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The term Entitlement needs a re-branding

625206358Much is said about “entitlements” and their cost and how they are driving the federal budget northward and need to be reduced. Much of that argument is BS.

First of all, the specific programs being maligned are Social Security and Medicare. The term entitlement is a bad way to describe programs which largely are funded directly from dedicated allocations to FICA and Medicare.

“Entitlement” sounds like a term a parent says to a spoiled child demanding more toys or candy. As it relates to social service programs, nothing could be farther from the truth. So called “entitlements” are not spoiled child demands, but rather government obligations based on direct payment towards these programs over the years by hard working Americans.

To be clear we directly pay for Social Security and Medicare, not indirectly from the overall U.S Treasury Revenue, but by specific allocated funds. Remember the first pay check you saw. “What’s this FICA and Medicare”, you asked? Here’s what it is how much it costs you:

1. Social Security

What it is:

Social Security is the foundation of economic security for millions of Americans—retirees, disabled persons, and families of retired, disabled or deceased workers. … Today’s workers pay Social Security taxes into the program and money flows back out as monthly income to beneficiaries. Payroll taxes under the Federal Insurance Contributions Act (FICA) tax or the Self Employed Contributions Act (SECA) tax (for self-employed individuals) fund Social Security and all of its benefits. The IRS collects tax deposits and formally entrusts them to the  Social Security Trust Fund, which is made up of the Old-Age and Survivors Insurance Trust Fund (the largest piece) and the Disability Insurance Trust Fund.

Cost:

Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed (like yours truly) pay 12.4 percent

2. Medicare

What it is:

The largest part of Medicare is the federal health insurance program for people who are 65 or older. 

Medicare is funded by the Social Security Administration. Which means it’s funded by taxpayers: We all pay 1.45% of our earnings into FICA – Federal Insurance Contributions Act which go toward Medicare. Employers pay another 1.45%, bringing the total to 2.9%.

It is NOT free. Americans pay for Part B (doctors) and Part D (drugs) and many pay for a supplemental policy. In addition the monthly costs are tiered based on one’s income, so those whose earnings are higher pay more.

Which brings me back to the bogus argument about the federal deficit being driven by these programs. The bloated federal deficit is being driven by a tax cut HEAVILY weighted to business and highest earners at a time it was unnecessary to do so.

Despite promises of the sacred nature of Medicare and Social Security, and campaign promises to not touch them, our President now says  “At some point they will be”

Who needs these programs the most—lower/middle class. And who needs them least—the wealthiest.

Of course the programs need to be largely self-funding and fine tuning needs to be done (as it already has). Social Security in particular needs to increase the full retirement age (as it is happening now) reflecting greater longevity, and perhaps raise the taxable maximum wage too. And Medicare needs a tighter program where the government negotiates for drugs at a lower cost. Time to squeeze big pharma. No tears for them.

But in the end, we all need to view these “entitlements” not as expenses, but rather as “earned obligations” of an enlightened government to its citizens. I fear that deep cuts will come (after the election of course) if the current administration remains. That’s another of many reasons that we need change of our current Administration and Senate. November 3 can’t come soon enough.




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