Your SlideShare is downloading. ×
AMERICANS and the Entitlements Dilemma
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

AMERICANS and the Entitlements Dilemma

348
views

Published on

Entitlements are stressing our current National and State Budgets. Projections accounting for America's aging population and 'Boomer bubble' show our debt level is heading into uncharted waters and …

Entitlements are stressing our current National and State Budgets. Projections accounting for America's aging population and 'Boomer bubble' show our debt level is heading into uncharted waters and the prognosis, based on history of other Nations is not good. Moreover, it's a lack of responsibility on our part to run up a large debt mess and leave it for our kids and grandkids to clean up. As a political hot potato, solutions are divisive as Citizens ponder the complexity of spending our way to disaster vs. ignoring the Needy amongst us. But in this situation it is more important than ever, that Citizens arm themselves with the knowledge to help our elected leaders converge on a solution. This article addresses the issues and offers some modest paths toward resolution. Take a look and make your own thoughts known to friends, colleagues, social correspondents and, most importantly, to our Electeds.

Published in: News & Politics, Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
348
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. AMERICANS AND THE ENTITLEMENTS DILEMMA
  • 2. TOPICS1. ENTITLEMENT a. ELEMENTS OF WELFARE COST GROWTH b. WHAT IS AT RISK? – A THREAT TO c. WHY IT’S GROWING OUR d. SOME APPROACHES TO REDUCE THE PROSPERITY THREAT2. WORKFARE a. AN ELEMENT OF THE “SOCIAL SAFETY AND THE NET” SOCIAL SAFETY b. WORKFARE HAS A HISTORY OF SOME NET SUCCESSES c. WHO IS HELPED? d. WHAT IS CURRENT STATUS? e. NON-GOVERNMENTAL SUPPORT GROUPS3. GRIDLOCK - - a. SAFETY NETS: A VIEW FROM THE OR IS THERE RIGHT AND FROM THE LEFT ROOM FOR b. RIGHT vs LEFT VIEWS ON SOME OTHER COMMON RELATED ISSUES GROUND?4. A PLAN - - a. MOVING FORWARD WITH A PLAN COULD YOU GO b. CONSIDER THESE ELEMENTS ALONG WITH c. RE-ASSERT WORKFARE AS A KEY THIS ? SOLUTION ELEMENT; HELP CHARITABLE GROUPS TO HELP d. CONCERNED ABOUT GIVING UP PRINCIPLES ? e. BUT WHAT ABOUT THIS PRINCIPLE ?
  • 3. THE CURRENT “SAFETY NET” ENTRAPS THOSE IT “SAVES”The growth of welfare spending isunsustainable and will drive theUnited States into bankruptcy ifallowed to continue. PresidentBarack Obama’s fiscal year 2011budget request would increasetotal welfare spending to $953B —a 42 percent increase over welfarespending in FY 2008, the last fullyear of the Bush Administration.The federal government runs over 70 different MEANS-TESTEDanti-poverty programs , including food stamps, public housing,low-income energy assistance, and Medicaid - - to meet thephysical needs of tens of millions of low-income families.However, the historical record of these programs givesevidence to their failure to aid recipients from a position ofdependence on the government to being able to provide forthemselves. In fact dependency on government isdemonstrably growing.
  • 4. THE CURRENT “SAFETY NET” NEEDS SOME REFORMThe programs need to bereformed to achieve the following:1. Rein in the out of controlspending; 2. Set a path whereby amore sustainable financial footingis achieved and is less able to bethrown out of kilter in the future;3. Re-structure the Programs sothe monies applied serve theNeedy and offer a hand uptowards more self-sufficiency andmuch reduced (and sometimesabused) government dependencyThis article summarizes some data and thoughtsrelated to the reforms noted.
  • 5. Our nation’s long-termfiscal outlook isunsustainable. Publiclyheld debt currentlynears 70 percent ofgross domestic product,the most commonmeasure of aneconomy’s size. Ourcurrent policy path leadsto debt of nearly 200percent of GDP over thenext 30 years.In all likelihood, such high and rising levels of debtwill have a disastrous impact on the U.S. economylong before they reach that level.
  • 6. Despite broad awareness thatthe country must address itsfiscal problems, lawmakershave made scant progresstoward addressing our truelong-term budget challenges.Those challenges are rooted inthe aging of the populationand fast growth of health carecosts, which will pushexpenditures on Medicare,Medicaid, and Social Securityfar above the levels of federalrevenues over the next 25years.This figure shows Federal spending over the period 1990 to2007 has averaged about 3% of GDP over revenues collected.The overage in 2008-2010 reached about 10%. This is certainlya poor situation in itself, but it’s the projected, steadily growingdeficits starting around 2018 that causes the true concern.
  • 7. As we’ll discussshortly,the concerns weface are theseThe figure records 1st halfof 20th Century with totalgov’t debt averaging 35%of GDP. In the last half ofthe 20th Century, the debtaveraged about 55%.Today our debt runs about60% GDP and we faceheading into theuncharted territory of200% GDP.
  • 8. SOCIAL SECURITYSocial Security accounts for more than 20 %of total federal spending. But our populationis aging, and Social Security’s costs undercurrent law will increase by about 20 % overthe next 25 years — from 5 percent of GDP in2012 to 6.2 percent of GDP in 2035.Social Security has been financed chiefly on a“pay-as-you-go” basis, which means thatcurrent workers pay for current beneficiaries.This arrangement worked well as long asthere was a consistently high ratio ofworkers-to-beneficiaries. But, as shown inthe Figure with our aging population, thisratio will decline from 3 workers per 1beneficiary now, to about 2 to 1 in 2035.This is one of the key reasons for the trendin funding shortfall.
  • 9. HealthcareThe federal gov’t spends around$1T a year on health careprograms. Different communities:the elderly; the disabled; militaryand civilian federal employees;low-income individuals and theirfamilies; and others - - benefitfrom these programs. The twolargest programs are Medicareand Medicaid. As shown in theFigure health care costs are largeand getting larger.Why the rapid cost growth? There are many reasons. A majorfactor is that a significant portion of health care in the U.S.A. isfinanced through “fee for service” payments, which pays healthproviders for services they deliver but not necessarily forquality of health achieved. But this process can encourageunnecessary, ineffective, or even harmful care.
  • 10. Higher income Nations tend to spend more on health care, and asthe Figure shows, the U.S.A. has the highest per capitaHealth Care costs in the world. OTHER COST CAUSES:
  • 11. When costs risefaster than revenuestaken in, theGovernment isaccumulating furtherdebt plus theassociated interestcosts paid for theborrowed money.Some perspective isgiven in the Figure.When the budget is being managed so that a service costassociated with borrowed money is larger than suchneeded National funding as Education or product R&D,then clearly the overall management focus needs to bequestioned. Education and R&D are both critical seedcorn for the future of our Nation.We need involved Citizens. A good sense of prioritiesseems to be AWOL.
  • 12. Having discussed some ofour financial challenges, itmight be helpful toconclude this portion ofthe discussion with abroader view that puts thequantitative picture ofgovernment REVENUESand SPENDING inperspective. The Figuredoes just that.Using data for year 2011,we see that REVENUESwere $2.3T. The majorcontributors are:Individual income taxes (47 %); payroll taxes (36 %); corporatetaxes (8 %); Estate taxes ( .2 %) and a compendium of various‘Other’ taxes ( 8.8%).
  • 13. Using data for year 2011,we see thatEXPENDITURES were$3.6T. an OVERAGE ofnearly 57%. The majorcontributors are:Major Healthcare Programs(25 %); Social Security (20 %);Defense (19 %); Interest On theDebt(6 %) and a collection ofAll Other Spending (30 %).The preceding financial perspective is critical as we now turnto some current policies and potential solutions for ourEntitlements including the “Social Safety Net”.
  • 14. TOPICS1. ENTITLEMENT a. ELEMENTS OF WELFARE COST GROWTH b. WHAT IS AT RISK? – A THREAT TO c. WHY IT’S GROWING OUR d. SOME APPROACHES TO REDUCE THE PROSPERITY THREAT2. WORKFARE a. AN ELEMENT OF THE “SOCIAL SAFETY AND THE NET” SOCIAL SAFETY b. WORKFARE HAS A HISTORY OF SOME NET SUCCESSES c. WHO IS HELPED? d. WHAT IS CURRENT STATUS? e. NON-GOVERNMENTAL SUPPORT GROUPS3. GRIDLOCK - - a. SAFETY NETS: A VIEW FROM THE OR IS THERE RIGHT AND FROM THE LEFT ROOM FOR b. RIGHT vs LEFT VIEWS ON SOME OTHER COMMON RELATED ISSUES GROUND?4. A PLAN - - a. MOVING FORWARD WITH A PLAN COULD YOU GO b. CONSIDER THESE ELEMENTS ALONG WITH c. RE-ASSERT WORKFARE AS A KEY THIS ? SOLUTION ELEMENT; HELP CHARITABLE GROUPS TO HELP d. CONCERNED ABOUT GIVING UP PRINCIPLES ? e. BUT WHAT ABOUT THIS PRINCIPLE ?
  • 15. THE SAFETY NET - - PRO & CONIn the broadest terms, “SOCIALSAFETY NET” (SSN) programs provideassistance for low-income households,and help insure individuals against therisk of falling into poverty.PROPONENTS OF THE SSN SAY: “ SSNalleviates the impact of poverty, andgives income security to thoseindividuals who, through no fault oftheir own, are at economic risk.CRITICS OF THE SSN SAY: “ SSNincome assistance creates a cycle ofdependence on gov’t , dampens workforce participation, and is ineffective.”
  • 16. THE SAFETY NET: SOME HISTORICAL PERSPECTIVEThe first components of thecontemporary SSN were created in1908, as a response to increases inworkplace injury and demands fromreformers. These WORKERS’COMPENSATION (WC) programsprovided cash benefits for medical care,or payment for worktime lost. In 1935, President Franklin Roosevelt’sNew Deal policies, during thewidespread unemployment and povertyof the Great Depression, established twoimportant social insurance programs:1. Old Age Social Security (OASS)2. Unemployment Insurance (UI)Today, Old Age Social Security provides retirement benefitsto individuals age 62 and over, their dependents, andsurvivors.
  • 17. THE SAFETY NET: SOME HISTORICAL PERSPECTIVESocial Security was expanded in 1954,under President Eisenhower, with theaddition of Social Security DisabilityInsurance (SSDI) to cover disabledindividuals who are unable to work.Benefits for OASS, Survivors’ Insurance,and SSDI are financed through federalpayroll taxes on current workers.Unemployment insurance providestemporary benefits for recently laid-offworkers and is primarily run at the statelevel.The Social Security Act of 1935 alsocreated a new means-tested program:(AFDC)
  • 18. THE SAFETY NET: SOME HISTORICAL PERSPECTIVEMEANS-TESTED programs providebenefits to those individuals andfamilies with income and assetsbelow a determined level. Theseprograms may also provide directfinancial support to specificgroups (such as workers, theelderly, the disabled, or singlemothers and their children) or forspecific expenditures (such asnutrition, housing, or health care)In the mid-1960s, aiming to raise the basic welfare of the poor.President Lyndon Johnson enacted two of today’s largestMEANS-TESTED programs: 1. Food Stamps (now called SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM, “SNAP”) 2. MEDICAID
  • 19. Unlike the AFDC program, SNAP andMedicaid do not provide cashassistance to low-incomefamilies but instead provide in-kindbenefits of food and health care.Medicaid provides health insurancefor low-income individuals. States setthe eligibility requirements for specific“covered groups” including theelderly, the disabled, children,parents, and pregnant women.In 1996, President Clinton replacedAFDC with the TEMPORARY AID TONEEDY FAMILIES (“TANF”) program.With growth, increased taint offraud across many of theseprograms has been reported.
  • 20. The Earned Income Tax Credit (EITC) wasadded to the social safety net by PresidentsFord and Reagan. The EITC provides cashbenefits to low-income families but only tofamilies with working members.All of the ‘SOCIAL INSURANCE’ programs (e.g.Social Security, Medicare, UnemploymentInsurance), and the largest MEANS-TESTEDprograms (e.g., Medicaid, SNAP) are“ENTITLEMENTS”. All people who meet theeligibility requirements are “entitled” to benefitsif they choose to participate. Non-entitlement,or “DISCRETIONARY” programs can only serveas many people as budgets allow. TANF is thelargest discretionary program byexpenditures.Since the 1960s, reforms to social safety netprograms have focused on: encouragingemployment and job skills (often referred to as“WORKFARE”). But progress has been uneven.
  • 21. The core concept of welfare reform under Pres.Clinton (the Personal Responsibility and WorkOpportunity Reconciliation Act of 1996): TANFable-bodied adults would be required to work orprepare for work as a condition of receivingwelfare aid. Under the old, pre-reform AFDCprogram, the Gov’t mailed checks to recipients,who were not required to do anything in return.Citizens should oppose any return to the old way.Under the TANF “Workfare” reforms, some 30–40 percent ofadult recipients were required to engage in “work activities”,defined as: unsubsidized employment; subsidizedemployment; on-the-job training; attending high school or aGED program; vocational education; community service work;job search; or job readiness training.Participation was part-time: 20 hours per week for motherswith children under six and 30 hours for mothers with olderchildren.
  • 22. “WORKFARE” HAS DEMONSTRATED SOME PAST SUCCESSESDespite claims from opponentsthat welfare reform would leadto disastrous outcomes, thereform “Workfare” law hadseveral successes. E.g.,• Prior to the reform, AFDCcaseloads had not declinedsignificantly since World War II.Within five years of welfarereform, the caseload promptlydropped by close to 50 %.• As welfare dependence fellchild poverty among theaffected groups also felldramatically.However, since 1996, TANF work requirements have beenweakened, as Congress and the States have used loopholes tocircumvent some of the stronger work requirements.
  • 23. TOPICS1. ENTITLEMENT a. ELEMENTS OF WELFARE COST GROWTH b. WHAT IS AT RISK? – A THREAT TO c. WHY IT’S GROWING OUR d. SOME APPROACHES TO REDUCE THE PROSPERITY THREAT2. WORKFARE a. AN ELEMENT OF THE “SOCIAL SAFETY AND THE NET” SOCIAL SAFETY b. WORKFARE HAS A HISTORY OF SOME NET SUCCESSES c. WHO IS HELPED? d. WHAT IS CURRENT STATUS? e. NON-GOVERNMENTAL SUPPORT GROUPS3. GRIDLOCK - - a. SAFETY NETS: A VIEW FROM THE OR IS THERE RIGHT AND FROM THE LEFT ROOM FOR b. RIGHT vs LEFT VIEWS ON SOME OTHER COMMON RELATED ISSUES GROUND?4. A PLAN - - a. MOVING FORWARD WITH A PLAN COULD YOU GO b. CONSIDER THESE ELEMENTS ALONG WITH c. RE-ASSERT WORKFARE AS A KEY THIS ? SOLUTION ELEMENT; HELP CHARITABLE GROUPS TO HELP d. CONCERNED ABOUT GIVING UP PRINCIPLES ? e. BUT WHAT ABOUT THIS PRINCIPLE ?
  • 24. THE NATIONAL DEBT CLOCK - - @ 7:10am 9-9-2012 THE NATIONAL GRIDLOCK DEMOCRATS REPUBLICANS LIBERALS CONSERVATIVES LEFT RIGHTMeanwhile, back at the ranch - - GRIDLOCK doesn’t seem to behelping the Citizen to address the problem !
  • 25. A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
  • 26. A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
  • 27. A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
  • 28. A BROKEN BRIDGE MAKES ADVANCING DIFFICULT
  • 29. TOPICS1. ENTITLEMENT a. ELEMENTS OF WELFARE COST GROWTH b. WHAT IS AT RISK? – A THREAT TO c. WHY IT’S GROWING OUR d. SOME APPROACHES TO REDUCE THE PROSPERITY THREAT2. WORKFARE a. AN ELEMENT OF THE “SOCIAL SAFETY AND THE NET” SOCIAL SAFETY b. WORKFARE HAS A HISTORY OF SOME NET SUCCESSES c. WHO IS HELPED? d. WHAT IS CURRENT STATUS? e. NON-GOVERNMENTAL SUPPORT GROUPS3. GRIDLOCK - - a. SAFETY NETS: A VIEW FROM THE OR IS THERE RIGHT AND FROM THE LEFT ROOM FOR b. RIGHT vs LEFT VIEWS ON SOME OTHER COMMON RELATED ISSUES GROUND?4. A PLAN - - a. MOVING FORWARD WITH A PLAN COULD YOU GO b. CONSIDER THESE ELEMENTS ALONG WITH c. RE-ASSERT WORKFARE AS A KEY THIS ? SOLUTION ELEMENT; HELP CHARITABLE GROUPS TO HELP d. CONCERNED ABOUT GIVING UP PRINCIPLES ? e. BUT WHAT ABOUT THIS PRINCIPLE ?
  • 30. A LOT OF WORDS ARE NOT A PLAN HERE ARE SOME PLAN ELEMENTS
  • 31. A GOOD PLAN STARTS WITH: WHERE DO WE WANT TO GET TO ?SUCCESSFUL BIPARTISAN SOLUTIONS CANNOT BE AT THE EXTREME ENDSOF THE SPECTRUM AND ARE DISREGARDED: PRIVATE + GOV’T ADMINISTRATION
  • 32. AN INVENTED HERE ALGORITHMFOCUSING ON THE “WORKFARE” APPROACH, I’VE PUT TOGETHER A LITTLEALGORITHM TO HELP ILLUSTRATE A SOLUTION APPROACH I THINK MANYCOULD ACCEPT .• THE NUMBERS USED AND CALCULATED ARE BY NO MEANS OPTIMAL; THEY ARE SIMPLIFIED AND JUST USED TO INDICATE THE CONCEPT.• GOVERNMENT FUNDING TO THE POVERTY LEVEL IS ASSUMED AS THEBASELINE CASE.• THE ALGORITHM USE ALSO HELPS ASSURE IMPARTIAL APPLICATION FOR ALL BENEFICIARIES. RESULTS ARE GIVEN IN THE NEXT 2 CHARTS.
  • 33. AN ALGORITHM FOR ‘WORKFARE’• THE BENEFICIARY, WITHWORK, WILL TOTAL MUCHBETTER THAN JUSTBEING ON WELFARE.• THE GOV’T PAYS OUTLESS BECAUSE THEBENEFICIARY’SEARNINGS ARE ADDEDIN.• IN OTHER WORDS,EVERYONE ISINCENTIVIZED IN AGOOD DIRECTION.
  • 34. AN ALGORITHM FOR CHARITABLE GIVINGA SIMILAR ALGORITHM ISAPPLIED TO HELP OFFSETGOV’T HANDOUTS WITHTHE HELP OF VARIOUSCHARITABLE GROUPS• AGAIN, THE BENEFICIARY ISLIFTED ABOVE THE POVERTYLEVEL.• AGAIN, THE GOV’T EXPENSEIS REDUCED, ASSUMING IT ISBEARING THE FULL BURDENOF AID TO REACH THEPOVERTY LEVEL.
  • 35. A RELEVANT QUOTE FROM FORMER SENATOR J. WILLIAM FULBRIGHT“To me, (an increasingly important issue is) theinability of so many Americans to identifythemselves with something as vast as the UnitedStates. Left to wither is the national purpose,national educational needs, literature and theater,and our critical faculties.The national dialogue is gradually being lost in afroth of misleading self-congratulation and cliché.National needs and interests are slowly beingsubmerged by the national preoccupation with theirrelevant.”Senator J. WILLIAM FULBRIGHT, “In Need of a Consensus,” PenroseMemorial Lecture, delivered to the American Philosophical Society,Philadelphia, Pennsylvania, April 20, 1961.—Proceedings of the Society,August 1961, p. 352.
  • 36. CONCLUSIONS• OUR RUNAWAY ENTITLEMENTS PROGRAMS ARE A SERIOUSNATIONAL ISSUE.• COSTS ARE OUT OF CONTROL AND WE’RE HEADING FORMAJOR NATIONAL PROBLEMS UNLESS WE ADDRESS THEM.• BUT POLITICAL DIALOG AND ACTION HAVE BEENGRIDLOCKED, RESULTING IN NO REAL MOVEMENT TOWARDSOLUTION.• A PRIVATE-PUBLIC PARTNERSHIP TO INTEGRATE THEEFFORTS OF PRIVATE BUSINESS / CHARITABLE GROUPS /GOV’T IS AN APPROACH MOST AMERICANS CAN SUPPORT.• SOME SIMPLIFIED ALGORITHMS SHOW THAT WITH SUCH APARTNERSHIP, THE NEEDY CAN COME OUT AHEAD, WHILETHE GOV’T CAN REDUCE ITS CURRENT AND PROJECTEDOUTLAYS.• AMERICA COULD APPLY SOME OF THOSE SAVINGS TOWARDOTHER SERIOUS ISSUES SUCH AS EDUCATION, JOB GROWTH,ENERGY R&D, MANUFACTURING AND PRODUCT INNOVATIONAND OTHERS.
  • 37. So those are some elements of a plan to move forward. What are your thoughts ?I know some are concerned that compromise too often equates to not standing by Principles.But what about the Principle of: Citizens working together to keep America Strong, Free and Prosperous?
  • 38. BIBLIOGRAPHY FOR THIS ARTICLE“Confronting the Unsustainable Growth of Welfare Entitlements..”, Katherine Bradley andRobert Rector, Heritage Fndn Backgrounder # 2427, June 24, 2010,“Ending Work for Welfare: An Overview”, Robert Rector and Rachel Sheffield, HeritageFndn Issue Brief # 3712, August 29, 2012“State of the Union’s Finances”, The Peter G Peterson Foundation, PGPF.org, 2012“Poverty and the Social Safety Net”, Dustin A. Cole and Rebecca M. Tippett, WeldonCooper Center for Public Service, U. of Virginia, Feb 2012“George Will Argues Against ‘Spreading Web of Dependency”, Jennie McKee quotingGeorge Will, American Academy of Orthopaedic Surgeons, Aug 29, 2012“Liberal vs Conservative Values”, News-Basics.com/2010/liberal-vs-conservative-values,2010“Heritage Charts”, www.heritage.org/federalbudget/national-debt-skyrocket“Clueless About Medicare”, Bryan R. Lawrence, The Washington Post, May 30, 2012
  • 39. THE ENDACTUALLY, IT’S NOT THE END - - YOURVOICE IS IMPORTANT TO OUR NATION.CITIZEN INTEREST, DIALOG AND DATAARE CRITICAL TO GOOD CIVICOUTCOMES. AND THAT INCLUDESOUTCOMES WHICH SIMPLY ASSUREPROPER CONDITIONS FOR THE FREEMARKET TO WORK.