That's about the way the US economy and tax system have worked for decades and decades, and that's a major reason why the federal deficit shrank so much in the late 1990s. Of course we could avoid such revenue shortfalls through sensible policies such as a 100% tax on poverty or a really flat tax of $10,000 a year per person.
You haven't heard of this? When Roosevelt sold SS as a pension plan, one of his advisors privately told him it wasn't one. FDR replied that he knew it but had to convince the public otherwise so that it couldn't be dismantled by the Republicans after he was gone.
Former Communist and current Republican economist Thomas Sowell criticizes SS for being a pyramid scheme:
Time magazine, Mar. 20, 1995, "Social Insecurity":
"Many people flatly refuse to believe Social Security was sold to the populace as social insurance, with disastrous effect. Legions of people take it as an article of faith that each person gets back in benefits exactly as much as he or she has paid in contributions during the working years. Some seem to think that somewhere in the depths of the system is an account bearing each person's name and number, containing the exact amount of taxes paid over a lifetime, in cash or readily cashable securities, to be paid back penny for penny on retirement. This idea lends a note of moral fervor-almost fanaticism- to the demands that benefit formulas never be touched.
"But it is a mirage. To finance Social Security, Congress set up a pay- as-you-go system that is still in operation: each year's pensions are paid out of the taxes contributed by workers that year. In the early days it was a fabulous money-and-votes machine. Workers paying taxes, even at what now look like phenomenally low rates, so heavily outnumbered retirees that Congress could raise benefits every few years, to the glee of pensioners and the ballot-box profit of their representatives. Even when the money began to run out in 1983, a bipartisan commission saved the day--for the next 75 years, it was then thought--by recommending rather minor cutbacks in benefits and very major increases in taxes, the last of which took effect only in
1990."
Yet you told me to cite a source for my claim about SS. >:(
Around here, the hospital in the retirement community of Sun City tended to have lower than average costs than other private hospitals in the area for the same procedures, and that hospital received a much higher proportion of its payments from Medicare. About the only overall cheaper hospital here was the county's, which also received a higher percentage of Medicaid and Medicare than normal. In fact it used to be such a cash cow that the county used its profits to cover the county's revenue shortfalls.
I don't think any innovations in health coverage have been created by the private insurance system in the past 20+ years; it's basically just copied the federal government's cost controls while cherry picking patients.