Time Is Running Out To Fix Social Security

Time Is Running Out To Fix Social Security

By Dr. Thomas Patterson |

Here are the hard truths of our threatening situation with Social Security and Medicare. We have a looming major fiscal crisis which no one denies. There are solutions but no politically easy ones, and our options get worse with time.

Yet every time a working politician suggests considering even mild changes, the formidable senior lobby and AARP erupt in outrage and beat down the hapless reformer. Former allies of responsible reform flee, and the status quo is again preserved.

Facts, as they say, are stubborn things. Social Security is by design a mandatory government administered defined-benefit retirement trust, funded by payroll taxes. However, the inflows to the trust are insufficient to support the benefits promised and, unlike private pension plans, there is no corpus of funds earning compound interest to make up the difference. Thus, the fund will become insolvent in nine years. As matters stand, benefits across the board will need to be reduced by 23%.

Worse, deficits in Social Security and Medicare comprise the overwhelming majority of future anticipated federal debt accumulation. So, the courageous politicians who assured seniors in this and every election that they will “protect” their Social Security (i.e., do nothing) were not protecting anything except their own political skins.

The problem nobody wants to face is that either benefit levels are too high, payroll taxes are too low, or retirees are retired for too long. Politicians long ago raided the “surplus” and replaced the funds with non-income generating IOUs.

Reducing benefit levels, even for high earners, is politically toxic. The mere suggestion evokes hyperbolic charges of “pushing granny over the cliff” and “giving the middle finger to senior citizens.”

On the other hand, raising taxes would be nearly as unpopular. It would take a 25% hike in the payroll tax to fill the hole once insolvency occurs. Economic growth and consumer spending, the drivers in our economy, would be crowded out as would several federal programs.

Clawing back the Social Security trust funds so that income could be generated would be nice. But that train has left the station. The funds have long since been spent on other priorities

That leaves only shortening the length of retirements that Social Security supports. This option is also massively unpopular, as public demonstrations against it here and around the globe attest.

Yet when Social Security was established in 1935, the average life expectancy was just 63. Today it is nearly 80. We are now down to just three workers paying into the system for every retiree, compared to 16 at the beginning of Social Security.

These workers’ earnings are paid out as current benefits in what amounts to a giant Ponzi game. Like Ponzi schemes before it, this one is also doomed to failure.

The concept of retirement was basically unknown until recently in human history. Everyone worked as long as they could, and the rest were cared for primarily by families. So why is delayed retirement, even modest (two years) and gradually phased in, violently opposed?

Part of the reason is that government subsidies are never “enough.” Free money is always popular, and beneficiaries quickly develop an entitlement mentality.

Since retiree benefits are funded by payroll taxes, the notion of being “owed” is understandable. Unfortunately for proud seniors, the facts now are that the money flows in Social Security are essentially like other government welfare programs.

Fortunately, most jobs today are not as physically demanding as in the past. Medical care for job related injuries is much improved. Disability insurance and retirement accommodations for workers in occupations like law enforcement and the military are already in place. For the rest, many able seniors experience work as manageable and even enriching.

Regardless, the do-nothing option, so wildly popular in this last election, is no longer feasible. The “private account” reform offered by George Bush in 2005, which was demagogued into the ground by the same crowd proudly blocking all reforms this go-around, would have resulted in the average worker having three times more retirement income by now.

This can has been kicked down to near the end of the road. Our options now are to defer retirement or face serious program cuts. Sad.

Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.

No Matter What, Politicians Keep On Spending More Than We Have

No Matter What, Politicians Keep On Spending More Than We Have

By Dr. Thomas Patterson |

Social Security and Medicare are so popular they are commonly known as the “third rail” of politics. Any politician who touches them gets a nasty shock. The politically smart thing for decades has been to periodically increase benefits and not worry too much about adequately funding these supposedly self-sufficient programs

Congress designates SS/Medicare as non-discretionary spending, which allows even fiscal conservatives to earnestly explain that Congress is unable to touch them, not even to reduce the benefit increases they themselves bestowed in the past. Of course, this is ridiculous since Congress could legally eliminate the programs if it chose to do so (not recommended).

As the population has aged and birth rates have fallen, SS/Medicare have descended into serious financial distress. This year, the programs will spend $69 billion more than they take in. The programs’ trustees recently moved the date for expected insolvency up to 2031 for Medicare, 2034 for Social Security.

Yet there is little acknowledgment from the political class that a problem exists. To acknowledge it creates a mandate for making highly unpopular choices. Even Donald Trump, the would be “conservative” leader, has decreed that no part of making America great again will involve touching our major entitlements. The endless quest for re-election continues to dominate decision making in Washington.

Even beyond entitlements, America has a spending problem. The federal government spends about 25% of GDP but only takes in revenues of 19%. The rest is charged off to future generations. With interest rates returning to normal levels, federal debt service will soon exceed $1 trillion a year, roughly what we spend to defend our country.

Why do we continue to spend so recklessly in times of peace and prosperity? It’s partly our perverse politics, where spenders dare opponents to suggest fiscal reforms and then rip them for bringing it up.

It’s also a mindset. Not long ago, families were considered the primary caregivers for each other. It was contemptible to neglect your own.

Americans today believe they are entitled to have government assume what were formerly family duties. Politicians gain millions of grateful dependents and family structure suffers, but there’s no going back.

Federal decision-makers have adopted an all-purpose solution to the problems that plague us: throw dollars at it. Schools failing? Send money. Semiconductor industry struggling? More money. People still living in poverty? Appropriate even more money. Money papers over our problems but affords no actual solutions.

Nobody even talks about the monetary implications of our ongoing border crisis. Over seven million mostly unskilled illegal immigrants breached our borders. Immediately upon successfully registering their fraudulent asylum claims, they expect food, shelter, medical care, transportation, eventually education, and social services all without a thought of paying for them.

The direct and indirect costs are incalculable, but California already reports annual direct expenses of $21.76 billion while Texas pays $8.8 billion and Arizona $3.2 billion.

Yet Democrats contend only more money can solve the problem. Biden and border czar Kamala Harris claim Republicans are responsible for the border mess because they once blocked further spending increases, even though the money goes to accommodate more illegal immigration. It’s time to end this massive farce and lawfully control the border. Democrats will have to find some less costly way to recruit future voters.

Our response to the COVID epidemic was another giant boondoggle. There wasn’t much to do about the virus. Protect the vulnerable, treat the ill, develop a vaccine, and allow it to run its course.

Instead, we embraced an orgy of spending. Trillions went to infrastructure improvements, solar energy, daycare, schools, businesses, and even individuals, all inexplicably in the name of COVID. It didn’t affect the course of the disease, but our descendants will pay for this spree far into the future.

It gets worse. In 2025, the spending caps on Obamacare and other discretionary items are set to expire as are the low interest bonds the government issued when money was cheap. There will be tremendous pressure to spend yet more just to maintain the spending status quo.

Thomas Jefferson, 250 years ago, extolled the benefits of a “wise and frugal” government. We didn’t listen. We will soon wish we had.

Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.

Please Don’t Let Biden Cancel Social Security and Medicare Reform

Please Don’t Let Biden Cancel Social Security and Medicare Reform

By Dr. Thomas Patterson |

Joe Biden is facing a moral dilemma. Does he embrace politically unpopular reforms to Social Security and Medicare that will ensure their survival for future generations? Or does he, for short-term political gain, aggressively block any changes to these iconic retirement programs?

Democrats have worked hard and successfully to make Medicare and Social Security the “third rail” of American politics. Medicare and Social Security reform now have such a stink about them that Republican lawmakers shouted their outrage at allegations that they were threatening Social Security in President Biden’s State of the Union address.

The only current proposal, by Florida Sen. Rick Scott, would merely require periodically reviewing Social Security and other major programs to assure that they are functioning as intended…which happens to be virtually identical to a proposal advanced in 1975, and again in 1990, by a senator with the same name as the current president.

Demagogues on the left learned long ago that many seniors could be freaked out by baseless charges that “they’re trying to take away your Social Security” or “drive grandma over the cliff.”

Biden’s allegations that many Republicans “dream” of eliminating Social Security are deliberate lies. C’mon, man. We need to have an urgent, focused debate over Social Security and Medicare reform, but Biden has so toxified the issue that politicians seem frozen in place.

But there are reasons why we can’t allow these entitlements to be ruled out-of-bounds for serious debate and improvement. Social Security is a broken, outdated program that by 2034 will be unable to pay its promises. Medicare, according to its own trustees, will be insolvent by 2028.

The assumption has been that these programs, upon which so many seniors depend, will never be endangered. General tax revenues will come to the rescue. But the general fund is close to being tapped out.

America is an unbelievable $31 trillion in debt. Interest payments will soon exceed $1 trillion annually. We are already having trouble financing the basic functions of government, like the national defense.

Even the strongest line of credit in the world can be depleted eventually. If America goes bust, the chance to embrace the painful but necessary solutions available now will be gone.

The answer lies in understanding our history. Social Security was designed as a safety net for those who outlived their earning years. It was a government-administered insurance trust that all paid into to provide retirement income for those who needed it. Insurance 101.

But there was a fatal flaw in the program’s design. They neglected to protect it from the Swamp. The funds supposedly being held in trust were stolen (“borrowed”) so that government programs could grow without the inconvenience of raising taxes.

With nothing left in the trust fund for retirement benefits, Social Security was turned into a Ponzi scheme, where every dollar paid in went immediately out the door to fund current benefits. Like all Ponzi schemes, this one worked for a while.

In 1950, there were 16 workers to fund every retiree. Now there are less than three. By 2030, every Social Security recipient will be supported by just two workers.

We did our seniors no favor by forcing them to contribute to a “retirement fund” that was actually just another welfare program, thus depriving them of the substantial benefits of compound interest. Yet now Biden wants to pose as their champion.

“Let’s all agree to stand up for seniors,” he recently urged. Yet his brave agenda was to do…nothing. (This happens to also be the position of Donald Trump, another leader not there when most needed.)

Forget reform. All Social Security recipients recently got an unfunded benefit spike. Many Democrats want to put everyone on Medicare, the equivalent of loading more passengers onto a sinking ship. Brilliant!

This insanity must stop. In fact, it will stop because it’s unsustainable. There’s just the question of how much more misery we want to inflict on those who will inherit this hot mess.

There are plenty of promising solutions out there, which urgently need to be vetted and discussed. All roads to a prosperous future for America lead through Medicare and Social Security reform.

The worst option is to listen to President Biden and ignore the portents of disaster.

Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.

Medicare Ads and Other Inane Policies

Medicare Ads and Other Inane Policies

By Dr. Thomas Patterson |

We’ve all seen them, the Medicare TV ads exhorting seniors to apply for enhanced benefits. Government appears to be coaxing often reluctant retirees into greater dependence.

But this is a colossally bad idea, even for those of us who support helping citizens in their sunset years. It stimulates greed (it’s freeeee!) and entitlement in the demographic which government programs have already made into the most wealthy. It expands the reach of government into our lives.

But it’s worse than that. The ads are pitching benefits in a program already teetering on bankruptcy. Americans were told that their mandatory payroll contributions were put in a fund to finance payouts in retirement, but that was a lie. Politicians raided the trust long ago and today’s retirees are dependent on the (inadequate) contributions of today’s payers – yes, like any other welfare program.

The rational response would be reforms that include reducing expenses where possible. Instead, we spend untold millions to pump up program outlays. Not smart. Consequences to follow.

But screeching Medicare ads aren’t the only government initiative which, partisan disagreements aside, simply don’t make sense. Take electric cars. They’re touted as a big key to a carbon-free future. We’re pouring public funds into subsidies, charging stations and other enticement for owners.

We may disagree over the feasibility of carbon reduction strategies to ultimately reduce climate change, but it doesn’t matter. Electric cars aren’t the answer. They still require energy that must be produced somehow.

The pollutants may come from an electricity generating plant instead of a car’s exhaust, but the damage done isn’t greatly different. The environmental costs of battery production and disposal as well as the extra power sources needed to service a national fleet of autos make EVs an environmental loser.

But politicians use them anyway to bolster green credentials. Buyers like the subsidies, the perks and driving a cool car. Manufacturers are joining the ranks of the uber-rich. So, the beat goes on.

EVs could have some environmental benefit if nuclear generation sourced their electricity. Once again, stupidity intervenes.

The environmental Left decreed long ago that nuclear was off-limits. Nuclear power plants would henceforth be discouraged by excessive regulation and harassment. The strategy has basically worked, but it’s a shame.

It’s still true that nuclear is by far the most environmentally friendly, non-emitting energy source available. Nuclear-producing France pays 50% less for energy with 10% the amount of pollution experienced by Germany, which sanctimoniously exited the nuclear market years ago.

Here‘s more lunacy. A year ago, America had finally achieved energy independence, after decades of kowtowing to Arab sheiks and oil-rich autocrats . Within days, the Biden administration returned us to supplicant status. Pipeline permits were canceled, offshore drilling cut back and even the remote ANWR oil deposits were shut down.

Meanwhile, with our consent, Russia’s Nord Stream pipeline was approved, which will dominate Western Europe‘s natural gas supplies. Biden unsuccessfully begged OPEC to increase oil production, so US gas prices have predictably skyrocketed and a cold winter looms.

Again, the environmental benefits of our foolishness are nil. Pipelines are the most environmentally safe way of transporting natural gas. The fuels from Russia and the Middle East are no cleaner than ours.

We have more inane policies. Children too young to vote, drink, smoke or drive are now permitted to change their socially constructed gender by irreversibly altering their bodies-without parental consent.

$450,000 payouts are seriously proposed for illegal immigrants who were separated from their children in a humane effort to avoid mixing children with adults during detention. In spite of causing no known harm, GMO bans limit the amount of food available to starving Africans.

The driving force for these nutty, harmful policies is the relentless pursuit of electoral success by pandering to special interest groups. We’ve come a long ways from Thomas Jefferson’s vision of a “wise and frugal government, which shall restrain men from injuring one another…”

Listen to political analysts uncritically predicting the fate of multi-trillion dollar spending bills based solely on how the vote would affect legislators’ prospects for remaining in office another term.

It’s disgraceful, but we expect no more, so that’s what we get.