House Speaker John Boehner's suggested
solution to the current "Fiscal Cliff" controversy is to make deep cuts in
those nasty old "Entitlements." It
is also suggested that Medicare, Medicaid and Social Security cost $2.05 trillion
in fiscal 2012 which represented 58 percent of the federal budget. Apparently the leader of The House of
Representatives would like us to believe Medicare and Social Security
contributes nothing toward the federal budget and Medicaid is covered under the
entitlement program - it is not.
So what are the real facts?
The annual report dated April
23, 2012, submitted by the Medicare Board of Trustees to House Speaker Boehner
can be summarized as follows: for
the calendar year 2011 the income from payroll tax was $514.8 billion plus
$15.2 billion in interest earnings for a total of $530.0 billion. Expenditures for 2011 were $549.1. The shortfall of income relative to
expenditures was deducted from Trust Fund leaving surplus assets of $244.2
billion. What this really means is
because the Federal government borrowed trust funds during those years of
financial surpluses, it is now asked to honor its debt and pay back some of
those borrowed funds.
It has been universally
recognized that Medicare suffers from fraud and abuse to the tune of more than
$60 billion annually. A modest
amount of decent law enforcement would recover more than the $19 billion
current deficit.
The Social Security annual
report dated April 23, 2012 for calendar year 2011 lists payroll tax income at
$691 billion and $114 billion in interest income for a total of $805
billion. Total expenditures were
$736 billion which increased assets held in special issue U.S. Treasury
securities to $2.7 trillion. Once
again - all the assets recorded in this report are paper notes or IOU's because
our government has borrowed all these funds and apparently objects to honoring
its debt when it comes time to pay it back.
One wonders what the fuss is
all about. It is true that both
Entitlement funds are spending more than annual income received from payroll
taxes. This will eventually absorb
surplus assets; however, this hardly measures up to a "Financial Cliff!"
The Social Security payroll
tax was reduced by 2% for 2011 and 2012 and that legislation provided fund
transfers from the Treasury to replace those revenues lost which amounted to
$103 billion in 2011 and an estimated $112 billion for 2012. Obviously, this questionable tax
reduction should be allowed to expire in 2013. The Social Security system can be salvaged by outlawing
government borrowing of the funds and instead making investments into financial
instruments which do not require raising taxes to pay back the borrowed funds.
The real problem is that
"Entitlement Income" is included in the Federal General Fund. This technique leads to the political
myth that "us" old folks are responsible for the outrageous national debt and
the poor management of Federal funds.
If these trust accounts are pulled from the budget and handled
separately, the Federal Budget figures reveal and entirely different point of
view.
For example, excluding
Entitlement trust funds, the actual Federal Revenue for 2011-12 is $1.628
trillion. The military budget
during FY 2011 was approximately $740 billion , $141 billion for veteran
expenses, and $48 billion for the Department of Homeland Security for a grand
total of $929 billion. This is, in
fact, 57% of the federal budget.
When adding in another $500 billion to cover interest on the national
debt, it is little wonder our government is forced to borrow an additional
$1.327 trillion just to pay its bills.
You ask a Congressman about
his retirement and he will hasten to point out he pays into Social Security,
but he will not mention the Federal Employee Retirement System (FERS) as
amended under Federal Employees' Retirement Act of 1986. This plan calculates retirement based
on the top three year salary average times number of years served times 2.5%. The Federal employee and your
Congressmen pays 1.3 percent of their salary (the taxpayer pays the rest), and
they can qualify for the pension after 5 years but cannot draw the retirement
until 62; however, if 20 years of service allows retirement at 50, and 25 years
of service allows retirement at any age.
Congress and federal
employees cannot draw more than 80% of their salary for retirement income. Even so, any Congressman (current
salary of $174,000), with a minimum 5 years of service would be eligible
($174,000 x 5years x .025) for an
annual pension of $21,750 at age 62, and if he sticks it out for 20 years, his
retirement is a whopping $87,000 plus Social Security plus income from the
"Thrift Savings Plan".
For perspective, the average
American retiree on Social Security considers himself lucky if he can get
$1,000 per month at age 65 after contributing 6.2% of wages for a
lifetime.
Possibly, one might wonder
why the President and Congress agreed to reduce employee contributions by 2% to
a financially troubled Social Security system. Obviously, their own retirement plan involves smaller
payments and a larger return upon retirement. Social Security, therefore, is a bad investment.
As long as Congress is
looking into solving soaring "Entitlement Costs," it would appear to me they
should be looking at their own bloated pension plan which is costing the U.S.
taxpayer a fortune.