Public Sector Privatization

Public Sector Privatization

One of the most paramount public policy issues is the increased welfare state. Welfare has expanded dramatically over the past 100 years. At one point, families, local communities, and charities formed the backbone of the social safety net. The Great Depression changed of the 1930s changed much of that. President Roosevelt's New Deal established Social Security in 1935 and inaugurated the modern day federal welfare program with a small program called Aid to Dependent Children. The next great expansion came during the Johnson administration in the 1960s, when Medicare, Medicaid, public housing, and other programs were established. While they may have been passed with good intentions, they remain a continuous pacification system while continually delivering ill-conceived results and raising the risk of moral hazard at alarming rates.

Social Security is financed by payroll taxes levied on an employer's taxable payroll; half is deducted from wages of the employee and other is taken from employer income. This hurts potential workers by raising the cost of labor above the given market rate. And thereby reduces the demand for labor which is a major cause for unemployment. According to a New York Times article, the system will pay out more in benefits than it receives in payroll taxes. This, in time, will compound to an even larger problem. Social Security should be privatized. The privatization of SS would immediately restore trust in the system and would also place more responsibility on the individual to refrain from financial mismanagement.

The Medicare program provides subsidized medical insurance for the elderly and for some people with disabilities. As the Medicare system itself faces financial troubles, beneficiaries also face higher cost. Gross spending for Medicare will total $572 billion in 2011, which is a jump of almost 10 percent, recorded last year. As the number of new Medicare beneficiaries rises sharply, there will be significantly fewer workers per retiree to fund Medicare.

While Medicare provides health care for seniors, Medicaid is a safety net for low-income individuals. The CBO does not expect Medicaid expenditures to rise much from its 2010 outlay of $278 billion. However, this number is still extremely costly and is not conducive to a free society. As the recession grows deeper, and federal and state governments are tightening budgets, there should be discussions on which programs are efficient and which are.

Instead of continually funding Medicare and Medicaid, I suggest we allow the market to set prices and allocate resources by allowing more choice and competition. I propose that over the next few years, the government should slowly dismantle the size and scope of the programs. During this time, physicians could reduce overhead brought on by Medicare and Medicaid. Patients would be free to make better choices