Rossputin.com Rational Thinking About Our World

The following note by The Freak was originally posted as a comment to a prior blog piece, but it's so good it deserves a posting of its own.

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First, let me state that I don’t take personal offence at what people write unless they make personal attacks. Opinions are just that and we can disagree and remain virtual friends.

Let me begin by answering your last question: yes, I do wish all the programs you list would, by and large, disappear. I am very keen that government provide a minimal safety net, but it should be just that – minimal and restricted to those who truly need it. There are many, many reasons for this wish. I will try to list several of them (the list, whilst not exhaustive, may provide useful).

First, any government program requires funding. Funding requires taking the fruits of production of some and redistributing them to others. Since taxation is not optional, it is – in a very real way – a forceful taking by the majority. Since force and tyrannies of the majority are dangerous (some might find them to be abuses of power or even infringement of human rights) they must be kept to a minimum.

Second, government social programs change behaviour. This can be as benign as shifting investment choices towards less efficient vehicles (for instance, I invest much of my children’s college savings plans in a state sponsored 529 plan because it makes the contributions deductible from state taxes – even though the yield is somewhat worse than comparable plans). At the other end of the spectrum, people’s decision to have children (or not) may be linked to what benefits are available. At the far, far end of the spectrum, people might end up working against those very people they mean to save (like the physicians who refused to resuscitate my grandfather because he failed to meet government “viability” criteria – in a country with a glorious universal health plan; more on that later).

Third, government social programs rob people of accountability to themselves. I am an estate planning attorney and I am continually shocked by the number of people who consider reliance on social security a retirement strategy; you are right, people spend their money the moment they get it – but I think you may be missing (at least part of) the causal nexus.

Fourth, government social programs rob individuals of social conscience and altruism. The perception builds that taking care of one’s neighbour is the government’s job. This has devastating consequences for the social fabric of society. I give you the charitable giving rates for most European countries, compared to the US. Even within the US, fiscal conservatives give more to charity than liberals (if you don’t believe me, I’ll need 3 months to get to my US house where I have the source of that statistic – I’m currently living in the UK).

As an aside, I consider it a personal responsibility to take care of my neighbour and give about 10% of my yearly income to various charitable causes. Paying a total of about 50% of my income to the government (federal, state, local, excise, and sales taxes) makes this pretty painful (I also have 5 children I support, one of whom is attending a private university). Am I the only one whose charitable gifts would increase if the forced ones (for charities I would never support if I had the choice, like most HUD programs) decreased dramatically? I doubt it.

Fifth, government programs don’t work well, particularly as it pertains to social security and universal health. This is an area I want to expand quite a bit, since I have significant experience across many different countries (note: advocates of these programs consistently acknowledge failures, but they seem to think that “this time, it will be different – we can learn from the scores of failures before us”; this, I think, is sheer madness).

Let me give you some personal background. I immigrated to the United States from Italy when I was 12 years old and spoke not a word of English (in fact, Ross was one of the first folks who befriended me at a time I still had a strong accent). I studied in the US, went to college and law school in the US. However my professional career allowed me to experience living and working in a number of countries besides the US, to wit: United Kingdom, Switzerland, Italy, Greece, and Mexico (amazingly, Ross has visited me in most of those places).

Most of these countries have very broad infrastructure for public provision of retirement and health care. In each case, they are utter failures. I won’t bore you with outcome statistics for public health care along objective measures (and since you read Ross’ blog you’re smart enough to look them up yourself). You could, if you were inclined, learn that 53% of UK public hospitals are infected with MRSA, that Italy and Greece have a circa 20% iatrogenic disease and illness rate, that all countries have tremendous waiting lists throughout, and that all health care takes longer to obtain at the public hospitals (and these, by the way, sap the productive power of the countries – time is money) etc. So I won’t mention any of these and let you look them up yourself.

I will, however, attempt to put a human face on the consequences by relating real anecdotes I’ve had to face during my life. Like the fact that I visited one of my employees in Greece, a young man of 23. He was in a public hospital following a car crash waiting for his right leg to be amputated because the hospital lacked the vascular surgery facilities to save it; he was lucky that I was able to work within our company to find him a private facility and his leg was saved.

Or my grandfather in Rome (see story above) who was old and not considered “viable” by the public hospital that treated him for pneumothorax. So when he went into cardiac arrest, the doctors (not his desire) declined to resuscitate him.

Or my grandmother who was crippled at the age of 68 because she broke her hip in Rome, but since the public hospital had no operating rooms available she sat waiting for 2 days until bone marrow fragments caused embolisms. She’s 97 now, but she never walked independently again.

Or a friend of mine who lost his leg (no joke) because he had a compound fracture on August 14th (huge holiday throughout Europe) and all the public physicians were on vacation and nobody could bother to deal with the fact that his femoral blood flow had been interrupted until two days later.

The beat goes on. Talk to any individual European and, if they feel comfortable, they will share similar stories with you.

Fortunately, in some of these places, private care is springing up, of very high quality, and very expensive. So my mother was able to have private surgery for a lung tumor rather than wait several months in the public facility in Rome – the family pitched in and we paid for it. Where that’s not readily available or too expensive, offshore treatment is an option. Lots of Englishmen are able to travel to private facilities in a number of countries to obtain the treatment the NHS won’t pay for (if you fly Ryanair sometime, look at the in-flight magazine for the score ads for “offshore clinics, avoid the waiting lists!”

This, of course, is all ridiculous. I’m all for health coverage for the poor, those who truly need it. But please, please, please spare me from having to sign up for universal coverage for all. I pay for private insurance that will airship me to the US on a dime….and I value it dearly.

Social security in these countries is similarly flawed – more than in the US (not surprising, since it started with a more generous presumption). I won’t go into detail, but stupid fiscal policies coupled universal coverage, coupled with stupid population policies, led to an upside down demographic pyramid in most of Europe that inexorably leads to diminishing benefits offset by increasing burdens on the working. Great – let’s get some more of that!

By the way you also asked me whether I would take my social security benefits. Well, of course I would. I’ve been robbed blind for some 25 years (I’m in my mid forties) on the promise that I’d get some of it back, so I’ll take whatever I can. I doubt I’ll break even. Let me do some math….

Each year I’ve worked I’ve put away the maximum I’ve been allowed in my employer’s 401K plans (or IRAs before then). This works to about the same amount that social security costs (about 15% on the first $60K-$80K – don’t forget to factor in the employer portion of the tax. My 401K is worth about $500K. I figure I’ll work another 20-25 years, so I figure I’ll have $1M in my 401K in today dollars. If I’d had that same money that I paid to social security, I would another $1M in today dollars (give or take). If I lived 25 years post retirement (unlikely) social security would have to pay me $40K per year for me to break even.

So, you see, I would love the option of taking the money and minding it myself. I would also love to see the whole program go away and be replaced by a straight forward, much smaller, and much cheaper program for the very poor.

Cheers.