I'm Old! Gimme Gimme Gimme! (Repeat 77 Million Times)

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Franklin Roosevelt's reach beyond the grave is longer than Ronald Reagan's.

Slightly over half of all Americans – 52.6 percent – now receive significant income from government programs, according to an analysis by Gary Shilling, an economist in Springfield, N.J. That's up from 49.4 percent in 2000 and far above the 28.3 percent of Americans in 1950. If the trend continues, the percentage could rise within ten years to pass 55 percent, where it stood in 1980 on the eve of President's Reagan's move to scale back the size of government.

That two-decade shrink-the-government trend now appears over, if for no other reason than demographics. The aging baby-boomer generation is poised to receive big payments from Social Security and government healthcare programs.

Nothing really new here, and we knew this was coming since, oh, 1964 or so. In the future, changes in the tax system will have next to no relationship to changes in the entitlement state—it will expand, regardless of who's writing the laws, to make life ever-cushier for Boomers.

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  1. the entitlement state

    Keep in mind that — at least regarding Social Security — the federal government has a moral and legal obligation to repay the money it forcefully stole from the “participants”. You can make the same case for Medicare. That’s why it’s so insidious. Congress creates a Ponzi scheme for political reasons and counts on the beneficiaries to keep the pressure on. And who can blame the beneficiaries who want to recoup what was stolen from them in the first place (“who” meaning anyone old enough to grasp such complicated issues, i.e. Americans over 30)?

    life ever-cushier for Boomers

    Yes, even libertarians play the age card and engage in class politics. This is going to get ugly. Cue the Gen-whatever whiners.

  2. The aging baby-boomer generation is poised to receive big payments from Social Security and government healthcare programs.

    Get ready for some serious tax raises, a la France or Germany, in order to pay for all this. Productive people will be taxed with the levels of 1979-1980, just to keep up. If the Demagogues and the Republi-cons have their way and drive away the immigrant labor, tax levels will have to go higher. This, if the FedGov wants to avoid the printing press and the return of the Weimar Republic.

    This is the legacy of Bismarck/FDR/LBJ. May Hades hang them from their privates for all eternity.

  3. The solution for the Social Security crisis is for Americans to have many many more babies, and to die earlier. I propose the following:

    1. Abolish all birth control and abstinence programs from schools. We need more people!

    2. Revoke all smoking bans and taxes; smoking must be encouraged from a young age. We need people to die sooner!

    3. No more prescription drug benefits! Again, we need people to die sooner!

    4. Dr. Kevorkian to receive Medal of Freedom.

    5. “Logan’s Run” should be required viewing for all citizens.

    (If anyone thinks I’m serious…)

  4. Does these numbers include people who work for military contractors?

    Around here more people admit to being that than confess to being SS recipients.

  5. ed,

    I think the SCOTUS has already ruled that there is NO legal obligation to pay SS benefits.

    Someone correct me, and/or supply case name.

  6. My Dad is one of those anti-illegal aliens guys, I’m an open borders guy. The only argument that even comes close to working with him is “Hey, if your generation didn’t demand so much, my generation wouldn’t need so much help paying for it. Every migrant I want to give amnesty to tomorrow will help me pay for your retirement tomorrow.”

    Every other argument I have gets drowned out in a sea of Lou Dobbsisms.

  7. the federal government has a moral and legal obligation to repay the money it forcefully stole from the “participants”. You can make the same case for Medicare

    In a representative democracy, only taxpaying citizens can have a moral obligation. There is no legitimate reason that today’s taxpayers should be obligated to pay for the cock-ups of the current batch of retirees. We may do it anyhow, but that’s because we’re nice, not because of a sense of obligation.

  8. “…the federal government has a moral and legal obligation to repay the money it forcefully stole from the “participants”. ”

    Look at it this way- those “contributions” were wasted, just like the rest of your tax payments.

  9. I think the SCOTUS has already ruled that there is NO legal obligation to pay SS benefits.

    However the politcal consequences of messing with SS are disasterous to anyone who tries.

  10. Love the title, I laughed out loud when Abe Simpson said that.

  11. MP, I understand where you’re coming from. But here’s the only problem I have with that.

    Libertarian thinkers assume that free market outcomes are just outcomes. We will stipulate that as true for the purpose of this discussion.

    If it’s true, that means that non-free-market outcomes are UNJUST outcomes.

    We haven’t had a free market in retirement saving in decades, so we have to take it as a given that we currently have unjust outcomes.

    But in my book, the entity responsible for the unjust outcome has the liability for that outcome. In this case, that entity is the state.

    You may think that kind of collective obligation isn’t morally possible, because it’s the individual taxpayers who have to pay – but if an employee of the state while on the business of the state destroyed your property [drove their tank through your house or something like that] you would pursue the state for satisfaction of your claim, and it would be tough dots for the taxpaying citizens of that state.

    In this case, previous employees of the state [Congresspersons, the President, and bureaucrats at Social Security] harmed millions of citizens by taking away money those citizens could have saved for their own retirement. They also harmed those citizens by making false promises. Having caused those harms, it’s now up to the state to make good.

    I realize that means the state will probably engage in even most injustice, and that conceptually we’re trapped in a loop as a result – but I really don’t know what to tell you about that.

  12. But how many receive net income from such programs in any given year? How about summed over any given 5- or 10-year period? And is the value of their work to gov’t for payments deducted, or is it figured as for tax purposes, i.e. as null? That is, does a gov’t employee making $X have the entirety of that $X counted in Schilling’s analysis, or is it $X-$Y, where $Y is that employee’s total contribution to job production?

    Oh, there’s a link to RTFA? Well, I’ll post this anyway.

  13. Keep in mind that — at least regarding Social Security — the federal government has a moral and legal obligation to repay the money it forcefully stole from the “participants”.

    How so? Governments have never been under an obligation to return tax funds to those that paid them. That’s the whole point of progressive taxation and entitlement/redistribution programs: to take a lot of money from some people, and pay it out to others. SocSec is just another income redistribution program – don’t tell me you believe there’s actually a trust fund out there where they deposit your taxes for your personal use in the future.

    Even within the SocSec universe, many Social Security recipients never get back everything they put in (those that die young).

  14. Isaac B

    yep. untouchable. pee on the third rail and, no matter what Mythbusters may have shown, you’ll get electrocuted.

    Although, SocSec is the least of our worries: Medicare truly frightens me.

  15. R C Dean

    you could have also mentioned the inverse of what you just posted: most SS recipients receive their full, inflation-adjusted, contributions within 3-5 years of retirement, then continue to collect for another 20 years.

  16. True Social Security, she insisted, was canned vegetables and slaughtered pigs in your cellar.

    Rose Wilder Lane (as quoted by Brian Doherty)

    Alternately:
    After 215 years of trying, we have finally discovered a special interest that includes 100 percent of the population. Now we can vote ourselves rich.

    P J Orourke

  17. (“who” meaning anyone old enough to grasp such complicated issues, i.e. Americans over 30)

    what happens at age 30?

  18. There is no way that 85% effective tax rates will be tolerated by the working populace in this country. In the end if the people via their government choose not to cut benefits, the least painful way to pay for the debacle is to print fiat money. It is what government’s of various stripes have always done. Devaluing the U.S. dollar by about 40% in a short and painful 3-year period of time should about cover it. Pay the boomers their “benefits” in dollars that are worth significantly less than they were when the benefits were promised. CPI has been massaged so much (and is being set up for yet another revision….) that the COLA’s wouldn’t rise much above the current 3% per annum. Simple to see how this could be done with our foreign debt holders shouldering much more of the burden than the locals, taking one last free ride from being the world’s reserve currency. Once the generational storm passes, we’ll all be wishing we owned Chinese Renminbi.

  19. SS is a disaster. The statists will never ever admit to what it truly is: a welfare program.

    99.9% percent of people would not need it if they took their 12% of the entire life’s earned income and saved it for retirement. The .01% that couldn’t save enough? – pay for them from the general budget. Federal, state, local, whatever. There would be plenty to cover those who truly need it.

  20. Settle down, people.

    If the economy averages 3.3% annual growth, there will never – never, unto the infinite time horizon – be a shortfall in Social Security funding, even without tax increases.

    Since the end of the Civil War, economic growth has averaged 3.4% annually. That’s a period that includes the Great Depression.

    You want to make your moral argument against the program, fine, but the sky is not falling.

  21. what happens at age 30?

    downstater,

    Carousel.

  22. “In this case, previous employees of the state [Congresspersons, the President, and bureaucrats at Social Security] harmed millions of citizens by taking away money those citizens could have saved for their own retirement”

    I wonder how many folks are gonna have SS as their sole means of support in retirement?
    Did the amount “stolen” from them actually keep them from participating in some other retirement planning? Or did they convince themselves that Uncle Sam was lookin out for them and they didnt need to worry?

  23. “He added up the number of federal, state, and local government workers, plus private sector workers who owe their jobs to government.”

    The study probably wasn’t worded that way, because that last term — workers who owe their jobs to gov’t — would be subject to enormous uncertainty.

  24. joe

    Are you seriously suggesting that we can grow our way out of a problem?

    That sounds vaguely optimistic.

  25. The answer to the previous question is Flemming vs. Nestor. You have no right to the money you pay in to SS.

  26. Thanks, Tim.

  27. Albionite,

    Absolutely. Economic growth won’t solve every problem, but when it comes to creating wealth, it’s da bomb.

  28. Since the end of the Civil War, economic growth has averaged 3.4% annually.

    Yes, but it required a lot of carbon emissions to achieve that.

  29. SS is one of the more benign government programs. It’s just moving money around. The government takes a cut, of course, but it’s only 2% or so. The 2% is the real economic cost, not the budget figure. It’s misleading to compare it with things like the military or NASA, where 100% is consumed by government employees and contractors.

  30. SS is a disaster. The statists will never ever admit to what it truly is: a welfare program.

    Actually the problem is that they will not admit that it is a taxation program.

  31. OK, joe

    So let’s do everything we can to encourage such growth! Like, cut taxes.

  32. Albionite,

    Yes, let’s “cut” them back to the levels they were during the longest period of peacetime economic growth in American history.

    You know, the 1990s.

  33. Why cant we pass a law that retail prices must stay the same.
    Then the gubmint prints a PILE of money. Said gubmint gives every person 1 million dollars.
    problem solved.

    that also would encourage growth in the freakonomy

  34. 99.9% percent of people would not need it if they took their 12% of the entire life’s earned income and saved it for retirement. The .01% that couldn’t save enough? – pay for them from the general budget. Federal, state, local, whatever. There would be plenty to cover those who truly need it.

    Uh huh. And who would NOT “truly need it”, except for a few chumps who foolishly saved their money and now have to fork it over to everyone who didn’t? What you propose would be vastly more unfair to the upper middle class than SS is.

  35. Did the amount “stolen” from them actually keep them from participating in some other retirement planning?

    Not in my case, no. And most people of any means whatsoever are saving in other ways (cash, IRA, 401K, pensions, bonds, homes, etc.) but I would prefer to take the money earmarked for SS and invest it myself. I can make 10% easily. Not that they don’t owe me what they have already confiscated from me.

  36. Joe,
    If the economy averages 3.3% annual growth, there will never – never, unto the infinite time horizon – be a shortfall in Social Security funding, even without tax increases.

    “The economy” does not exist outside human intervention. Thinking that the “economy” is going to grow at a steady rate as if it were a plant is indicating a lack of knowledge on economics.

    The problem, Joe, is that Social Security generates a series of perverse incentives that create unforseen distorsions in the market. In the first place, the wealth distribution generates more demand that it would exist in an unfettered market – probably. For example, unproductive seniors would demand more housing, medicine and care in greater quantities than what the market could provide, raising prices across the board (as it is happening right now, by the way). The extra taxes that the productive elements of the economy have to dole out distorts their budgeting decisions, even encouraging people to use credit more just to compensate. The costs of calculating the withholding for each employee affects the resources allocation for each company in different ways, et cetera.

    The economy, thus, is not like a solar system, where simple rules keep all planets going round the same star. It is extremely more chaotic, like the weather – can you say for sure how the weather will be from today until, say, 10 years?

  37. Social Security is an amazingly popular program because it’s produced extremely good results.

  38. Joe,
    in case you havent heard, the bastard Clinton got a hummer in the whitehouse from a woman not his spouse. That nagates any other success he may have been associated with.

    Try to keep up my friend. Bush may be a lying, spying, stiff-necked, obstinate, illiterate, spineless, hopeless, dickless, brainless snake-eyed pile of monkey shit. But he didnt let a fatty do the slurpy.

  39. Let’s not get too teary-eyed about Ronnie. It was RR who bragged, in 1986, that his administration had given more aid (i.e., cash handouts) to farmers than all previous administrations combined!

    Ronnie was taking advantage of inflation, of course. He always had trouble with that. But it sure sounded good on the stump.

  40. SS is one of the more benign government programs. It’s just moving money around.

    This is the kind of comment that makes education in economics so important. Maybe the government is “just” moving money around, but so does a con artist using a Ponzi scheme. The money had to come from somewhere…

    Did the amount “stolen” from them actually keep them from participating in some other retirement planning? Or did they convince themselves that Uncle Sam was lookin out for them and they didnt need to worry?

    If you think people do not convince themselves that the FedGov is going to “help” them, then you have been living under a rock all these years – just consider how many people expected the Gov to pull them out of the Big Easy after Katrina . . . even with water up to their eyebrows.

  41. Dave W. | April 16, 2007, 10:52am | #
    Does these numbers include people who work for military contractors?

    Around here more people admit to being that than confess to being SS recipients.

    Aren’t you lurking in the Great White North these days? Are there that many US military contractors or SS recipients up there?

  42. Francisco,

    “Thinking that the “economy” is going to grow at a steady rate as if it were a plant is indicating a lack of knowledge on economics.”

    Would you care to point out where I predicted steady growth?

    “The problem, Joe, is that Social Security generates a series of perverse incentives that create unforseen distorsions in the market.” It’s been in place for the past 70 years, and during that period, growth has beaten the 3.3% growth rate.

    “It is extremely more chaotic, like the weather – can you say for sure how the weather will be from today until, say, 10 years?” And here we see the common misunderstanding between predictions of a specific event vs. of a collective event. I don’t know what the stock market is going to do next year, but I know that it will average 7-10% annual growth over the next 20.

  43. the longest period of peace-time economic growth in American history was the latter decades of the 19th Century, when there was no income tax.

  44. There were numerous depressions in the late 1800s.

  45. joe

    so?

  46. Economic growth won’t solve every problem, but when it comes to creating wealth, it’s da bomb.

    Then Congress should get busy and mandate economic growth! While they are at it, they should also pass a reduction in the law of gravity…

  47. Having caused those harms, it’s now up to the state to make good.

    Treating “The State” as an independent entity wholly separate from the body it represents sets up a whole hosts of problems. It is why I disagree with suing “The State” for compensatory damages. It is one thing to hold actors of the state directly responsible for their actions. It is entirely another thing to put taxpayers directly on the hook for poor choices made by their political representatives, especially when we’re talking about dead representatives of dead citizens.

  48. Since the end of the Civil War, economic growth has averaged 3.4% annually.

    If the only thing needed to keep SS solvent is growth, then there was no need for any of the SS tax percentage increases over the hsitory of the program.

  49. Would you care to point out where I predicted steady growth?

    I did not say “predict”. I say “thinking” it will. If you did not “think” it will, you would not have mentioned it.

    It’s been in place for the past 70 years, and during that period, growth has beaten the 3.3% growth rate.

    Adjusted for inflation? How much of that “growth” constitutes government outlays (which means money taken at gunpoint from the serves)? How can you be sure that this historical metric will be followed by the economy? The SS base is, by the way, diminishing steadily, as more and more people retire. See http://www.gao.gov/new.items/d05193sp.pdf Page 19 of Section II

    Again, your problem is thinking that the economy is this system that will follow a certain pattern, just because it has been following a “pattern” before. It does not have to, however, because the economy is driven by people’s decisions (myriads of them) every day, and these are affected by many conditions/desires/fears/incentives/reasons.

    I don’t know what the stock market is going to do next year, but I know that it will average 7-10% annual growth over the next 20.

    It is your money…

  50. Albionite,

    So, the economic growth between the Civil War and the Spanish-American war was not “uninterrupted.” It was repeatedly interrupted by depressions.

    Francisco,

    “If you did not “think” it will, you would not have mentioned it.” And indeed, I didn’t mention it. Anywhere.

    And yes, the 3.4% figure is real GDP growth.

  51. 99.9% percent of people would not need it if they took their 12% of the entire life’s earned income and saved it for retirement.

    Ironchef, I entirely agree, but the decision of saving for the future should be left to each individual. It is one thing to suggest one should save for the future, another entirely different to “suggest” it at gunpoint, as the FedGov is currently doing, even if the suggestion is just to place your money in a private investment fund.

  52. Joe, you DID mention it:

    “If the economy averages 3.3% annual growth, there will never – never, unto the infinite time horizon – be a shortfall in Social Security funding, even without tax increases.”

  53. The bottom line is we are screwed. The problems created by the entitlement programs are intractable; they can not be solved. There is going to be a big, fat, deep depression (or hyper inflation) and period of misery in the US. Those who live through it will vow, “never again”.

  54. Oh, for God’s sake, joe!

    Clearly, I’m going to have to go to Boston and kill you.

    (As good excuse as any for a trip. Nice pubs there. I can expense this, I think. Prepare yourself to die…or buy me a pint instead.)

  55. Franklin Roosevelt’s reach beyond the grave is longer than Ronald Reagan’s.

    I don’t know, David, The Gipper’s reach beyond the grave is looking pretty long to me:
    http://www.imdb.com/title/tt0760187/

  56. Yes, let’s “cut” them back to the levels they were during the longest period of peacetime economic growth in American history.

    You know, the 1990s.

    Real taxation has steadily increased. There has never been a cutback of taxation, except maybe immediatly after WWII. REAL taxation is the amount of GDP consumed by the state. The tax rates can kind of determine how the burden will be allocated throughout the economy, but the REAL cost to society is the amount of finite goods and services that the state consumes.

    If the government borrowed money, and purchased 100% of the oil on the market in the U.S., it would be taxing 100% of the oil, even though technically it would not be taxing anything because it “borrowed” the money. If the government consumes 100% of the oil, there is no oil for the rest of us, no matter how you shuffle the numbers.

    Taxes were lower, at all points in U.S. history than they were now. No president has ever cut taxes, certainly not G. W. Bush as you implied. Taxes were lower during the Clinton years than during the Dubya years.

  57. Francisco,

    Do you know what the word “average” means? It means I’m not talking about any individual year, but the mean of each year’s growth over a period of time.

  58. Anyone know how much a newly retired person will take from the sysytem assuming a 20 year retirement? Perhaps someone could make it worth my while….

  59. the REAL cost to society is the amount of finite goods and services that the state consumes.

    Right. To reiterate my point, SS does relatively well on that score. 98% of the money just passes through.

    Same with interest on the debt. Big part of the budget, but it’s not consumption.

  60. Have they released Logan’s Run on DVD yet?

  61. JKP,

    No, but it’s being read into the Congressional Record as we speak. Look for a dome to be built in West Virginia.

  62. I predict the politicians attempted way out of the fiscal noose of social security will be the means testing of benefits.

    It won’t matter whether someone paid into SS their entire life, if they happened to be otherwise sucessfull and wound up with too much wealth, their SS benefits will be eliminated to enable continued payouts to those who really “need” it.

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