Wednesday, December 12, 2012

Entitlements versus sense of entitlement

Folks on both the left and the right often confuse the concept of entitlements with the sense of entitlement. This influences the debate over things like the Fiscal Cliff.

Entitlements are obligations or promises that the government has made to various people. Social Security and Medicare are among the biggest entitlements. These are promises that the government has said it will provide due to various acts of legislation governing things like Social Security.

Sense of entitlement is a different concept. That's more related to the concept of being "spoiled," of the feeling that, the world owes one a living. Folks often get used to a certain standard of living and they have expectations that this standard will always be available. Sometimes poor people may have a sense of entitlement, but middle class and the wealthy have this also. The wealthy who always expect taxes to be low and the country to be functioning, military and all, have their sense of entitlement. One often hears that spoiled American tourists have a sense of entitlement over conditions in hotels and so forth as they travel to countries where things are different.

Getting back to the other use of the word entitlement, the government uses this concept in it's budget planning process. Entitlements are promises that have already been made by legislation, such as Medicare benefits, which people are already relying on. These are fairly inflexible obligations in the budgeting process as opposed to the concept of discretionary spending where the government has more leeway for change from year to year.

Discretionary spending includes many things. Its the running of the government where choices are made to appropriate money for each fiscal year. Most of military spending probably falls in the category of discretionary spending even though some of the military budget is things like entitlements promised to veterans.

A big problem faced by budget planners today is that most of the budget is devoted to entitlements. With medical costs rising and the retirement of post war baby boomers, Medicare costs are projected to eat up just about all of the budget in the future leaving practically nothing for discretionary spending. Practically nothing for basically running the government from tiny slices of the budget for NASA, the FBI and other discretionary spending. A fairly large slice of discretionary spending goes to the Pentagon. Even the vast defense budget may get squeezed out from future Medicare obligations, if certain trends continue.

While promises for things like Social Security and Medicare have been made, promises can not always be kept. These promises can be conceivably broken if there just isn't enough money to go around. Also the entitlements that are promised to future generations can be scaled back. The amount of money that the government has to spend is dependent on a strong economy with the collecting of taxes.

There is another kind of promise that has been made that could threaten the ability of the federal government to meet its financial promises. That threat is something called Grover Norquist. It's a pledge that many members of Congress have signed saying they'll never allow taxes to be increased. This gives the government less flexibility on the revenue side as it struggles to balance it's budget. Conservatives have often pressured their Congressional representatives to sign the Grover Norquist Pledge, but this can cause problems as costs for things like Medicare keep rising.

Even without Grover Norquist, the government has trouble collecting enough money to meet it's expenses. That's why we have to keep borrowing money, thus adding to the Federal Debt. The amount of tax that the government can collect also depends on the strength of the economy. It depends on how much taxable income is out there.

People on the left often say that Medicare and Social Security are not entitlements, but they are things that people have earned. This isn't totally true. In some cases, Social Security and Medicare pay out more to an individual than the individual has paid in. In other cases, the opposite is true. People sometimes pay more into Social Security than they get back; especially if they die before they retire, for instance. These programs are not just like bank accounts, but they are also of our country's social safety net. Without the safety net, life in society would be a lot rougher so I am in favor of the safety net.

Many folks do seem to have the other kind of entitlement; the sense of entitlement that we can have everything from low taxes to a strong safety net to an always prosperous economy.

In the final end, it always seems to depend on the math; even for the entitlements that the government has promised. It only works, in the long run, when the numbers add up.

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