Tuesday, April 14, 2009

The Entitlement ‘Ghost-Dance’

In 1890, after years of starvation and mistreatment by the American government, the Lakota Sioux under Chief Sitting Bull adopted the mystical practice of the “Ghost-Dance”. The Ghost-Dance involved dancing in circles, sometimes at such a feverish pace that they passed out from exhaustion. Such extraordinary exertions on the part of the Indian tribes were intended to somehow produce peace with the white settlers around them and protect them from the white man’s bullets.

It did neither.

Some accounts of history report that participants in the ‘Ghost-Dance’ really believed that if they danced hard enough, fast enough and long enough, they would become ‘invisible’ to the white man and could then live on their land in peace for years to come.

We have accepted the same type of delusion in 21st century America. We feel that if ‘we talk about the long-term viability of Social Security long enough’, ‘shore up Medicare with high enough taxes’ and ‘raise the states’ participation to pay for Medicaid services’, we will make the financial shortfalls in all three of these massive entitlement programs ‘just disappear’ into thin air. Just like the Lakota Sioux believed they could enact peaceful relations with the white man through some sort of spontaneous combustion.

We will be proven as wrong as they were before they were massacred at Wounded Knee.

How can any rational, sane person in their right mind not look at the mind-boggling numbers staring us right in the face on these three programs and not demand that reforms be made right now to protect us all as a nation?

Social Security is supposedly the “safest” of all of the entitlement programs due to the over-taxation of the payroll tax rates enacted in the 1983 reforms mentioned in a previous posting. [1] Prior to the most recent Trustees Report issued on March 30, the lines were expected to start to cross in about 2017 between income coming in and payments going out in benefits to current senior citizen beneficiaries. However, those lines might cross next year in 2010 and things start to really tumble downhill after that for Social Security. [2]

The cost of Medicare HI (Hospital Insurance) Part A is expected to exceed incoming payroll taxes by 2013, 4 years from now. Medicare Part B is already darn near broke in an actuarial sense according to the Trustees Report for Social Security and Medicare. Passing the Medicare Part D prescription drug package in 2003 was an attempt by the Bush Administration to curry favor with the nation’s senior citizens for the GOP. [3] That political maneuver and dream failed to carry through even to the 2008 election for Republican candidates across the board. Oh, and it also added approximately $11 trillion in unfunded net present value liabilities for our kids and grandkids. Don’t worry about it if you don’t understand net present value: $11 trillion is a very huge number and burden on future generations.

So the next time you see or hear any politician or government official opine that “all is well” with Social Security and Medicare, think about the Lakota Sioux doing their Ghost-Dance over 100 years ago. They did not survive their delusional thoughts and neither will the U.S. unless we, the public, act now to put pressure on our brave elected leaders (is that an oxymoron?) to make the tough structural changes to these programs we need today.

[1] see March 27, http://www.telemachusleaps.com/2009/03/waddya-mean-i-am-not-going-to-get.html

[2] See March 30, 2008, "Recession Puts a Major Strain On Social Security Trust Fund; As Payroll Tax Revenue Falls, So Does Surplus" By Lori Montgomery,Washington Post Staff Writer; http://www.washingtonpost.com/wp-dyn/content/article/2009/03/30/AR2009033003291.html?

[3] Seniors vote almost 90% of the time in every election, presidential, off-year and off-off year, primary and general…boomers and Millennial do not; hence the seniors “win” in the federal budget vis-à-vis every other aged cohort. SS and Medicare now account for close to 50% of our $3.6 trillion budget. The percentage is bounding up quickly so that by 2024, 100% of all available tax income revenue coming into Washington will be consumed by all entitlement programs when Social Security and Medicare are coupled with Medicaid and Net Interest on the national debt.

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