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Wednesday, May 5, 2010

The Corrosive Power of Entitlements

I was at a diner yesterday morning for breakfast when the subject of Greece came up among the staff. One of the staff suggested that the way to have averted the crisis was to have benefits to many of their public employees benefits packages long ago. After all, the employee reasoned, the budget deficit that is causing the country to be on the verge of collapse is due in large part on sweetheart deals to public employees.

It's a simple solution and it would also solve many of our own "unfunded liability" issues in Medicare, Medicaid, and Social Security. They are taking in less and less in revenues and paying out more and more in benefits. So, we must raise the age of benefits, cut the amount of benefits, and/or raise the taxes on benefits.

I listened as the employee presented a perfectly reasonable idea and I couldn't listen any more. This idea, while perfectly reasonable on a policy level, has no political viability. That's because whenever any politician proposes any cuts to benefits, there is another politician ready to demagogue the issue and claim you're going to take what is rightfully someone's right. Those politicians will proclaim that said entitlements are perfectly solvent and under their plans everyone will get their benefits. That's exactly what happened during the Social Security debate in 2005. Any proposed change to Social Security by Bush was met with attacks by Democrats that he "was taking away your social security".

Furthermore, you can bet your opponents will find some $2000 campaign contribution from some donor that they will then claim will benefit from your cuts. Now, suddenly, you're no longer proposing a fiscal solution but a corrupt politician.

The idea proposed assumed that voters are logical. Voters can see when a program has no long term fiscal viability. Of course, if that were true President Obama would never have been president. He promised everything to everyone: free health care, student loans, to pay your mortgage, and only the really rich would pay. That's not viable and yet he won overwhelmingly.

That's what happens as soon as you give out an entitlement. People feel entitled and anyone that dares to take it away gets eliminated.

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