Is Social Security an Entitlement?

There are differing opinions as to whether or not Social Security should be considered an entitlement as is stated in this article and elsewhere.  People near retirement age or already collecting Social Security claim that it’s not an entitlement because they paid into the system and deserve their money back.

The issue is really two-fold:  the word entitlement has acquired a negative connotation, and the definition of an entitlement is not clearly understood.

Today we hear about people having a sense of entitlement meaning that they take things for granted, feel that the world owes them, and expect to get things even though they are only willing to do the absolute minimum.  The word conjures up images of spoiled children complaining that the world isn’t fair, whining for more snacks, toys or clothing, and expecting to be praised and rewarded for just showing up.  It’s no wonder seniors, who worked for it, are offended at the thought of Social Security being an entitlement.

Technically, though, is Social Security an entitlement?  I found this rather long definition.   An entitlement is a “government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right (enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program.”  The site goes on to classify it as an entitlement program, but Social Security does not fit this definition.

Although, an individual may be able to demand the same benefits paid to others in the same status, the group has no legal recourse.  Congress can change the program unilaterally, as they have done at least 17 times in the past.  The most significant change was a 20% increase plus annual cost-of-living adjustments in 1972.  They could, however, as easily reduce or eliminate it altogether.  The 2012 Actuarial Note explains their use of the term unfunded obligation as follows:  “We use the term obligation in lieu of the term liability because liability generally indicates a contractual or legal obligation. No contractual or legal obligation exists for paying full scheduled benefits on time once the trust fund reserves are depleted.” With no guarantee it can’t be an entitlement. 

Does this really matter?  The estimated unfunded obligation referred to above is $21 trillion, an unbelievable sum!  Sure we all paid in, but technically we paid a payroll tax or a FICA tax, not a contribution to a personal account.  Part of that payment went to current retirees.  The rest was saved in what politicians told us was a trust fund or lock  box – but how do you invest such large amounts?  It can’t be put into the stock market, corporate bonds or a bank account like a university endowment.  That would be too risky and inappropriate.  The only reasonable investment would be government bonds, and government bonds are the source of borrowed funds when the government runs a deficit.  So the trust fund is really IOUs from the government to itself.  Short of declaring bankruptcy, the government must pay back the borrowed money; but when the IOUs run out and the system is no longer able to pay out the promised benefits, they are required to pay out only what they take in.  The fact that we contributed all those years is meaningless.

I am now collecting Social Security retirement and hoping it will continue.  Because I knew it was risky and unwise to trust my retirement entirely to the government, I also invested in IRAs and 401(k)s.  I encouraged others to do the same.  Although it meant spending less at the time, it also helped me develop a more frugal lifestyle, which now costs less to maintain.  (Isn't it interesting the way that works out?)  Unfortunately, these facts were not made clear to many, and “Social Security is currently estimated to keep roughly 40 percent of all Americans age 65 or older out of poverty.”  Even if it's not technically an entitlement, far too many people are and will become almost totally dependent on it.  In some cases today's dependence is the consequence of earlier behavior.

Shortest Month of the Year

In honor of the shortest month, here are a few short examples in the key behavioral dimensions.

(Critical Thinking)  A yogurt container reads "From cows not treated with rBST."  Below is added “No significant difference has been shown between milk derived from rBST treated cows and non-rBST treated cows.”  The only reason to make the first statement would be to satisfy people who incorrectly believe that there is a difference.  Would a farmer intentionally put water into his tractor’s fuel tank or something harmful into his cows?

(Perspective)  Last year at this time, you couldn’t turn on the radio or TV without hearing about Jeremy Lin, a basketball player from China playing for the Knicks.  He was “Lincredible,” sparking “Linsanity” at Madison Square Garden.  This year it took two searches to find recent news about him.  When I did, it was asking “What does Jeremy Lin need to do to turn his season around?”  A better question would be:  Why do we allow ourselves to be so easily caught up in the hype?

(More Perspective)  Does anyone know what suffering means anymore?  A radio ad asked me if I was suffering from hair loss.  Well, I have a lot less hair than I used to, but I’m certainly not suffering!  Another asked if I was suffering from hypertension.  I thought it was called the silent killer because it shows no physical symptoms until it’s too late.  Again, I hear of couples suffering from infertility.  The inability to have children could be a huge disappointment to some, but is it suffering?

(Discipline)  “Binge drinking continues to be a worrisome, under-recognized health problem among women and girls, according to a new CDC report. Nearly 14 million women binge drink about three times a month, and consume an average of six drinks per binge…” Social pressure and other factors may contribute, but no one is holding a gun to your head forcing you to drink to excess.  It's just a poor choice.  (The same goes for men.)

(Responsibility)  Whatever happened to:  “Ask not what your country can do for you…”?

(Critical Thinking)  Another reason to exercise caution with dietary supplements is that in response to FDA warnings, at least one company just changed the name on the bottle and kept selling it. 

(Even More Perspective)  How can the number one news story on January 15, 2013, according to all the major media outlets, be that Lance Armstrong admits using drugs?  All he did was ride a bicycle.  Sure, he was the best in the world, but really, how important do we make riding a bicycle?   During the same week another story considered important enough to make national headlines told of a Notre Dame football player’s non-existent girlfriend.  While we are stressing over these issues, people are dying in Syria and rioting in Egypt.

(Economic Understanding)  If the government couldn't borrow money and couldn't spend more than they had unless they sent everyone a letter saying, “This is what we are doing and your share is $X; please send a check,” would that change their behavior?

(More Critical Thinking)  How can every car insurance company save me money over every other car insurance company?  All their ads say so.

(Final Critical Thinking)  In another example of substituting derogatory nicknames for scientific discussion, as happened last year with "pink slime," the critics of a genetically engineered salmon have dubbed it "frankenfish."  The company spent 17 years doing research and winding through the approval processes of the FDA and other government agencies.  The salmon are shown to be environmentally safe and safe to eat, but opponents hope to build a grassroots protest by attaching a scary name.

Fat Tax Warning

Two related articles appeared in the news last week.  One advised that the Affordable Care Act contained high penalties for smokers.  The second told of a proposal to fight obesity by shaming overweight people.  (That outrageous suggestion demonstrates some people's level of frustration and desperation to solve the problem.)  The relationship between smoking and obesity is hard to ignore.  Both behaviors cause personal health problems and lead to increased healthcare costs.  It seems reasonable to use the history of dealing with smoking to predict future possibilities regarding obesity.

Of course smoking was easier to attack because smokers were a minority and smoking can be irritating to others.  The issue of secondhand smoke affecting the health of children also made it an easy target.  The campaign began with increased cigarette taxes, restrictions on advertising and printed warning labels.  It then moved to legislated bans on smoking in most public places and to policies restricting smoking at work.  States won large legal settlements from tobacco companies, intended to be used for education.  Employers began charging smokers a higher health insurance premium.  It is not uncommon for others to look down on smokers, nagging or trying to shame them into quitting (usually unsuccessfully).  Shaming of smokers is not considered outrageous or objectionable, since we're only trying to help.

In light of that, consider the so-called obesity epidemic.  So far the approach has been comparatively mild.  Sports organizations and doctors encourage kids to get outside and play.  There are health warnings and education about the dangers of being overweight.  Food packaging must post nutritional information, but not yet warnings.  Companies provide opportunities, even facilities, for their employees, and sometimes their families, to work out or be more active.  Since these actions have not made a significant impact, governments stepped in with stricter regulations on school lunches and bans on trans fats.  Last fall New York City passed the controversial ban on large soft drinks.  There has been talk of special taxes on fast food to discourage consumption.  Where may this lead?

Following the smoking model and despite a specific prohibition in the current law, could the next step be health insurance premiums based on body mass index (BMI)?  Could life insurance premiums follow?  Could minors be prohibited from buying certain foods?  Will airlines charge based on the total weight of the luggage and passenger?  These changes may not be out of the question.  I recently read in my local newspaper an expert opinion that it's not fair for healthy people to subsidize the healthcare of those with unhealthy lifestyles.  Further, this CBS News report from two days ago on weight-loss myths concludes with the sentence:  "'The big issues in weight loss are how you change the food environment in order for people to make healthy choices,' such as limiting soda sizes or junk food marketing to children."  Changing the "food environment" sounds eerily similar to steps taken to reduce smoking.

This is a responsibility issue.  We expect to be able to live our lives relatively free of interference, free to make our own choices.  But once we expect the government or our employer to pay our doctor bills, our choices become a "public health issue" and they believe they have the right to tell us how to live.  They become judges of our behavior.  As I have often said, failures in the area of responsibility often lead directly to losses of freedom. A right to free or subsidized healthcare cancels some other rights.  We can’t have it both ways.

Added Note (2/13/2013):  A sugary drinks fee is being considered by the Hawaii Senate as "an important way to fight obesity."