Wednesday, July 19, 2017
Free! Free! Free! Free is a Potent Opiate
The Cleveland woman screamed out during the 2012 Presidential Campaign: “Everybody in Cleveland - low, minority - got Obama phone! Keep Obama president, you know. He gave us a phone.” The free Obama Phone! The Lifeline program for free phones goes back to the Reagan Administration with President George W. Bush extending it to mobile phones. President Obama did not in fact start the Obama Phone program, but he extended it. The more that’s free, the greater cost to those working and the greater the diminution of the work ethic for those receiving benefits. The list of often substantial free benefits keeps growing. Cell phones are the least of it; food, housing, medical, and even cash head the list. Why work hard to achieve the American dream when you can get much of it for free? Government’s role was limited, except during war, until the Great Depression and the New Deal. The government promoted economic development and growth. The American ethos was limited government, self-reliance, and hard work. The change from reliance to at least quasi-dependence occurred earlier around 1890 when the Director of the Bureau of the Census announced the Frontier was closed. The early English settlers in Jamestown and Massachusetts always had a western frontier to settle. Wave after wave of mostly European immigrants poured into America as they progressively settled the West. Hundreds of millions of acres were cheap, if not free. The frontier settlers had to be strong and self-reliant to survive. The American people believed in independence and personal responsibility. They had to for survival. (As a side note, I took little note of the Turner Thesis, “The Significance of the Frontier in American History,” in my American history course in college). The formal end of the frontier was accompanied by the rise of the cities, whose residents could not be self-reliant. They have to rely upon others to supply food, clothing, utilities, protection, transportation, waste disposal, sanitation and public health, which necessitates a growing role for government. The New Deal started the progressive change in government’s role to one of redistribution and dependence with entitlement program after entitlement program. FDR started social security in 1935 pursuant to which many beneficiaries will be able to earn substantially more than they and their employers paid in. Unemployment compensation started in 1932 in Wisconsin, spread to five more states, and then became a federal/state program in 1935 in an expansion to the Social Security Act. The periods of receiving benefits is normally 26 weeks, but is often extended. Social security was further expanded in 1956 during the Eisenhower Administration to include disability benefits. Housing can be free or subsidized for low income residents. Los Angeles is responding to the escalating homeless problem by spending hundreds of millions of dollars on shelters and housing. Portland, Oregon is experimenting with tiny homes for the homeless. Berkeley mandates marijuana dispensaries provide free marijuana for low-income and homeless residents. Lyndon Baines Johnson, a young Democratic Congressman from Texas during the New Deal, followed FDR’s New Deal with his Great Society when he became President. He gave America Medicare and Medicaid. Medicare is for seniors and Medicaid originally for those in poverty. Medicaid is free for some, with co-pays and cost-sharing for others, but heavily subsidized. It is one of the fastest growing part of state budgets, squeezing out other programs. The ObamaCare extension offers Medicaid to those with income up to 138% of the poverty level and increased the eligible groups. President George W. Bush added Medicare Part D, a prescription plan, to Medicare. Free medical benefits also exist in a federal statute which requires emergency rooms to treat all patients, regardless of ability to pay. Free food benefits accrue through The Food Stamp Program (Supplemental Nutrition Assistance Act – “SNAP”), which covers about 46 million Americans in addition to the School Lunch Program, which has been extended into summer and breakfasts. Students are demanding free tuition, realizing that their student loans are not in fact as free as they seemed at the time. Mark Zuckerberg is advocating for a universal basic income of $13,000 per person. Think of a Berkeley student with free tuition, free pot, free or subsidized housing, free food stamps, and $13,000 cash. Free! Free! Free! The days of of struggling college students working their way through college on a tight budget, receiving a basic education in economics and self-discipline are history for many of today’s students. Hard work was the path to success. It still is. The only place where success comes before work is in the dictionary! It's not free. Harvard students were traumatized by overdue library fines, so now they have free use of books for however long they want. President Nixon gave us the Earned Income Credit. Many of the programs are means tested, directed at the less fortunate in our society, but not all. We end up with about half of Americans (Governor Mitt Romney’s infamous 48%) receiving government benefits, often for free. In addition, every new program creates a new bureaucracy, federal and state, to administer it. Once implemented, a new entitlement is almost impossible to repeal. Government keeps growing. Free quickly becomes addictive to the beneficiaries. An entitlement, once in place, becomes politically impossible to repeal. Free is addictive, even to Republican governors. Yesterday’s failure of the Senate to rein in, much less repeal ObamaCare, is illustrative. Much of the potent political opposition to the Republican’s efforts to repeal and replace ObamaCare was by Republican governors who signed onto the ObamaCare extension. It was “free,” hence seemingly free money to the states. The federal and state governments normally share the costs of Medicare with the current ratio about 57% for the feds and 43% for the states. The Medicaid expansion was 100% covered by the feds. Hence, free cash to cash starved states. Many Republican governors rejected the extension because it was 100% free but only for three years. The state’s share will rise to 10% by 2020. The House and Senate proposals would roll back some of the Medicaid expansion The governors squawked. Yet it was their jumping for the free money which puts them in this position. State health insurance laws and requirements imposed compulsory mandates on health insurance coverage. ObamaCare expanded these mandates at the federal level with the Secretary of Health and Human Services authorized to impose additional mandates as essential health benefits. She extended it to reproductive rights. Mandates may seem free to the beneficiaries, but someone is paying for them. It is not the insurance companies which will pass them on. The catch about "free” is that someone has to pay. They impose an increasing tax burden on those working for a living. Government at the federal, state, and local level though a series of large taxes, such as income, property, sales, payroll and excise, as well as a seemingly infinite number of lesser taxes and fees, keeps seeking more funds. National Tax Freedom Day was April 23 this year, the day when American income has covered all federal, state, and local taxes. In short 31% of American’s income went to fund government this year. It is never enough. Free is not free when someone has to pay for we all pay in the end, directly or indirectly.