|How the sausage is made|
An entitlement program is a government-sponsored program designed to provide guaranteed benefits to its citizens, through right or legislation. Generally, the term is associated with the many forms of welfare.
In the United States
In present-day politics, the term "entitlement programs" is used as a snarl word by conservative politicians and pundits to describe any benefits program that uses tax dollars. Generally speaking, they use the term to encompass the collective social programs established by prior generations; Social Security, Medicare, Medicaid, and WIC are all included in this grouping. Conservative arguments against entitlement programs range from privatization to dissolution, claiming that the entities are mismanaged, too expensive, and/or rife with corruption.
Not entitlement programs
Another criticism is that calling Medicare and Social Security "entitlement programs" is a misnomer, as these programs are argued to be funded by the wages of laborers with the intent that they will be used later by the same individuals--that is, the people who are to eventually benefit from the program are the ones who are allegedly funding it.[note 1] Which is equivalent to the bank saying that the money in your savings account is welfare, instead of being entitled to it because it's your money they are holding onto till you withdraw it.
To clarify: The paystub of any American worker appears with the following categories (as needed):
- Wages (hourly, salary, overtime, bonuses, holiday/PTO wages, declared gratuities)
- Compensation (mileage, depreciation, compensation for other expenses)
- Taxes (based on wages):
- Federal Income Tax
- State Income Tax (if necessary)
- Local Income Tax (if necessary)
- Medicare Tax
- Social Security Tax (sometimes labelled "FICA")
- Voluntary Pre-tax deductions[note 2] (401(k), medical/dental/vision insurance premiums, FSA/HSA investments)
- Voluntary and Mandatory Post-tax deductions (Life insurance premiums, Short-term disability/long-term disability, memberships, union dues, garnishments, alimony/child-support, other non-business expenses)
All of the withholdings under "Taxes" are calculated based on the total of the values under "Wages". Welfare programs such as Medicaid and WIC are funded by collections from the Federal Income Tax bucket and deficit borrowing, along with all other federal government programs (military, national parks, etc). State programs (running the government, state highways, state parks, etc) are paid for by collections from the State Income Tax bucket as well as other sources of state revenue (usually lotteries or legalized gambling establishments). Medicare is paid for by collections from the Medicare Tax bucket. Social Security is paid for by collections from the Social Security Tax bucket.
Social Security pays a minor monthly stipend to retirees once they reach the retirement age, which has been pushed back several times over the last several decades. In a program unrelated to worker benefits, it also pays out disability benefits to qualifying individuals.[note 3] Medicare pays for some retirees' medical bills--the benefits of which have changed over the years as politicians modify the bill to manage expenses and close loopholes. The original intention was to ensure that problems that occurred during the Great Depression (where wage earners had no pension, retirement funds or money for medical care) did not happen again.
If an individual never earns a wage in their life, they won't collect Social Security Retirement benefits when they reach the retirement age (at least for themselves--they might collect from a spouse's benefit).[note 4] Those that collect wages and pay Social Security will receive Social Security benefits commensurate to the wages they collected over their working lifetime upon retirement age.
The self-employed owe and pay into Social Security and Medicare every year during tax season, paying both the employer and employee contributions, or twice as much as an employed person. There is an upper limit to the amount of income that is considered taxable in this respect. Current political/economic arguments seeking better income equality (such as the Occupy Wall Street movement) seek to raise this limit (so that millionaires pay more into Social Security and Medicare[note 5] to keep the programs solvent). The problems is that, based an a system where the amount paid determines the size of the benefit, and most people's lifetime contributions are paid out in two years, the millionaires and billionaires would be nursing the public spigot for all it's worth.
Social Security also pays benefits to the survivors of the deceased. So unlike other "entitlement programs", which only pay to the living, the earnings are not lost upon death and can be used to help pay bills and keep elderly widowed grandparents from being homeless or having to rely on charity for meals. This distinction is important--Social Security Retirement isn't "free money" to those who aren't working; it's earned money being paid back. Wage earners receive annual statements from Social Security to let them know what their expected benefits will be, and those funds are paid out upon retirement as long as they are needed (that is, until the earner, their spouse and any invalid dependents are deceased, and any children reach the age of 18), not until the funds "run out".
Post-Keynesian economists would say that Medicare and Social Security are still mostly government-created entitlements though. As post-keynesians claim that taxes do not fund federal spending. They would argue that the taxes spent in the "name" of "funding" and receiving entitlement program money is just a form of means testing, and not actual participation in the allocation of money to entitlement recipients, with the exception of their labour power. This seems like nitpicking, but if this is true, it implies that the monetary "funding" of entitlement program in the absence of an inflation threat is mostly just taxpayers throwing their money away because the government wanted to make them feel like they are somehow participating in government policy and their future entitlements.
Many conservatives mark unemployment benefits (sometimes referred to as "the dole") as an entitlement program, snarling it as a "laziness tax paid for by business owners". Unemployment benefits (in the United States) are only paid after a long period of unemployment (usually six weeks), and only if the grounds for unemployment were beyond the control of the unemployed; e.g., if a business had to downsize due to reduced revenues, the laid-off employees would be eligible to collect unemployment, whereas if they were let go because they came to work drunk or didn't show up because they were in jail for a felony, they would likely not be eligible. Carrying unemployment insurance is often a mandatory business expense.
Additionally, one of the requirements for collecting unemployment benefits is actively searching for a new job—and those benefits also don't last forever.
Why should we have them?
Incidentally, the Preamble of the Constitution states that part of its purpose is to "promote the general Welfare", a part that Republicans seem to forget, which begs the question as to what the Founding Fathers had in mind when they wrote it in there.
- Social Security Reform: Legal Analysis of Social Security Benefit Entitlement Issues. Emily M. Lanza Legislative Attorney & Thomas J. Nicola Legislative Attorney. Prepared for Members and Committees of Congress. Congressional Research Service. September 17, 2014
- The Wikipedia entry for "Entitlement", as of 18 November 2011, lists Social Security and Medicare as entitlement programs, which begs the question as to who the the author is.
- Also known as Section 125 deductions.
- Some Disability benefit recipients, such as disabled infants who survive into adulthood, may never have worked or paid into the Disability fund.
- They may qualify for SSI payments, however. 
- Assuming a change in the law could withstand the Equal Protection clause; Gay marriage bans have successfully challenged US & State tax laws under the Equal Protection clause, opening the door now to challenges against progressive taxation, as well.