Social Security and Medicare are not entitlement programs. They are insurance programs that are largely acutuarily sound. They should not be considered government expenditures as they are funded by the users of the insurance programs.
They are entitlement programs. Current taxpayers pay for current beneficiaries, and it has been that way since the programs were founded. Who do you think paid for the first recipients of social security?
The distinction is meaningless. It is always the case that the currently economically active part of the population pays for those who aren't active. [1]
If you prefer thinking in monetary terms (as most people do), think about somebody who has a retirement savings account. Their money comes out of payments that firms make (in the form of interest on bonds, or in the form of dividends etc.). This is money that could otherwise have gone to the employees of those firms.
To get an even clearer picture, think about it in real terms. Retirees use up real resources and services that are generated by the currently working population. So the current workers provide for the current beneficiaries, plain and simple. The movements of money that are used to reflect the movements of real resources is really just a thin layer on top, and it would be wise not to focus too much on the cosmetics of that thin layer.
[1] Mostly children and retirees and, if you allow yourself to be honest about the reality of capitalism, the rich and powerful.
I don't think that is correct for social security.
I just started taking social security (yes, I am an old programmer :-) and unless I live a very long time I will never get back all that I have paid into social security, if you take I to account what I put in and earn a small amount of interest on the money (which is not so small with compounding).
Medicare is more of a government handout - I agree with you there.
They actually didn't intend to; it was supposed to have around a decade of money paid in before any started going out. Also, though, remember that it didn't cover the same people it covers now.
Can we go back to a scheme where we have a decade of money paid in? I'd happily pay a little more if it helps end the endless name calling and what not.
I found it interesting that the system looks to be in far better shape today than it has been for many decades. In the early ears, assets outweighed expenditures by a huge amount, sometimes by more than a factor of 10. As you move down the table, this stops, and in the 1970s it hits a 1:1 ratio of yearly expenditures to assets, then shoots way past. In 1983, the trust fund had under $20 billion in assets but the program spent $153 billion! That's clearly a program where current taxpayers are paying for current retirees, rather than the savings program it's painted as.
By the late 80s, things start looking much better, as income substantially outweighs expenditures. In 2001, the trust fund exceeded $1 trillion while expenditures were at a considerably more modest $378 billion. The 2013 figure has about $2.7 trillion in the trust fund, with expenditures of about $679 billion. Not a factor of 10, but certainly far better than the 60s, 70s, or 80s.
I knew that SS was in better shape than many people say, but I had no idea that it used to be so much worse. The picture painted by the naysayers is one of a long slide towards disaster, whereas it looks like the program is currently doing great. Future demographic shifts will certainly hurt a lot, but compared to the years when the trust fund was essentially nonexistent there's almost nothing to worry about.
In effect they hit the budget, as they only "invest" in US government securities. Now that SOcial Security doesn't have a surplus, it is drawing off of debt service payments paid by the treasury.
It's an entitlement program masquerading as an investment program, largely by design, as the high payroll taxes that accompany the program are meant to provide it political legitimacy.
