A Thinly Veiled Attack On Social Security And Medicare From Heritage And Its Allies

Yesterday Heritage released an "Index of Dependence on Government" report. Fox and others in the conservative media trumpeted the report. But even a quick look at Heritage's report reveals its true intent: a thinly-veiled attempt to discredit important government programs such as Social Security and Medicare.

The report suggests that times were better when, rather than relying on a government-provided social safety net, Americans of limited means had to hope for "support provided by families, churches, and other civil society groups." Here is what the Heritage report has to say about Social Security and similar government programs:

Financial help for those in need has also changed profoundly. Local, community-based charitable organizations once provided the majority of aid, resulting in a personal relationship between those who received assistance and those who provided it. Today, Social Security and other government programs provide much or all of the income to low-income and indigent households. Nearly all the financial support that was once provided to temporarily unemployed workers by unions, mutual-aid societies, and local charities is now provided by federal income, food, and health programs.

This shift from local, community-based, mutual-aid assistance to anonymous government payments has clearly altered the relationship between the receiver and the provider of the assistance. In the past, a person in need depended on help from people and organizations in his or her local community. The community representatives were generally aware of the person's needs and tailored the assistance to meet those needs within the community's budgetary constraints. Today, housing and other needs are addressed by government employees to whom the person in need is a complete stranger, and who have few or no ties to the community in which the needy person lives.

Both cases of aid involve a dependent relationship. However, support provided by families, churches, and other civil society groups aims to restore a person to full flourishing and personal responsibility, and, ultimately, to be able to aid another person in turn. This kind of reciprocal expectation does not characterize the dependent relationship with the political system.

And it's nostalgia for the good old days is just as strong when it comes to Medicare. The report says: "Regardless of whether the medical and financial results are better today, the relationship between the people who receive health care assistance and those who pay for it has changed fundamentally. Few would dispute that this change has affected the total cost of health care, and the relationships among patients, doctors, and hospitals, negatively."

But how good were the good old days? Poverty was far more prevalent among the elderly back in those days. With the implementation of Social Security and subsequent increases in Social Security expenditures, elderly poverty experienced precipitous declines, falling from 35 percent in 1960 to 10 percent in 1995. In other words, back in the good old days, more than a third of the elderly were poor. Now it's down to less than one in 10.

From the National Bureau of Economic Research: 

Medicare has had a similarly profound impact on the elderly. Consider this: In 1963, a little more than half of all persons over 65 possessed health insurance. By 1970, Medicare had achieved almost universal coverage for the elderly, at 97%. 

But even on its own terms, the Heritage report is nonsense. Heritage goes to great lengths to highlight the growth in what it calls the "non-taxpaying population" and its relationship to government programs:

It is the conjunction of these two trends--higher spending on dependence-creating programs, and an ever-shrinking number of taxpayers who pay for these programs--that concerns those interested in the fate of the American form of government.

[...]

In short, the country is now at a point where roughly one-half of "taxpayers" do not pay federal income taxes, and where most of that same population receives generous federal benefits.

The impression Heritage is trying to give is that a large portion of the population, unencumbered by taxes, is living it up on the unsustainable largess of the federal government -- with ruinous implications for the country.

But there is no proof of this in the report, whatsoever. Indeed, whether people are paying federal income taxes is largely irrelevant because a large percentage of the people who are "dependent" on government according to Heritage are recipients of Social Security and Medicare. But those programs are not funded by federal income tax. They are funded by FICA payroll taxes, and everyone who has a job pays FICA payroll taxes. And every retiree previously paid FICA payroll taxes.

The theoretical underpinning that lends Heritage's "Index of Dependence on Government" the air of empiricism are also quite dubious. Here is how Heritage describes its methodology:

The Index uses data drawn from a carefully selected set of federally funded programs. The programs were chosen for their propensity to duplicate or replace assistance, such as shelter, food, monetary aid, health care, education, or employment training, which was traditionally provided to needy people by local organizations and families.

In calculating the Index, the expenditures for these programs are weighted to reflect the relative importance of each service (e.g., shelter, health care, or food). The degree of a person's dependence will vary with respect to the need. For example, a homeless person's first need is generally shelter, followed by nourishment, health care, and income. Analysts in The Heritage Foundation's Center for Data Analysis weighted the program expenditures based on this hierarchy of needs, which produces a weighted Index of expenditures centered on the year 1980.

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CDA analysts began by reviewing the federal budget to identify federal programs and state activities supported by federal appropriations that fit the definition of dependence--providing assistance in areas once considered to be the responsibility of individuals, family, neighborhood groups, churches, and other civil society institutions. The immediate beneficiary of the program or activity must be an individual. This method generally excludes state programs; federally funded programs in which the states act as intermediaries are included.

In other words, with this index, Heritage determines the timeline, the federal programs, and the metrics used for weighing expenditures "relative to the importance of each service." In essence, Heritage has constructed its own theoretical model that is as self-serving as it is arbitrary.

It seems Heritage has created a meaningless number based on faulty assumptions in order to get right-wing talking heads to rail against the evils of Social Security, Medicare, and other important government programs.

At least Heritage has succeeded at something.