In a statement to the Business Roundtable, President Obama remarked how ”programs like Social Security and Medicare and Medicaid and unemployment insurance haven’t just saved millions from poverty, they’ve helped secure broad-based consensus that is so critical to a functioning market economy.”
However I agree with Jonathan Hoenig when he says that there is little consensus or safety when it comes to the safety net.
The sovereign debt crisis in Europe should be a glaring example:
The Greece healthcare system provides free care for all citizens but Greece is broke, meaning that all those recipients of “free” care are now running to find alternatives and those alternatives are running away from Greece. Novo Nordisk, the leading maker of insulin, announced it would stop sales in Greece after the government said it would cut payments for it by 25% and force the company to operate at a loss. A compromise was reached but for a time the life-dependent medicine of thousands of Greek diabetics was in flux. Sound Safe?
Spain provides its citizens with two years of unemployment benefits, an entitlement which has contributed to a 20% unemployment rate (40% for those under 25), the highest in the developing world. Sound Safe?
France provides relatively generous retirement to its citizens after a certain age. The French government recently announced it plans to raise the minimum legal retirement age from 60 to 62 and increase the years needed to qualify for benefits. Protests and strikes ensued. Sound Safe?
Here’s the deal: Unlike a 401(k), private savings, or the simple fact that you can design a life that requires little income to be sustainable, there is no ownership of anything. Bureaucrats decide when you can retire, the amount of your benefits, how often you receive them, the availability of medical procedures, etc.
Hoenig’s right in saying that:
“In effect, the “safety net” is simply a promise from a politician, along with a bill you’re obligated to pay regardless if that promise is ever delivered upon.”
It’s happening in Europe. Are we safe?
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