Archive for July, 2011

On the Elderly and the Economy

July 31, 2011

On The Elderly and the Economy

I read Mr. Robert J. Samuelson’s column entitled Elderly Slowly Sinking the Ship today, July 31 2011. In the article, which deals with his interpretation of what’s harming the US National Economy, he concludes: “It’s the elderly, stupid.”

He couldn’t be more wrong. Allow me my own quote: “It’s the politicians, stupid!” By the end of this document you may judge for yourself.

I’m fairly typical, I suspect, of Americans of my age group (currently 71). I grew up in the ‘40’s and ‘50’s and graduated from high school. I had a very basic education, such as was common to small-town southern high schools back then, no trade of course but I could have attended college and learned enough to embark on a career. Except that I had no money for that. Plus, in those days, a young American male faced the draft. Generally it arrived in your early to mid 20’s, and at that point you left your job and went to serve for two years in the Army. You could, of course, join a branch of the armed services anytime after 18 and once you had served, you wouldn’t have to worry about the draft, short of a war in which you would get recalled but that would happen to everyone anyway.

During the time I worked before my 18th year, I paid income tax and social security. I had no choice; it was the law, a law passed by the US Congress and signed into being by the US President.

This was a part of the legal system of the United States. Congress passed these laws. I mention this because it seems they have forgotten this small fact.

I entered the US Army. I was paid a pittance, as we all were at the time. I got $77.10 per month in 1958. I got room (along with 50 or so others, in the same barracks) and board (3 meals in the Mess Hall; occasionally strange, but supposedly nourishing, unless the ‘cooks’ made a mistake). I also got medical care from the Army’s Medical Services. I paid Social Security Taxes from my salary, involuntarily. It was the law.

I now had become the beneficiary of two promises from the US Government, both of them originating in the US Congress.

In return for my contributions to Social Security, I would, upon reaching a certain age, become eligible for a pension. The money that I, and all the others like me paid into the system, was expected to provide the funds for that. This promise or assumption was already being eroded; more on that a bit later.

The second promise had to do with the draft. It was unpopular, and so the government, in order to reduce the numbers needed to be drafted to maintain the armed forces, offered retirement after 20 or more years with a salary and certain other benefits. Free medical care for myself and my wife, plus any minor children, was one of those promises. There were other, lesser benefits promised, but I want to concentrate on the ‘free medical care’ part.

In time, the government realized that this medical benefit was becoming very expensive. The solution was to simply, over time and involving a number so small steps, legislate it out of existence. Broken promises…but never call it such. It’s “reform’ of ‘entitlements’. Those entitlements were earned, part of a contract between myself and others who served until retirement, but don’t call it a contract which has now been broken by half the contracting party, the US Government, after the other half (the veterans) have done their part. Call it ‘entitlements’; it sounds so much better than breach of contract.

Meantime, the second promise, that of Social Security Retirement.

The money collected in this way went into a fund. But congress, leery of raising taxes, soon found out that this fund could be raided and the money transferred to the general fund. It was replaced by IOU’s, which of course, unlike other government loans, didn’t require repayment of interest.

Unlike other funds such as those of various state teachers organizations, social security funds didn’t get invested into interest-earning accounts. Also unlike other funds, the beneficiaries of the various insurance policies didn’t diminish in numbers. For every thousand teachers who contribute into the retirement fund, some of them will die. The numbers of those entitled to benefits are not expected to grown without contributing a commensurate amount to the fund. But for social security entitlements, the numbers grow. Disabled retirees retire without contributing fully; children may become entitled because a parent died; and so forth. And the money collected became simply another tax, but without calling it such; there were, after all, those government IOUs to back up the entitlements.

But in theory, if you worked for a certain number of quarter-years, and paid in so much money, you would be entitled to a pension as set by law, e.g. by the congress.

Um…not quite. If you had another pension, say from the Railroad Pension Fund, or from a Teacher Pension Fund (these had exceptions built in so that they could fund their retirees, and so they didn’t pay social security retirement taxes). So there was an ‘offset’. Despite the fact that you might have qualified for a social security pension, you would receive part of what you had earned, or often nothing at all.

Another broken promise by the congress, which believes that only the current congress exists. Whatever was done before, whatever was promised, unless it’s protected by the constitution, any promises or contracts are no more than what congress says they are.

The congresses’ promises are essentially worthless. They can change from one election to the next.

And so, the evolution of one of those entitlements: medical care. Military hospital care became Tricare care, in which you went to a physician or hospital and the bill was paid by Tricare. You could go to a military facility if there was one available, and so many retirees settled near a military base when they retired. No Tricare required. But then this too was deemed too expensive, and so at age 65 the retiree was dumped into Medicare, no longer eligible for military facility care. Medicare subscription fees were to be paid by Tricare as supplemental insurance, and by social security if you were able to get anything from them. No longer free. Just another broken contract, but unlike a contractor, retirees or social security enrollees can’t sue for breach of contract.

Unemployment benefits: these too are on the congressional chopping block. There’s a tax paid by employees and employers which is split by the state and by the national government. But it doesn’t fund unemployment benefits, especially in a recession. The money has already been folded into the general tax fund by one or the other accounting gimmick.

And now we come to 2011. TEA Party people and Republicans want to simply dissolve whatever remains of that contract that past congresses have made, to take the money and airily decide that there was really no contract at all.

And so you can now ask yourself: Is it the seniors and the Military Retirees and the Unemployed, the people who followed the laws as they were then, who fulfilled their part of the contract between themselves and the US Government? Is it the seniors, stupid?

Or is it the politicians who, over generations, have repeatedly broken the contracts after the people fulfilled their part of the bargain?