The Tribune Democrat, Johnstown, PA

Editorials

January 7, 2013

Jim Scofield | Retirement and health care costs

— I guess we shouldn’t be surprised that the CEO of Goldman Sachs, Lloyd Blankfein, tells us that the country must cut entitlements, meaning Social Security and Medicare.

“What people think they’re going to get ... they’re not going to get it,” he said.

After all, such programs don’t mean much to someone who was paid more than      $50 million in 2010, and that after his firm accepted at least $10 billion (not million!) from the federal government in the bank bailout. On his level, there are real handouts.

However, entitlement cuts  are the received wisdom of not only America’s richest, who have been able to monopolize more and more of the country’s wealth while drastically lowering their tax rates, but of establishment politicians and pundits.

Despite this, polls show that a large majority of citizens want to protect Social Security and Medicare benefits. The idea of a debt crisis is being used to force cuts in these programs. These are the programs that have lowered the seniors citizens’ poverty rate to less than 9 percent, about the lowest of any group, and way down from the rate        50 years ago; and vastly improved their health.

Social Security and part of Medicare are funded by payroll taxes paid by most working people, over 15 percent of total compensation – that’s why they are “entitlements” – Mitt Romney notwithstanding. Both programs have accumulated future funds for payments covering the next 10 to 20 years. We can, and in all decency should, continue to fund them, given our overall wealth.

More than 70 percent of Social Security recipients depend on these benefits for over half of their income.

Social Security payments were cut back by a President Reagan commission in the 1980s, and President Obama has floated the idea of changing the yearly cost-of-living adjustments to squeeze $122 billion from the program over the next 10 years.

The powers-that-be generally favor entitlement cuts.

Employee pensions don’t exist for about one-third of all workers, and most systems are switching to the 401(k) plans, which are acknowledged to be weaker and usually inadequate. Only 42 percent of private employment workers have pensions. Public employee pensions are under attack and are being scaled back in various ways. Attackers have tried to appeal to the possible jealousy in private sphere workers who now, more than ever, may themselves lack decent pensions and protections.

Pennsylvania state workers contribute around 7 percent of their pay to retirement, but their system has been weakened because the state and localities often have not matched this or contributed anything, even when the economy was strong. According to USA Today, average annual pensions of state and local workers are $24,373.

Critics of entitlements maintain that American health-care costs themselves will become unaffordable.

Indeed, the Democratic health-care bill is calculated to better control these costs, but it won’t cover everyone.

More and more Americans, especially low-wage earners, are covered by $5,000 deductable or higher amount policies. That means you pay your first $5,000 per year in medical expenses.

Today’s youth, entering a depressed labor market, will have real difficulty getting affordable health care or saving for retirement, even when they can find a job.

Medicare, the government health care for seniors and the disabled, is run at a lot lower overhead than private insurance, and it insures those who, obviously, are liable to have the greatest health needs. For-profit health insurance and even private non-profit policies inflate American costs, as do the multiple paper-work insurance forms and clauses most doctors and hospitals have to service.

A single-payer system, or Medicare for all, would deal best with future medical burdens. The cost per insured person in other wealthy democracies that have such systems is half that of the U.S.

Everyone is covered, and medical outcomes are better, according to all international measures.

However, neither our media nor our politicians will allow an honest description or debate on this. It is a perceived truth that whatever system we have is better, facts notwithstanding. Private insurance companies, and even the American Chamber of Commerce, form a large, expensive lobby to propagandize the public against change.

There are many ways we can cover future health and retirement costs. Other countries do. James Surowiecki, in the New Yorker (Dec. 24, 31), comments that Medicare and Social Security will go bankrupt only if we let them: “Why are politicians obsessed with the question of solvency? Because it makes cutting entitlements seem inevitable, rather than a political choice.”

Is America willing to strand larger numbers of citizens with poor health and retirements?

Jim Scofield of Richland Township is an associate professor emeritus at Pitt-Johnstown.  

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