Living in Panamá, Social Security, Medicare, Me and More

September 11th, 2012

By Dan Miller

Many problems face the nation and President Obama has shown that his administration is not able even to begin to solve them.

Someone posted this on my Face Book wall:

You’re Panamanian. You’re living on Medicare. You’re living on Social Security. And you’re a Republican. With all due respect please explain yourself in 50 words or less.

To respond in “50 words or less” would require exclusive reliance on trite talking points and would be as silly as it would be worthless. I won’t even try.

The Face Book post is factually wrong on two out of four counts: I am not Panamanian and neither is my wife. We reside (legally) in Panamá and we are both U.S. Citizens; we vote in United States Federal elections, have paid lots of taxes there and pay substantial attention to what is happening there. I write frequently about such matters at this blog. We are not “living on Medicare,” zero benefits from which are even available in Panamá. Instead, we pay roughly $150 per month for adequate medical insurance through a local Panamanian hospital.

Social Security

The Social Security system was set up during President Roosevelt’s New Deal and remains an unsoundly structured Ponzi scheme. If it is to be preserved it needs to be changed. We rely substantially on it but would likely be better off if, rather than “contribute” to the Social Security fund as established, we could instead have paid into a system augmented by commercially reasonable returns on investments.

Throughout my working years, roughly 1966 – 1996, I “contributed” to Social Security. I paid into the system because I was required by law to do so, not because I wanted to do so. Contrary to the official line, “contributions” did not go into “lock boxes.”  Nor has there been a “pay as you go” system for many years.  As noted at the article linked above,

In the distant past, Social Security was a “pay-as-you-go” system, where current tax collections paid for current benefits. The Social Security trust fund idea gave us the illusion that we were advance funding Social Security benefits, in a manner similar to the private pension system. In reality, though, Social Security is still pay-as-you-go, with the difference being that future generations will pay for both the benefits outlay and the repayment of principal and interest on the special government bonds in the trust fund. (Emphasis added.)

The author of that article observes, “I have faith that these bonds will be honored — provided that future generations can afford to repay the bonds.” (Emphasis added.) That’s a big “provided.”

For most of my working years (1966 – 1996), my payments were at the maximum amount because my income was equal to or greater than the amounts on which “contributions” were to be made. From the mid 1970′s until I retired in 1996, I paid substantially more even than previously, not because I wanted to but because I had become a partner in our law firm. That meant that I had transitioned from employee to employer and paid both employee and employer shares of my required Social Security “contributions.”  As an employer, I also paid my pro-rata share of my firm’s employer “contributions” to our employees’ Social Security accounts. Also, in addition to my own contributions to our private retirement plan, I paid my pro-rata share of our firm’s contributions to our employees’ private retirement plan. When my wife was working, she of course paid into Social Security as well.

I do not know whether my Social Security “contributions” as an employee, compounded at commercially reasonable rates of interest, would exceed or be less than however much Social Security may eventually return to me. Among other things, that would require that I now know how long I will live. Nor do I know whether all of my “contributions” to my Social Security account as my own employer, even without regard to my pro-rata share of our firm’s “contributions” to our employees’ accounts, compounded at then commercially reasonable rates of interest and added to any amounts which I have received or may receive in the future would exceed or be less than however much Social Security may eventually return to me. It does not much matter because that’s not the way the calculations are made.

Social Security is not a freebie. Nor is it part of any Democrat “pro-choice” platform. There should be substantial elements of free choice as to Social Security; something has to be done to reform it. Otherwise, it will eventually have to go broke, “contributions” will have to be increased substantially and/or the benefits paid will need to be substantially diminished and/or be available later than currently.

Medicare has similar problems.

As this article by Thomas Sowell points out, correctly I think,

nobody in his right mind has even proposed taking away the [Social Security or Medicare] benefits of those who are already receiving them.

Yet opponents of reforming these programs have managed repeatedly to scare the daylights out of seniors with wild claims and television ads such as one showing someone — who looks somewhat like Paul Ryan — pushing an elderly lady in a wheelchair toward a cliff and then dumping her over.

There are people who take seriously such statements as those by President Barack Obama that Republicans want to “end Medicare as we know it.”

Let’s stop and think, if only for the novelty of it. If you make any change in anything, you are ending it “as we know it.” Does that mean that everything in the status quo should be considered to be set in concrete forever?

If there were not a single Republican, or none who got elected to any office, arithmetic would still end “Medicare as we know it,” for the simple reason that the money in the till is not enough to keep paying for it. The same is true of Social Security. …

Neither Social Security nor Medicare has ever had enough assets to cover its liabilities. Very simply, there has never been enough money put aside to do what the government promised to do.

These systems operate on what their advocates like to call a “pay as you go” basis. That is, the younger generation pays in money that is used to cover the cost of benefits for the older generation. This is the kind of financial pyramid scheme that got Charles Ponzi put in prison in the 1920s and got Bernie Madoff put in prison in our times.

A private annuity cannot play these financial games without its executives risking the fate of Ponzi and Madoff. That is why proposed Social Security and Medicare reforms would allow young people to put their money somewhere where the money they pay in would be put aside specifically for them, not used as at present to pay older people’s pensions, with anything left over being used for whatever else politicians feel like spending the money on.

It is today’s young people who are going to be left holding the bag when they reach retirement age and discover that all the money they paid in is long gone. It is today’s young people who are going to be dumped over a cliff when they reach retirement age, if nothing is done to reform entitlements.

Yet the young seem not to be nearly as alarmed as the elderly, who have no real reason to fear. Try reconciling that with the belief that human beings are rational. (Emphasis added.)

I agree with Mr. Sowell. Social Security and Medicare as presently constituted are fiscally unsustainable, and obviously so.

soc sec chart

Medicare has to change in order to survive in any recognizable form. According to the Congressional Budget Office,

Unified budget accounting shows that the majority of the HI trust fund savings under [Obamacare] would be used to pay for other spending and therefore would not enhance the ability of the government to pay for future Medicare benefits” (emphasis added) Source: Douglas W. Elmendorf, Director, Congressional Budget Office, letter to the Honorable Jeff Sessions, U.S. Senate, January 22, 2010, p. 3.

Social Security must change as well. That’s among the many reasons why I have usually (but not always) voted Republican and why I plan to vote for Governor Romney and Congressman Ryan this year. It is not because I expect them to pull rabbits out of magic hats but because I expect them and their colleagues to be able to find and implement fiscally sustainable paths out of the morass in which our nation is now drowning.

Tax increases under President Obama’s signature legislation, ObamaCare, will do little if anything to ameliorate the problems with Social Security or Medicare but will continue to increase the costs of medical care in the United States while diminishing patient choices.


Nor will any other taxes or any other plans that they have proposed ameliorate our problems significantly; hopes and promises are inadequate.

Other matters

The morass extends far beyond Social Security and Medicare, into other forms of Federal taxation and spending in all areas (not to mention State taxation and spending, beyond the scope of this article). Those areas also include international relations, employment, economic recovery and promises of more “free stuff” for President Obama’s composite Julia and her kin, to be provided neither by thee nor by me but instead by obscenely rich “men behind the tree” who apparently are the only ones who should have to pay and on and on and on.

Private sector unemployment and underemployment are high and getting worse, not better.  Record numbers are food stamp recipients or otherwise need or want to live on welfare. As observed here,

Qualitatively, the job market decay is all around us. The following stats only scratch the surface of the ugliness (all figures are seasonally adjusted):

  • Full-time employment only increased by 43,000 in August. It’s down (yes, down) by 902,000 since March, and by over 1.4 million since Obama took office.
  • 562,000 fewer married men and 700,000 fewer married women were employed in August than were when the recession officially ended in June 2009.
  • 22% of the 3.47 million private-sector jobs created since the recession’s end have been at temporary help services.
  • What about what the new jobs created actually pay? The National Employment Law Project recently reported that “Lower-wage occupations were 21 percent of recession (job) losses, but 58 percent of recovery growth. Mid-wage occupations were 60 percent of recession losses, but only 22 percent of recovery growth.” The leftists at the NELP wouldn’t state the obvious, so I will: Their research proves that the Obama administration’s economic policies are gutting the middle class.

According to this article written nearly six months ago in March, the National Debt was then $15.566 trillion.

(CBS News) The National Debt has now increased more during President Obama’s three years and two months in office than it did during 8 years of the George W. Bush presidency.

The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since President Obama took office. (Emphasis added.)

It gained another $436 billion to reach $16 trillion on August 31st. That was reported on September 4th, during the first day of the Democrat National Convention, perhaps symbolizing the problem.

In 2007, Senator Obama had said on the Senate floor,

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

In 2008, President Obama had called the National Debt increases during President Bush’s eight years in office increases in the National Debt “unpatriotic.”

Was that a commitment not to do the same or not to do worse? In either event, the Obama Administration failed.

President Obama also failed to achieve most of the rest of what he promised in 2008. He failed to do so despite Democrat control of both houses of the Congress from his January 2009 inauguration until the Congress reconvened in January of 2011, following the 2010 elections. Thereafter, the Democrat party controlled only the Senate.

Bailout of the U.S. automobile industry? Hardly a success.

“Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts,” the news agency reports.

Talk about a loss leader: Is the car company hoping to make up the difference on floor mats and rust proofing? It would cost GM half as much to shut down Volt production and give everyone who wants to buy one a new Honda Civic hybrid (MSRP $24,800) instead.

Perhaps the idea is to make up on volume what it loses on each sale.  That is unlikely to work well.

International relations

The situations in the Far East and Latin America as well as our relations with Russia and China are substantially worse; we have little useful leverage internationally. Is President Obama even interested? He rarely attends daily intelligence briefings, managing to be present at only thirty-eight percent of them during 2011 and the first half of this year.

According to former officials who have detailed knowledge of the PDB process, having the daily meeting — and not just reading the briefing book — is enormously important both for the president and those who prepare the brief. For the president, the meeting is an opportunity to ask questions of the briefers, probe assumptions and request additional information. For those preparing the brief, meeting with the president on a daily basis gives them vital, direct feedback from the commander in chief about what is on his mind, how they can be more responsive to his needs, and what information he may have to feed back into the intelligence process. This process cannot be replicated on paper. …

When Obama forgoes this daily intelligence meeting, he is consciously placing other priorities ahead of national security. As The Post story that the Obama White House sent me put it, “Process tells you something about an administration. How a president structures his regular morning meeting on intelligence and national security is one way to measure his personal approach to foreign policy.”

We are no longer a great world power, nor are we respected as though we were. My wife and I are well aware of some aspects this first-hand, having traveled extensively in Central and South America between 1996 and 2002 and now living in Central America. Smirks and giggles directed toward our country seem more common than evidences of respect.

The United States have declined in global competitiveness to number seven — dropping from first in 2008 and continuously thereafter.

According to the WEF survey, the American economy’s sharp decline in recent years is due to, among other problems, a lack of trust in government and politicians — especially by businesses — as well as declining macroeconomic and political stability. More important to the latest drop in the rankings this year, however: increasing fears over the U.S. economy’s fiscal health as the federal government continues to borrow more than a trillion dollars per year with no end in sight.

We need a respite from President Obama’s “leadership” that is taking our nation down the spiral drain. With that respite we will, perhaps, be able at least to begin to climb up out of the muck and get moving in a good and fiscally sustainable direction again.


The Country is not now in the “very best of hands” and probably never will be.

We can, however, make the situation much better, slowly and incrementally. I consider Governor Romney and Congressman Ryan the far better of the available choices to make this happen.

(This article was also posted at Dan Miller’s Blog.)

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One Response to “Living in Panamá, Social Security, Medicare, Me and More”

  1. larry |

    Old Man Dan
    So much for fifty words.
    You have done an excellent job of pointing out some serious short comings in social security.

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