Entitlements

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The Federal Government keeps its books in a way that would send any private business to jail.  In the near future, Social Security, Medicaid and Medicare are going to be consuming much more in resources than the taxes collected to service the programs.  The current national debt is $12.46 trillion, (I would put all the placeholders for effect, but I can’t type as fast as it moves), that is compared to a GDP of $14.3 trillion.  Not pretty huh?   If this was it this would be a bad problem,  Think of it, if you have credit card debt of 87% of your income you are in pretty bad shape.

However, now for the really bad news– The total unfunded liabilities of the Federal Govt. is $107.6 trillion!  This includes the cost of future social security payments, as well as health care and drug costs for the life of American retirees.  The interest on this debt (so far this year) is $36 billion.  This amount is staggering. Think about this- If I am an individual who has $107,000 in credit card debt and I only make $14,300 a year, I have a very big problem.  As the years go by with this, and as more citizens retire and start collecting Social Security/Medicare, we will have to quickly and drastically increase taxes and cut benefits for all the citizens who have paid into this system their entire lives with the expectation of benefits in retirement.  This is the problem with doing all this on a federal scale.  If only one state had endeavored on this course, citizens could have fled to more responsible states rather than endure the pending wholesale theft, but people cannot flee the Federal Govt. without giving up the freedoms that are promised here.
You cannot talk about the entitlement system in America without acknowledging the role of the federal reserve in giving the Federal Govt. the impression that they can just “print money.”  This sense of complacency allows Congress to ignore the pending disaster thinking “we could just print an extra 100 trillion dollars or so.”  But this will only work for so long until people stop accepting the dollar as currency.  The law of supply and demand is immutable in economics. As soon as people figure out there is no end to the supply of dollars the demand will be unable to keep up, and thus the value of all dollars (including those saved for retirement) will drop to nearly zero.  Thus far, this realization has yet to fully sink in (as is obvious by the fact that foreigners still buy our debt).
Once it does sink in, the interest rates demanded for debt for the Federal Govt. will skyrocket. This in turn will make the American debt impossible to repay.

Before the Great Society/New Deal every state took care of the medical care, the impoverished, and the elderly in their own way. Usually the impoverished would be taken care of by local charities who had a hand in helping the person in question get out of their current situation.  They saw the person on a daily basis and knew if s/he was malingering or really in need.  They could help direct the person toward opportunities to help them get past their troubles.  The elderly were helped by their families or they saved for their own retirement.  Health care was much more affordable because there was no third party payer system.

The reason prices of medical care have gone up so high and so fast is because there is no customer input into the system.  The third-party payer system was a byproduct of wage controls in the New Deal.  Employers wanted to pay more but could not legally do so, so their solution was to pay for a new product as part of an employees salary, called health insurance.  This health insurance would pay for your medical care.  The problem with this is that the customer is removed from the supply and demand equation regardless of the price of a service the customer will pay, because the payment does not come from him.  A more sensible system would give insureds a pool of money to pay for health care.  If the pool was not fully used the money would carry over to the next year, in this way the customer would be enticed to actually be frugal in their use of health care.  As long as no true free market exists in the health care system continued skyrocketing of health care costs should be expected.

The entitlement spending of our Federal Government is unsustainable from a financial standpoint, illegal from a constitutional standpoint and immoral from a human standpoint.  The only way out at this point is to divest the Federal Govt. of the authority they have illegally seized and transfer responsibility to the state governments. I won’t delude you into expecting this will be easy or cheap.  The first step is for the Federal Govt to give responsibility for payments to the states.  Next the Federal Govt would have to stop stealing the FICA payments they have been confiscating from your paychecks and from your employer.  Then would come the hard part- the states would have to start taxing their citizens the amount necessary to clean up the mess made by the Federal Govt.  They would need to raise money to pay for the retirement benefits that have been promised to all the retirees in their states. They would also have to decide what to do with the Social Security program; most would continue it in some form, however, most would actually have to make changes to make it sustainable.  Benefits would probably be reduced for future retirees, some may even privatize it.  Funds would probably be saved for future benefits.  All these changes are necessary right now, (truth be told, they should have been done decades ago), but state governments cannot operate at a deficit- most require balanced budgets. Most importantly, people always have a choice as to which state they live in.  Plans like this would work for every entitlement program currently in operation.

Changes like the one detailed above, as well as Congress taking over their un-delegable responsibility for coining currency, would make our economic system sustainable, legal and moral.  Don’t hold your breath that congress is going to make the decision by themselves, but hope that some adults will be elected who will.   Sooner or later the reality will come crashing down on our make-believe economy and throw cold water on the fantasy that the U.S. Government has an inexhaustible source of funds to spend.

In Liberty,
Tim Reeves

www.oregon.tenthamendmentcenter.com
Tim Reeves is the State Chapter Coordinator for the Oregon Tenth Amendment
Center

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