Friday, June 24, 2011

"Uncle Tom" Sowell - Another pie-eyed Economic Idiot!

I was enjoying my breakfast of freshly brewed coffee along with a fancy bear claw this morning, when all of a sudden I turned the page of our local rag to find another incompetent load of economic drivel from "Uncle Tom" Sowell staring at me. I nearly dropped my coffee all over the paper (which might have been better) on reading some of his moronic codswallop which shows he hasn't the faintest clue about the Pareto Distribution, or Pareto Efficiency - which I covered in two previous blogs.

Since I've dealt with the noisome and dishonest Uncle Tom before, let me merely stick to his more outrageous claims in this particular column. He writes, for example:

"They (American seniors) want their Social Security and their Medicare to stay the way they are- and their anger is directed against those who want to change the financial arrangements that pay for these benefits"

Now that's a really neat euphemism, "change the financial arrangements"! But as I already showed, the "change in financial arrangements" these miscreants want for Medicare is NO Medicare! Paul Ryan's pseudo -Medicare plan essentially converts the whole system into a voucher system. The senior will be handed a $12,000 voucher (if that) then be sent on his or her merry way to try and purchase a policy on his or her own. Good luck on that! I tried it, in perfect health, merely 3 years ago, and the BEST policy I was offered was one with an $8,500 deductible (which didn't cover all medical issues) and for $450 a month. A senior in poor health would be lucky to get anything! The reason is the medical loss ratio for the insurance company would be too excessive, no profits! The senior could as well kill herself, what one enterprising senior recently did in NC, rob a bank (sticking up a teller for $1) in order to be jailed and receive health care there. (No one could make this shit up, believe me!)

THIS is what the great Ryan "financial arrangement" will mean for most poor or sickly elderly. The CBO itself estimates that out of pocket costs will rise to 67% of totals, compare to about 25% now for standard Medicare.

As for Social Security, their idea of "financial arrangements" is to put the money into the stock market or what they call "privatizing it". Just what do these genii think would have happened had Bushie jr. gotten his way in 2005, and Social Security had been privatized? Well, seeing now in hindsight the stock market crash in the fall of '08, most seniors would be eating cat food out on the streets- assuming they could find spare cans in enough dumpsters!

Sowell obviously doesn't know dick or diddly, or he is simply too dishonest to come out with the real facts.

He then bloviates:

"Their anger should be directed at those politicians who were irresponsible enough to set up those programs without putting aside enough money to pay for the promises that were made- promises that cannot now be kept"

More nitwit bollocks! In fact, when FDR set up Social Security (read the history of this in the excellent book Social Security and Its Enemies by Max J. Skidmore) he knew the ONLY practical way to make social insurance feasible was to implement it as a payment system via current workers to current retirees. NO other way would work. This was known by ALL from the outset, and also that it would be paid for by payroll taxes. Thus, Sowell is disingenuous in asserting they didn't put aside money to pay for it. In fact, the payroll taxes accumulated as the implementers knew they would, and built up huge cash reserves! (Even more was infused in 1983, after Alan Greenspan proposed a higher payroll tax, to the current 6.2%, to take into account the coming baby boomer onslaught).

The problem? Despicable politicos and pork mongers have raided it to disguise the size of deficits, starting with Reagan. Thus, the money was there, but stolen! Hence, it is ignorant and wrong to say "promises were made that couldn't be kept". Indeed, as recently as 2004 more than $3.3 trillion remained in S.S. Trust funds (which DO exist and are kept in special bonds) but that has been drawn down by the protracted military adventures, occupations (see my previous blogs)

As for Medicare, that was also designed to be paid for by payroll taxes and it did have the money to sustain it. But idiot Sowell doesn't mention (or mayhap he forgets) the changes that caused its monies to bring it to near insolvency:

i) Not allowing Medicare from the outset to bargain for lowest prescription drug prices like the VA does.

ii) Not keeping a tighter rein on Medicare fraud.

iii) the 2003 Bush Medicare Act which created "Medicare Advantage" plans that consume $12 billion more per year than standard Medicare

All those in concert have placed Medicare near insolvency, but that problem can be reversed - not by killing Medicare like Ryan wishes - but reversing all the above policies: e.g. telling the Big PhrmA to go get fucked and allowing bargaining like the VA, eliminating all Medicare fraud, and eliminating all Medicare Advantage plans.

In addition, raising payroll taxes another 1 % wouldn't hurt, and increasing the payroll cap to at least $1 million, would also help sustain it.

Thus, Sowell's rejoinder to the effect "Don't you understand the money is not there any more? is pure B.S. It was there, but was raided by filthy political thieves and collaborators! (E.g. lobbyists)

The last bit of bullshit is the worst:

"..The way Social Security was set up was so financially shaky that anyone who set up a similar retirement scheme in the private sector would be sent to prison for fraud"

Again, this shows what a disreputable fraud he is! In fact, Social Security was never set up as a "retirement scheme", it was set up as a social insurance program. In the way it pays for current retirees, it is exactly like social insurance programs in other countries. For example, the National Insurance program of Barbados uses the exact same approach, and it started before FDR's. A certain % is taken out of the worker's pay each period and this goes to pay current retirees.

As for American Social Security, social insurance, as Max Skimore notes (op. cit.) it was always made clear to retirees that Social Security was to be but ONE prop of their retirement income, not the whole enchilada! They were expected to supplement it by pensions from private sources, or other means (e.g. annuities). Funny that a nabob like Sowell can't even communicate that simple truth about the program - but then, knowing his dishonest stance, maybe he prefers not to! It's easier to call it a "retirement scheme" analogous to a privately run operation.

As for tossing old ladies off of cliffs, no matter what changes are proposed for future retirees (i.e. the current Gen X and Y'ers) if they sow a lack of confidence in the system, such that these current workers lose faith in the programs, then that will impact all current beneficiaries negatively - if only by brazen political acts to reduce their S.S. COLAS while increasing the cost of Medicare premiums.

Why wouldn't Uncle Tom know that? Who knows? Maybe those who take his words as "gospel" ought to inquire!

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