TFP Column: Titanic Proportions

I truly intended to get a mid-week posting up on time this week; but the more I worked on the effort, the more it became apparent that the effort fit more with the TFP than with JBS. (I will still do a mid-week effort, but it may be a day late ... or so.)

With that in mind, I turned this effort over to Editor-in-Chief Michael Miller (who's work on the upcoming Titanic event in fact instigated this week's column).  Michael, kind soul that he is and ever willing to attempt to save a drowning man a lifesaver (cherry, my favorite) agreed to publish "Titanic Proportions" on the website.  While the piece is not about my ongoing battle of the bulge, you might find it interesting as exercise in tying two things together that shouldn't normally find themselves in close proximity (you know, like steamships and icebergs).  

Since this is happening in the middle of the week, you will find it while reading the mid-week Star Edition on the website; but I'm sure that there will be even more promising efforts there as well in the weekend edition of that which remains the largest Sunday circulation newspaper in Toledo, and Ohio's Best Weekly Newspaper for the third year in a row, the Toledo Free Press.

Social Security Taxation - A Brief History Lesson

Nothing truly inspirational has come across my path this week that deserves a full-blown rant, but I did come across an interesting bit of the past where Social Security was concerned in my continuing education course, "Things this dummy never learned in college".  

Since I am all but incapable of maintaining the structure required for 'higher education' these days, I have been force to audit even this class; which has no lectures, no syllabus, and no testing (and therefore no grades).  Apparently the ne'er do well leading the program has no plan in mind except the acquisition of knowledge, regardless of the department or discipline involved. This would be an admirable goal in and of itself normally, but I am familiar enough with this reprobate to recognize that no praise for this tortuous effort is warranted.

At any rate, I came across this bit of the history of Social Security in "Economics in One Lesson" but Henry Hazlitt.  While last updated in 1979, Hazlitt provides a wealth of information in just over 200 pages that could help even the most moronic of students understand the basic principles of the Austrian school of economics (and I ought to know).  

Concerning our 'Senior Safety Net', he said:

"Social Security was to be entirely a self-financed insurance plan based on strict actuarial principles.  A reserve fund was to be set up sufficient to meet future claims and payments as they fell due.

It never worked out that way.  The reserve fund existed mainly on paper.  The government spent the Social Security tax receipts, as they came in, either to meet it's ordinary expenses or to pay out benefits.  Since 1975, current benefit payments have exceeded the system's tax receipts.  ....

In the original 1935 bill the salary taxed was only the first $3,000.  The early tax rates were very low.  But between 1965 and 1977, for example, the Social Security tax shot up from 4.4% on the first $6,600 of earned income (levied on employer and employee alike) to a combined 11.7 percent on the first $16,500.  (Between 1960 and 1977, the total tax increased by 572 percent, or about 12 percent per year compounded.) ...  At the beginning of 1977, unfunded liabilities of the Social Security system were officially estimated at $4.1 trillion." (Emphasis added)

Now if that period after 1965 seems oddly familiar, those of you old enough, or who have studied your history might remember that Medicare and Medicaid were added to this program in the Social Security Act of 1965.

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Sell Crazy Someplace Else

"Sell crazy someplace else. We're all stocked up here." 

- Jack Nicholson from "As Good As It Gets.

That's it ... 'nuff said.

OK, I guess that I can't leave it at that, as much as I'd like to.  But let's face it, that train (the crazy train) left the station a long time ago; and not only is it not coming back, but as Ian Anderson said in 'Locomotive Breath', "the train won't stop going, no way to slow down".  It would be nice however, if somebody would let you off for a rest once in a while, especially during what has already become another never-ending election season.  You see, during election season, every time someone dares to turn one of our sacred cows into steaks, the mental wards seem to let loose great streams of naysayers to speak to the Media.  Don't believe me, then let me cite some examples:

Rick Perry says that Social Security is a 'Ponzi Scheme' and everyone is up in arms.  How dare he attack one of the most important programs in the history of this nation!  Of course the fact that Social Security fits the definition of a Ponzi Scheme like a glove (and not the ones from the OJ Simpson trial) is irrelevant. The facts get thrown out the window because Social Security is in fact part of the fabric of American Society (and that fabric seems to be more than a little frayed these days).  After all Rick Perry must be a kook since he's a Republican from the same state as George Bush and that strange Ron Paul guy (who's not only also skeptical of this unsafe safety net, but tells the not-so-pretty truth about most of the rest of this country's economic problems).  Besides, the AARP and a lot of the early investors don't want hear the truth about Social Security for fear that they'll lose out on the money promised to them when they were forced by the government to join it.

Some candidates are saying that Global Warming is true, some are saying its not!  OK, even if we concede some validity to the prospect that the planet is getting warmer (for the sake of argument), do we therefore need to concede that the sole cause of it is Man?  Yes, I know that Man's technologies produce carbon dioxide, methane, and other 'Greenhouse Gases', and that Man could therefore be part of the cause.  On the other hand, there's a lot of other things on the planet that produce Greenhouse gases that could be contributing (like cows and pigs, and oh yeah ... volcanoes).  If the planet is in fact getting warmer though, couldn't it also have something to do with that big bright ball of fire that we see in the sky.  You know ... the Sun.  Let's face it, this planet has been getting warmer and colder since it was formed; and a lot of the same guys that are telling us that the Man is causing the planet to get warmer now were telling us that Man was causing the planet to get colder 40 years ago.  Which is it?  Or do we need to concede both sides of the equation to them so that there's justification for massive government regulation designed to save us (if it doesn't kill us first).  Besides, the guys trying to make the case can't get the weather right from day to day or year to year, let alone decade to decade or century to century; and seem to change theories far more often than they change their underwear.  (Sorry, that's not fair.  I have no idea how often they change their underwear.  Hey, maybe we can get some government funding to do a study and find out.)

Republican candidates are saying The 'Theory of Evolution' is right, no wait it's wrong.  No wait, it's a still theory, not proven fact.  New evidence is coming to the attention of scientists every day that cause this 'theory' to be modified; but that's what you're supposed to do with scientific theories.  You test them against the evidence and change them to fit the facts.  The 'Theory of Evolution' has itself evolved significantly since first proposed by Charles Darwin; and while he'd probably still recognize it, I'm not sure he could stake a claim to it any more.  As for the alternative proposal, that every form of plant and animal on the planet was created in seven days, I for one am just as skeptical.  The only proof seems to be a book that has been translated more times than 'Gone With the Wind' and probably become more garbled with each translation than Brent & Stuart Tarleton's speech when they tried to chat up Scarlett O'Hara at Tara.  Factor in that many of these translations were done at the behest of the government in power at the time or by a Hierarchical church bent on proving a point or controlling the peasants, and maybe we should all be more skeptical.  That doesn't make what was written wrong, but neither does it make the latest translation proven fact. 

The Democratic candidate seems to believe we can spend our way out of the current recession.  The discussion really heats up when talk begins about how to get us out of our financial doldrums.  In spite of crushing debt in this country, there seems to be a body of opinion that says that spending more money that we don't have is the answer.  Red or Blue, take your pick.  Both have managed to ignore easily provable facts of mathematics and contributed to the continuing disaster by endlessly debating their reliability for more years than I have been around.  Recently they seem to spend most of their time with their fingers in their ears singing "la la la la la" when you try to talk to them, until you want to slap them sillier than they already are.  The two sides of the argument often seem limited to the ones who say it's really not problem in the first place and those that believe we can fix it without spending less.  When someone does at long last stick their neck out far enough to concede the proven scientific principles of addition and subtraction are true, they cut it off, castigate the perpetrator as an apostate or a loon, and propose a fix that involves not reducing the spending, but reducing the rate at which spending increases.  You know, it's this kind of thinking that normally leads people to grand new chapters in their lives ... usually Chapter 7 or Chapter 11. 

Ahhhhhhhh!  Where did I leave my damned duct tape?

Of course this list of insanities could go on and on (hmm, sounds like an old Stephen Bishop tune), but doing so could be considered symptoms of obsessive / compulsive disorder (yep, back to the Nicholson reference); and I think you're starting to get the idea anyway. Besides it's almost time for one of the twice weekly therapy sessions I attend during election season (which means year round these days) in the misguided hope that it will help me to cope with the madness. Let me tell you though, for those of us really paying attention to what's going on in the country these days, we're already getting plenty of crazy.  Go sell yours someplace else.

 

Health Care Buys Medicare Solvency?

The trustees of Medicare and Social Security released a report yesterday asserting that Medicare is in better shape than previously stated in the reports of 2009. In a story released by the Associated Press, this latest release states in fact that the financial solvency of Medicare will be extended from last year's estimate by another twelve years as a result of the recent passage of health care reform legislation. Not all in government however, agree with the assessment given in this report however.

According to the story in fact, "top Medicare actuary Richard Foster warned that the report’s projections “do not represent a reasonable expectation”. His skepticism comes from as a result the new reports' assumptions that call for a reduction of Medicare payments by 23% at the end of the year and 30% over the following three years, which he called “an implausible result”. Regardless of which government expert you agree with however, Medicare will run short of funding by 2029, and Social Security (which is paying out more money than it is taking in) will do likewise by 2037.

Many would suspect that a Conservative thinker would agree with Mr. Foster on the implausibility of any government program reducing costs and would be skeptical of numbers extending the financial solvency of a program that most of like minds consider little more than a sink hole of funding. While this is in fact normally the case, in this particular situation however you would be wrong. Of course, I have no hope that Congress will in fact reduce payments to Medicare either at the end of this year or in the years ahead. In fact, I suspect that legislators seeking to retain their incumbent status will do nothing to anger a senior citizen voting block that traditionally goes to the polls in high numbers.

Far too concerned with retaining their jobs in a tough economy instead, I doubt that even a return to a Republican majority in both houses of Congress will see any curb in such payments, even as deficits in this country mount. (In point of fact, I am not sure that Medicare payments to doctors is the actual culprit in this situation.) I do believe however, that a savings will come as a direct result of implementation of the Patient Protection and Affordable Care Act and that this savings will contribute to Medicare solvency, though perhaps not in a way that the Administration would like to tout as much as they seem to be.

As both the costs and the number of recipients continue to increase during the implementation of health care reform, government will likely find itself in an increasingly untenable position in trying to sustain the unsustainable. As the Canadian and British systems have shown in the past, this is likely to lead to both treatment delay and some form of health care rationing over time. Rationing of course, leads inevitably to necessary or sometimes even vital procedures not being performed in the timely fashion required by the patients condition. Since those traditionally requiring the greatest amount of health care are our aging population, it is likely that such rationing is likely to have the largest negative impact on this population segment. The conclusion to be drawn from this simple chain of logical assumption is that the growing number of senior citizens (a group to which I am far too close to becoming a part of) is likely to face a legislative or regulatory "thinning of the herd".  

And though it may sound like little more than cruelty to say so (something many would say Conservatives are particularly good at), it's hard to argue that reducing the numbers of this aging population is likely to have a positive financial impact on the funding requirements for the programs covering the medical care and retirement benefits that these programs represent, and forestall their financial demise as a consequence.

So will health care reform buy us some additional solvency in Medicare? I believe that there's little doubt that it will. The question that we should be asking ourselves however, is not whether the numbers that government is tossing around today are viable or not; but whether the price of health care reform as it's enacted is one that we are willing to pay.