HOW FDR MADE MY GENERATION LAZY AND ENTITLED

By Celia Bigelow Published: 10:23 AM 12/23/2011

Senior, Hillsdale College

As young people head home for the holidays, they’re bracing for unsolicited advice and stories from their elders about how life used to require hard work and how young generations have an entitlement mentality.

It’s time my generation listens up, though ironically it was our grandparents’ generation that generated that sense of entitlement.

I grew up in a lower-middle-class family in a wealthy suburb of Detroit, Michigan (yes, they exist). Money became a major concern after my parents split when I was in second grade. My mother and I moved into a cramped, one-floor house in a low-income area, where she worked extremely hard so I could enjoy our wonderful public school system.

My mother was tough on me starting at an early age. I had to work hard for the simple things in life — clothes, treats, toys, etc. When I was too young to get a job, I did chores around the house to earn a $5 weekly salary. This empowered me to save money to buy toys and do fun activities with friends. However, this was not how most families in my city operated. My acquaintances enjoyed much more luxurious lifestyles than I did, and they didn’t have to work a single minute for it. This didn’t sit well with me.

It hit me much harder in high school. Most of the cars in my high school’s student parking lot were worth over $50,000 — more than any car in the teachers’ lot was worth. What is even more pathetic is that while mommy and daddy were writing the checks to pay for these vehicles, their children were doing drugs.

America has a culture problem, and I think the cause of that problem is Big Government. Entitlement programs have taken away the sense of personal responsibility that Americans used to have. Now, Americans don’t worry about the future because they think that the government has their backs. Americans have lost the ability to govern themselves.

It’s difficult to teach the masses how to govern themselves when they have grown up in a society that fosters a sense of entitlement. It’s even more difficult to teach self-government when Big Government continues to turn Americans against one another: the poor and the middle class against the big, bad rich folks.

America has become a nanny-state. Entitlement programs now consume most of the federal budget and are growing at unsustainable rates. Currently, 3.3 taxpayers support every retiree. The ratio of taxpayers to retirees will continue to fall as the baby boomers retire. The government will have to raise taxes or increase the retirement age in order for younger generations to receive the level of benefits that today’s retirees are receiving.

Who will bear the costly burden of these entitlement programs? My generation and the generations that will follow.

Young Americans like me need to fight for the principles of the American Founding Fathers before we become just another page in history. It’s up to us to serve as way-showers for those who have lost sight of the beauty of self-government. We are the hope of America’s future, and it’s time we take on this responsibility.

Celia Bigelow is a senior at Hillsdale College

Read more: http://dailycaller.com/2011/12/23/how-fdr-made-my-generation-lazy-and-entitled/#ixzz1hOHlm9px

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By Ross Kaminsky on 10.14.11 @ 6:11AM

Behind its new ad to pressure the Super Committee to leave Medicare and Social Security untouched.

I'm not a number. I'm not a line item on a budget. And I'm definitely not a pushover. But I am a voter. So, Washington, before you even think about cutting my Medicare and Social Security benefits, here's a number you should remember: 50 million. We are 50 million seniors who earned our benefits, and you will be hearing from us -- today and on Election Day.

So blusters the retirement-aged gentleman in the AARP's new TV ad.

AARP is not just taking a partisan gamble with this brazen threat against reformers, most of whom are Republicans; they're threatening our whole nation's financial future. The organization makes an enormous amount of money from selling insurance policies that are desirable to its members precisely because the current system is as it is. Thus, the AARP has a multi-billion dollar financial interest that is separate from, and arguably contrary to, the interests of its members.

Indeed, earlier this year the House Ways and Means Health Subcommittee held a hearing on whether the overlap between AARP's insurance business and its lobbying and advocacy efforts is appropriate: "there is good reason to question whether AARP is primarily looking out for seniors or just its own bottom line."A report by Republican congressmen Wally Herger (CA) and Dave Reichert (WA) entitled "Behind the Veil: The AARP America Doesn't Know" is a damning indictment of the organization's inherent conflicts of interest, including:

• "AARP is in fact a large, complex and sophisticated organization with over $2.2 billion in total assets and had revenues in excess of $1.4 billion in 2009 alone."

• "AARP is one of the nation's largest insurance companies and by far the largest provider of Medicare plans to seniors."

• "AARP is also one of the most powerful and active lobbying groups (in terms of dollars spent) in the country."

• "The missions of [AARP's subsidiaries] appear in direct conflict with one another and, as such, it is very difficult to determine which interests are being represented -- those of the 'non-profit' or the 'for-profit' arm of AARP."

• "The Democrats' health care law, which AARP strongly endorsed, could result in a windfall for AARP that exceeds over $1 billion during the next 10 years."

It's not the first time the AARP has run such an ad. A similar one, with the same actor, came out in July also emphasizing the group's 50 million membersas an unveiled threat against members of Congress.

AARP spokesperson Tiffany Lundquist spent some time discussing the issue with me, including saying that the ad "was designed to bring attention to the discussions now taking place in Washington on proposals which may include cuts to Social Security and Medicare benefits."

When asked whether the release of this ad was timed to influence the discussions of the "Super Committee" that is attempting to negotiate deficit- and debt-reduction policies to bring before Congress, Ms. Lundquist responded "definitely."

I suggested to Ms. Lundquist that I was unaware of any plan that would cut benefits for current retirees or even near-retirees, to whichshe replied that the AARP has members as young as fifty and that the organization "works for the interests of our younger members as well." Further, she named a particular idea that the AARP is against: a change in the formula to calculate Social Security's annual cost of living adjustment ("COLA").

In particular, there has been discussion for many years of changing which version of the Consumer Price Index is used to calculate annual benefit increases. It has been suggested that changing to a"chained CPI"which more accurately reflectshow people actually spend money, in part by assuming that people will substitute out of items which are increasing in price if they can, will slow the growth of entitlements' cost.

Going back many years, some of the most credible economists in America have argued that the current CPI calculations overstate inflation and thus increase Social Security payments more than they should, putting tremendous pressure on the federal budget -- not least because each over-generous increase is compounded by the next. In 1997, Federal Reserve Chairman Alan Greenspan stated that "We know with near certainty that the current CPI is off. There's a very high probability that the bias ranges from half a percentage point to 1 1/2 percentage points per year." And Alice Rivlin, a Democrat and then Vice Chairwoman of the Fed, said that "The way we measure inflation, the way we measure productivity are flawed," repeating in a 2004 book that "Research has shown that the consumer price index overstates inflation somewhat."

THE AARP's POSITION mirrors those of redistributionists everywhere who argue that slowing the growth of a government program is the same as cutting it. If your employer gave you a three percent pay raise this year and then a two percent pay raise next year, the AARP and almost every Democrat on Capitol Hill would argue that you got a pay cut in that second year because you were expecting a bigger raise. At least they should argue that to be consistent with their sky-is-falling claims about controlling the growth of entitlement spending.

Ms. Lundquist also repeated the ad's rhetoric that AARP members have "earned" their benefits. But what exactly have they earned? Is any current or future recipient of entitlement payments due a particular COLA formula? At least two courts have recently said "no." In June, judges in Denver and St. Paul, Minnesota, ruled that beneficiaries of public pensions do not have a right to a particular cost of living calculation.

In the Minnesota case, the plaintiffs (beneficiaries of various Minnesota public retirement systems) claimed that the state's move to adjust the formula for post-retirement benefit calculations were an unconstitutional taking of property. In his ruling, Judge Gregg Johnson stated that a claimed "expectation that future adjustments would be made pursuant to a particular formula… has neither a contractual basis, nor a reasonable basis enforceable by estoppel principles."

And in a similar Colorado case, plaintiffs sued after the state capped COLA increases (as well as increasing retirement age and other qualifying requirements) for PERA, the state's public employee pension plan, arguing that the changes violated "Contract, Takings, and Substantive Due Process Clauses of the United States Constitution." In his opinion, District Court Judge Robert Hyatt concluded that "there is no contract right to a specific COLA formula frozen at retirement for life." Furthermore, both judges agreed, as Judge Hyatt put it, that there is a "legitimate governmental interest of… preserving the solvency of PERA."

Responding for this article, Senator Mike Lee (R-UT) said, "There is no plan I have seen or supported that would cut benefits for current retirees. But, the reality is that without reforming our entitlement programs for future beneficiaries our economy will collapse. We have an obligation to prevent that from happening." Senator Lee, along with Senators Rand Paul (R-KY) and Lindsey Graham (R-SC) have introduced legislation to begin to deal with the cost of Social Security benefits -- but they explicitly exclude those of or fewer than five years from retirement age from any impact of the changes, and they phase in those changes for those more than five years from Social Security eligibility. The trio explained their rationale in a press conference in April.

Indeed we do have a responsibility to keep from bankrupting the nation. But the AARP sees no such responsibility as part of its mission, at least not if it means its current or future members giving up even one cent of entitlement increases based on the way those increases are calculated today.

Ms. Lundquist says that the AARP "wants to see [the entitlement-related budget issues] addressed now or later." But when asked if the AARP would support plugging our gaping budget hole in part by reductions in benefit growth for future retirees, her answer was a resounding no: "Don't cut benefits."

Of course, this came mere moments after she professed the organization's desire to see Social Security "strengthened." When I suggested that a refusal to accept any benefit cuts (including slower growth in benefits) ever means that the group can only be supporting tax increases, the AARP's spokeswoman responded coyly, "We haven't said that."

And she was equally adamant against Social Security reform that would include personal accounts, making the usual anti-liberty econo-nonsense claim that "recent stock market volatility shows that's the wrong way to go."

A cursory look at major mutual fund companies' offerings shows a range of funds investing in a range from government bonds to corporate bonds to blends of bonds and stocks that despite the wild volatility in the last few months and years have long-term returns at least double that which Social Security will provide. At least as importantly, many of them have a "beta" (correlation to a stock market average, a common measure of risk) much less than one, meaning an investor in such funds doesn't have to lie awake at night worrying about what the market will do tomorrow.

Furthermore, the large fund companies have products specifically tailored to a person's expected retirement age, moving the asset allocation gradually out of stocks and into bonds as a person nears retirement. Almost any of these funds would be better than Social Security if your goal is actually to retire with a nest egg.

Helping create solid nest eggs and self-reliant retirements for its members is apparently not on the AARP's "to do" list.

So what is the AARP afraid of? They're afraid, as all liberal interest groups are, of several things:

• Less money flowing through the sticky hands of government, reducing the ability of government to create programs which benefit the AARP's bottom line.

• More personal responsibility being taken by individuals for their own retirements, reducing the need for retirees to be dependent on AARP for advice, financial services, or lobbying.

• More Americans having incentive to be economically well-educated and to care about the impact of government policy, including taxation and spending, on the value of their retirement savings, and most of all they're afraid of.

• Better financial results for their members, reducing the need for the members to buy AARP-branded insurance policies.

MAY 1, 2011 REPRESENTED the 30th anniversary of reforms of Chile's Social Security-like system that turned it from a defined benefit plan with a defined contribution system. A National Center for Policy Analysis study from last year lays out the tremendous benefits of the reforms on labor participation, by its removing the incentive from people to retire in their early 60s when they would still have many productive years ahead of them, should they choose to work. People contribute more and begin withdrawing later, an obvious recipe for retirement plan success.

The Chilean system isn't perfect, but has been gradually made better over time. As a report by our own Social Security Agency notes, "The International Monetary Fund supports these changes because they strive to retain the basic features of the individual account system and, at the same time, address its major shortcomings…. Since the 1990s, 10 other Latin American countries have adopted some form of an individual account system either to replace or supplement their PAYG systems."

It's not just Social Security, either, which in economic terms is small in comparison with the problems we face with Medicare. If the nation were to try to fix Medicare's fiscal woes without slowing the growth in costs… well, it simply cannot be done.

The leading Republican voice for Medicare reform -- one of the few men with the courage to take on the issue -- is House Budget Committee Chairman Paul Ryan (R-WI), who contributed a few thoughts for this article:

We can no longer let politicians in Washington deny the danger to Medicare-- the danger is all too real, and the health of our nation's seniors is far too important. We have to save Medicare to avoid disruptions in benefits for current seniors and to preserve the program for future generations. House Republicans showed in the Path to Prosperity that we can fix this program for future generations while making no changes for those who are in and near retirement.

The facts are this:the President's healthcare law takes half a trillion dollars from Medicare and puts it towards a new health care entitlement; then charges the Independent Payment Advisory Board (IPAB) with putting price controls on Medicare, limiting care for current seniors. House Republicans passed a budget this spring, which stands in stark contrast to this approach. We stop the raid on Medicare, we repeal the President's board, and we preserve the Medicare benefit keeping it intact for everyone above the age of 55 and reforming the program for future generations.

But the AARP will have none of Paul Ryan's reforms, nor anybody else's, if it means reducing the growth in health care expenditures (even if that growth would be accompanied by productivity gains which would give better health care overall for fewer dollars).

After all, with the AARP, it's not really about better results for the nation or even for its members, most of whom I assume care deeply about the future of our nation. It's about selling insurance. And that means working to perpetuate a system in which America's future senior citizens will not have either the wherewithal or the economic education to be responsible for their own autumn years' finances and health.

The AARP poses the situation as if the status quo in terms of entitlement spending is somehow an option.  A Republican congressional aide put it to me this way: "From my view, it's fine for AARP to say, 'We'll be watching and remembering your votes on entitlements because we're senior/retirees and we have been promised these benefits.' It's quite another for them to be completely silent about the fact that their members will be facing drastic across the board cuts to Medicare (in 2021) and Social Security (in 2037) unless reforms occur. The Democrats plan is to bleed these entitlements dry until they're insolvent while Republicans are offering what AARP constituencies should want: NO CHANGES for anyone over 55 with respect to Medicare, while acknowledging that reforms must be made for future generations."

The Republican House budget -- the only budget that has passed either chamber of Congress in a couple of years -- strengthened the solvency of our entitlements without making changes for those in or near retirement. Unfortunately, AARP's entitlement reform plan is the same as President Obama's. What is that plan, you ask? Again, the House aide: "The answer can be found both in the President's health care law and in his budget (no reforms of Social Security and Medicare, literally it's status quo). Pretending a problem doesn't exist, doesn't mean you've solved it -- and in the case of entitlements, with 10,000 baby boomers retiring each day with fewer workers to replace them, you're simply exacerbating the problem and leaving us less preferable options."

The AARP's dual loyalties -- to its members and to its own bottom line -- make it a difficult organization to trust. The Herger-Reichert report notes that "Since 2002, income generated from AARP membership dues has increased 32%, or $60 million. However, during this same period, income derived from AARP's business relationships, primarily with insurance companies, nearly tripled, increasing by $417 million. Royalty payments from for-profit companies comprised nearly 46% of AARP's revenue in 2009, while membership dues totaled just 17% of total revenues." With insurance revenues roughly triple the level of dues revenues, it is hard to see the members' interests -- not to mention the nation's interests -- winning out should they come in conflict with the AARP's bottom line.

Yet that is precisely the conflict we face today with yawning budget deficits threatening to swallow our financial future but the AARP screaming "we want every penny, even if it bankrupts our members' grandchildren." The AARP's ad explicitly threatens politicians who do anything other than raise taxes to address entitlement programs' financial woes.

It's time to fight back. It's time for the rest of the nation to say to the AARP that "We're not pushovers, either. We're three hundred million people whose futures you are risking so you can collect insurance premiums. And we're going to stand up for every politician who calls you out for what you are."

About the Author

Ross Kaminsky is a self-employed trader and investor and is a fellow of the Heartland Institute. He blogs at Rossputin.com and is the host of Backbone Radio on Sunday evenings.
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LET THE SUN SHINE IN ON PUBLIC PENSIONS, BENEFITS

By ANDREW G. ATKESON, WILLIAM E. SIMON JR. AND JAMES E. PIERSON

Posted 05/03/2011  06:49 PM ET

As debates heat up in states across the country over budget shortfalls, more and more focus is being placed upon the runaway growth in health and pension benefits for state and local government workers.

These excessive benefits are a major factor behind the exploding costs of government in many states.  It is time to bring these costs under control before they completely overwhelm state and local budgets.

Setting aside partisan rhetoric, it is clear that the pension and health benefits actually being paid out to state and local workers and retirees have steadily grown more generous relative to those in the private sector.  This has been happening for at least two decades because negotiations between governments and public sector unions lack transparency and accountability.

Taxpayers are rarely made aware of the costly promises that public-sector unions are able to extract from state and local governments.  Politicians often find it easier to reward unions with deferred payments for pensions and health care instead of offering salary or wage increases that appear immediately on the budget.

Thus they are able to buy peace today by selling out the future.  So far the unions have been happy to oblige them.  Without fundamental reform, this pattern is bound to continue year by year with devastating consequences for public budgets, taxpayers' pocketbooks, and economic growth.

Consider these facts:

The pension benefits paid out to retirees by state and local governments have more than doubled form 11.1% of payroll in 1990 to 23.8% of payroll in 2009.  By contrast, pension payouts in private industry grew only from 6.1% of payroll in 1990 to 9.8% in 2009.

The growth in state and local pension payouts relative to current payroll has been driven by steady increases in the generosity of pension agreements rather than by the aging of the state and local government workforce.

In 1993, retirement benefits paid out to state and local government retirees averaged $10,812 per year per beneficiary nationwide, or 35% of the $30,870 in wages and salaries paid out to the average full time employee.  By 2008, average retirement benefits per public retiree had grown to $23,225, or 45% of the $52,058 in wages and salaries paid out to the average employee.

The growth in state and local pension payouts has continued year after year in good times and bad.  In the wake of the dot-com crash that exposed pension funding problems everywhere, state and local governments nationwide added $1 trillion to the actuarial value of their pension promises.

From 2000 to 2006, the actuarial value of state and local pension commitments rose from $2.2 trillion (3.75 times payroll) to more than $3.2 trillion (4.2 times payroll).  During the recent recession, many public agencies in California actually increased their commitments to retirees even as the state's financial condition deteriorated.  As recently reported by California's Little Hoover Commission, an independent state oversight agency, only 2O% of the 1,500 plus public agency contracts with California's Public Employee Retirement Fund (CalPERS) were amended during 2008 and 2009 to lower benefits for new workers.

During the same period, nearly 200 agencies actually enhanced benefits for current workers in the face of the most severe fiscal crisis faced by the state since the Great Depression.

The same irresponsible pattern holds true for non-pension benefits.  Among state and local governments across the nation, spending on non-pension benefits rose from 15.3% of payroll in 1990 to 21.9% of payroll in 2009, while over the same period spending on non-pension benefits in the private sector held steady at 16% of payroll. 

The pattern is clear:  pension and health benefits have grown much faster in the public than in the private sector and the pattern has continued in good  times and bad regardless of obvious budget shortfalls.

The solution to the problem is to make the negotiating process more transparent and to apply to the public sector some of the approaches that have worked successfully in the private sector to control costs and to maintain the solvency of retirement programs.

California's SB400, a 1999 bill that retroactively increased public pensions, is a notorious example of how elected officials engage in pension giveaways when the fiscal consequences of these decisions are hidden and deferred to the future.

In evaluating the fiscal impact of that bill, actuaries at CalPERS maintained that legislators could pay for higher pensions out of excess earnings in the pension fund and that the state's contribution to the fund should remain below the level of 1999 contributions for at least a decade.

In fact, pension contributions from state and local governments in California rose more than three-fold from $4.8 billion in fiscal 1998-99 to $15.8 billion in fiscal 2007-08.

Until very recently, the accounting of the costs to taxpayers of health benefits for state and local government retirees has been even more opaque.  Thus, taxpayers could not discern the costs of retiree health care benefits because most states lumped retiree health care costs with expenditures on health benefits for current workers on a pay-as-you go basis.

Now the Government Accounting Standards Board (GASB) has required state and local governments to provide an actuarial projection of the costs of promised retiree health benefits.

Based on these newly released estimates, the Government Accountability Office estimated in 2009 that state and local governments are carrying an unfunded liability for retiree health benefits of more than $530 billion with $62 billion lodged against the state government in California.  That figure is three-fourths as large as California's entire stock of long-term general obligation bonds but until recently it was not even recorded and even now it is not included in the state's balance sheet.

What is the solution?  How can we make sure that public officials are carrying out their public trust?  Here as in other situations sunshine is the best disinfectant.

First, we need real improvements in the accounting and reporting requirements for retiree pension and health benefits so that taxpayers, employees, public officials and bond investors have access to accurate information about the costs of these benefits that is consistent across time and comparable across governments. 

Both the American Academy of Actuaries and the GASB have acknowledged the flaws in current accounting standards for public retirement systems.  Both bodies are now engaged in efforts to design accounting frameworks that will provide all stakeholders with a clear understanding of the likely long term costs of retiree pension and health care benefits.

State and local governments should be held to uniform accounting and funding standards for the accrued liabilities to public employees similar to those imposed on private corporations by the Financial Accounting Standards Board and by federal ERISA regulations.  This will allow stakeholders to monitor these liabilities as they are accrued.

These accounting reforms must have bite if they are to curb the temptation of public officials to award generous deferred benefits to public unions and to skimp on the funding of these benefits as the annual bills come due.

The Public Employee Transparency Act (HR 567), introduced in February by Rep. Devin Nunes, R-Calif., and Sen. Richard Burr, R-N.C., offers a sound approach for putting muscle behind stronger accounting standards.

The legislation would require state and local pension plans to submit accounting statements to the U.S. Treasury on a consistent and actuarially sound basis if these governments are to retain the privilege of issuing tax-exempt bonds.  This legislation should become law.

Finally, with respect to new employees, state and local governments should no longer support retiree pension and health benefits as forms of deferred compensation.  In the case of pensions, governments should adopt defined contribution plans like those now in use in the private sector in which the state and local liability is paid in full in cash when the employee's contribution is made.

The change to defined contribution plans has begun in12 states int he past decade and should spread to all 50 states.  There are otherwise too many conflicts of interest to rely on actuaries and accountants to hold elected officials and unions responsible for containing and funding these benefits.

These fairly simple steps will take us beyond the sound and fury of current debates to lasting solutions to an urgent fiscal challenge.