Current System Turns Makers Into Takers

A woman and her health care provider

Editor’s Note: The following is Scott Winship’s contribution to a U.S. News & World Report Debate Club discussion titled “Is the United States a Nation of ‘Makers and Takers?’

Former Gov. Mitt Romney’s remarks about the “47 percent” and the resulting controversy are a distraction from the big issue the presidential race should have been about. Entitlement spending will cannibalize the rest of the federal budget in the not-too-distant future absent wholesale reforms. It turns out that we—all of us—are the “takers” as well as the “makers”.

Here’s how it works. Step One: We makers go out and earn a paycheck. Step Two: Uncle Sam takes part of that paycheck and then makes us into takers. The vast majority of us will get Social Security and Medicare someday, and in a couple of years, even solidly middle class families will receive subsidies to purchase health insurance on Obamacare’s exchanges. Because we feel entitled to these benefits, because life expectancy rises, because new innovations in healthcare proliferate, and because neither we nor our doctors have much incentive to be frugal, we end up taking more than our making finances.

But there’s no reason we or our government need to be takers here. Rather than inefficiently taking from makers and making them into takers, the federal government could simply sponsor voluntary “citizen benefits” in the same way that employers offer benefits to their workers and let people pick and pay for the menu of benefits they want. It could allow workers and their employers to contribute to personal retirement accounts that it would sponsor, run by private investment funds. Social Security would eventually become a true safety net program rather than an inefficient transfer system from makers to themselves as takers.

The government could also sponsor voluntary health insurance exchanges without individual or employer mandates but with incentives for healthy people to participate. Unlike the system envisioned by Obamacare, the focus would be on coverage for catastrophic expenses, not on routine care that is easily anticipated. And the exchanges could also support the sort of premium support model for Medicare that Romney and his running mate—but also several leading Democrats—have proposed. That would give seniors incentives to choose the least-costly insurance options. Finally, citizen benefits might include an income-loss insurance offering that could improve on and replace the current unemployment insurance system.

Citizen benefits would promote fiscal responsibility and personal responsibility at the same time it expands choices. Any takers?