Michael Lissack based on insurance principles. This basic truth is often obscured by today’s fashion of calling government benefits “entitlements.” Yet the insurance nature of social programs should be obvious upon a moment’s reflection: We all pay part of our taxes into a pot so that when one of us suffers a tragedy, like becoming a widow or giving birth to a retarded child, we can draw on that pot to get us past the hard times. When we set up welfare, unemploy- ment compensation, and other types of social insurance in the Roosevelt administration, we assumed that people would act responsibly and attempt to limit losses. Today, voluntary decisions are increasing the loss rate to such a point that our safety net mechanisms can no longer be viewed in any reasonable sense as insurance. We have, in effect, converted a comparatively cheap yet highly comprehensive social insurance system into an exorbitant, overtaxed, and largely incompetent general subsidy program. Our social insurance premiums act both to raise taxes and to devour other state and local programs such as infrastructure. Combined, these fundamentals form the basis of a wasteful public policy. Entitlements are federal programs that give money to people because they fall into a certain group. If you’re over age sixty-five, for instance, you get Medicare health insurance benefits. You’re entitled to those benefits, not because you necessarily need them, but because of your age. The same principle applies to farm subsidies, unemployment benefits, school lunches. Some are for the poor -- welfare, Medicaid, housing and nutrition programs - and they approach $150 billion. Some are for the middle and upper classes: school loans and less obvious subsidy programs like the tax deduction on home-mortgage interest payments, worth an estimated $40 billion. Entitlements and interest on the national debt make up more than 65 percent of the federal budget. There are few if any checks on this spending, it open grows automatically. Congress made these programs mandatory so they wouldn’t have to baffle for funding each year. And now no one con- trols them. And the money does not necessarily do what we want it to do.
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