Are entitlements real culprit in our deficits?
As a retiree and a senior citizen I am tired of politicians coming on television and repeatedly creating the myth that the biggest culprits of budget deficits and national debt are the entitlement programs like Social Security and Medicare when the truth is that the wars in Iraq and Afghanistan are two of the major culprits in this context.
These two wars have been expensive. According to estimates by well-known economists Joseph Stiglitz and Linda Bilmes, when all costs are counted the Iraq invasion cost U.S. taxpayers $3 trillion. Ditto for the Afghan war. In other words, the two gratuitous wars doubled the U.S. public debt. This is the reason there is no money for Social Security, Medicare, Medicaid, food stamps, the environment, and the social safety net.
What did America get from these wars? But as the war debt will never be paid off, citizens and their descendants will have to pay interest on $6,000 billion of war debt in perpetuity.
Furthermore, thousands of Americans lost their lives and hundreds of thousand Americans were physically and emotionally maimed.
Post 2008-09 financial crisis, our government bailed out big banks. Now the Federal Reserve has interest rates so low that retirees and others living on their savings can earn nothing on their money. The interest rates paid on bank CDs and government and corporate bonds are lower than the rate of inflation.
To live on interest income, a person has to purchase Greek, Spanish, or Italian bonds and run the risk of capital loss. The Federal Reserve’s policy of negative interest rates forces retirees to spend down their capital in order to live. In other words, the Fed’s policy is destroying personal savings as people are forced to spend their capital in order to cover living expenses.
In the meantime, the super rich got richer (0.01 per cent) saw their income rise faster than the merely rich. In 2010, about 15,000 households with average income of $23.8 million saw their income rise by 21.5 per cent. The top 1 percent, whose average income is $1,019,089, had an 11.6 percent increase in income. The bottom 99 percent received a microscopic $80 increase in pay per person in 2010, after adjusting for inflation.
Retirees are not getting Social Security benefits for free. They and their employers paid into the system throughout their working lives. The same is true for Medicare. Retirees not only paid into Medicare funds for their working lives but they also pay a monthly premium into the system after retirement and the benefits after the deductibles are met and are paid only at 80 percent. In other words, they again have to pay 20 percent of the balance out of their pockets.
Those of us who contributed to these so-called entitlement programs for more than three decades could have seen that money easily quadruple or more (with benefits of compounding interest) during those years if invested in fixed-income instruments. Their benefits are, therefore, neither for free nor are they out of proportion.
— Khwaja A. Hasan
Formerly of Terre Haute