Privatizing Medicare: Caution! Highly Explosive!

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In response to my recent post where I averred that the cigarette companies were treated as scapegoats, I have had several cyber and actual conversations about personal responsibility. I believe that folks should realize the consequences and the benefits of freely made decisions. While we want American society to be compassionate, we do not want to punish success and reward failure. Our goal is to do all that we can to maximize everyone’s success. We should be ready to assist those who need and deserve our private and governmental assistance, but personal effort and responsibility are necessary elements of these interventions.

In our gastrroenterology practice, when we see patients who are in financial difficulty, my physician partners and staff will do all that we can to help them. While it is not our policy to do colonoscopies for free, we will make whatever adjustments that are necessary to make sure that the patient receives necessary medical care. However, when patients who owe us money hang up on our calls, or express their view of medical entitlement with foul language, then we forward these accounts to a collection agency.

There is also a self-interest angle to supporting assistance for those in need.. One day, we may need a boost ourselves.

Recall the concept of privatizing social security, a sound proposal that was vilified and snuffed out during George W. Bush’s presidency. Antagonism against this modest proposal was seasoned with a large measure of arrogance, a splash of hubris and a dash of paternalism.

In summary, this proposal argued that if folks could manage a small portion of their own social security money, which they earned themselves, that it could be a force that could empower earners and reinforce the system. The political left turned white hot over the notion of the government transferring any responsibility for managing retirement funds to the citizens who earned the money. Isn’t this preposterous? They predicted doomsday when our imbecilic citizenry, who were somehow smart and industrious enough to earn the money in the first place, would squander it all, vaporizing the last remaining safety net that would keep them afloat. Then, the lefties argued, the rest of us would have to rescue them at much greater expense.

Their argument is transparent. Review some pesky facts below.

The plan only permitted individuals to invest 4% of wages that are subject to social security taxes into private accounts, with modest increases permitted in subsequent years. So, even if these investment tyros lost it all, which is hard to do in any investment, it wouldn’t be a game changer.

The government was not permitting folks to invest in hedge funds, penny stocks or junk bonds. They were required to select from a list of legitimate investment vehicles.

The program was voluntary. If an individual did not have the skill or desire to make personal investment choices, he did not have to. He could continue to allow the government to manage his money.

The program is so modest and so reasonable; it seems that it would be difficult to attack it. Why, then, did it provoke such ire and vitriol from the left?

These guys were scared. They weren’t frightened that folks would lose money and be vulnerable during their retirement years. They weren’t spooked that it would jeopardize the social security system’s financial stability. They were terrified that the program might actually work. They couldn’t tolerate any fissure in their edifice that stood for total government control of other people’s money and personal decisions. If this initial privatization effort succeeded, they knew that the public, now empowered, would demand greater control of their own money.

Yes, I am familiar with some of the criticisms. The government would have to borrow gazillions of dollars to replace the monies being deposited in beneficiaries’ private accounts. In addition, retirees would have to repay the government their privately deposited funds back, plus interest, so it is possible they would lose money if their accounts did not outperform this low interest rate. It would increase the federal deficit, and is not risk free, as stated above. As is obvious, I am not an economist or an actuary. It may be that the dirty details of the program would pose drawbacks, more dire than I realize. Indeed, many liberal advocacy groups vigorously denounced and derided this program. Yet, I support the notion that I have the right to participate in a voluntary program to manage money that I have earned.

To those who believe that the government knows best how to invest my social security retirement money, then why shouldn’t it control all of my investments? Should I be trusted to invest money that will one day be used to pay tuition for my kids? Indeed, anti-privatizers could argue that all of our money should be turned over to the government, so they can wisely manage it and then disburse it as it sees fit.

Recently, Alice Rivlin, a Democratic economist and Paul Ryan, a Republican congressman, both members of the president’s deficit reduction commission, advised consideration of privatizing the Medicare program. Of course, this is political dynamite, but their bipartisan proposal from two thoughtful public servants shows that this strategy deserves air time and public discussion.

So, when you stumble across dynamite, what should or response be?  Call the bomb squad or light the fuse?