Social Security & Medicare – ‘Earned’ Entitlements |

Social Security & Medicare – ‘Earned’ Entitlements

By Mitch Gurney

May 29, 2010

What association do you make with the word ‘entitlement’? Is it negative or positive?

I have a theory that many of us make a negative connotation to the word. I’ve been conducting a little survey and so far my findings support my theory. What brought this to mind is that I received a chain email that perhaps some of you received as well:

Email subject: Entitlement my Ass:

Entitlement my ass, I paid cash for my social security insurance!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!

They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. Why did the government borrow from it in the first place?

There were other topics covered in the email that I can’t vouch for their accuracy but the portion regarding Social Security and Medicare hit a nerve with me. I can understand the outrage expressed in that email and get fired up too whenever I hear Social Security and Medicare referred to as ‘entitlements.’

I’ve been studying cognitive science and how it is applied in politics. Cognitive science is the study of how we mentally process information via perceptions, language, reasoning and emotions. With language the use of a single or a combination of words referred to as frames convey concepts instantly. Frames are deep seated mental structures that allow us to understand facts and reality and sometimes to create what we take to be reality. There are literally thousands of frames and some can evoke a lot of emotions. If I say the word ‘hospital’ it conveys images in your mind enabling you to interpret instantly and this is a process referred to as framing. 99% of our mental interpretations occur in this manner unconsciously. In most cases comprehension is assumed by those holding a dialogue. 

Political framing is applied cognitive science, perhaps similar in nature to subliminal advertising, where combinations of words are used to frame issues that influence people’s opinions with most not suspecting. Conditioned as we are today in receiving information in 30 second sound bites political framing is a vital and effective tool for quickly conveying complex issues. But sometimes hidden within these words can be complex agendas that are not communicated. The word entitlement, containing multiple meanings that many of us may make a negative connotation with can be such a word. ‘Tax relief’ is another; we all want it without realizing they’re most often about tax breaks and tax loopholes that mostly benefit the wealthy and corporate America . Meanwhile Fed revenues continue declining forcing cuts in education and other social programs. “Change you can believe in” is another; most want real change, but there is no change at all. These tactics could have people supporting legislation or a candidate leading them to vote against their economic self-interest unconsciously. I suspect this occurs far more frequently than most of us realize. To see how this might play out let’s look at the word entitlement as an example.

Entitle by definition means to give and often by inference given freely. The word ‘entitlement’ can be interpreted in two ways:

1). an entitlement is a guarantee of access to benefits based on established rights or by legislation. A “right” is itself an entitlement associated with a moral or social principle, such that an “entitlement” is a provision made in accordance with legal framework of a society. (Plus see: entitlement)

2).  In a casual sense, the term “entitlement” refers to a notion or belief that one (or oneself) is deserving of some particular reward or benefit – if given without deeper legal or principled cause, the term is often given with pejorative connotation (e.g. a “sense of entitlement”).

Sense / culture of entitlement:

Culture of entitlement is a concept mainly promulgated by conservatives and meant to encapsulate the social norm whereby a society comes to expect government entitlement programs to provide employment opportunities, health care, or general access to things that have come to be perceived by… others as basic human rights…In a political context… [the term]…is almost synonymous with “Nanny State”. The phrase “welfare queen” is employed as well. In recent years American conservatives have targeted the entitlements of Social Security and Medicare.

By using the second interpretation within the context of a ‘culture of entitlement’ conservative opinion shapers can exploit the negative connotation many people make with ‘entitlement’ and frame Social Security and Medicare in a negative misleading manner while at the same time accurately describe them as entitlements. Seldom mentioned, however, is that Social Security and Medicare are ‘earned’ entitlements based on legislative arrangements and requirements with taxpayers. The premise behind the conservative’s agenda for these programs is the belief that people are better equipped to plan their own future and don’t need the government’s assistance. Whether that is true is a matter of opinion. The historical record doesn’t bear this out. It’s part of their ‘selective’ less government motif and perhaps part of a corporate serving agenda as well.

With corporate funded elections and lobbied sponsored legislation political framing opportunities of this nature have fostered corporate-serving agendas. If, for example, there were a corporate sponsored agenda to transition Medicare from a government run program to one that is privately run by insurance companies or Social Security to Wall Street investment firms this certainly would be a hefty boon in business for them if successful. This may sound farfetched to some but it’s not beyond the realm of possibility. Currently we have the Republicans via Ryan’s budget proposal attempting to change Medicare from a government run health insurance program to what would eventually become an underfunded voucher program forcing seniors to buy insurance with private companies. If this succeeds it will evolve in time with most seniors unable to afford sufficient insurance and potentially be denied care by private insurance companies – the private equivalent to those ‘government death panels’ Palin worries about. Even if her misguided notion were true she apparently prefers profit seeking companies throwing the seniors and disabled out on the streets.

Social Security as most know was enacted during the depression era of the 1930’s because history had proven most people do not adequately prepare for the future or for disaster. Medicare was enacted in the 1960’s because of the difficulties seniors, the poor, and the disabled had in getting care and coverage or in getting coverage at all. At the time most people paid out of pocket for minor doctor visits and those able to afford it had medical insurance but many had inadequate coverage for catastrophic illness and were often denied care. Quite often this put a huge financial burden on the families. This is the future Ryan’s plan would eventually subject seniors and others to if passed.

It’s more accurate to refer to Social Security and Medicare as ‘earned entitlements.’ We pay dedicated taxes that are really a form of insurance payment intended to supplement retirement and health care coverage during retirement. Certain qualifications need to be met before most receive benefits.

Most of the people receiving Social Security receive retirement benefits, but many others get Social Security because they are disabled, or are a spouse or child of someone who gets Social Security, or are a spouse or child of a worker who died, or a dependent parent of a worker who died. The eligibility requirements vary depending on the circumstances. The differing guides are explained here but in general:

As you work and pay taxes, you earn Social Security “credits.” In 2011, you earn one credit for each $1,120 in earnings—up to a maximum of four credits per year. (The amount of money needed to earn one credit usually goes up every year.)

Most people need 40 credits (10 years of work) to qualify for benefits. Younger people need fewer credits to be eligible for disability benefits or for family members to be eligible for survivors’ benefits when the worker dies.

(For more info see; and

The 2011 Annual OASDI Trustees Report summarized those receiving benefits as follows:

At the end of 2010, about 54 million people were receiving benefits: 37 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers. During the year, an estimated 157 million people had earnings covered by Social Security and paid payroll taxes. Total expenditures in 2010 were $713 billion. Total income was $781 billion ($664 billion in non-interest income and $117 billion in interest earnings), and assets held in special issue U.S. Treasury securities grew to $2.6 trillion.

Nothing is perfect but overall Social Security and Medicare do provide millions with the care they need when required. Over the course of their history numerous amendments have been made to the. In the 1980’s Social Security faced a serious short term financial crisis. President Reagan appointed a panel, known as the Greenspan Commission, to study the financing issues and make recommendations for legislative changes. The final bill, P.L. 98-21, (H.R. 1900) was signed into law in 1983, made numerous changes in the Social Security and Medicare programs, including the taxation of Social Security benefits, the first coverage of Federal employees under Social Security and an increase in the retirement age. (See, summary of the provisions of the ’83 Amendments).

As a result of these changes, particularly the tax increases, the Social Security system began to generate a large short-term surplus of funds, intended to cover the added retirement costs of the “baby boomers.”

In most years the S.S system has collected more than it paid out and as noted in the Trustees Report the excess funds have been held in “special issue U.S. Treasury securities and by the end of 2010 has grown to $2.6 trillion.” These U.S. Treasury securities are as Wikipedia notes:

In short, Congress borrowed the surpluses from the Social Security system; the Treasury securities held by the S.S. Trust fund are U.S. government “I.O.U.s”. Under the law, the government bonds held by Social Security are backed by the full faith and credit of the U.S. government.”

(See SSA revenue tables here and investment tables here).

These securities are “risk-free,” backed by the full faith and credit of the U.S government to pay back its obligations to the trust. While they may be risk-free for the bond holders they are not necessarily ‘cost-free’ to the taxpayers.

2010 was the first year since the late 1980’s that S.S collected less than it paid out. A CBO report projects the shortfall will continue through 2021 and are expected to be exacerbated in the short term because Congress, in December 2010 while extending the Bush era tax cuts, also passed a reduction in the S.S tax rate. Workers are temporarily paying 2 percentage points less, from 6.2 percent to 4.2 percent, in Social Security payroll taxes this calendar year. recently ran an analysis about this lampooning several Democrats who had claimed S.S did not add to the deficit. In Democrats Deny Social Security Red Ink using the Trustee and CBO reports as the basis for their analysis FactCheck provides the projections and a chart showing the accumulative shortfall that by 2021 is estimated will be $630 billion. The report mentions the Trust Funds accumulated assets when commenting on a report that ran in USA Today:

We agree with [Jacob] Lew [President Obama’s Budget director] that Social Security does not “cause our deficits,” at least not by itself. But it already contributes some of the deficit, and that will grow over time unless changes are made somewhere.

[When Lew said]….Social Security is “entirely self-financing,” he refers to the trust funds that have built up assets of more than $2.5 trillion over the years. That’s what the rest of the government has borrowed and spent on other things. Those trust funds and the future interest payments will keep benefits funded at promised levels for years to come, it’s true. But unless the government raises taxes or cuts other spending substantially, the government will need to borrow more from the public to finance its obligations to the trust funds.

Factcheck avoids stating the obvious; this problem is largely because of Congressional fiscal mismanagement and not because of insufficient revenue collection by Social Security itself, at least up to this point. Had the funds not been “spent by the Fed on other things” and the cash was available the Trust could have drawn from the reserves. $2.6 trillion is $2600 billion. If the CBO projections are proven accurate and we deduct the $630 billion from the reserves it would leave a balance of about $1970 billion, or $1.9 trillion.

A contributing factor seldom mentioned for declining Social Security and Medicare revenue and overall Fed tax revenue in general is the current jobs crisis with millions that are long-term unemployed and the skyrocketing youth unemployment or those able to find work are earning minimum wage at best which is half the national average hourly wage rate. As noted in BLS Jobs Report; what’s the real unemployment rate?, the unemployment rate is between 10.6% – 11.6%, about 17.6 million people unemployed. But getting a handle on this is difficult given the BLS bogus reporting methods.

Well, so much for ‘securities’, eh? Naturally it’s not practical to take such a large sum of money and allow it to just sit there, it has to be put to work, right? Whenever you take your cash savings and purchase a treasury security, or government bond, as the trust did, you’re exchanging cash for a debt instrument, an IOU. While they are backed by the “full faith and credit of the U.S government” there can be inherent risk, and in this case the risk is an increased cost to the taxpayer.

This situation illustrates a flaw in our financial system; one where dollar savings are exchanged for another piece of paper and in this case a debt ‘security’ no less. For governments and their taxpayers this is costly business, there’s no guarantee the cash will be there to settle the debt. Nothing is completely risk free but we’re not dealing with honest investments here. There’s nothing tangible to sell and raise unencumbered ‘free’ cash. The only option is to issue more bonds and carry more debt. The debt never gets settled. For example if the Trust had invested in gold it would have the gold to sell thereby raising ‘free’ cash thus imposing no increased hardship on taxpayers. The other problem with exchanging dollar savings for dollar denominated bonds, as goes the value of dollar so follows the value of the security, vulnerable to inflation and other thieves.

FactCheck proposes “raising taxes now because the Fed needs to borrow more from the public to pay its obligations to the trust funds.” What this means is that taxpayers will pay taxes twice; the dedicated Social Security taxes we initially paid and eventually a second time when it comes time to redeem the new bonds with interest the Fed issues to pay its obligations to the Trust. A real win-win, eh?

In wrapping this up it worries me that in our society where many of us rely solely on 30 second sound bites as the source of our information single words like ‘entitlement’ can dupe the public into supporting legislation or a candidate with alternative motives that serves some other agenda and voting against their economic self-interest unwittingly.

Mitch Gurney

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