BUY ONE, TAKE TEN - Entitlement Programs

It's easy enough to describe socialism to your children with the Halloween candy story, but put it into prospective, in real life terms, makes hard working Americans see red -- no pun intended. Americans who have played by the rules, are paying for those who did not.

Paying for someone's gas in their car, or your neighbor's mortgage, or the person's food in front of you at the market doesn't set right, and yet the government takeover is expanding these programs -- again. Re-starting the housing mortgage lending policies, after it was the main reason for the economic melt down, should infuriate every hard working citizen.

PajamasMedia writes:


Buy One, Take Ten
Entitlement programs have convinced citizens that the government never runs out of free money, a view that is psychologically crippling.
by Richard Fernandez, October 16, 2009

When a society has been told for years it can have something for nothing the damage is not just physical, but psychological; an entire mentality is crippled. A former British official who is now a director at the London School of Economics says that Britain is in deep trouble. Years of entitlement have convinced people that government is an endless source of wealth. With the economic crisis in full swing, the government has to cut back for national survival. The problem is that no one wants the music to stop. Even the intellectual class, according to Sir Howard Davies, has come to believe that any crisis can be met by simply borrowing and printing more money.

Sir Howard Davies, now Director of the London School of Economics, said Britain faces a dangerous rise in the levels of public debt – even taking into account tax increases planned for coming years.

“The next six months are going to be extremely delicate in the UK”, he told a gathering of HSBC clients in London. “It is very clear that something dramatic has to happen to control spending: but is the economy robust enough to survive fiscal tightening?” …

What is disturbing is that the British people seem unwilling to face minimal belt-tightening. Even professors in higher education are balloting to strike, demanding a continuation of boom-time pay raises. “You have the best minds in the country planning to go on strike for 8pc. People are miles away from understanding what is needed.”

Polling data shows that 48pc of the public are against any spending cuts and only 20pc see the need for retrenchment. Britons appear to assume that the “fantastic growth in public spending” over the last decade has become an entitlement.

It’s laughable, right? But how sane is everyone else? A riot which broke out at a Burlington Coat Factory outlet when a mentally disturbed woman, posing as the newly rich winner of a lottery, hoaxed customers into believing she would pay for everything that they bought illustrates how credulous people can be. She drove up to the store in a rented limo and announced that she was going to pay for everything the customers bought. Before long the store resembled the scene of a civil disturbance.

A woman arrived at the store in a Hummer limo, announcing that she’d won the lottery and offering to cover tabs totaling up to $500. … Before the hoax was even revealed, two dozen police officers were called in to quell the unrest sparked by the woman …

As cashiers rang sale after sale, Brown left in her limo to withdraw funds to cover the large scale shopping spree- but returned empty handed. The situation predictably worsened, with the large crowds expecting free things and not willing to leave empty handed. Shoppers began throwing merchandise on the floor and looting.

But it isn’t just the people at the Burlington Coat Factory or Britain who can be tricked into buying things on fake credit. Forbes recently described how health care “reform” is going to be paid for with a windfall that will never come. Is there any difference between a woman who imagines she’s won the lottery and politicians who will pay for future expenses from invented revenues?

A careful reading of the evidence suggests that the Baucus bill will add as much as $376 billion to the federal deficit through 2019. And that figure understates the full impact of the bill on the budget. If the big-spending parts of the proposal started next year rather than in 2014, the fiscal damage would be much greater.

At face value, the Baucus bill seems to be close to what the president ordered. According to the CBO, the bill gives coverage to 29 million uninsured Americans for less than $900 billion while simultaneously reducing the deficit. The problem is that the bill counts as savings large cuts to Medicare providers that will almost certainly never happen.

The most blatant example is the annual cut in fees paid by Medicare to physicians. The cuts started out small, about 5% a year, but even that was unsustainable. To “solve” the political problem without having to admit to a big increase in the deficit, Congress has given doctors a series of one-year fixes. The foregone payment reductions add up, and next year Medicare is supposed to slash doctor’s fees 21%. Clearly, that will not happen.

The Ohio hoaxer was arrested and she is believed to be mentally disturbed. But politicians can do the same thing without worrying about being dragged away by the men in white coats. Steve Chapman talks about how Washington, having just watched the financial system destroyed by a real estate bubble, is inflating another to take its place.

Watching Washington policymakers in action, I sometimes think they make mistakes because of unrealistic goals, flawed thinking, blind obedience to party, or dubious information. And sometimes I think they make mistakes because they are—how to put this?—clinically insane.

There is no other way to explain what is going on at the Federal Housing Administration, which provides federal guarantees for home mortgages. Given the collapse in real estate prices, the weak economy, and the epidemic of foreclosures, banks are acting with more caution than before. They now commonly require home buyers to make down payments of 20 percent to qualify for a loan. But the FHA often requires only 3.5 percent.

That’s the equivalent of playing pool with a guy named Snake, and it’s had two predictable effects. The first is that the agency is insuring about four times as many home loans as it did just three years ago. The other is that the number of FHA-approved borrowers who are not repaying their loans is climbing. Since last year, the default rate has jumped by 76 percent.

Another likely consequence looms: you and I eating the losses.

Chapman says, “a former executive of mortgage giant Fannie Mae told a congressional subcommittee that the FHA ‘appears destined for a taxpayer bailout in the next 24 to 36 months.’” Is anybody surprised? Should anybody be surprised? Chapman describes the behavior as akin to being “clinically insane”. Maybe the problem is exactly as Sir Howard Davies described it: the culture of dependency which in some circles is confused with the phrase “scientific socialism”. When even people who should know better believe they can get something for nothing — striking academics in the UK, shoppers in a store, people with health care insurance, people with mortgages — the problem comes to resemble not ordinary debt but participation in a scam. It’s almost as if a hoaxer had appear on the national scene and grandly offered to pick up the tab for a dazzling future without a real dime to his name — and people believed him. How could it happen? And what happens when the joker is unmasked?


Read more articles by Richard Fernandez here.