The Grumpy Economist has a post up discussing a New York Times article and he displays two graphs from that article. If you're a lazy reader like I often am that first graph will get you fired up about all those entitlements. Here, look at it:
It looks horrible. $7,000 per person is being spent on entitlements. I think per-capita is every man, woman, and child and not just tax paying citizens. Notice that the entitlements listed say "Social Security, Medicare, Veterans Benefits, and Food Stamps." That makes it sound like we are all spending a lot of money to take care of the poor folks in the country. However, this second image destroys that notion. About 58% is going to the poorest 40% of the population. So that means the other 42% of the money is going to people who aren't poor. Here, look at the chart:
Simple Math
Why are we giving out entitlements to people who aren't poor? I'm not sure. Notice also that the amount going to the poorest fifth has dropped substantially while the combined amount given to the richest 60% has gone up. I wish there were numeric labels at the end of each line instead of just the top one but still, we can see somethig is messed up.
Let's do the math:
7,000 * .58 = 4,060 per capita going to the poorest 40%
7,000 * .42 = 2,940 per capita going to the wealthiest 60%
According to the US Census bureau we have a population of 311,591,917 thus if we stopped giving out entitlements to the top 60% we would save:
916,080,235,980
That's nearly a trillion dollars - a year. Now, to make sure we aren't including anyone living below the poverty line in this calculation let's see how many people live at that state of poverty - according to a different NY Times article 46.2 million people are below the poverty line. That is 14.8% of the population. So it seems reasonable to say the bottom 40% of the population catches everyone that is truly poor or on the verge of being so. Granted, I'm making a big assumption becuase I don't know the income range for that second lowest fifth as demarcated in the graph above.
There is a Catch
Of course, all of this is fairly misleading. All of that earlier math was assuming money is dolled out in some kind of even distribution across benefit programs. It clearly isn't. What programs are the biggest sources of monetary distribution?
Social Security and Medicare
Check out this graphic from the original NY Times article which clearly illustrates the disproportionate expenditure on these two benefit programs. Make sure to also look at the stuff at the bottom - the money helping out only the poor (it would be nice to see welfare on there too).
Now, if you're like me you may not be good at remembering the difference between medicare and medicaid. According to medicare.gov the differences are stark:
Medicaid is for low income:
- Pregnant women
- Children under the age of 19
- People 65 and over
- People who are blind
- People who are disabled
- People who need nursing home care
Application for Medicaid is at the State's Medicaid agency.
Medicare is for:
- People 65 and over
- People of any age who have kidney failure or long term kidney disease
- People who are permanently disabled and cannot work
So social security and medicare are for anyone and everyone regardless if you can afford to do without the benefit. These two programs are basically destroying our budget year after year.
Let's Forget About Social Security
There is no way social security will be changed. Everyone pays into it and they all expect to be able to take some money out of it when they retire. But what about medicare? How badly funded is it? Well, let's look at another graphic at the NY Times article entitled pay less, receive more while ignoring social security. It shows that each person receives 350,000 in benefits but at most we put in 149,000. Clearly somethings gotta give. Here are some assumptions so we can do the math; the US life expectancy is 78.1 and the benefit age starts at 65. That means the 350,000 is spread out over, on average, 13.1 years. Also there are about 34.4 milion retired americans.
((350,000-149,000) * 34,400,000)/13.1 = 527,816,793,893.13
That's almost 528 billion dollars in shortfall each year. More than half a trillion!
Ok, so we all agree that some kind of cuts to medicare have to happen to fix the budget problems right? Not quite. Check out the responses on the NY Times Article:
A full 56% of the population doesn't think we'll have the money for medicare but only 22% of the population thinks it is the main contributor to our budget defecit (while a deluded 27% think the problem is benefits for the poor) furthemore 77% of the population thinks a reduction in Social Security and Medicare should play at most a minor role in fixing the budget problems. Sadly this question isn't split up between the two different programs.
It seems like just like our elected leaders our population doesn't want to face reality.
In Summary tl;dr
Poor folks are getting benefits they need but those benefits aren't the problem with our budget. The population of our nation thinks the big budget entitlements shouldn't be cut at all (social security and medicare) but both of them need more funding to match their expenditures; especially medicare. However, 63% of the population is opposed to raising taxes on all Americans (though they are happy to raise them on the rich). Almost to a tee that same 60% (55 really) thinks they will pay for more benefits than they receive in their life which is clearly not the case even when accounting for Social Security (total difference for medium to high income people for both Social Security and Medicare is $117,000 more than they pay into it them).
So the question is why are we giving out so much more in benefits to the medium to high income earners?
My Barely Informed Opinion
I don't think we need to raise taxes on these people I just think we need to decrease their entitlements OR figure out a way to decrease the cost of health care so that people can continue to receive the same level of benefits but at a cost that results in a net gain as opposed to a net loss on revenue.
