NEWSLETTER # 29 SPRING 2003
NEWSLETTER # 29 SPRING 2003
HAVE WE GOT A DEAL FOR YOU!
We always need more members. If you send $5.00 for a membership for someone you believe will want to remain a member, we’ll extend your membership for a year.
If someone sends their own $5.00 in and states that you recommended SAFE, we’ll extend your membership for two years.
DON’T MINIMIZE THE SOCIAL SECURITY PROBLEM
SAFE President Barry Dorsch has sent the following letter to the three members of Delaware’s Congressional delegation.
Dorsch takes both the Social Security Administration and “AARP-DC” to task for stating falsely that the Social Security problem doesn’t hit until 2042.
We hope you will send this letter or something similar to your members of Congress. Send us a copy and we’ll add you to our elite group of SAFE activists.
Here’s the letter:
Members of SAFE are concerned that the Social Security Administration is minimizing the seriousness of the Social Security problem and the need to take corrective action soon. For example, on www.ssa.gov, Social Security’s Chief Actuary is quoted as follows: “If benefits were reduced to meet the shortfall in revenue for the combined program, the reduction would need to be 27 percent starting with the exhaustion of the trust fund”.
The above statement implies that the trust fund will take care of the problem until about 2042. However, as you know, and the people in the Social Security Administration know, there is no money in the Trust Fund. The problem will hit about 2017 when benefit payments start to exceed payroll taxes.
Unfortunately, Bill Novelli of the AARP made a similar misleading statement last November 19th in a talk before the National Press Club. Novelli said: Social Security can pay full benefits until 2042-".
We hope you will help clarify the situation, by pointing out the error of assuming the problem doesn’t hit until 2042.
According to an Associated Press article in the March 16th News Journal, Wilmington, DE, Social Security has been put on the back burner for political reasons. That is unfortunate. We hope you will go on record that the Social Security problem starts to hit about 2017, and a solution is needed soon. As Alan Greenspan points out, the greater the delay, the more difficult the solution.
IT’S A TRAIN WRECK,
IT’S MEDICARE!
Bill Whipple
In issues #24 and #26 of this newsletter, John Boughton reviewed the background and track record of Medicare.
Briefly, Medicare has existed at the Federal level since 1965. It is effectively a compulsory program, as seniors desiring to avoid enrollment in Part A (limited coverage of hospitalization) benefits would have to forego their Social Security benefits as well. Medicare currently accounts for over 10% of total Federal government spending.
Benefits claimed by Medicare supporters include reduced out-of-pocket medical costs for seniors. Unfortunately, as John pointed out, “a number of studies show this goal has not been achieved” due to the rapid increase in health care costs. Thus, an AARP study in 2000 estimated Medicare beneficiaries were spending an average of 19% of their income on out-of-pocket medical costs – which happens to be about the same as the pre-Medicare figure in 1964.
If the benefits of the Medicare system are fuzzy, the huge deficits to support the system are clear. According to a February 6, 2003 report of the Office of Management and Budget, the benefits promised under Medicare will far outstrip the revenues dedicated to pay for them. Indeed, the projected Medicare shortfall over the next 75 years is a staggering $13 trillion.
In the words of David Walker, Comptroller General of the United States, “when viewed from the entire perspective of the entire budget and the economy, the growth in Medicare spending will become progressively unsustainable over the longer term.”
By the way, this sobering outlook does not reflect the soaring cost of providing Medicaid benefits for low-income seniors who need help with long-term care, Medicare premiums/deductibles, and – yes, you read right – prescription drug costs.
Counting Medicaid payments, the provision of health care to seniors is already using Federal income tax revenues as well as consuming the 2.9% payroll tax (over and above the 12.4% payroll tax for Social Security) dedicated to supporting Medicare. Don’t be fooled by reports that Medicare will not “have to begin dipping into its trust fund [read IOUs] in 2013 to keep up expenditures” and will not “become insolvent until 2026.”
So what are our national leaders doing to reform the Medicare system before it collapses? The main legislative proposal this year, surprisingly enough, is to expand the current coverage of Medicare: Part B (doctor’s treatment, etc.) to include partial coverage of the cost of prescription drugs for all Medicare participants.
Given what we have said about the fiscal problems of Medicare, how could the country afford to liberalize the program? One possible answer is that Medicare beneficiaries would absorb the cost by paying increased premiums for Medicare: Part B coverage. Also, the Administration initially proposed that Medicare participants would be required to switch from the traditional Medicare fee-for-service program into private (competing and therefore hopefully more efficient) health plans to get a drug benefit.
Whatever the merits of a private health plan proposal, and I must confess to being unconvinced, it’s not about to be enacted. The Congressional reaction was negative on both sides of the aisle, with the perception being that seniors should not be forced into private insurance plans to get a drug benefit. The Administration has now passed the ball to Republican congressional leaders to determine what sort of proposal for a Medicare drug benefit would be politically feasible.
The AARP position on this issue, according to Executive Director William Novelli’s column in the March 2003 issue of the AARP Bulletin, is that Medicare should offer “new voluntary, affordable prescription drug coverage” that contains “no exclusions due to age, geography, health status or ability to pay.” Who is going to pay for this? Mr. Novelli doesn’t say exactly, but there is a note at the bottom of the page urging seniors to “call your senators and members of Congress and tell them to budget enough money for a meaningful Medicare drug benefit.”
In accordance with the fiscal conservatism that SAFE has long espoused, your board of directors takes the other side of the issue. Thus, we believe that the top priority is not to add new benefits to Medicare, but rather to figure our how the benefits that have already been enacted can be paid for without putting an intolerable burden on our children and grandchildren. Until Congress comes up with a sensible answer to that challenge, we would urge that they forget about enacting a drug benefit.
If you agree with the foregoing, we urge you to share the thoughts expressed in this column with your family, friends, colleagues, the media, and our leaders in Washington. It’s surprising what people can do if they put their minds to it, and there is more power in our little organization – or the larger organization that it could become – than any of us has ever imagined.
One more thing. Whether you agree with your board of directors on this particular issue or not, let us know how you feel. An easy way to do this would be to email me at ww3@delanet.com. I shall acknowledge your inputs and share them with the other directors.
MAKE STATE GOVERNMENT ACCOUNTABLE
We focus on the federal government, because of the huge problems it may leave for our children, and grandchildren. However, let’s not forget state governments.
As we reported in earlier newsletters, New Zealand had very serious financial problems and part of the solution was to make government agencies responsible for results. For example, if an agency stated that 10,000 people went through a job training program, the questions would be asked: “How many more obtained and held jobs than would have done so without the program.”
Maurice McTigue of New Zealand had a significant role in this reform. He is now at the Mercatus Institute at George Mason University, Arlington, Virginia, and is helping U.S. Federal government agencies comply with the Government Performance and Results Act.
Director Jerry Martin has informed some members of Delaware’s General Assembly about this approach. They are considering application of some aspects to improve Delaware state government.
Maybe one of your state senators or representatives would be interested in this approach. How about checking out Mercatus on the web ( www.mercatus.org ), then passing appropriate information to one or more of your state senators or representatives or publicize it via a letter to the editor. It couldn’t hurt.
As stated in the Winter Newsletter, we sent an editorial attacking “AARP-DC” to over 100 newspapers. Unfortunately, it was printed in few if any of the papers. It probably won’t go out of date for some time, so we may use it again.
Meanwhile, we encourage you to use any part of it. If you don’t have the Winter Newsletter (No. 28), we’ll be happy to send it. Here are some excerpts:
“We’re leaving a huge federal debt and a Social Security problem to the next generations, and AARP is part of the problem.”
“The problem lies with AARP’s Washington, D.C. office and its lobbyists. For brevity, let’s call this combination “AARP-DC.”
“The AARP-DC support of big government works against paydown of federal debt.”
“AARP-DC sidesteps the Social Security problem by pretending there is money in the Social Security trust fund.”
“In fairness to the next generations, both the debt problem and the Social Security problem need to be addressed now. However, AARP-DC pushes for more spending and opposes Personal Retirement Accounts. AARP-DC is no friend of the next generations.”
At the invitation of PBS Station WHYY SAFE President Barry Dorsch and founder Bill Morris appeared on the April 16th Wilmington, DE nightly news program. Program host Nancy Karibjanian was a friendly interviewer, and SAFE goals of smaller government and Social Security choice were brought out. And, our opposition to the big government bias of AARP lobbyists was made very clear.
Our web site and telephone number were shown several times. We believe the invitation resulted from an earlier news release sent to WHYY. Goes to show that when they hear from us, we get noticed.
I believe SAFE is the only seniors organization that concentrates on the future welfare of the next generations.
With only two workers per retiree, benefits will have to be cut 25%, or Social Security tax will have to be increased 37% as of 2042. Then it gets worse as far as the eye can see.
You could take the Social Security Trust Fund bonds and burn them on the Capitol steps, and it wouldn’t really affect anybody.
If interest rates double, interest on the debt will be larger than military spending.
A breakthrough in life expectancy would be wonderful for retirees, but not for the workers being taxed to pay Social Security benefits.
You can’t predict the future. When government economists predict a surplus, there’s usually a deficit and vice versa.
We see the AARP as a big business that promotes big government.
AARP has its head stuck in the sand – the Washington D.C. office minimizes the future problem with only two workers per retiree.
Compared to the AARP, we’re like a flea on an elephant’s back.
A good information resource: "Grandfathers Economic Report"
President
Barry Dorsch, Wilmington, DE
(302) 478-0676
Treasurer
Ed Fasig, Wilmington, DE
(302) 999-0611
Director, 2003-2005
Jerry Martin, Wilmington, DE
(302) 478-5604
Bill Whipple, Wilmington, DE
(302) 376-7036
Director 2003-2004
John Boughton, Wilmington, DE
(302) 475-6718
Ed Fasig, Wilmington, DE
302-999-0611
Director 2003
Orville Wetmore, Wilmington, DE
(302) 652-0107
Dick Reese
(302) 478-4970
Also, we have our SAFE link in the Social Security section of Cato Institute’s web site, which you will find very informative.