Aging Populations and State-Provided Health Care will Stress State Systems to Collapse

Posted by PITHOCRATES - June 16th, 2013

Week in Review

When people provided their own health care and retirement nest eggs it didn’t matter if the population was aging or getting younger.  For each person planned to take care of him or herself.  But when the government took over health care and retirement nest eggs the age of the population began to matter.  For when the state provides these benefits they have to pay for them via taxes.  And if the population is aging that is a big problem.  Because more people are leaving the workforce and consuming health care and pension benefits than there are entering the workforce to pay for them.

Which means the government has to increase tax rates on those paying for these benefits.  And when people are living longer into retirement it really throws a wrench into the state’s plans.  For it is requiring a level of taxation that simply isn’t possible.  And this is exactly what the baby boom generation is doing to advanced welfare states throughout the world.  It’s causing greater governmental expenditures.  Resulting in larger budget deficits.  And financial crises (see Our aging population set to put a heavy toll on our systems, and we’re not ready by Simon Kent and Shawn Jeffords posted 6/14/2013 on the Toronto Sun).

The first baby boomers began turning 65 in 2012, and by 2036, one out of every four of our neighbours will be elderly…

“We don’t have a health care system in Canada, we have an acute care system,” [Sharon] Carstairs [former senator and was the first woman to lead an opposition party in Canada] after becoming Manitoba’s Liberal leader in the ’80stold QMI Agency.

The very sick are cared for well but we don’t do a good job of keeping others at home and out hospitals and high-cost facilities.

“We’re using acute care hospital beds to hold thousands of Canadians who should be in long-term care or home care,” she says…

Canada has a “little bit of breathing space” for preparations to cope with aging boomers, but not much, suggests University of Toronto professor emeritus David Foot, one of the country’s most respected demographers.

“We need to get this right to prepare for that boomer onslaught,” Foot says. “We can have an excellent system if we choose to.”

Zero hour is 2027.

“The first boomer born in 1947 reaches 80 in 2027,” Foot says.

That’s when the critical mass, the largest bulge of the baby boom, approaches 80 and will require the most care of their lives…

Canada needs to train gerontologists, therapists, psychiatrists, palliative care nurses and specialists, replace the workforce of aging nurses and the army of some 3 million volunteers who currently provide the bulk of in-home care to seniors, say experts…

“The sheer number of baby boomers that will be drawing on the system will magnify and put pressures on the systems that has not been felt before,” he says.

Both the United States and Canada have aging populations.  And a baby boomer bulge coming down the pike.  It will make it very difficult in Canada.  And far worse in the United States.  For they have about 9-times the population of Canada.  And will have 9-times the baby boomer bulge.  Making it a very poor time for the state to take over more pension and health care spending obligations.  Which is exactly what the Americans did by passing Obamacare into law.

The United States is already suffering record trillion dollar deficits.  By the time Obamacare pays to train gerontologists, therapists, psychiatrists, palliative care nurses, specialists, etc., and builds nursing homes to handle the baby boomer bulge the deficit will soar even higher.  Unless there really are death panels in Obamacare.  Which may be the only way not to break the fiscal back of the nation.  Well, there’s that.  Or they could let people provide their own health care and retirement nest eggs like they once did.  And then the age of the population would be irrelevant.  For it basically comes down to these two options.  Either we pay for our own health care and retirement.  Or the government will have to figure out how to cut costs.  And how do you do that when the largest cost is caring for the very old and the very sick?  In a word, death panels.  Well, two words, actually.

Welcome to the brave new world of Obamacare.

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LESSONS LEARNED #40: “Big Government is more efficient when old people die sooner.” -Old Pithy

Posted by PITHOCRATES - November 18th, 2010

Big Government is a Ponzi Scheme

When it comes to government funding, birthrates and death rates are key.  Think of government as a great Ponzi scheme.  Ponzi schemes work when more people pay into the scam than collect from the scam.  Like in a pyramid scheme.  Those collecting benefits are the few at the top.  Those paying in are the many at the base.

An increasing birthrate means more taxpayers for each successive generation.  This keeps the base of the pyramid growing.  A steady or increasing death rate keeps the top of the pyramid smaller than the base.  A declining death rate, on the other hand, will flip the pyramid upside down.  Because the population at the top will grow larger than the population at the bottom.

Big Government tries to keep as many people as possible dependent on government.  Lots of different programs attach lots of different people to the welfare state.  But when it comes to big numbers, old people can’t be beat.  The lion’s share of government assistance goes to them via Social Security and Medicare.  And they are the most politically active.  That means they vote.  And when they vote, they vote to keep their benefits.

Of course, this is a dual-edged sword.  Yes, old people can provide a loyal voting base to sustain Big Government.  But on the other hand, the cost of their benefits is growing so large that it is undermining the very foundations of Big Government.  How?  By the double whammy of a falling birthrate and a declining death rate.  For various reasons, fewer people are being born.  And old people are living longer.  This has flipped the pyramid in the great Ponzi scheme upside down.  The growth rate of those collecting benefits is greater than the growth rate of those paying into the scheme.

An Increasing Life Expectancy is Bankrupting Social Security

FDR signed Social Security into law in 1935.  The average life expectancy in 1930 was approximately 59 years.  The retirement age in the Social Security Act of 1935?  65.  That’s right, the average American would have been dead for 6 years before qualifying for Social Security retirement benefits.  That’s a 6 year cost cushion.  But not everyone died at 59, though.  So a lot of people lived to receive those benefits.  But one thing the actuaries were sure about then, this Ponzi scheme was going to be a big winner.  For Big Government.

The average life expectancy increased to approximately 70 years in 1960.  In other words, people were living approximately 11 years longer.  That 6 year cost cushion just became a 5 year cost exposure.  That’s a swing of 11 years.  The actuaries in 1930 never saw this coming.

Social Security had its first crisis in 1975.  To save the program, they increased payroll taxes and decreased benefits.  Another crisis came in 1983.  Now they started taxing some Social Security benefits.  Even taxed federal employees (who previously didn’t pay these payroll taxes).   And they would increase the retirement age for later retirees.

By 2000, the average life expectancy increased to approximately 77 years.  That’s another 7 years.  That’s a swing of 18 years from 1930.  A huge actuarial miscalculation.  The population was getting far older then the FDR administration ever guessed.  And, to make matters worse, the birthrate was declining.

A Declining Birthrate is Bankrupting Social Security

The birthrate (per thousand of population) had been declining from 1910 (30.1) to 1920 (27.1) to 1930 (21.3).  That’s about a 10% decline from 1910 to 1920.  And a 20% decline from 1920 to 1930.    Perhaps that’s the reason for the 6-year cost cushion they gave themselves.  They saw fewer babies being born.  Which meant fewer taxpayers would be paying for later retirees.

The birthrate fell to 19.4 in 1940.  Though it was falling, it wasn’t falling as much.  Only 9% from 1930 to 1940.  Then came the baby boom generation.  The birthrate in 1950 shot up to 24.1, a 24% increase from 1940.  More babies meant more taxpayers.  This birthrate held pretty steady in 1960.  No doubt the LBJ administration felt optimistic. 

LBJ exploded federal spending.  He added Medicare and Medicaid.  Made Social Security more generous.  And why not?  Things were looking up.  Birthrate-wise.

But it was short-lived.  The birthrate went from 23.7 in 1960 to 18.4 in 1970.  That’s a 22% decline.  The birthrate was 15.9 in 1980.  That was a 14% decline from 1970.  Or a 33% decline from 1960.  Birth control and abortion were taking their toll on the U.S. birthrate.  Fewer babies meant fewer future taxpayers.  And fewer taxpayers could pay for less government, not more.  The LBJ administration was wrong to feel optimistic.

The Selfish Baby Boomers Invert the Ponzi Scheme Pyramid

The baby boom generation has really thrown a wrench in the works.  The government used their spike in the birth rate as a baseline for future government spending.  But they screwed the government in the end.  Instead of being good little taxpayers by making even more little taxpayers, they stopped having babies.  They didn’t stop having sex.  They just stopped having babies.  It was the era of free love.  And ‘free love’ had no room for babies.

And it’s these baby boomers that are working themselves up to the top of the pyramid.  But being the selfish ingrates that they are, they’ve left no one to follow behind them to keep the Ponzi scheme going.  And to make matters worse, they’ll be living longer in retirement than anyone ever guessed.

It’s a perfect storm of sorts.  A declining death rate.  An even more declining birthrate.  And a huge chunk of the population about to go on the public dole.  But it gets even worse.  The boomers will be living longer in retirement because of huge outlays in Medicare spending to keep them alive.  In other words, the government is spending a fortune to make their financial problems worse.

Amnesty, Catholics and Dead Retirees May Save Social Security

They’re trying to fix things on the taxpayer side.  The Big Government legislators are desperate to give illegal aliens amnesty and citizenship.  To them it’s simple math.  More people equal more taxpayers.  And these taxpayers will be Catholic.  Catholics don’t use birth control and abortion like Americans currently do.  Their birthrate is less likely to decline.  (Approximately 1 in 5 of young children in the United States is Hispanic already.  They project that to increase to 1 in 4 within a few decades.)

On the benefit side, they’ve already raised the retirement age to 67.  And there’s talk about raising it to 69.  If more people die before they’re eligible to collect retirement, that’s a lot of benefits the government doesn’t have to pay.  They’re also talking about cutting the Medicare budget.  The less they spend, the more may die.  And dead people don’t consume Medicare benefits.

There’s no getting around the fact that old people are a huge drain on government.  Though they worked hard to get these people dependent on government, their continued living is becoming more of a burden than a benefit.  An increasing lifespan is anathema to Big Government.  Old retirees take more than they give.  Young workers, on the other hand, give more than they take.  The government needs more young workers.  And fewer old retirees.

(Social Security + Medicare) Spending = 2 X Defense Spending

To be efficient government has to minimize costs in relation to revenue (i.e., taxes).  And there’s an 800 pound gorilla in the room.  Old people.  Nothing can impact the budget more.  Even war.  Social Security and Medicare combined make up approximately 40% of the federal budget.  Defense spending is approximately 20%.  A blind man can see the gorilla.  Government needs these old people to hurry up and die.

And now add Obamacare to the equation.  Which will cover more people than Social Security.  The costs will be astronomical.  Social Security, Medicare and Obamacare will easily eclipse 60% of the total federal budget.  That kind of spending cannot be sustained.  Greece, France and Great Britain have proven this in the 21st century.

That’s some serious cost to contain.  And how do you contain that kind of cost?  You do what the Left says the private health insurers do.  Deny coverage to sick people.  And they will.  They’ll have to.  And with the power of life and death literally in their hands (i.e., death panels), they’ll be able to.  They’ll be able to maximize the number of young workers (by treating them).  Minimize the number of old retirees (by not treating them).  As well as minimize the number of undesirables who take more than they give (by not treating them).  Or even take more serious measures with those seriously ill or impaired (euthanasia).

Don’t think it can happen?  It’s happened in other Big Government states.  In fact, the Progressives even talked about the scientific benefits of eugenics and euthanasia here in the United States in the early 20th century.  To deal with undesirables.  So, yes, it could happen here.  Because it almost once did.

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