses much more; not merely retirement and healthcare, but an income as well.” To boil it down: eliminate waste. The conservatives believe themselves to be asking merely for conservation, not for an obscene and weaselesque abandonment of the needy.
The second school of thought believes that the funding for entitlement programs should not be decreased at all. These people are the “most people” that The National Debt referred to, unwilling to make cutbacks for fear of compromising the common man. Mr. Britton used himself as an example of this type of person, “I would be completely against taking the entitlement programs that do exist and cutting back on entitlements…If you change the programs, where does that leave John Q?” This type of nobility stems from a strong belief that not only should there be a social contract, but also that it should do more than it is doing now. The social contract is that unspoken agreement between citizen and government that says that by giving up certain rights and paying certain taxes, citizens are ensured that the government will insure them. These people believe that the social contract is in horrible disrepair and that Washington needs to take more initiative, either by correcting the inefficiencies of the programs or by forcing business, by law, to carry more weight. These people would be very disappointed with the news presented in a December, 2005 article about the upcoming budget, printed by the Washington Post:
The budget measure, more than 700 pages long, would change
federal health care, student loan programs, pension insurance
and dozens of other programs to try to curb the growth of federal
entitlement spending that rises automatically according to set
funding formulas. The bill marks the first time in nearly a
decade that Congress has tackled such an effort (Weisman).
Due to the sensitive nature of the issue, politicians usually fear making adaptations to the programs. However, with the federal deficit reaching $8,278,662,378,891.09, people are finally getting motivated to make changes. While the Bush tax cuts have added some stimulation, they will not be enough to thrust us out of the red. The national debt has increased an average of 2.10 billion every day since September 30, 2005 and in a nation of 298 thousand and change, this has left each person with a share of the debt almost $28,000 strong (Hall). The second school of thought, traditionally more liberal, would like to see other areas of the budget downsized before social programs, and an increase in taxes to make up for the money we have lost due to a mistaken faith in trickledown economics over the past few decades. The trickledown, deficit spending theory became mainstream with President Ronald Reagan in the 1980s and has been perpetuated by his two Republican successors, Bush I and Bush II. To correct the past and provide for the future, we must not only encourage but force business to provide for their employees, make government, rather than the market, the predominant factor in influencing executive decisions. “The corporate model for the provision of social services, whether for medical programs or retirement, is fatally flawed and in fact broken…it has to be enormously modified with the force of law,” says Mr. Britton. The legislative fist must restore honor to business. “The loyalty factor in corporations today is practically nil,” says Britton, “bottom up, top down.” Obviously, this view is at odds with those of the opinion that business is responsible for itself and for the stockholders, and that people must learn to manage their own affairs.
Personally, I believe that a compromise must be breached between the two sides. I lean predominantly to the school of thought preaching self-reliance and the elimination of fraud, but simultaneously recognize that certain aspects of the programs cannot be cut, at least not now. To put my opinion in real terms, the budget measure noted above would receive my support. It envisions saving more than ten billion dollars over ten years by raising co-payments and deductibles for many of the recipients of Medicaid, and saving an additional six billion from reductions in health benefits (Weisman). Although this would hurt some people, something must be done now. Today has a responsibility not only to today, but also to tomorrow, to our children and grandchildren.
In an ideal situation those perpetrating fraud would be caught and punished, leaving sufficient funds for the people who really need it. Businesses would not need to assume more burdens, but just continue to carry the weight they already do. I am for blind justice, not need based justice.
First and second hand experiences have helped form this belief in me, that the law must be enforced and that business, if they are not themselves perpetrating fraud, are carrying a large enough load in terms of medical services and retirement. For example, in 2005 I became a dishwasher in an Italian restaurant in Plaistow, NH. My work there has introduced me to the abuse of social services, specifically unemployment and welfare fraud. Two of the workers at the restaurant receive unemployment and are paid “under the table.” Although being paid “under the table” is common, it is nevertheless abuse. Those evils that we accept as part of life are the most dangerous and detrimental.
Another experience that helped inform my conviction was a discussion I had with an adult friend about the benefits that businesses already provide to workers in terms of health care and retirement. Although the figures were somewhat hypothetical, they nevertheless helped me understand the issue in terms that are more concrete. The hypothetical went something like this: A single man working as a teacher has 85% of their health care covered. If the total health care cost is $5,000, then the school covers over $4,000 of that. This expense is coupled with social security, an even more expensive program, which the school pays 50% of. If the school was expected to pay 100% of health care and all of social security they would go bankrupt. In the words of Mr. Henaghan, “companies can only be expected to make reasonable contributions.”
Many that are against “cutting” call it “slashing.” The use of hate words in public debate hurts everyone. If people are too sensitive to certain proposals, and react by being defensive and harsh, then progress is a dream. With a large military presence in Afghanistan and a war in Iraq estimated to have cost $247,395,575, 500 so far (“Cost of War”), as well as the ramifications of hurricane Katrina to deal with, a cost likely to be over 80 billion dollars (“Hurricane Central”), the government must look to reduce, reduce, reduce. With war costs remaining at current levels, CBO predicts a deficit for 2007 of $355 billion. Bush has proposed $36 billion in cuts to Medicare over five years, “chiefly by reducing inflationary increases to providers like hospitals and nursing homes (Taylor).” He has also proposed making his tax cuts permanent and borrowing approximately $4.5 trillion over two decades to privatize Social Security (“Importance of Being”). As moves are made to deal with the issue of entitlement programs one must be conscious of the obvious, or in other words simple, reform measures available. We must spend the money on enforcement, not on trying to cover everyone who says they need it.
In the 1930s, John Maynard Keynes, in response to a remark about the importance of balancing the budget, made this now infamous comment: “In the long run we’re all dead.” I have faith that the United States of America will survive these tough times, as they have all others, abandoning the fatalism of Keynes and embracing the promise of the future. With any luck, the two-hundred or so years we have been around, will become two-thousand or so, all of them prosperous. Keynes was right; in the long run we will all be dead. However, he forgets to mention, that our legacy will live on.
****
Bibiliography:
Interviews:
Britton, William. Teacher, Social Studies Department
Henaghan, Patrick. Teacher, Foreign Language Department
Works Consulted/Cited:
“Federal Entitlement Programs More Costly.” Associated Press 27 December 2005. 10 March 2006. [http://www.msnbc.msn.com/id/10609044/]
Hall, Ed. The US National Debt Clock. 11 March 2006. [http://www.brillig.com /debt_clock/]
Hurricane Central. The Weather Channel. 27 February 2006. 10 March 2006 [http://www.weather.com/newscenter/tropical/]
Medicare History. Senior Journal. 12 November 2005. 10 March 2006 [http://www.seniorjournal.com /NEWS/2000%20Files/Aug%2000/FTR-08-04-00MedCarHistry.htm]
National Priorities Project: Cost of War. National Priorities Project. 11 March 2006. [http://nationalpriorities.org/index.php?option=com_wrapper&Itemid=182]
Sandak, Cass. The National Debt. Twenty-First Century Books. New York: New York, 1996.
Social Security Debate (United States). 8 March 2006. Wikipedia. 12 March 2006. [http://en.wikipedia.org/wiki/Social_Security_debate_%28United_States%29]
Social Security. The Federal Government. 13 March 2006 [http://www.ssa.gov /history/ratios.html]
Taylor, Andrew. “CBO Analysts Say Bush Overstates Deficit.” Las Vegas Sun 03 March 2006. 4 March 2006. [http://www.lasvegassun.com/sunbin/stories/bw-cong/ 2006/mar/03/0303 08638.html]
“The Importance of Being Earnest.” New York Times 14 February 2005, Editorial Section. 10 March 2006. [http://www.nytimes.com/2005/02/14/opinion/ 14mon1.html? ex=1266123600&en=1 920b54ad36e718c&ei=5090& partner=rssuserland]
United States Budget Process. 7 February 2006. Wikipedia. 12 March 2006. [http://en.wikipedia.org/wiki/United_States_budget_process]
Weisman, Jonathan. “House Budget Bills Face Senate Fight.” Washington Post 20 December 2005, A01. 4 March 2006. [http://www.washingtonpost.com/wp-dyn/content/article /2005/12/19/AR2005121900159.html]
I guess it's not like procrastination doesn't have any benefits
