FT100: “Benefit recipients agree that responsible governing should start AFTER they get theirs.” -Old Pithy

Posted by PITHOCRATES - January 13th, 2012

Fundamental Truth

Legacy Health Care (and Pension) Costs Bankrupted GM

Franklin Delano Roosevelt ruined General Motors (GM).  And created the health care crisis.  How?  With price controls.  By interfering with market pricing mechanisms.  In a misguided effort to fix the economy he instituted a maximum wage.  Meaning companies couldn’t compete for good workers by offering them a higher wage.  So to compete for good workers they started us down a path that is destroying our economy.  Instead of higher wages (which were illegal) they offered benefits.  And the United States would never be the same.

Health care.  Before FDR, we paid for our health care.  After FDR, other people paid for our health care.  And we demanded more because we weren’t paying the bill.  It worked well for awhile.  When there was an expanding population.  When there were always more younger workers than older workers.  And retirees.  But the population aged.  Thanks to birth control.  And abortion.  During FDR’s time it was common for a family to raise 10 children.  Now it’s closer to 2 or 3.  Which means a generation or two later there were no longer more younger workers than older workers and retirees.  And what does this mean?  Well, older workers and retirees consume more health care than younger workers.  So the cost of health care soared for business.

This is what bankrupted GM.  These legacy health care (and pension) costs.  Instituted during a time when they were cheap and easy to provide.  But they became unsustainable.  Because of that declining population growth rate.  Union contract after union contract discussed these legacy costs.  But the way the rank and file felt was that it was their turn.  The system may be flawed.  But it worked before them.  So let them have their benefits they say.  And fix the system after they get theirs.

Social Security and Public Sectors have the same Problems GM Had

Social Security has the same problem.  That declining population growth rate is forcing fewer and fewer workers to support a retired worker.  And they’re living a lot longer than FDR’s actuaries ever calculated thanks to better and better health care.  Which just compounds the problem.  Social Security is a pyramid scheme gone bad.  The top is far wider than the base.  There are more benefit recipients than benefit contributors.  And it will follow GM into bankruptcy.  It’s just a matter of time.

There’s been a lot of talk about privatizing Social Security to prevent its collapse.  But it always meets fierce resistance.  Especially from the elderly and retirees.  Who are stuck in the system never having provided for their own retirement because they believed in the Ponzi scheme that is Social Security.  They say the system may be flawed.  But it worked before them.  So let them have their benefits they say.  And fix the system after they get theirs.

If you combine the rising health care costs and the rising pension costs inherent with a declining birth rate we come to the public sector.  Who have always enjoyed far better benefits than those in the private sector.  But that aging population is requiring ever higher taxes to support these most generous benefits.  And the taxpayers simply can’t sustain them any longer.  Those in the public sector know these systems need to be reformed.  But they worked before them.  So let them have their benefits they say.  And reform the system after they get theirs.

This Generation will Always Kick the Can to the Next Generation

That’s the problem with bad public policy.  Everyone can agree that bad policy needs to be reformed.  But what harm could one more generation do?  So kick that can down the road.  We have time.  After all, it took generations to get where we are now.  So another generation won’t ruin the country.  Even though it very well could.  But the important thing for them is that they get their benefits.  And the responsible governing can start after they get theirs.

But that’s the problem.  This generation always wants the following generation to fix things.  They always want to kick that can down the road.  But the problem is that there will always be another generation to kick that can to.  So they always will.  And no one will fix these problems while there’s a chance to fix them.  One generation will just suffer the consequences of all this can kicking.  As will every generation that follows.



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