The Freak on destructive entitlements

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. ----------- 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.
  • The Freak
    Comment from: The Freak
    01/31/07 @ 10:01:46 am

    I hate to pile on to my own post, but this was too good to pass up. The national health service in the UK is honest enough to post waiting times for specialist consultations. Check out: Enter any UK post code (NG2 7BZ) for instance, and check out the waiting times for different things. Try important stuff, like cardiology, infectious diseases, and accident/emergencies. For comparison sake: my son developed a red spot on his back, around a tick mark in November. His pediatrician gave me an appointment the same day I called her, she made a tentative diagnosis of lyme, referred me to an infectious disease doc who saw me that same afternoon, confirmed lyme (subsequently confirmed by blood titer) and commenced treatment. All in the same day. All in the US.

  • T F Stern
    Comment from: T F Stern
    01/31/07 @ 07:42:12 pm

    Universal Health care is a little like the something for nothing attitude that the kids who were sharing music on Napster had a few years ago, it's free, it's all free. The only problem is that someone else was paying for it, just not them. The price of an authorized CD that did get paid for included the cost of the "stolen" music. It is not logical to believe that medical costs should be paid for with taxpayer money since that means that the same group that is paying most of the taxes now will only have to pay more. Those who are on the receiving end will be able to spend money they should have spent on insurance on other items. I still believe that those who earn the money should have the fruits of their labors, not have to watch someone else enjoy those fruits.

  • bob
    Comment from: bob
    02/02/07 @ 03:12:13 pm

    Hello Freak, I appreciate your articulate response concerning government social programs in general and private investment accounts versus the current social security system, in particular. I am also very aware of the downside aspects of government social programs. I think it is a given, very few government programs work flawlessly. However, sometimes even having an alternative may be better than nothing at all. I’ll engage that subject more fully below. Additionally, let me say that I agree that intelligent people can agree to disagree with both sides having a sound basis upon which to ground their case. I try to be reasonable and open minded because the issues of our day are increasingly complex and nobody has perfect knowledge. And, unfortunately, some have a bias of one sort or another. Believe it or not, I can even be persuaded to have a change of opinion as I learn more about an issue and concede that my position does, in fact, make less sense. We have a mix of state and federal government programs which cover a wide variety of benefits for our citizens. I honestly have no problem with continuous reviews of these programs to eliminate waste, increase efficiency and reduce costs. However, these programs were developed in response to a perceived need at some time in the past. Now, whether they deserve continuation is something that should be reviewed by our leaders and brought up for discussion. Ultimately, issues of such national significance will be incorporated into the national platforms of a political party and candidate and decided in the voting booth. I can live with this kind of change. It is democratic and about as fair as it can get. So, will a national candidate take the lead in reducing social programs and make it the issue that propels him or her into the White House? The answer is likely…no. It would probably be political suicide. So making a change to social programs will have to come from a broad consensus with both parties. With respect to private investment accounts, I do not purport to deny any individual the right to prepare for their own retirement in any way they see fit. However, I do take issue with any change to our current system unless a truly fair discussion about it takes place. Unfortunately, in my view, the earliest that can happen is after the 2008 elections. President Bush should not be a party to the discussion, in my opinion. I don’t believe he has the moral standing or character, the openness or honesty to be a participant for such an important national issue that directly affects the welfare of so many. I think establishing private investment accounts should be done gradually….or not at all depending on how the debate goes. I want to see the plan specifics and then make a decision. I am not to say, “Gee that sounds like a great idea. Let’s do it.” The details of such a transition are very important. Realistically, it is the only way to make one’s mind up. Set the plan out there for all to see and have its pros and cons debated. I am all for that. Social security has existed for some time now. You mentioned several instances in which a different system might work better and that may well be so. Fortunately, for you and me, we have sufficient resources to find an alternative to the social system which exists to cut through red tape and inefficiency. But, nevertheless, there are numerous other examples where people do not have the family support framework in place or the financial resources to take alternative action as we can. Therefore, I continue to have faith that our system serves its purpose by and large. Is it inefficient in some cases? I am sure we can find inefficiencies. Are there financial issues in running the program? Yes, but the finances of social security have been abused for years, have they not? To be fair, the finances of social security have been abused by both parties. But as I have become older, I believe more than ever that government needs to invest social capital in its citizens. So should social security disappear and all programs of its ilk? Not in my view. There are far greater wastes of money spent by our government with less redeeming qualities. Simply because a social program is cut does not necessarily mean that the deficit will be reduced. It also does not necessarily follow that the money saved from the social expenditure will be spent more wisely somewhere else. It’s convenient to cherry pick social programs for cutback but in point of fact there are many other areas of financial consequence that might be cut back to better spend the government’s (or our funds, as Ross would point out) funds. Our deficit spending arises from the impact of all sorts of factors, right? These areas might include not granting tax breaks to large corporations, not granting outsized tax breaks to the wealthiest strata of the country, not allowing no-bid contracts to companies that have ties to high level members of government or not providing foreign aid to other countries as well. How about avoiding starting trillion dollar wars based on fiction? There are all manner of behavior modifications that can assist in better spending our tax dollars. Actually, I think universal health coverage for all citizens is something that should be looked at. Why not? If we should discuss private investment accounts why not discuss universal healthcare? If the program has traction with the public why should it not be discussed? President has proposed tax breaks for those of us that pay for health care plans. As usual, he misses the whole point of things. Many people who need health care can’t afford it in the first place. Let alone worrying about whether they can get a tax break for it. Will some enjoy benefits without paying? Yes, most definitely. So what? Just because we pay taxes does not mean that the government has to assure you that every dime it spends is for an expenditure you agree with or that you get direct benefit from. I pay property taxes (county), for instance, which go to pay for schools yet, I have no kids. Why should I pay that tax? Well, it is for the greater good of society and there you go…I have to pay whether I like it or not. I fold my cards. All sorts of expenditures like this could be found where the taxpayer takes issue with the expenditure of his or her taxes. It is a political issue and it will be decided by our common government. One side or the other will win out on the issue based on the merits of the proposal or not.

  • bob
    Comment from: bob
    02/03/07 @ 11:09:59 am

    I would like to take a minute to tip my hat to Ross, the host of this website. I know that sometimes my point of view doesn't sit well with him and others that view his blog, perhaps. Yet Ross has never edited or not posted any response from me. I respect Ross's point of view but, more importantly, I respect Ross for not dampening the voice of those who may not see eye to eye with him. In my view, hearing from all sides of an issue makes for a better, more well-rounded discussion. An appreciative thank you, Ross.

  • The Freak
    Comment from: The Freak
    02/03/07 @ 02:50:57 pm

    Hey Bob, Thanks for your reply. I disagree with much of what you write, but this I can agree with: there are plenty of areas in government that can be cut beside social programs; I just chose one that you had brought up. I could just as easily condemn any of the ones you just mentioned. In the end, you seem to ascribe to the philosophy of legal positivists -- an heir of John Austin and Jeremy Bentham. According to you (if I did not misinterpret your writing) the political process is responsible for all, good or bad, that might befall a society; the people are their ultimate masters and can legislate whatever they agree to. The political process itself legitimizes their actions. Ross and I would counter that there is a natural law that implies fundamental human rights. That when the people, even if through a majority based democratic process, infringe on those rights, then they become tyrants. That tyrannical governments are to be despised and resisted. As an aside, I don't think you should be paying for schooling other people's kids. Schooling the young is the responsibility of parents (and over 99% of children are the result of a volitional act). Whether it is for the common good or not is doubtful or at least debatable.

  • Mike DePinto
    Comment from: Mike DePinto
    02/05/07 @ 12:07:22 pm

    "If we should discuss private investment accounts why not discuss universal healthcare?" It is implementation not discussion that is worrisome. Private accounts put choices into the hands of citizens while universal healthcare eliminates choices for individuals. Allowing people to make decisions for themselves is the basis for a free market.

  • juandos
    Comment from: juandos
    01/05/09 @ 03:59:07 am

    "let me state that I don’t take personal offence at what people write unless they make personal attacks"... O.K.... "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"... O.K., now its time for a personal attack... You are a SOCIALIST SLUG when you throw in the whining bit, "those who truly need it"... Since when does someone else's need, real or otherwise is considered a rationale for stealing someone else's property to fulfill that need?