Observations on life

Has our dependency on government entitlements hit the tipping point?

This is a subject nearly impossible to discuss because so much of America has come to accept the current state, an expanded state of dependency on government.

We have gone beyond helping those in need on a temporary basis to creating a permanent reliance on government that may well perpetuate poverty and dependency thereby vesting growing power among those who decide on the distribution of government entitlements.

49.5% of the population received some form of government entitlement benefit in the third quarter of 2012. . For comparison, in the third quarter of 1983, only 29.6% of Americans received government entitlement benefits such as Social Security, Medicare/Medicaid, Supplemental Nutrition Assistance Program (SNAP), Federal Supplemental Security Income (SSI), and various means-tested entitlements.

With the expansion of Medicaid that 49.5% is higher in 2017. These programs were intended to provide temporary assistance to those in need or to supplement other resources such as with Social Security, but for many, perhaps most Americans, they have become an ongoing entitlement.

I know there is more in there, let’s make this easy

Are we comfortable with a growing dependency on government or more specifically the people we elect to run our government?

With only half of Americans actually carrying the cost of these programs, is it time to question where we are headed? Do we truly define progress as expanding the number of Americans influenced more by the politicians who promise to preserve what they have or to provide more, than by their own initiative?

Shouldn’t the goal of the richest country be to have decreasing dependency, an actual declining poverty rate, not one based primarily on wealth transfer as often measured by socialist leaning countries?

Social Security presents the best example of intentions gone astray. Here is what FDR said to Congress about Social Security:

“In the important field of security for our old people, it seems necessary to adopt three principles: First, non-contributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps thirty years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.”

Note the key points; self-sustaining and the concept of additional voluntary contributions and individual initiative. How did that work out?

👉 Among elderly Social Security beneficiaries, 48% of married couples and 71% of unmarried persons receive 50% or more of their income from Social Security.

👉 Among elderly Social Security beneficiaries, 21% of married couples and about 43% of unmarried persons rely on Social Security for 90% or more of their income.

Congress has expanded Social Security over the decades, but has failed to follow the original self-sustaining concept and instead created growing expectations and dependency. Given the public debt and deficit one could argue the same irresponsible behavior applies to all entitlement spending.

Have we reached the point where our dependency on government has shifted the balance of power from the people to the politicians?

Advertisements

Categories: Observations on life

13 replies »

  1. When trying to calculate a breakeven point for social security taxes vs benefits, simply adding total taxes paid in and expected future benefits is wrong. You need to consider the value of the dollar you paid in at that time. You have to convert the value of those dollars paid in many years ago to what they are worth today. Obviously the value of a dollar 45 or 50 years ago could buy a lot more then than it can today.

    On the subject of entitlements, there is a big difference between entitlement and contract. If a contract is broken unilaterally you get your day in court. If an entitlement is changed unilaterally, it was just a politician’s promise to start with.

    Like

    • I did the math on my 27 years of SS tax payments adjusting the amounts of tax to 2017 dollars. From age 16 to 62 I have 19 years I chose not to work living on only a small military pension in low cost of living area in MT. Total paid in $81,536. I will get that back in 69 months. I am taking my SS at 62 and since my wife did not work her 35% benefit moves our total benefit up to a little above what of my FRA benefit. So after age 68 all SS benefits will be above the taxes paid.

      SS is a great return on taxes paid for the low income worker, the program is doing exactly what it was set up to do. The only problem I see is the funding levels to the trust fund have not been correct.

      The SS tax rate has not been raised since 1990, but benefits have continued to go up. This has given both employee and employer a tax break that has caused the funding shortage that is coming in 2032. The SS tax will have to be raised or future benefits cut, Congress should of fixed the SS program 20 years ago.

      SS has always been an entitlement program not a retirement program.
      The supreme court has ruled that the money credited to each account is not yours and the law covering benefit payments can be changed at any time.

      Like

    • You can’t look at this on an individual basis. And you can view it as total payback. There are too many variable and it is not a straight annuity. For example, my wife never worked outside the home, but is collected $1200 a monthly on my taxes. A single persons payback using the taxes versus total benefits would be quite different than my family. You also have to factor in the COLAs perspectively and many other variable such as early death family and disability benefits. The simple comparison of a single worker paying taxes for 40 years vs benefits collected just doesn’t give a full picture.

      Like

  2. I pay monthly or yearly premium (tax ?)in auto and home insurance; if I am unlucky I expect the organization to pay out the proper sum IAW the plan documents – is that an entitlement?
    I pay monthly health and life insurance premiums; if I need doctor or hospitalization I expect these organizations to pay IAW the terms of the contract. Again, is this an entitlement?

    I have paid into the (Social Security is the commonly used term for the federal )Old-Age, Survivors, and Disability Insurance (OASDI) program since 1968, my share and various companies share amounts to approximately $335,500 with an additional $97,400 in Medicare taxes (premiums?) per the June 2017 SS statement.

    My late wife also paid in to the OASDI program beginning in 1967 to the tune of $64,050. She collected SS benefits and received something under $7,500 for five months before she passed. Is this an entitlement from every worker in the country?

    How can an intelligent being see this as entitlement? It makes me sick to hear this entitlement noise; I have a good job, have saved in 401k program and have continuously worked for nearly 50 years and paid into the OASDI program the entire time – now that I plan on filing for benefits later this year, it’s an entitlement.
    Please get real.

    Like

    • I think you need to check your math. I paid SS taxes since 1959 and for the 20 years before I retired in 2010 I paid the maximum. The total my employer and I paid was $264,000 as of 2010. Based on my monthly benefit I have already received more than we contributed and if you add in my wife’s benefit for which she paid no taxes, we collected it all including the employer portion in less than five years of retirement. You also have to factor in survivor benefits, COLA increases in retirement and family benefits. The fact is the great majority of people collect way more than contributed in taxes. As far as Medicare goes, your taxes only pay toward Part A and most people only pay 25% of the cost of Part B. What you contributed all your life could easily be used up in a short hospital stay. These programs are indeed very generous entitlements being paid for mostly by younger Americans or in the case of SS, not fully being paid for at all.

      Like

      • I am looking at July 3, 2017 SS statement; Estimated taxes paid for Social Security:
        You paid: $165,037
        Your employers paid: $170,401
        My math skills show that as $335,438 . And, as of my most recent paystub, I have paid $5586.90 YTD, and PSEG paid an equal amount, adding $11,000 to SS entitlement dumping ground. Using rad con math for the maximum benefit I could receive from SS (no spouse); it would take 10.7 years (129 months) to break even; and I’m still paying into the system.

        Like

    • The key difference is that as for car insurance you pay into a pool. You collect from that pool. When the pool funds get too low, the insurance company will raise the rates hopefully more for those who causes excessive or multiple claims (think drunk drivers). If an insurance company miscalculates the income to loss (payout ratio) they will go out of business. This is not an entitlement since you pay into a pool. I consider myself lucky since I have only collected once on my car insurance for about $8K. I have paid more than $2k yr for the last 20 years, that >$40k into the pool. Therefore I am keeping the insurance pool a float. Your welcome. This was a one paid CLAIM that the insurance company would paid on a financial lost.

      Decades ago, social security attempt to be set up as a pool. The amount paid into the pool was suppose to equal the payout over time. But several things happen. People began to live longer but the “rates” did not match that increase. Benefits were given to non-working spouses while their spouses were still alive. Disability payments are given to disabled adults all their lives but they never worked a day in their life. THEN the politicians started expanding the benefits and added COLA increases without once again increasing the rates (tax).

      I will get all my money and all my employers money that were paid in TAXES in about 4.8 years once I start to collect. If I collect for 20 years, my follow taxpayers will pay my benefit. I am entitled because the government made me a promise and the extra money, one day in the next 10-20 years, will come out of the general treasury instead of the “pool” that was suppose to fund these BENEFITS. When the pool is dry it can only be a government benefit or an entitlement since I do not pay into a properly fund pool.

      Social Security was a mandatory tax on the worker and employer. Those workers are getting a benefit paid for by other people’s tax money just for getting old and it never stops unlike the insurance claim.

      Like

      • I am approaching FRA (66); I also have been paying TENS of THOUSANDS into auto insurance pool since I began driving at 17. No claims, no bragging – facts only. Maybe I’m lucky; but have ben working in an industry that mandates FFD.
        As for insurance companies going out of business – ever hear of New Jersey Joint Underwriting Fund; I pay EXTRA into that risk pool, essentially bailing out auto insurance companies. Or else they pack up and leave the state.
        I am looking at July 3, 2017 SS statement; Estimated taxes paid for Social Security:
        You paid: $165,037
        Your employers paid: $170,401
        My math skills show that as $335,438 . And, as of my most recent paystub, I have paid $5586.90 YTD, and PSEG paid an equal amount, adding $11,000 to SS entitlement dumping ground. Using rad con math for the maximum benefit I could receive from SS (no spouse); it would take 10.7 years (129 months) to break even; and I’m still paying into the system.
        And when I do collect at FRA, I will be taxed on 85% of my SS monthly payout. So I image I am funding my own entitlement.

        Like

      • I think you have to view the big picture. We are not funding our individual retirement, we are funding the SS system. Chances are good you will collect benefits well beyond 10 years. The life expectancy at 65 is 17 years. Also consider that your benefit to start is adjusted for inflation so that 10 years will shrink over time. But also consider the worker who dies at 50 with a wife and children. Or those who become disabled. The system also provides benefits to ex spouses and the current spouse. It’s the big picture that has to be considered. As far as the tax on 85% of the benefit goes. The tax you pay on the difference between 50% and 85% goes to Medicare.

        Like

      • Dwayne, you cannot get disability benefit payments unless you worked and earned credits within the last 10 years. When I quit working, at some point my SS statement of benefits said I did not have the credits in the correct years to get disability. If you are thinking of people on SSI, that program is funded by general income taxes, it is just administered by the SSA.

        Like

  3. With 10,000 Boomers retiring every day, for the next 18 years, the percentage of households receiving government payments will continue to go up. At some point all government programs will need to be cut and everyone will get less. We will look back on the 2020’s and call them the good old days.

    Like

  4. The answer is yes, I think we might have past the point of no return like Greece. However, of the 49.5% of Americans on some form of government entitlement currently as of 2016, 14.5% were over 65. Americans paid something into social security and Medicare and rightfully are getting something back and but too much more. By 2060 it is predicted that 25% of the people will be over 65 and that demographic group will be larger than those under 18 for the first time in history. There are many reasons from better healthcare to clean water that has resulted in longer life spans.

    With no fault to present world governments, the Ponzi scheme that the young pay for the old will fail. What they promise today under the best circumstances, they will not be able to keep those promises decades from now. It will be just a matter of population numbers and we all live for the now, not the future.

    So how I do not believe the other welfare programs, student loan programs, farm subsidies, NEA grants, or the hundreds of other programs will shrink but continue to grow.

    Like

What's your opinion on this post? Readers would like your point of view.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s