The Offense Continues
In my last article, entitled The Looting of America, I aptly described the frenzied increase in people taking advantage of — many abusing — government entitlement programs. The consequences of this are exploding our deficit and endangering the very same safety net that our truly needy depend upon. Pointing out the abuses of the system apparently highly offended a lot of people — ironic, because it underscores exactly what the problem is and why it deserves further discussion.
Before I continue my offense, let me make sure I take full credit for the content here which may very well offend in the future. People ask me why I allowed such offensive opinions and cartoons to be published in our last newsletter. What is said is intended to be informative, not politically correct. The articles I write come from my pen, and when we run an original cartoon, the idea comes from me. I work with an artist, and he draws what I tell him to draw. So if you have a complaint, your complaint is with me.
Most of the complaints that I read after our last newsletter were from people receiving some kind of government money, payment, or stipend. Their most common complaint was, “Don’t pick on me – I earned this! I paid into the system for years. It was promised to me, and it’s mine, I tell you, it’s mine.” And therein lies the main problem. We have sent our politicians to Washington to bring home the bacon. And, why shouldn’t they? Except that there are 535 representatives there, all trying to carve up this big pig – the real problem is that the amount of bacon we’re expecting exceeds the size of the whole hog.
Of course there should be a safety net. But all of these people getting from the government – whether they believe they’ve earned it or they’re entitled to it for some other reason – are drawing from an unsustainable scheme.
Now that’s offensive.
Our current economic issues are a simple supply and demand problem. There is a lot of demand for free goodies – some free, some earned – and an ever smaller supply of people willing and able to hoof the bill. Political consultants will tell you that people have a hard time believing that they voted for the wrong person. It is easier for them to believe that they were tricked by the politician into voting for them. Well, if the politicians have been lying, then it is a lie we all wanted to believe. According to polls a large percentage of people continue to believe that the government can continue its deficit spending in perpetuity. One only has to look at this last month’s elections in France and Greece as examples.
Of our social programs, one of the best-intended, but least-sustainable, is Social Security. It’s broke.
The source of income funding the Social Security trusts is payroll taxes. Money that you and I pay straight from our paychecks to Social Security. However, that’s a declining income source. First of all, the 16 workers for every Social Security recipient from the first days of Social Security is now down to 3.3 workers per recipient. Second, we’re living longer. In 1935, the average American died at 61.7 (59.9 for males, who made up the majority of the workforce). By the start of the Baby Boom in 1946, life expectancy had risen to 66.7; by 1964, 70.2. Those born in 2010 are expected to live to an average age of 78.7. We’ve gone from anticipating a manageable number of recipients drawing payments for a short time to a large pool of recipients drawing funds for more than a decade.
Add to that what happens to the money we pay in. It’s not being held in a bank, or a secure vault somewhere. Our real dollars have been exchanged for IOUs from the US government — unique US Treasury obligations called special issues. These are securities sold only to the Social Security Trust Funds.
The so-called assets of Social Security that you may be expecting to someday receive are really just the promises of the US Treasury Department to return cash to the Social Security Trust when it’s needed. Meanwhile, as the government squanders more and more money on buy-a-vote social programs that are not sustainable by current tax dollars, it’s conveniently “borrowing” the hard-earned cash you dutifully paid to Social Security and spending it on 435 Congressional districts worth of bacon.
Oh yes, we also recently reduced the amount of payroll taxes that go directly to Social Security. That will only add fuel to the fire.
And while there is certainly a lot of cash going in to Social Security, it’s coming right back out to pay benefits to retirees. Last year, Social Security paid out more than it collected for the first time in history, which means that its trustees had to redeem those special issue Treasury IOUs to cover the difference. And we’re only just beginning to see the effects of retiring Baby Boomers. Accelerate that process, and pretty soon Social Security will be turning more and more to the Treasury Department and its special issue IOUs. But if the special issues can only be sold to the U.S. Treasury – and the government is running deficits of a trillion dollars a year – where will the Treasury get the money to repay its debt to Social Security? Even if the special issues are backed by the full faith and credit of the United States Government, how much faith can you have in an entity that’s nearly $16 trillion in debt? At some point, we have to question the value of the assets we’re holding, including the Social Security benefit we have all been promised. It’s no different than holding a note on any failing entity – if the entity is broke, its IOU isn’t worth the paper it’s printed on.
And even if the Social Security trusts can redeem their Treasury notes, their trustees just released a report indicating that the trust fund will now be exhausted in 2033, three years earlier than was thought just last year. Social Security Disability may be bankrupt by 2017, according to the Congressional Budget Office.
Doesn’t much sound like the Social Security “lock box” that Al Gore advocated in 2000.
Here’s something else to contemplate. Everyone’s worried about how much US debt China owns, but its share of our debt is only 8%. Social Security’s share of US debt is a staggering 17%, making it the holder of the single largest portion of US debt.
Recently, protestors in Greece stormed a television station and pelted a conservative commentator because he said what they didn’t want to hear – that they were going to have to take less.
These people are in denial. They want to shoot the messenger. That’s where the problem is.
Here in the US, we have the same problem. The American public is addicted to debt and enabled by its politicians. And what the public is demanding is putting off payment of debt to a point in the future when our children’s generation will be paying it off. Not especially fair.
We’ve all heard about 12-step programs, which have helped many people suffering from addiction. Maybe that’s what we need for ourselves as taxpayers and politicians – a 12-step plan to conquer the American debt addiction.
Most addicts don’t begin any kind of reform until they’ve hit rock-bottom, which is why every 12-step program I’ve seen starts with the admission that the addict is powerless over his addiction. It’s clear to me that we, as a citizenry, are indeed slaves to our need for more and more government programs. Let’s hope that the American people wise up and stage an intervention while there’s still time.
Let me adapt the 12-Step approach so successful elsewhere and propose it for all of us. Here is what it might look like:
The Twelve Steps of Deficit Anonymous
- Admit we are powerless over our spending addiction and that our government has become unmanageable
- Come to believe that a righteous people is greater than any contrived bureaucracy
- Make a decision to become responsible for ourselves and to those who are truly needy
- Make a searching and fearless moral inventory of ourselves, for that is the path to restoring our sanity
- Admit to ourselves that promises were made that are unsustainable
- Admit that we have strayed from the path of fiscal righteousness and pledge to have the moral fiber to return to the correct path
- Pass a balanced budget amendment
- Make a list of all those we have harmed through our fiscal irresponsibility
- Make amends to those we have harmed (within fiscal constraints)
- Admit that this is a nation of laws and the power of those laws is derived from the Constitution of the United States; that the power to govern is limited by the Constitution, and, through extension, the will of the people
- Improve our fiscal, historical, and Constitutional consciousness through study and meditation, for without this knowledge we are bound to stray
- Commit ourselves to a fiscal rebirth, providing guidance and prosperity for posterity and as an example for the world
And remember, you can’t blame the politicians. They’re just responding to public demand. If enough people called up and said they wanted greater fiscal responsibility, the politicians would deliver it – they want to stay in power.
The cold reality is no matter why you’re receiving a government check, the only way to get back on a path to fiscal sanity is if we all take the treatment. No matter what you were promised. And if we don’t, there’s a table full of kids who will soon be screaming, “You didn’t make that deal with me. PAY YOUR OWN BILLS!”
Source: Northwest Territorial Mint