NY-26

Yonkers, New York
31 May 2011

People belonging to America's dwindling middle- and lower- classes, and the "poor," are not dumb.

They know, for instance, that Republican Paul Ryan's Budget--which he succeeded in ramming through a Republican-dominated House of Represenatives without the benefit of the usual public hearings, and without the benefit of the expected extended debates on the floor of the House on such a significant piece of legislation, will have the effect of gutting Democratic Presidents Franklin Delano Roosevelt's New Deal and Lyndon Baines Johnson's Great Society Programs which benefit them primarily.

They now fearfully realize that, in particular, Medicare, as they have known it for always, will be destroyed by the Ryan Budget which they denounce as "draconian!" Under the Ryan Budget, Americans who are entitled to make their claims on Medicare will be given "Vouchers" for, say, $15,000 which they are to use to buy health insurance policies from private for-profit companies.

Not only is the amount of the Ryan Voucher insufficient for the purpose, it is supposed to be given to private for-profit health insurance companies which are notorious for past practices which the Democratic administration of President Barack Obama has successfully "reformed" under the so-called "Obamacare" Program.

No wonder the Ryan Budget failed to make it to first base in the U.S. Senate. And no wonder a good swath of the American people, Teapartyers included, are opposed to it and denounced it.

Mariano Patalinjug

I see Tea Party members as us-and themers. Until "them" becomes "us". I also see Tea Party members as coming primarily from an advantaged stratus of society. No compassion as long as "us" are not going to find thyemselves in the shoes of "them". // Jean Clelland-Morin

It seems that the basic problem is that insurance companies with their multimillion dollar executive class (UnitedHealth CEO Stephen Hemsley's total compensation of $101.96 million last year made him the highest paid executive in the country) do not exactly engender a great deal of trust. Also, the competition that is supposed to lower costs in the voucher program doesn't seem to have lowered costs since the current system was brought in under the Nixon administration. The free market that is talked of doesn't exist except as a beauty contest among similarly priced plans. (I checked with 8 companies last fall about a medicare supplement plan and each company was within six dollars of their competitors price for the same coverage. Big Whup!! on the savings of competition.) So much for the so called competitive free market approach. So, is there really any mystery as to why anyone would want to trust an insurance company with their health at any age?

Attracted like mosquitos to the live third rail of REPUB political thought and theory:
(1) Paul Ryan- pftzz-zapp.
(2) Jane Corwin-pftzz-zapp.
(3) Lazay Fare Trickkle Down- pftzz-zapp.

Are there any intelligent REPUBS out there who recognise that the solution to escallating Medcare costs is not containment of health care insurance costs but the containment of health care delivery costs.
Or is EVERYONE in the pocket of AMA and Big Pharma?

You forget a crucial thing here: TeaPartiers have a very low cultural level, and a high percentage of them just ignored that Medicare was not a private insurance

Funny that you have forgotten (or decided to ignore) those ridiculous "don´t touch my Medicare" anti-Obama posters. They were meant to send a message to democrats: Don´t dare to nationalize Medicare

You and the TeaPartiers can just take my word for it: Obama will not nationalize it

Now, your dear friends might one day end up privatizing it ... Who knows?

We´ll laugh our hearts out then and there

Maybe England could show us the way, in the meantime. Go lobby for it, Economist!

The Tea Party regulars are a group of easily duped people who have fallen for a massive propaganda campaign by the radical right wing. This campaign falsely claims that government is incompetent and can not properly operate any program that is desirable. It relies on racial prejudice and ignorance of the wider world on the part of people who are willing to believe that Medicare is run by incompetents yet the FBI and the military are not. It encourages people to believe what one elderly lady told me last week. She claimed that the tax cuts for the rich will end unemployment because "those are the people who hire others." The concept of demand for a product being the basis for business expansion was foreign to her thinking. We never got to the point of discussing how increasing middle class demand would be a decent strategy or that the tax cuts have decimated the middle class - creating or aggravating the economic decline.

These are the Tea Party regulars. They believe many things at once and never connect the dots. The USA having medical delivery less effective than every major industrial European country? The thought never registers. Their mantra is that the USA has the "best medical care in the world," never mind how or to whom it is delivered or denied.

Elections in this country are driven by ignorance more than rational thought and educated choice. In 2010, in the city of St. Petersburg, Florida, where I volunteer at the polls, only about 20 percent of all registered voters actually voted; and only about half of the potential voters are registered. Who turns out consistently? Those who firmly believe what some radio or TV propagandist promulgates. Scary!!

My upper-middle class neighbors own their house in Orange County, CA; have several rental properties; both are retired with good pensions, 401K’s, and health benefits; and are just under 65. They take worldwide vacations 2-3 times a year, buy new cars, and live very comfortably.

What is wrong with their Social SECURITY checks, when they hit 65, going towards their Medicare? They won't miss it. Why are my taxes giving them this welfare benefit?

We don’t have to cut Medicare for all, but just quit pretending it’s an “entitlement” and not a (necessary) tax/transfer program. While I certainly admire Paul Ryan for getting the conversation on the table, what private insurer wants to take the gamble that the elderly aren’t going to incur healthcare costs? Competition between insurers is meaningless to really cut the costs of care. That’s why that government safety net had to be created in the first place.

But today, given wealth distribution by age, there is no reason that a large share of seniors can’t pay their own premiums. Because even if all the surpluses are paid back – the ones that funded all those wars against WMD and the latest ‘ism – we cannot afford to pay $15K (and rising) a year for 80 million seniors.

In other words, the GOP's cherished mission to enrich corporate profits, reduce taxes on the wealthy, and transfer a large share of social program spending to corporate entities is being enabled by a self-destructive faction of hypocrites whose prejudices are stoked by the sound bites of Palin, Bachman, and Gingrich.

Having already started two wars, run up a huge deficit, and decimated our constitutional protections, the party of Bush/Cheney now finds it convenient to let others take the leadership role in trying to manage these disasters, while unanimously opposing all progress from the sidelines. Why else would the GOP float absurdities like Ryan's voucher plan?

If voters actually voted in their own best interests, the GOP would land in the dustbin of history. Unfortunately, as Socrates warned, mob rule is only a short step from democracy when the electorate is so easily bamboozled into voting against its interests.

Just what the (rich) doctor prescribes..

The writer is a fool. "[M]assive cuts in America's defence budget" would leave your little island defenseless, because Cameron is decimating the UK's defense capabilities already. We in America do not need to protect the UK anymore; let China or Russia do it, although—come to think of it—Putin's Russia is effectively a Third World country militarily, and a mere shadow of what the Soviet Union once was.

See http://naegeleblog.wordpress.com/2010/09/27/the-economic-tsunami-continu... ("Sun Setting On British Power")

With respect to "NATO's confused intervention in Libya," few Americans really care what happens in Libya, in large part because there is reason to believe that the Arab Spring will be hijacked by ultra-conservative Islamists, similar to what happened in Iran. The “Scent of Jasmine” that began in Tunisia may morph into a “stench” that engulfs the region; and the UK's involvement in that campaign may prove to be a waste of financial and human resources.

Also, there will be no cuts to Medicare and Social Security; they are effectively the "third rail" of American politics—too hot to touch. Those who try will be rejected by the voters. If Obama had not wasted taxpayers' monies on his so-called "Stimulus Package" and other programs, increasing our budget deficit dramatically, no one would be focused on cutting our defense budget, and Medicare and Social Security would be dealt with many years from now, if at all.

Social Security is both social insurance and an investment, but mostly it is a political fudge. For those who are in danger of destitution for whatever reason, it with other government social programs means mostly that you won't starve and you will have a roof over your head and minimal at least health care. For thriftier or wealthier people, it is in fact a pretty regressive system, and there is enough of a return on the investment over the years that you would have to be a pretty cold-hearted wretch to begrudge it too much. (Though there are always those who go around yelling that they were going to plunk down their savings on Microsoft's IPO and then the government came and stole their money...)

It's popular because of the fudge that is in the process of bankrupting it. People live a lot longer, the benefits are defined, for the poorest, cutting them really would be a big problem, but it's popularity among the middle class is based on the fact that the benefits are largely scaled to what you put in. Changing that scale, added to the fact that wealthier/thriftier people vote more than the poor, and you really will start down the road to medicaid or welfare.

You could of course pick up the difference from the general fund, but Whoops, deficits do matter, no matter what Reagan or Cheney figured, or didn't.

There is a simple five-word phrase that reveals the unsavoury truth about these peoples' political views:

THERE AIN'T NO FREE LUNCH !!

fullstop.

@GH1618

It is difficult to see where to start. To reply to your point about Social Security's resemblance to a Ponzi scheme, you mention that SS generates some amount of income. However, SS also pays out benefits indexed to CPI, which negates much of the benefit of investing in treasuries (since the SS trust fund invests in 10-year treasuries instead of TIPS). In addition, the formula used to determine COLA to the SS payments overcompensates for inflation, making the annual COLA grow at a rate higher than inflation and eating into this income.

So we have the people at the very beginning making a modest profit from the scheme, and the people at the bottom who are seeing a system whose COLA adjustments overshoot inflation. Doesn't sound like a sustainable system to me. Especially when you consider the havoc that will arise from Congress opening the SS trust fund in a few years and selling the box full of I.O.U.s to meet obligations. The Fed would have to be on its toes for sure.

Lex again makes a valid point that a social insurance scheme does not pay benefits regardless of need. Unemployment insurance, for example, does not pay out from the system when I am employed. Means testing is not a necessary condition for a social insurance scheme to determine eligibility for benefits, but it's one of the better proxies for a need for consumption smoothing out there. And yes, SS is also taxed, but the portion of SS that is taxed does not go back into the SS system.

Also, I'm not the most active member of the Economist's online community, but I am prolific enough that it should be easy enough to figure out why I have these views on social security. It's not because I'm a libertarian (no, the actual libertarians here would disown me), or wealthy. It's because I'm a young person who doesn't expect to see benefits from the system that I'm contributing to, ever.

LexH is the one talking out of both sides of his mouth here. Insurance does not imply means testing. If your automobile is insured, and damaged in a collision, your insurance company doen't ask if you can afford to fix it yourself. If you're covered, that's it. Some people never collect anything near what they pay for car insurance, but accept that as the price of peace of mind.

Social Security is not an investment. It is insurance against the possibility that you outlive your ability to work sufficient to earn a living wage. It could be means tested or not; it's insurance either way.

The controversy about Social Security does not center on confusion about how it works, as the facts are readily available from the Social Security Administration website. The disagreement arises because it is essentially a socialist program. Socialists and Libertarians will never see things the same way. Their policy diffetences are fundamental.

GH1618 wrote:
May 28th 2011 3:32 GMT
"Social Security is not an investment; it is insurance. All insurance has a similar inequity, because the purpose of insurance is to spread risk for the benefit of all."

This is the underlying confusion of many of those who comment on Social Security -- when you point out that it is an unsustainable retirement program, they argue that it is old-age insurance for the poor. When you then point out that it is not really an insurance program because its benefits are not means-tested and are not progressive, they argue that it is a pension program and the elderly are entitled to get back what they paid in. This talking out of both sides of the mouth is the reason that Social Security likely will never be reformed.

It would be nice if Social Security were actually run like insurance, but sadly you are mistaken. If it were truly intended to be insurance against poverty-stricken old age, then it would be payable only to those who truly need it; in other words, social security would be means-tested, and the FICA tax to support it would be made entirely progressive. This would provide a minimum safety net, and adequate solvency.

However, Social Security is not run like an insurance program; it is run like an ordinary pension program. It is payable to all, regardless of need. In fact, the benefits are correlated to your lifetime earnings, so wealthier Americans can collect a bigger benefit check than poorer Americans. This is clearly NOT insurance for the poor and needy.

I don't have problems establishing some sort of old-age insurance program for the truly needy, but Social Security in its current incarnation is NOT run like an insurance program, and as a retirement program it is NOT supportable or sustainable.

Ah Beng, good that you hesitated to call Social Security a Ponzi scheme, but then you went ahead and did so. "Ponzi" is just a scare word which people like Libertarians use to spin their schemes to privatize what is essentially (as all insurance is) a socialist program.

"Ponzi" means something specific: it is a scheme which pretends to an investment, but which has no real assets, investments, or earnings. The fraud is hidden (for a short time) by using the money from new "investors" to pay the old, and, because there are no earnings, the number of new "investors" must increase without limit.

This does not describe Social Security at all, which has several trillion dollars of assets invested in U. S. Treasury securities, and which does not require that the population increase without bound to sustain itself. Social Security would work just fine with a stable population and economy. Because there are fluctuations in these, however, the system must be adjusted from time to time to accomodate them. Leveling these fluctuations is one of the explicit objectives of the system, as is clear from the historical documents, and it is just as valid a goal today as it was then. The problem is, some people, especially the wealthy, don't support the goal.

A Ponzi scheme is a fraud. The fraud in the discussion of the Social Security System is perpetrated by those who call it a Ponzi scheme to serve their own nefarious ends.

RR

No I attributed the 2010 swing to a number of things, but sure I think Obamacare was a large part of it. You say that there is a steady +-45% Dem vote in the district and attribute the 76% vote to a one-term incumbency, I don't think so, and I think the swing back has a lot to do with Ryan's wishlist.

My partisanship is always on display, I wear it on my sleeve normally, but sometimes supplement that with a t-shirt. See my comment on pathologizing the tea partiers above.

@GH1618

I'm afraid that I'm going to have to come down on the side of Lex here. Social security at its inception was designed such that benefits began at approximately the life expectancy of the average American. When it was created, the system worked to help those who lived longer than they expected to live and didn't have enough savings to tide them through.

There's a very good argument to be made that the program has not guarded against poverty in old age for a very long time, now that life expectancy has climbed far above the age at which benefits begin. Instead, it's become a clear young-to-old wealth transfer program. I'd hesitate to call Social Security a Ponzi pyramid scheme but frankly, there is no single phrase that better describes the system. (And for the record, I'm close to the bottom of the pyramid)

To bring social security back to where it was in FDR's time, you'd have to ditch indexing to CPI, raise the benefits age to the life expectancy (~75), and then lower the social security payroll tax to reflect actual
(lower) benefits paid.

It is often said that Social Security pays the benefits for people retired today by taxes on people working today. This was certainly true at the start of the system, but it is not that simple today. According to the Summary of the 2011 Annual Reports of the Social Security Administration, Social Security ran a surplus from 1984 through 2009. The Old Age and Survivors Insurance fund showed assets of 2.4 trillion dollars at the end of 2010. This is money that Baby Boomers (my generation) have been paying into the system above the amount needed to fund current retirees, in order to fund, at least in part, our own retirement. These assets are invested in U. S. Treasury securities.

In 2010, Social Security went into deficit, partly because of a weak economy, but also because the Baby Boomers are beginning to retire. As this trend continues, much of the cost of retirement benefits will be paid by drawing down these assets. People working today will pay for this when they pay off the treasury securities that the SSA redeems. But it is inaccurate to think of such payments as being for the support of the Social Security System. What they actually are, are repayments of loans borrowed for the purpose of doing all the other things that federal government does, such as building B-2 bombers at a billion dollars each, and so on.

The apparent inequity of Social Security benefits paid to long-lived recipients, pointed out by LexHumana, was understood at the time of its creation and is of no concern to someone who understands and accepts the purpose of Social Security. It is To "give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age." (Franklin Roosevelt) When it pays a monthly stipend to a person who lives a longer-than-average life span, it is doing exactly what was (rightly) intended. Social Security is not an investment; it is insurance. All insurance has a similar inequity, because the purpose of insurance is to spread risk for the benefit of all.

The complete statement by FDR (on signing the Social Security Act into law) can be found at the website of the Social Security Administration, along with other historical documents, for those interested in such things.

Social Security works, and the principles on which it was founded are no less valid today than they were in 1935.