Boomers may be surprised to find `something for nothing' doesn't add up

March 02, 2006|By THOMAS SOWELL

Suppose someone left you an inheritance of $1 million -with the proviso that every cent of it had to be spent on tickets for you to go watch professional wrestling matches.

If you happened to be a professional wrestling fan, you would be in hog heaven.

But what if you were not? How much would that $1 million be worth to you?

Certainly a lot less than $1 million.

What if there were a clause in the will that said that you could forfeit the $1 million and instead receive $100,000 in cash to spend as you pleased? Many of us would take the hundred grand without strings.

In short, money with strings is worth less than money without strings - sometimes a lot less.

Many of us who receive money from Social Security or other government programs are learning the hard way the difference between money with strings and money without strings. For example, Social Security recipients have to be enrolled in Medicare, whether they want to be or not. "Universal" coverage means compulsory coverage, just with prettier political spin.

Those who are complaining about how hard it is to understand the new Medicare coverage seem not to realize that no government program voted into law by more than 500 members of Congress is going to be simple. Everybody in Congress has his or her own pet notions, or his or her own little claim to fame, and a lot of those pet notions and claims to fame have to go into the legislation in order to get the votes needed to pass the law. The complications and restrictions are the strings attached to Medicare.

People who think that they are getting something for nothing, by having government provide what they would otherwise have to buy in the private market, not only are kidding themselves by ignoring the taxes that government has to take from them in order to give them the appearance of something for nothing, but also are ignoring the strings that are going to be attached to their own money when it comes back to them in government benefits.

That is not even counting the fact that government programs are usually less efficient than similar services provided by private enterprises.

Compare the service you get at the Department of Motor Vehicles with the service you get at AAA. No one who belongs to the American Automobile Association is likely to go to the DMV for a service that is also available through AAA.

Yet the illusion of something for nothing has kept the welfare state going - and expanding. If there is something for sale in the marketplace for $10 and you would not pay more than $5 for it, some politician can always offer to get it for you free - as a newly discovered "basic right," or at least at a "reasonable" or "affordable" price.

Suppose that the "reasonable" or "affordable" price is $3. How do you suppose the government can produce something for $3 that private industry cannot produce for less than $10? Greater efficiency in government? Give me a break!

The fact that you pay only $3 at the cash register means nothing. If it costs the government $12 to produce and distribute what you are getting for $3, then the government is going to have to get another $9 in taxes to cover the difference.

One way or another, you are going to end up paying $12 for something you were unwilling to buy for $10 or even $6. But so long as you think you are getting something for nothing, the politicians' shell game has worked and the welfare state can continue to expand.

The baby boomers, who are beginning to turn 60, are unlikely to get back all the money they paid into Social Security, with or without strings.

The illusion that Social Security can provide pensions more cheaply than a private annuity or other retirement plan is the grand something-for-nothing political triumph.

The baby boomers are going to pay the price, big time.

Thomas Sowell is a senior fellow at the Hoover Institution at Stanford University. His syndicated column appears Thursdays in The Sun. His e-mail is

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