In the US and in Europe there is great debate about retaining “entitlements”¬†promised¬†by¬†successive¬†governments.
The same goes for New Zealand…especially with schemes such as ACC, Superannuation, interest free student loans and Welfare for Families. Those programmes all have to be paid for and as Margaret Thatcher once said…eventually you run out of other people’s money to spend.
Sometime soon our politicians are going to have to start being honest with us.
If there were not a single Republican, or none who got elected to any office, arithmetic would still end “Medicare as we know it,” for the simple reason that the money in the till is not enough to keep paying for it. The same is true of Social Security.
The same has been true of welfare state programs in European countries that are currently struggling with both financial crises and riots in the streets from people who feel betrayed by their governments. They have in fact been betrayed by their politicians, who have promised them things that there was not enough money to pay for. That is the basic problem in the United States as well.
We are not yet Greece, but we are not exempt from the same rules of arithmetic that eventually caught up with Greece. We just have a little more time. The only question is whether we will use that time to make politically difficult changes or whether we will just kick the can down the road, and keep pretending that “Medicare as we know it” would continue on indefinitely, if it were not for people who just want to be mean to the elderly.
In both Europe and America, there are many people who get angry at those who tell them the truth that the money is just not there to sustain huge welfare state programs indefinitely. But that anger might be better directed at those who lied to them by promising them benefits that were inherently unsustainable.
Neither Social Security nor Medicare has ever had enough assets to cover its liabilities. Very simply, there has never been enough money put aside to do what the government promised to do.
These systems operate on what their advocates like to call a “pay as you go” basis. That is, the younger generation pays in money that is used to cover the cost of benefits for the older generation. This is the kind of financial pyramid scheme that got Charles Ponzi put in prison in the 1920s and got Bernie Madoff put in prison in our times.