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Entitlements: A Hammock for the Lazy or a Safety Net for All of Us?

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HammockOver the past few months, America's social safety net -- also known as its "entitlement" programs -- has gotten a tough rap. Republican presidential candidates and congressmen have decried its cost, its supposed infantilization of the citizenry, and its long-term effect on the American dream.

Yes, this collection of programs and services has been described as "a dime bag" of drugs that will "hook" users, a threat to America's "merit-based society," and a socialist tool that will steal "America's soul." And the people who accept money from these programs? They are "passive," "lazy," "slothful," and are "systematically destroying" America's work ethic.

Viewed in these stark terms, entitlements seem terrifying -- but when you look at who is actually receiving them, the picture changes rapidly.

Let's examine the largest two slices of the entitlement pie first: According to a recent analysis by the nonprofit Center on Budget and Policy Priorities, 53% of entitlement spending goes to the elderly through Social Security and Medicare. And, as a study recently released by Wider Opportunities for Women suggested, these programs are hardly encouraging sloth: For many oldsters, they can mean the difference between economic viability and desperate poverty. Another 20% goes to the disabled, through programs like Supplemental Security Income and Medicaid.

Sure, But Aside from the Elderly and the Disabled ...

What about the remaining 27% of entitlement spending? Well, the CBPP found that 18% goes to working households, through entitlements like the school lunch program, the earned income tax credit, the child tax credit, and the children's health insurance program, which are designed to help provide a minimum standard of living for the working poor, a group that the Department of Labor conservatively estimates at 10 million.

After deducting the shares absorbed by the elderly, the disabled and the working poor, we're left with 9% of entitlement spending, about $176 billion a year. But even within that figure, the CBPP finds that only a small portion finances the slothful layabouts whom entitlement critics complain about. An estimated 7% goes to the "almost elderly," covering medical care, unemployment insurance, Social Security survivor benefits and Social Security benefits for those between the ages of 62 and 64.

And the remaining 2% of entitlement spending? That gets spent on what is generally temporary assistance for needy families, and other programs designed to help those who are sound of mind and body, but whose lives have been undermined by bad luck, job losses and the unsteady economy.

Divide and Conquer

Some critics have chosen to dive into the deep end of the entitlement fight, suggesting ways to cut Medicare and Social Security -- two of America's most popular government programs. But savvier critics of the social safety net have taken a divide-and-conquer approach, drawing a separation between spending on the elderly -- incidentally, one of the nation's most powerful voting blocs -- and other entitlements. One popular argument is that, because Social Security and Medicare are funded through specific, mandatory payroll taxes they should be thought of as distinct from other social programs.

If Social Security and Medicare benefits were channeled into -- and out of -- private savings accounts, this argument might hold some water, as it would suggest that the money that one pays in and the money that one gets out are the same. In reality, the amount of money that one gets out of these programs varies widely from what gets put in, depending on cost of living increases, mortality rates, and changes in coverage. For that matter, it's worth noting that other safety net programs -- like unemployment insurance -- are also partially funded through earmarked taxes.

We Have Met the Entitlement Slackers, and They Are Us

Here's another little-known fact: Far from funding some imagined underclass of nonworking slackers, entitlement spending is distributed fairly evenly across the economy. The CBPP estimates that 58% of entitlement spending goes to the middle 60% of households -- better known as the middle class. The richest 20% receive about 10% of these benefits, while the bottom 20% receive about 32%.

Another argument for slashing these programs, proposed earlier this year by Mitt Romney, is that entitlements aren't just funding a bloated underclass, but also a bloated federal bureaucracy. The math, though, doesn't back Mitt up. Administrative costs for federal entitlement programs eat up between 1% and 10% of their budgets; 90% to 99% goes to the intended recipients.

In the case of Medicare, administrative costs are estimated at between 3% and 4% of total spending, leaving 96% to 97% going toward medical care. By comparison, private insurers spend more than 17% of their revenues on administration and paying investors.

Whether by providing food to hungry children, economic security to the unemployed, or health care to the elderly, entitlements are a vital life preserver, helping keep the middle class afloat. As voters this year are asked to choose between strengthening the social safety net and making it smaller, it's worth taking a bit of time to recognize precisely who relies on these programs. Because the truth is, rather than providing a hammock for unmotivated slackers, entitlements are offering a safety net for most of the voting public.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.



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