Tag Archive for: Tradeoffs

Why There Are No ‘Fair’ Solutions Out of the Federal Government’s Spending Quagmire

The federal government is facing very serious budget issues, dramatically worsened by the past few years’ expansion in profligate spending. But while that gets most of the fiscal headlines at the moment because of the national debt limit discussion, the Social Security and Medicare Trust Funds have far more unfunded liabilities than the official federal deficit. And those huge problems are well past the “something should be done” stage and getting very close to the “something must be done” stage. That has led some to reconsider reforming Social Security, the famous “third rail” of politics.

The mere possibility of that has energized those who fear that a change from the status quo might give them less, even though the huge financial holes involved cannot be sustained for long, meaning that “doing nothing” for now guarantees a worse deal for many soon. So such opponents are gearing up to prevent any move toward improved fiscal responsibility and sustainability that might involve reducing anyone’s benefits now or in the future by asserting that it would be unfair.

Unfortunately, however, if we rule out all options that might “unfairly” reduce benefits for current or future beneficiaries, we must be unfair to others. The reason is that the federal government has promised trillions of dollars more in benefits than taxes to fund them through Social Security (and even more so for Medicare), and those overpromises leave no fair way out.

Consider the option of reducing Social Security retirement benefits in one way or another. That is not fair, because government promises of ongoing retirement support have led people to believe in continued funding at the promised levels, and to adapt their behavior to those promises. Having done so (e.g., saving less privately for their retirement), it is unfair to cut that funding, because many who relied on benefit promises have become dependent on the government living up to them.

But there is a good reason for considering this possibility—if we continue to do nothing to change things, the trust funds will soon run out and benefits will have to fall substantially from then on, which would also be unfair, and potentially even more so.

Despite that, if history is any guide, any serious proposal of potential benefit reductions will not lead to rational discussion, but fights to make sure someone named “not us” will bear as much of the burdens as possible. We will witness a “guilt parade” of the most obviously pitiful and destitute beneficiaries, none of whom should be forced to “do without,” to remind us of its unfairness (just as we see struggling family farmers when agricultural or water subsidies are under fire; the most seriously ill when medical benefit cuts are proposed; poor, inner-city children when cuts to education funding are considered; etc).

Now, this fairness argument is partly correct. But only partly, because it does not consider the fairness of the alternatives. While benefit cutbacks can be considered unfair to those now and soon-to-be dependent on them, every alternative is unfair as well. Rather than choosing between fair and unfair options, we must choose between unfair ones.

Say we look to maintain benefit promises through substantially higher Social Security taxes. The problem is that people have also adapted their behavior to the promised extent of those taxes (already greater than income taxes for the majority of Americans), and some now depend on not losing any more take-home pay just as many recipients depend on not losing anticipated benefits.

Proposing that we just tax “the rich” more, as by increasing or even eliminating the income limits on Social Security “contributions,” would especially increase its unfairness to higher income earners, who are already paying far more in Social Security taxes than they will ever get back in benefits, and who also pay a sharply disproportionate share of income and other taxes as well (not to mention being in the crosshairs for further increases in those taxes).

Benefits could be maintained without increasing Social Security taxes by federal borrowing. But borrowing is just deferred taxation, so that would unfairly burden whichever taxpayers will be left holding the bag for those taxes. It would also increase the tax uncertainty faced by all Americans, who face a harder task of guessing how, where, when, and on who those future taxes will be assessed.

What about some sort of privatization? That could potentially increase the rate of return earned on retirement savings relative to what Social Security offers, improving the system from this point in time forward. However, such a move cannot magically eliminate its current multi-trillion dollar unfunded liabilities. And if future benefits are to be more closely based on private contributions than the current system, as privatization would require, treating those savers more fairly would unfairly take funds now used to subsidize the retirement of current workers, even though many of them paid far less in taxes than they will receive in benefits under the current structure.

Even doing nothing about Social Security to avoid treating people unfairly is unfair, since the status quo is unsustainable, requiring future commitments to be broken in a major way. Even Social Security statements now communicate that there will soon be too little money to meet their benefit promises.

It is time we realized that there is no fair way out from government Social Security commitments that exceed the funds available. Current overpromises mean that everyone has a plausible fairness claim on their side, yet something must give. The closest we can come to being fair is to avoid making any new over-commitments, to search for ways to make the program more sustainable (to reduce future unfairness problems), and to look seriously at the contentious issue of which of the options will minimize the adverse impacts of unfairness that cannot be avoided altogether. Demonizing any real consideration of the various options, as some have already started doing, only increases the likelihood that there will ultimately be more unfairness than necessary.

It’s also important to recognize that the inherent unfairness we must soon address is not limited to Social Security. That problem comes in the wake of any ongoing government program that offers benefits in excess of costs to beneficiaries at the start, because in a world without free lunches, that requires future Americans to be saddled with the burden of paying for those excess benefits.

So “not fair” also applies not only to the introduction and past expansions of Social Security, but also to current attempts to sweeten the Social Security pot, as with the Social Security 2100 Act. It also applies to Medicare, Social Security’s 1965 offspring, which faces an even larger financing hole, since early recipients got far more benefits than they paid for (both because benefits have increased and because early recipients paid for at most a few years at lower tax rates than now, but got benefits for the rest of their lives).

The same unfairness applies to any government trust fund with unfunded liabilities, such as for the Highway Trust Fund, due to be fully depleted within the next dozen years. (Since benefits from the road work began long before much of the associated costs came due, the program leaves more costs than benefits for succeeding Americans.)

The national debt reflects similar benefits that have not been paid for, unfairly leaving the tab for a huge pile of not-even-remotely-justified government spending projects and policies to later generations (not to mention providing the leverage for further expanding not-yet-paid-for benefits every time the debt limit expansion provides a must-pass piece of legislation).

It is worth remembering that in many areas that have been put under government control, the word “unfair” is correct. But that is because unfairness is baked in from the beginning of such government programs.

We can now only choose among unfair options which will be unavoidably difficult and unpleasant, with a government that has shown very little interest in facing those sorts of problems. And the way to prevent further inherent unfairness problems is not by embracing policies that attempt to buy votes today by creating policies where people are disproportionately treated (debt forgiveness, anyone?). Unfortunately, there is an ever-present pile of policy proposals whose political attraction is just such disproportionate treatment, which justifies little optimism for solutions arising out of the beltway anytime soon.

AUTHOR

Gary M. Galles

Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network. In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

CNN Medical Analyst Says Masking Stunted Her Toddler’s Language Development—and Taught Her an Important Lesson about Tradeoffs

A year ago, Dr. Leana Wen was arguing unvaccinated people shouldn’t be allowed to leave their homes. But now she says she’s abandoned her “extremely cautious” Covid views.


During the 1960s, the phrase “the personal is political” became a rallying cry for second-wave feminists challenging the social framework that existed at the time.

There was an unhealthy collectivist undercurrent to this idea—“There are no personal solutions at this time,” wrote Women’s Liberation Movement member Carol Hanisch in an essay on the topic, “There is only collective action for a collective solution”—but the phrase also contains an element of truth.

Personal experience does play an undeniable role in how many humans perceive politics and social structures, which brings me to CNN medical analyst Dr. Leana Wen.

Throughout the pandemic, Wen was in what I’ll call the “pro-mandate” camp.

In March 2021, she excoriated governors who rescinded or failed to pass mask mandates in their states.

“We are not out of the woods. We haven’t reached the end of the pandemic,” Wen said in a pro-mask CNN piece. “It’s counterproductive and truly infuriating these governors are treating this as if the pandemic is over. It’s not true.”

Later that year, she went so far as to argue that unvaccinated people shouldn’t be allowed to leave their homes.

“We need to start looking at the choice to remain unvaccinated the same as we look at driving while intoxicated,” Wen told CNN’s Chris Cuomo. “You have the option to not get vaccinated if you want, but then you can’t go out in public.”

A year later, Wen’s views have changed. In a recent Washington Post article, she explained why she’ll no longer be masking her children and how she shifted away from “being extremely cautious” with Covid protocols.

“I accept the risk that my kids will probably contract covid-19 this school year, just as they could contract the flu, respiratory syncytial virus and other contagious diseases,” she writes. “As for most Americans, covid in our family will almost certainly be mild; and, like most Americans, we’ve made the decision that following precautions strict enough to prevent the highly contagious BA.5 will be very challenging.”

Wen’s observations are not wrong. The new variants are less deadly, and this is particularly true for children, which has always been the case.

A year ago, when Wen was still advocating strict mandates, we pointed out that the CDC’s own data showed small children were at far greater risk of dying from the flu, drowning, vehicle collisions, cancer, and other things than Covid.

This data, for whatever reason, apparently did little to persuade Wen in 2021, however. What does appear to have changed her mind is that her child appears to have suffered from the mandates.

“Masking has harmed our son’s language development,” she bluntly asserts in the article.

Throughout the pandemic, few policies have been debated with more fury than mask mandates. The vast majority of these debates focus on a single point: does masking prevent or even reduce Covid transmission? Some studies say yes, others cast doubt on their efficacy.

For many, however, the efficacy of masking became a sort of dogma that could not even be questioned. (If you doubt this, consider that until a few days ago one faced risk of suspension on YouTube for suggesting that masks don’t play a role in preventing Covid transmission.)

Far less discussion focused on the costs of forcing people to wear masks, and Wen now sees this as a mistake.

“There is a tradeoff,” Wen says.

Many, however, refused to acknowledge this and argued that masking is simply a moral imperative. I recently had a discussion at a family gathering with a person who supports mask mandates. He became indignant when my sister-in-law said she didn’t think it was right to force her children to wear masks at school all day long.

“It’s about protecting others,” he said. “It’s the smallest thing.”

The fact that he was not wearing a mask himself as he said this didn’t seem the least bit ironic to him, but it proved Wen’s point: there are tradeoffs. (If there was not, we’d wear them all the time.)

The idea of tradeoffs is perhaps the most basic principle in all of economics. It’s rooted in a simple idea: in order to have or do one thing, one must sacrifice having or doing something else. All things come with opportunity costs, big and small. (A minor tradeoff with masking is simply being able to breathe more freely.)

For most of the pandemic, many Americans and most public health officials refused to acknowledge the reality of tradeoffs. In 2021, The New York Times described a phenomenon known as “Covid Absolutism.” It consists of two primary factors: 1. Taking every conceivable step that could reduce the spread of Covid regardless of its actual effectiveness; 2. Downplaying or ignoring the unintended consequences and tradeoffs of these policies.

Basic economics, however, teaches us the folly of this thinking.

“There are no solutions, there are only trade-offs,” Thomas Sowell famously observed.

This was the economic lesson Wen learned during the pandemic. She didn’t learn it in a classroom or in a textbook. She learned it in her personal experience when her own child began to struggle with language development (not a minor tradeoff), just like countless other children.

Writing in The Atlantic, Stephanie Murray also wrote about the reality of tradeoffs, stating that many parents with youngsters who are struggling see the potential benefits of masking as a poor trade for what they lose developmentally.

“Children with speech or language disorders offer perhaps the clearest example of these murky trade-offs,” she writes.

This is precisely why decision-making must be left to individuals, not bureaucrats. Nobody is more capable of weighing the pros and cons of a trade or action better than the people who themselves stand to lose or benefit from that trade or action (or in this care, their parents).

Dr. Wen no doubt knows a great deal about public health, just like Anthony Fauci and Rochelle P. Walensky. But even Fauci and Walensky, I suspect, would concede that it’s Wen who knows what’s better for her child.

It must be stressed that it’s not just that Wen wants what’s best for her child. It’s that she actually knows what’s best for her child because she has infinitely more knowledge about her child than any distant bureaucrat or meddling politician could ever possess.

Nobel Prize-winning economist F.A. Hayek detailed this “local knowledge” concept in his work exploring “the knowledge problem,” and he showed why central planners seeking to engineer society through force are capable of producing little beyond “planned chaos.” This is why it’s so important that freedom of decision-making is left to those who have the most local knowledge and can most accurately assess the risks and rewards of any given action.

The good news is that Wen, to her credit, appears to have learned something throughout the tragedy of the Covid pandemic, as have so many others.

The tragedy is that for so long she overlooked tradeoffs and used her platform to advocate coercive policies that deprived individuals of the ability to choose, a tragedy that is compounded by the fact that Wen now finds herself a target of cancellation for advocating a more sensible approach.

It’s an ironic twist considering that only a year ago Wen herself was a proponent of confining unvaccinated people to their homes, and not one we should celebrate.

But hopefully it can be a learning experience for Wen and others, who now recognize the danger in turning what should be individual decisions over to bureaucrats and political tribes.

AUTHOR

Jon Miltimore

Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune. Bylines: Newsweek, The Washington Times, MSN.com, The Washington Examiner, The Daily Caller, The Federalist, the Epoch Times.

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EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.