Rights, Entitlements and Money
Rights or Entitlements
There is a discussion about whether health care or other benefits provided to individuals by the government are natural human rights or entitlements. Right or privilege. It’s a subject that people will probably debate for decades or centuries to come.
Without getting into this part of the discussion, let’s just talk about it from the dollars and cents point of view.
If you look at the federal budget, one thing jumps out. The combination of mandatory and discretionary spending is more than the revenue causing a deficit. So, we are already spending more than we make. If we want to our government to give more, then we have to find a way to get some more money or spend less.
Just borrow the money? The only problem with that is we pay more interest when the debt goes up. Interest is part of the mandatory spending. When interest spending goes up, there is less to spend on other mandatory items, like Social Security or Medicare or less to spend on discretionary items like defense, education, roads or law enforcement.
We could just print the money, but that would cause inflation which would defeat the whole idea of having more.
The only other alternative is raising taxes so there is more revenue. Every time this approach has been tried, increased taxes lowered productivity or caused inflation. Current estimates say that personal income taxes would have to be increased to 60% to cover the expected growth in Social Security, Medicare, Medicaid and interest spending. It is doubtful that most people would put up with a 60% rate of income tax.
So, it’s back to square one. Whether health care is a right or an entitlement, it is really junior to the question of whether we can afford it or not. If we are going to pay for heath care, then we need to take something out of the existing budget or raise taxes.
Proponents of the health care plan that is currently in the House and Senate say that we can pay for the new benefits by cutting existing costs. Government programs have never been successful at lowering costs. One might ask, if it’s so easy and so fiscally important, then why haven’t we done it already?
Let’s say that the typical person makes $1,000 per paycheck. The taxes are approximately 20% or $200. This leaves you $800 for necessary expenses like rent, utilities and food. If you are lucky, these necessary expenses are less than $800 and you have some discretionary money to spend, invest, give away or save.
If government adds new benefits without reducing spending then they need more from you. Suppose your fixed expenses are $800, then raising you taxes to $300 means that you need to make more money or reduce your expenses to $700.
So, let’s take it from the top. As long as the government is taking in more than it spends, then it can spend the surplus on whatever benefits the people think are OK. But, whenever the government spends more than it takes in, it needs to reduce services or increase revenue. Translated, if you want more benefits, then you will pay more in taxes or government will have to spend less on some existing benefit.
The example above represents a typical American except that a typical American spends $850, but only brings home $800. That means that the typical person has to borrow $50 per pay period through the use of a credit card or some kind of line of credit.
In the past, growing spending was obscured and hidden hidden behind a growing economy. The same is true for individuals. Growing credit card limits, growing debt or growing equity in real estate hid the fact that people were spending more than they made.
Now that we have an economy that is in recession, home values are decreasing and credit limits have has been reduced. Meanwhile, federal spending is increasing while federal revenues have decreased. The result is that there is less money in the federal coffers just like there is less money in your pocket.
Whether health care is a right or an entitlement may be purely an academic subject because there just isn’t enough money to pay for it no matter what it is.
The factions that argue for universal health care coverage point out that we are all humans and part of the human condition and that all humans get sick now and then, so sickness is part of the “human condition”. Further, it is argued, if it is human to get sick, then it is natural to offer health care. The continuity of the logic is subject to your view point, but some people believe that humans are naturally entitled to government provided health care.