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The New Morality of Government Benefits

Modern democracies have created a new morality. Government benefits, once conferred, cannot be revoked. People expect them and consider them property rights. Just as government cannot randomly confiscate property, it cannot withdraw benefits without violating a moral code. The old-fashioned idea that government policies should serve the "national interest" has given way to inertia and squatters' rights.

So opines Robert Samuelson in today's WaPo, drawing specific attention to Europe's present fiscal miseries, America's reckless similarities and the National Commission on Fiscal Responsibility and Reform's "accounting exercise to shrink the deficit without trying to define what government should do and why." The overarching problem is that commission has failed to produce "a moral rationale for change."

The "entitlement" mentality has long been a feature of American politics, but the urgency of an economic downturn is finally forcing Americans to confront the unsustainability and pending consequences of this problem. Samuelson notes:

The social contract will be rewritten either by design or, as in Europe, under outside pressures. If we keep the expedient morality of perpetual programs - so that nothing fundamental can ever be abandoned - then Europe's social unrest could be a prelude to our own.

Samuelson hopes to begin a conversation about "the broader national interest" in order to form a philosophy of government. I salute his intention, second his diagnosis of the problem and commend his prescription for change - but I wonder if he has noticed that the Tea Party has already begun this particular conversation - and November's election was America's response.

The principle question now is whether our politicians have the knowledge and prudence to decipher the public will and translate it into governing policy. This would be a considerable accomplishment in the formulation of a new governing philosophy, as it would provide an example of true "politics": statesmen responding to sentiments of the citizens by crafting just and prudent laws respecting the will of the people and mindful of the good of the state.

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Discussions - 18 Comments

Do you really need a 'new governing philosophy', or do you need to do something more mundane, like persuade people that:

1. First dollar coverage of medical expenses is economically unsustainable.

2. The distribution of benefits to the elderly has to be done on a schedule governed by the ratio of the number of persons beyond the statutory age of retirement to the number of persons of working age.

I turned on C-Span a while back and there was a panel discussion which included a fellow from the American Enterprise Institute. He told of a conversation with a Republican congressional candidate where the candidate ruled out reductions in benefit levels, ruled out tax increases, and ruled out raising the retirement age. He said he wanted to go after....wastefraudandabuse. The judgment of the fellow from AEI: 'not serious'. And that describes the Republican congressional caucus in our time.

How about a new philosophy of proper governing?

The point is that we are all so tied to the federal government and to the benefits it so democratically provides that everyone will need to rethink that relationship because what we are doing is economically unsustainable. That congressional candidate knows the confusion on this point of the folks back home. One guy's wastefraudandabuse is another guy's bread and butter or safety net or something similar. It is going to be awfully darned hard to persuade people to be in favor of things that are not in their self-interest as they currently understand it.

No. The shnook's invocation of wastefraudandabuse was a way of avoiding an answer (or an indication that he is deeply ignorant, take your pick). Social Security is under pressure from demographic evolution. The situation is not dire, but it does need to be addressed. Addressing it means you tell people the truth, which is as follows:

1. Birth cohorts have for six decades been fluctuating around a set point of about 4,000,000 live births per year. There will likely be no secular increase in the size of the cohort entering the labor force each year.

2. People are living longer. A higher share reach the standard retirement age and they live a longer number of years subsequent to that age.

3. The working-aged population is tapped out. The number of entrants you can glean from married women abandoning housewifery and from mobilizing a quondam population of welfare recipients is quite modest, and once it's done, its done.

4. Ergo, the ratio of persons over 62 and over 65 to the working population has been increasing and will continue to do so. In response to this you can:

a. Raise the retirement age on some schedule;
b. Raise payroll taxes;
c. Reduce the real value of benefits paid per retireee; or
d. Some combination of the above.

That's the reality manifest in arithmetic and accounting identities that Mr. Wastefraudandabuse refuses to acknowledge. That is reality whatever innumerate people with the suffrage fancy their 'interests' are.

For years (sometimes less than seriously), the GOP has pushed for privatization of retirement and health benefits (in the form of medical and retirement savings accounts). The only way to break this dependency/entitlement cycle is to reintroduce the concept of personal responsibility for one's own welfare. It will have to be slow and begin with younger cohorts, but it must be done, and soon. Since people are, by and large, less responsible than they need to be, such programs will have to be involuntary, I'm afraid (much as payroll taxes are involuntary). This is all doable, but so long as politicians are dependent on scared dependent people for reelection there is no hope, and this is what the Democrat/Socialists have schemed for all along.

I don't argue with either of you. AD, your points are spot on. I have been fruitlessly arguing along those lines for most of my conservative life. What I get in response is something roughly like, "I deserve this (this = benefits as they are now); I have been paying in my whole life and I deserve the same benefits my father had in retirement, or better." A shockingly few people respond positively to the facts, even presented as succinctly as you put them. As Redwald notes, conservatives with any instincts for economics have pushed for privatization of one sort or another. Big deal. Your Schnook may be a schnook, but he is a representative schnook, representing an electorate who is confused about their self-interest rightly understood.

I have never gotten that response. What I have gotten are what might be called confused and scattershot objections, e.g.

1. "Our real problem is low birth rates".

A. The United States is not Japan. Our total fertility rate has been at or above replacement level bar for a modest run of years around about 1978. The raw size of the cohorts entering the labor force shows no secular trend toward decline. (And the largest cohort of live births on record arrived not in 1957 but in 2007).

2. "I would worry people would get into their sixties and the retirement age was abruptly raised and raised again."

A. The retirement ages in question would be specific to each cohort and (with some wiggling due to actuaries having to update their calculations) known passably decades in advance. The 1948 cohort retires at 62 or at 65, the 1990 cohort retires at 73, and the cohorts in between retire at ages betwixt and between).

You might suggest to your interlocutors who fancy they deserve this or that that if they want their grandfather's retirement age they might deserve as well the following:

1. The standard of living their grandfather enjoyed. Mine were both at the mid-point of their lives in 1930. The per capita income of the United States was about a quarter what it is today. A personal income a quarter the national mean is in our own time the official poverty level for a single-person household.

2. The life span of their grandfather. (Two of my four grandparents died at 49 and 50 respectively. They never saw a dollar of Social Security).

3. They can have the ancillary benefits of their grandfather. My grandfather's company retirement pension was (in today's currency) about $750 a month. He was employed in upper reaches of the federal civil service, so that pension was about as good as you got.

4. They can have their grandparents' teeth - or what was left of them. My grandmother was missing two-thirds of her upper set by the time she was 72 years old or thereabouts. My mother had 29 of her original teeth at that age.

Well then you have got Kate's objection. i.e.

2. "I would worry people would get into their sixties and the retirement age was abruptly raised and raised again."

"I deserve this (this = benefits as they are now)"=promissory estoppel. I have earned it, or begun work, in reliance upon it.

When folks were spamming "anti-change" meme's to counter Obama they were basically also argueing that there was "too much uncertainty."

"to much uncertainty+I deserve this" is both strongly anti-change, but also strongly in favor of a recognition that folks make long range plans on the basis of the current system.

I don't think you can argue points 3 and 4 considering that those types of bennefits are already priced into how inflation is calculated and reported. You could argue that we discount technological bennefits and under state deflation, or you could argue that we overstate inflation.

Tax planning, estate planning, all the long term planning folks hate change and uncertainty and stick to a sort of strict legalism.

Also in terms of the entitlement sctructure...the distribution/allocation of wealth since 1970 has became more pronouced.

So look we went along with Reagan tax cuts, and clinton welfare reform, and Bush tax cuts, and Obama tax cuts, numerous legal changes, capital gains cuts, and a real estate bubble.

I hardly think you can do better than to bargain for something like our current level of income inequality. that is the middle class folks who are saying preserve the system and our reliance interests aren't exactly barganning big, by historical standards of equality.

The reliance interest in the status quo falls disproportionately upon folks who accumulated the most wealth, under the system. I don't really think you have disproved marx or established that the most revolutionary and disafected folks aren't the poor and lower middle class.

I think you have a sort of system where the income gap is so big and productivity is so strong that a lot of workers are discouraged, maybe some folks have over-relied upon education or something else. There certainly are a lot of ambiguities and loopholes in the tax system.

I don't think there is anything new or shocking about the morality of government benefits, entitlements, incentives or bargains.

Granted the democratic party has almost established itself as a union serving in some colorable way the reliance interests of the middle class, but folks really aren't going to bargain away the promissory estopel reliance interest they have the status quo without getting some form of consideration in return.

I think folks will say we don't really need washington promiseing us any new unpaid for rights and creating webs of reliance interests they can't deliver on, and look we americans can tolerate and appreciate the super rich and maybe even current levels of income inequality, but I think you are close to the line, and I think knowledge gaps and genetic testing/eugenics by the rich could really create a super class, and then whatever sense of balance between equality/liberty you think is holding the country together is over.

And look I don't even know if I expect unemployment to fall. I have been saying this for a while, at its current level the US can produce(counting trading paper dollars for goods) far more than it can consume, the markets can easily reinflate without any improvement on main street.

In fact I am not even sure if paying out unemployment bennefits isn't more productive than hiring some people. What if a whole host of people were born into the world worthless in reliance upon a sort of christianity, that existed to soften the edges of reality and find dignity in human beings.

What if essentially on a sort of pure merit basis Justice Holmes was right in Buck v. Bell. That is if you look at the incredible boom in technology and productivity and creativity, you see the mundane and hard working middle class factory worker replaced by a new american industry centered out of california and focused upon, patent, trademark and copyright. The typical anti-property argument complained that a lockean theory of property, alienated man from land. But in reality a sweat of the brow theory is incredibly egalitarian.

What if California really is the future? But the real productive property is intellectual. So you either create great technologies and medicines at Cal Tech, start up internet ventures in sillicon valley, star in Hollywood movies, or else end up picking letuce and tommatoes. I fail to see how California isn't the state negotiating what the future must look like.

A rough understanding of human dignity and equality dies off, and like Nixon going to China, Obama's repudiation in effect is the killing off of Christianity.

Folks don't simply have a property interest in Government interests, but a broader property interest in ideas about morality, equity and justice. These sorts of reliance interest in no way guarantee that right is right, and wrong is wrong, just as there is no guarantee that christ was born on december 25th. But this in no way prevents a host of reliance interests both commerical and social from developing around christmas.

Academically you can talk about aitheism, but it is a whole other ball of wax to cancel christmas, or thanksgiving and the reason for this is that there are a set of traditions that once confered and addopted, become propriety, and assume a character of duty and mutual obligation, regardless of underlying facts or schedules.

I can build a sort of abstract ethical system out for you, but I am not sure there is anything deeper, older or more authentic than a morality based upon a sort of mutual reliance or promissory estoppel in the good will and integrity of others.

There are too many lies in the world, too many contract breachers, too many slick lawyers, too many folks who say one thing and do another. too many ways to make up excuses for why the contract needs to be renegotiated on different terms.

If the middle class is going to be stupid, its going to be stupid consistently. It will keep its guns, its god, its medicaire, its social security, its tax cuts and be warry of anyone promising change, or looking to renegotiate terms. Look, sometimes the contract screws you, sometimes you get the benefit of the bargain. People don't just expect them and consider them property rights, people expect them and consider them contract rights, part of the vast framework of things they relly upon.

Self-interest rightly understood for this group of people(whom I suspect is considerably larger than the hypothetical liberaltarian) means a good reputation, and the ability to trust in some foundational things customs and practices regardless of metaphysical validity(usage of trade, i.e. 12=13 with a bakers dozen.).

So I would say at least 70% of americans have an implicit and often explicit promissory estoppel sort of morality.

AD, I do talk about people about improved life-spans and quality of life into age. I also explain that most elderly have received all of the money put in over the first couple of years of retirement and that what they get after is really more like welfare than they would like to think. There are vague murmurings of assent and understanding, but no one is really interested in the alternatives.

Those being: working longer, not seeking all the medical care available that will prolong existence or, simply, dying.

My father expected to die as his father did, at age 65, of a heart attack. He had the heart attack that year, but survived and still survives at the age of 85. His mother lived to 92; so might he. My mother is 83 and despite fainting spells and a slippery memory, has nothing life-threatening wrong with her. Her parents were pretty darn ripe at death, too. We expect her to die of falling down and hitting her head while chasing the great-grandchild. I could live for a hell of a long time and therefore tell my children to watch for opportunities to allow me to die of natural causes -- if I look likely to kick the bucket, just let me.

Of course, what John Lewis says about people planning for the future and resenting uncertainty is true. The increasing uncertainty of all sorts of people (not just the old, of my students, too) will have an effect on society in many way, and perhaps causing people to think about being more self-reliant is one of those effects. Maybe the idea that government is unreliable is salutary.

I know they might be being selfish. (But, hist! People are selfish) What I do know of those aging friends around me is that people who have planned for retirement at a given age are reluctant to put that off. And sometimes it is not the employees who are eager to retire, but their employers who are eager to retire them. People pressing for advancement in companies will not want the old guys to hang on.

Not everyone is suited to become a greeter at Walmart, either.

corporations (and educational institutions) don't want to pay the higher salaries of those with "experience." It's not people from the bottom who push those "experienced" people out, it's managers who realize that I earn 100K but my 20 year younger colleague only earns 75K...it's simple math.

Oh, yes. That is a better way to put it.

Kate, the general retirement age is already on an escalator. I do not recall any severe public protests when that was enacted. I do remember when the periodic statement I get from the Social Security Administration noted that their calculations of my retirement benefits were done under the assumption I was leaving the workforce at age 67. Repairing Social Security likely means an adjustment to the pace of the escalator and phasing out the early retirement option over a period of decades.

of those aging friends around me is that people who have planned for retirement at a given age are reluctant to put that off.

Planned how far in advance? We are talking about telling a 45 year old man that he will receive his full benefits at 68 rather than at 67 and that early retirement benefits will be available two years prior to full retirement rather than five.

No, I am talking about people who are closer to 60 or over 60. Any 45 year old who even plans as you suggest is probably being unrealistic.

Those friends of mine are usually in excellent health; they could stay in the workforce longer and might be happier if they did. My sister-in-law just retired at 65 and thinks she has full benefits. She was actually afraid not to retire, lest benefits be lost to her.

I do not disagree that the retirement age must be raised, nor that expectations should be lowered for what "your country can do for you". I am just saying that people plan for SS or often do not plan because it IS the plan.

In that, I am no longer just thinking about my friends. My husband, a financial planner, has no retirement plan. It is a sore point between us, but we are still financing our children: one at home and headed for college, as well as the college loans of two others. "That would be our retirement." he says. When I found he had made no such provision after talking for thirty years about the responsibility people have to take care of themselves and the probable collapse of Social Security under the baby-boomer burden, I was ... perturbed at the inconsistency. At an age when my friends are talking about when to retire, I am looking around for full-time work, thinking I never can.

I hope I don't want to; I love teaching, which is my work, and find happiness in it. Maybe not in grading papers, so much.

My regrets about your current situation.

When I suggested the age of retirement be adjusted cohort by cohort, I meant just that: you add eight years to the standard retirement age over 45 cohorts (1945-90) and 11 years to the early retirement age over 42 cohorts (1948-90) until they converge at a value of 73. For someone in the 1950 cohort, that might mean an adjustment in the standard retirement age of nine months to a year (from 65 to 65.75 or 66.0) and an adjustment in the early retirement age of 6 months (to 62.5).

The real danger to Social Security (which is not a defined-benefit pension program which can 'collapse') is the condition of public finances generally. The demographic problem can be dealt with by some simple adjustments.

Ha! I will survive grading papers.

Isn't part of the SS problem all of the uses to which Congress puts the revenue that comes in? Granted, your cohort adjustments seem sensible, but -- I suppose you are addressing this in your last paragraph -- we are not talking about a well-funded pension. Demographics are against us in ways that "simple adjustments" seem inadequate to mend.

I suppose we are talking at cross-purposes. I am referring us to political problems in altering the system and you are attempting to address the economic facts of the situation. Maybe the economic tangle of SS can be untangled, but if it is painful, then we have the same problem we have had for a couple of generations. No one likes that kind of pain. I do hope you are correct, that people your age and younger will be willing to make suitable adjustments. That argues an intelligence I am discouraged about finding in the electorate -- today. Maybe tomorrow I will be more hopeful.

Demographics are against us in ways that "simple adjustments" seem inadequate to mend.

No, that's Japan Unlike Japan, most of Europe has had a mild recovery in fertility in the last fifteen years. France has had a dramatic recovery and now reproduces near replacement levels. American fertility has been at or above replacement for all but a few years over the last generation. The cohorts entering the labor force will be of an adequate size to support the population of retirees.

Really? Europe: is that because of their Moslem populations?

Are Americans really reproducing again? How much of the adjustment in that demographic is because of immigration? Who is reproducing? Not that it makes any difference in terms of Social Security -- there maybe the problem will be national prosperity.

More of the population living longer is not a problem?

Improved life expectancy is something to which a pension program has to adjust. What we will not face (which Japan and Germany will) is an inverted population pyramid with younger cohorts smaller than older ones. The total fertility rate in this country was below replacement level for a modest run of years a generation ago, and that is all. Immigrant populations have been about a tenth of the total over that time period. We do not have a chronic problem with depressed fertility, and never did.

Re: the recovery of fertility in France:

Arabs and Berbers make up about 8% of the population of France. Were improvements in French fertility to be attributable to this subpopulation, the total fertility rate of the Arab and Berber population of France would have to be in excess of 4.4 children per mother. Given that their countries of origin (Morocco, Algeria, and Tunisia) average a fertility rate just slightly above replacement level (2.2 or thereabouts), that is not bloody likely. Given that the non-indigenous Muslim population in Europe as a whole is around 5% thereof, I cannot imagine why anyone would attribute more than a modest fraction of fertility improvement to them.

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