Sunday, December 02, 2012

Eberstadt (and others): "A Nation of Takers: America's Entitlement Epidemic"

Author: Nicholas Eberstadt, with responses by William A. Galston and Yuval Levin

Title: “A Nation of Takers: America’s Entitlement Epidemic

Publication: Templeton Press, 2012,  978-1-59947-435-9, 134 pages, paper

This booklet is part of a series called the “New Threats to Freedom” series and it offers an “opposing viewpoints” technique I’ve discussed here before (September 19, 2006). 

The book comprises a long primary essay by Eberstadt, “America’s Growing Dependency on Government Entitlements: The Rise of Entitlement s in Modern America, 1960-2010”, with many detailed illustrative graphs, followed by “Dissenting Points of View” by William A. Galston  (“Have We Become a ‘Nation of Takers’”, and Yural Levin  (“Civil Society and the Entitlement State”), followed by an Epilogue, a “Response to Galston and Levin”.

When I hear the word “taker”, I think of Ayn Rand’s notion of “second-hander” in her novel “The Fountainhead”.  And it is true that America depends on welfare benefits administered by governments (states and federal) much more today than it did generations ago, when families had to take care of their own.  I can remember being annoyed in convenience stores when people in front take so much time using food stamps.  That sounds hard-hearted, but could only be answered if more people were willing to support others directly, in and outside the family, and not just their own children.

I do have to agree with Galston and disagree with Eberstadt to the extinct that he considers practically all benefit programs “entitlements”.  Eberstadt views Social Security retirement as a Ponzi scheme, predicated on future sacrifices of the unborn (even unconceived). 

Most social security retirement beneficiaries receive a benefit actuarially related to what they (and their employers or spouses) contributed over the years with the FICA (Federal Insurance Contributions Act) Tax, which began in the 1930s.  It is true that the first beneficiaries had contributed no premiums, so logically the government is always paying benefits of current retirees from current taxes in informal return to pay the worker an actuarially fair annuity benefit upon that worker’s retirement in the future.  It is acceptable to delay retirement age or reduce benefits as the lifespans increase. 

There is controversy over whether FICA is really a “tax”, because the Supreme Court has actually ruled (in Fleming v. Nestor (1960)) that no one has an “accrued property right” based on FICA or self-employment taxes.  In practice, for most people, the collection has been tied to a future benefit, an observation which may negate some of its regressivity and may counter the idea that it is a welfare “entitlement” that should be means tested.

The practical problem is that, not only are life spans increasing, but workers are having fewer children, so the number of people from whom a tax must be collected to pay a certain level of benefits decreases.  This has sometimes been called the “demographic winter” problem.   Galston points out that a well-constructed retirement “annuity” would not itself provide “moral hazard” problems that discourage work and self-reliance, but demographic changes, as well as gender-related issues, might.  In his reply, Eberstadt points out that the use of means-tested entitlements by people with reasonable incomes has increased over the decades.

The Mike Huckabee Show interviews Eberstadt:
This little book is critical for the Fiscal Cliff debate. 

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