Saturday, November 6, 2010

Fighting poverty creates poverty

From the 08 November 2010 Greater Niagara Newspapers

By Bob Confer

The federal government considers one to be living in poverty if income is $10,830 or less, or $22,050 for a family of four. The number of Americans within those categories grew last year by nearly a full percentage point to 14.2 percent, or 43.6 million people — a 3.8 million increase. The poverty rate is at its highest since 1994, while the actual number of those living in poverty is the greatest in 51 years.

To put that in perspective, the poverty crisis 51 years ago is what inspired Lyndon B. Johnson to initiate his War on Poverty. To combat our socio-economic problems he ushered in the Social Security Act of 1965, which introduced Medicare and Medicaid. They have become an indelible part of American life, used by the poor and - especially in the case of Medicare - the not-so-poor. But despite their abundant patronage, these massive, unconstitutional programs have neither eliminated poverty nor become even remotely efficient or affordable.

Medicare, which provides health “insurance” to 45 million Americans 65 and over, is funded through a payroll tax of 2.9 percent split between the employee and the employer. Despite stripping the economy of more than 3 percent of its value annually, the program is still unable to adequately fund itself: Since 2008 the Medicare trust fund has been paying out more than it brings in.

Like any Ponzi scheme, this unsustainable economic model is destined to come crashing down. Medicare has unfunded obligations of $37.8 trillion (2.5 times the size of the U.S. economy) a great deal of which is coming due soon. As the Baby Boomers age, they will put incredible pressure upon the system, ultimately bankrupting Medicare. Economists, as well as Medicare trustees, believe the fund will be in the red by 2017. Upon its collapse, what will the federal government do? It has done nothing yet to prepare for Doomsday, although it’s only 7 years away. So, a financial crisis and tax tsunami are looming for American taxpayers and Medicare beneficiaries, as well as those who must be paid to provide for their care.

The crisis continues with Medicaid which provides medical and health-related services and funding to the poor. Even though it’s a federal edict, it uses a combination of federal/state/local taxes and state management of Medicaid recipients. In 2007, there were an average 49.1 million Americans receiving Medicaid. The federal outlay that year was $190.6 billion, while the states pumped in another $142.6 billion for a total of $333.2 billion. That number is expected to reach $673.7 billion by 2017, the very same year Medicare comes to its crossroads. It should be noted that the program is notoriously abused, with some states - like New York - providing recipients with products and services that those on private health insurance would never receive without considerable out-of-pocket expense. In the Empire State the accumulated cost to taxpayers is a whopping $16,000 per Medicaid recipient.

These incredible burdens placed on productive sectors of the economy make it painfully obvious to the reasonable mind that Medicare and Medicaid have created poverty rather than alleviated it. In its effort to combat the very poverty it had previously created through taxation and regulation of a productive private sector, the federal government managed to create even more poverty by adding to the cost of doing business (which inhibits job growth, stunts wages, and sends jobs overseas) and living (which prevents people from spending as much as they could in the free market, which would then encourage economic development and squash poverty).

Whenever money — hundreds of billions annually for the War on Poverty — is forcibly removed from the private sector, the private sector is unable to do what it should. Thus, the average worker, because of diminished employment opportunities, becomes impoverished by the invisible hand of the government. That individual then relies on government subsidies, further stressing the system of dependence unleashed by our government, which will then, again, take away more jobs and opportunity further down the road. It’s truly a vicious cycle.

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