The further to the left or the right you move, the more your lens on life distorts.

Monday, November 12, 2012

De-Fund the Rich

As we move toward "fiscal cliff" negotiations it seems that "taxing the rich" is a central point of contention. Never mind that it won't reduce our national debt in any appreciable way, it's the symbolism that energizes the president and his legion of Left-leaning supporters.

Okay ... let's tax the rich! But only if Barack Obama agrees to de-fund the rich as well. What do I mean? Read on.

First, it's kind of important to understand the problem. There are two fundamental reasons that our national debt is frighteningly large and getting larger by the day: (1) we spend too much and get too little in return, (2) we have created unstable entitlement programs (and just added a new one—Obamacare—that is even worse) that will either go bankrupt themselves or bankrupt the country. Entitlements are the problem—not tax rates on "the rich." But it's quite apparent that Obama and his constituents would rather not look at the problem, meaning that any viable political solution is impossible. Hence, the road to ruin.

Since the re-elected president must now deal with an economy as it is (low GDP, high unemployment, high regulation, a dispirited business community ... I know, the election demonstrated that none of this could possibly be Obama's fault, he's simply a victim of G.W Bush and the meany GOP congress) it might be worth considering a few actual solutions, rather that class warfare-oriented rhetoric that will solve nothing (I understand that actual solutions and results are counter to type for Barack Obama, but one can always "hope").

Here's a modest proposal that has appeared a number of times in this blog over the years:

Since entitlements are going bankrupt and will bring the USA down with them, it might be time for means testing them—that is, de-funding "the rich" who participate in these programs. As an example, consider the following anecdote noted by Robert Samuelson:
[Entitlement] Programs have strayed from their original purpose. Take Social Security. Created to prevent destitution among the elderly, it now subsidizes the comfortable. The Wall Street Journal recently ran a story about a couple (he 66, she 70) touring the world. They've visited London, Paris, Florence and Buenos Aires. Their financial adviser sends them $6,000 a month from investments and proceeds from their home sale. They also receive Social Security. How much? They don't say. My hunch: between $25,000 and $50,000 a year. (I emailed the couple for details but received no reply.)

Is this what Franklin Roosevelt intended? Should Social Security be tilted more toward the less affluent? Good questions, but politicians rarely ask them. Anyone who does risks being attacked as hard-hearted.
The couple noted by Samuelson is representative of approximately 4,000,000 seniors who could easily survive with reduced social security payments. The savings would be substantial, and if coupled with other meaningful structural reforms (e.g., increasing the retirement age over time, reducing eligibility for social security disability insurance, reducing or eliminating COLA increases) it might actually have a beneficial societal effect. So where's our class warrior president in all of this? Crickets ... as usual.

But let's not stop there. Medicare should also be means-tested. Should a comfortable senior really pay $0.63 for a monthly supply of blood pressure medication, while a 40 year old with private health insurance pays $63.00? Should that same comfortable senior visit the doctor and pay nothing (no co-pay at all) while a 40 year old with good private health insurance might have a co-pay of, say, $35.00? The answer is obvious, but not to our class-warrior president who insists that a program similar to medicare (Obamacare) is cost effective, (it isn't) and solvent programs offered by the private health insurance industry are inherently broken. (they aren't)

Engineers learn early on that if you don't understand the problem (or refuse to see it), you can't possibly craft a meaningful solution. Barack Obama and his legion of supporters refuse to understand the problem, so they craft "solutions" that don't solve a thing. Four more years of that approach and ... well, get out the popcorn, sit back, and watch what happens.