Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - April 28th, 2014

Economics 101

(Originally published July 8th, 2013)

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1′s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1′s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1′s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1′s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Abortion and Tax Revenue

Posted by PITHOCRATES - January 27th, 2014

Economics 101

(Originally published January 21st, 2013)

The Population Growth Rate fell during the Sixties and Seventies from 19% to 11% due to Birth Control and Abortion

Taxpayers are born.  Yes, immigration helped populate America.  But it was really the children of immigrants that made the country grow.  For a large population having babies will increase the population far more than immigration can.  Why?  Where do immigrants come from?  Babies.  Having babies is like compounding interest.  For babies grow up and have babies of their own.  So babies are good.  Especially for a government that wants to spend money.  Because the more babies we have the more taxpayers we will have.  So high-spending governments need a growing population growth rate.  To provide ever more taxpayers.  Who provide ever more tax revenue.  But sometimes the population growth rate doesn’t always increase.  Sometimes it even falls.  (See Population, Housing Units, Area Measurements, and Density: 1790 to 1990.  The population numbers are from the decennial census numbers.  The population growth rate is the percentage of population growth from one decade to the next.)

Although the population has always grown the population growth rate has not always grown.  In fact, the rate of growth has been falling over time.  Taking steep declines during war.  During the American Civil War the growth rate fell from 36% down to 23% by the time of the next census.  The census before and after World War I saw a decline from 21% to 15%.  The rate plummeted from 16% to 7% before and after the Great Depression.  With so many people out of work and struggling to survive the last thing families needed was another baby to feed.  The rate actually increased during World War II.  But that had more to do with people not having babies during the Great Depression for economic reasons.  After World War II the rate rose to 14%.  Which was still a point less than after World War I.

The following table shows the decrease in population due to war.  (Raw numbers are pulled from United States military casualties of war.)

Note that the most devastating of American wars was the American Civil War.  Where approximately 2% of the population died.  In terms of percentage loss of population the next costliest war was the Revolutionary War.  Then World War II.  Then World War I.  These wars saw millions of men in uniform (except for the Revolutionary War).  Away from their wives for years.  Which put a crimp in baby making.  And the large number of wounded and dead compounded that problem.  Resulting in large dips in the population growth rate during these wars.  Despite the large loss of life in numbers of America’s other wars those losses were all less than 0.10% of the population.  Making the impact on the population growth rate negligible.  One thing these numbers don’t explain, though, is the decline in the population growth rate after 1960.  During the Sixties and the Seventies the growth rate fell from 19% down to 11%.    But it wasn’t the Vietnam War that caused that decline.  So what did?  Birth control.  And abortion.

Couples having only 2 Children can’t Support an Expanding Welfare State but Couples having 3 Children Can

The U.S. approved the sale of the birth control pill in 1960.  Which corresponded with the era of free love and the sexual revolution.  People were having more sex.  While having fewer babies.  Then Roe v. Wade made abortion legal in 1973.  Since then there have been on average about 1.4 million abortions a year.  Dwarfing the 156,250 killed a year in America’s most devastating war.  The American Civil War.  Which has brought the population growth rate to its smallest numbers that weren’t due to war or depression.  Because of that compounding nature of babies (growing up to have babies of their own).  And because babies become taxpayers this has a big impact on future tax revenue.  We can see this by looking at how 100 abortions ripple through the population.

Let’s assume those 100 abortions happen in Year 1 (Y1).  Had these abortions not happened these babies would have grown up and entered the workforce about 20 years later (Y1+20).  And split off into pairs to have babies of their own.  (If each couple has one baby they have a total of 50 babies.  If each couple has two babies they have a total of 100 babies.  Etc.)  Who would grow up and enter the workforce about 20 years later (Y1+40).  And so on.  The above graph adds up all the people for each 20-year period produced by the Y1 babies (children, grandchildren, great grand children, etc.) divided by 100 (those original babies not aborted).

If the Y1 people only have one baby they and their descendants disappear from the world in about 2 centuries.  If they have 2 children the population never grows larger than 4 times the original Y1 people.  Two children to replace two parents.  It’s not until you get to three children that you see an increase in population.  As well as an increase in tax revenue.

Assume each of the people, or taxpayers, at 20-year intervals earn a median income of $50,000.  They pay an effective federal income tax rate of 18%.  In addition to 12.4% for Social Security taxes (both employer and employee).  And 2.9% for Medicare.  Added together they total 33.3%.  This tax rate on total income at each 20-year interval produces the tax revenue in the above graph.  Note the revenue graphs are the same shape as the population graphs.  Showing a direct correlation between tax revenue and the population growth rate.  The tax revenue provided by couples having only one child disappears within two centuries.  Revenue provided by couples having only two children peaks out at $6,660,000.  As couples only have enough children to replace themselves.  Maintaining a constant of 4 taxpayers (2 parents and 2 children) after 80 years.  Showing that couples having 2, 1 or 0 children cannot support an expanding welfare state.  But a couple having 3 children can.  As long as it’s not too big of a welfare state.

You just can’t have an Expanding Welfare State with a Falling Population Growth Rate

The more children a couple has the greater the tax revenue.  For the more children they have the more people enter the workforce and become taxpayers.  If 50 couples have 3 kids each (as do their descendants) they will add $30.4 million in federal tax revenue in one century.  If they have 4 kids they will add $99.9 million in revenue.  If they have 5 kids they will add $264 million.  And if they have 6 kids they will add $599.4 million.

In two centuries these numbers are even more profound.  Couples having 4 kids will provide $3.2 billion in federal tax revenue.  While couples having 5 kids will provide $25.8 billion.  And couples having 6 kids will provide $145.6 billion.  If, that is, 100 pregnancies weren’t aborted 2 centuries earlier.

In the long-term revenue would soar if people simply started having babies again.  For birth control and abortion have greatly reduced the number of babies we’re having.  Causing tax revenue to fall.  We can bring revenue back up by having more babies.  But after some 30 years this baby dearth has pushed us into the flat part of these graphs.  Requiring up to a century or more to make large population gains.  And large gains in tax revenue.   And without these gains in revenue we simply cannot afford an expanding welfare state.

It is rather ironic that two tenets of liberalism clash here.  Liberals believe in both a welfare state.  And free birth control and abortion on demand.  They believe in one thing that requires women to have a lot of babies.  And another that helps women to have as few babies as possible.  Which is another reason liberalism will ultimately fail.  Paradoxes like this.  For you just can’t have an expanding welfare state with a falling population growth rate.  If you try you get trillion dollar deficits.  And $16.4 trillion in accumulated debt.

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Aging Populations and Replacement Birthrate

Posted by PITHOCRATES - July 8th, 2013

Economics 101

Trying to follow a Baby Boom with a Baby Bust creates Problems in Advanced Economies with Large Welfare States

In the late 1960s began a movement for zero population growth.  It called for women to have only enough babies to replace the current population.  Not to have too many babies that would increase the population.  Nor have too few babies that the population declines.  Something that women could easily do because of birth control.  And, later, abortion.  The drive behind this was to save the planet.  By keeping large populations becoming like a plague of locusts that devour the earth’s resources and food until the planet can no longer sustain life.

China did these zero population growth people better.  By promoting a negative population growth rate.  Limiting parents to one child.  They did this because during the days of Mao’s China the country set some world records for famine.  Their communist state simply couldn’t provide for her people.  So to help their communist system avoid future famines they tried to limit the number of mouths they had to feed.  Of course, trying to follow a baby boom with a baby bust creates other problems.  Especially in advanced economies with large welfare states.

China’s one-child policy and the preference for boys have led to a shortage of women to marry.  Some Chinese men are even looking at ‘mail-order’ brides from surrounding countries.  But China is going to have an even greater problem caring for her elderly.  Just like Japan.  Japanese couples are having less than 1.5 babies per couple.  Meaning that each successive generation will be smaller than the preceding generation.  As couples aren’t even having enough children to replace themselves when they die.  Leaving the eldest generation the largest percentage of the overall population.  Being paid and cared for by the smallest percentage of the overall population.  The younger generation.

States with Aging Populations are Suffering Debt Crises because they Spend More than their Tax Revenue can Cover

As nations develop advanced economies people develop careers.  Moving from one well-paid job to another.  As they advance in their career.  Creating a lot of income to tax.  Allowing a large welfare state.  Which is similar to a Ponzi scheme.  Or pyramid scheme.  As long as more people are entering the workforce than leaving it their income taxes can pay for the small group at the top of the pyramid that leaves the workforce and begins consuming pension and health care benefits in their retirement.  And there is but one requirement of a successful pyramid scheme.  The base of the pyramid must expand greater than the tip of the pyramid.  The wider the base is relative to the top the more successive the pyramid scheme.  As we can see here.

Babies per Generation - Constant Replacement Birthrate

Generation 1 is at the top of the pyramid.  It is the oldest generation.  Which we approximate as a period of 20 years.  In our example Generation 1 are people aged 78-98.  They’re retired and collecting pension, health care and other benefits.  Some combination of Social Security, Medicare, Medicaid, food stamps, heating assistance, etc.  All paid for by Generation 2 (58-78), Generation 3 (38-58) and Generation 4 (18-38).  Each generation is assumed to bring 6 children into the world.  So these couples are not only replacing themselves but adding an additional 4 children to further increase the size of the population.  Which really makes running a pyramid scheme easy.  For if we assume each member in Generation 1 on average consumes $35,000 annually in benefits that Generations 2 through 4 pay for that comes to $555.56 per person annually.  Or $46.30 per person monthly.  Or $10.68 per person weekly.  Or $1.53 per person daily.  Amounts so small that Generations 2 through 4 can easily pay for Generation 1’s retirement.  Now let’s look at the impact of a declining birthrate with each successive generation.

Babies per Generation - Declining Replacement Birthrate

When all couples in each generation were having on average 6 children this added 1.9 billion new taxpayers.  Which greatly reduced each taxpayer’s share of Generation 1’s retirement costs.  But thanks to birth control, abortion and the growing cost of living each successive generation has fewer babies.  Generation 2 only has 3 children.  Enough to replace themselves.  And add one new taxpayer.  Generation 3 has only 2 children.  Only enough to replace the parents.  Providing that zero population growth that was all the rage during the late 1960s and the 1970s.  While Generation 4 only has 1 child.  Not even enough to replace the parents when they die.  Causing a negative population growth rate.  Which is a big problem in an advanced economy with a large welfare state.  For instead of adding 1.9 billion new taxpayers they only add 217.5 million new taxpayers.  Greatly increasing each taxpayer’s share of Generation 1’s retirement costs.  Instead of paying $555.56 per taxpayer they each have to pay $5,384.62 annually.  Or $448.72 per taxpayer monthly.  Or $103.55 per taxpayer weekly.  Or $14.79 per taxpayer daily.  Numbers that prove to be unsustainable.  The state simply cannot tax people this much for Generation 1’s retirement.  For if they did this and added it to the rest of government’s spending they’re taxing us to fund it would take away all of our income.  This is why advanced economies with aging populations are suffering debt crises.  Because their spending has grown so far beyond their ability to pay for it with tax revenue that they borrow massive amounts of money to finance it.

If you want a Generous Welfare State you need Parents to have More Children

If you carry this out two more generations so every generation only has one child the per taxpayer amount tops out at $14,736.84 annually.  Or $1,228.07 per taxpayer monthly.  Or $283.40 per taxpayer weekly.  Or $40.49 per taxpayer daily.  Amounts far too great for most taxpayers to pay.  This is what an aging population does in a country with a large welfare state.  It makes the population top-heavy in elderly people who no longer work (i.e., pay taxes) but consume the lion’s share of state benefits.  When couples were having 6 children each across the generations there was a ratio of 84 taxpayers per retiree.  When there was a declining replacement birthrate that ratio fell to 15 taxpayers per retiree.  If we look at this graphically we can see the pyramid shape of this generational population.

Generational Population - Constant Replacement Birthrate

With 84 taxpayers per retiree we can see a nice and wide base to the pyramid.  While the tip of the pyramid is only a small sliver of the base (Generation 4).  Making for a successful Ponzi scheme.  Far more people pay into the scheme.  While only a tiny few take money out of the scheme.  This is why Social Security and Medicare didn’t have any solvency problems until after birth control and abortion.  For these gave us a declining replacement birthrate over time.  Greatly shrinking the base of the pyramid.  Which made the tip no longer a small sliver of the base.  But much closer in size to the base.  That if it was an actual pyramid sitting on the ground it wouldn’t take much to push it over.  Unlike the above pyramid.  That we could never push over.  Which is why the above Ponzi scheme would probably never fail.  While the one below will definitely fail.

Generational Population - Declining Replacement Birthrate

If you want a generous welfare state where the state provides pensions, health care, housing and food allowances, etc., you need parents to have more children.  For the more children they have the more future taxpayers there will be.  Or you at least need a constant replacement birthrate.  But if that rate is below the rate of a prior baby boom the welfare state will be unsustainable UNLESS they slash spending.  The United States has a replacement birthrate below the rate of a prior baby boom.  While the Obama administration has exploded the size of welfare state.  Especially with the addition of Obamacare.  Making our Ponzi scheme more like the second chart.  As we currently have approximately 1.75 taxpayers supporting each social security recipient.  Meaning that it won’t take much pushing to topple our pyramid. We’re at the point where a slight breeze may do the trick.  For it will topple.  It’s just a matter of time.

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Abortion and Tax Revenue

Posted by PITHOCRATES - January 21st, 2013

Economics 101

The Population Growth Rate fell during the Sixties and Seventies from 19% to 11% due to Birth Control and Abortion

Taxpayers are born.  Yes, immigration helped populate America.  But it was really the children of immigrants that made the country grow.  For a large population having babies will increase the population far more than immigration can.  Why?  Where do immigrants come from?  Babies.  Having babies is like compounding interest.  For babies grow up and have babies of their own.  So babies are good.  Especially for a government that wants to spend money.  Because the more babies we have the more taxpayers we will have.  So high-spending governments need a growing population growth rate.  To provide ever more taxpayers.  Who provide ever more tax revenue.  But sometimes the population growth rate doesn’t always increase.  Sometimes it even falls.  (See Population, Housing Units, Area Measurements, and Density: 1790 to 1990.  The population numbers are from the decennial census numbers.  The population growth rate is the percentage of population growth from one decade to the next.)

Although the population has always grown the population growth rate has not always grown.  In fact, the rate of growth has been falling over time.  Taking steep declines during war.  During the American Civil War the growth rate fell from 36% down to 23% by the time of the next census.  The census before and after World War I saw a decline from 21% to 15%.  The rate plummeted from 16% to 7% before and after the Great Depression.  With so many people out of work and struggling to survive the last thing families needed was another baby to feed.  The rate actually increased during World War II.  But that had more to do with people not having babies during the Great Depression for economic reasons.  After World War II the rate rose to 14%.  Which was still a point less than after World War I.

The following table shows the decrease in population due to war.  (Raw numbers are pulled from United States military casualties of war.)

Note that the most devastating of American wars was the American Civil War.  Where approximately 2% of the population died.  In terms of percentage loss of population the next costliest war was the Revolutionary War.  Then World War II.  Then World War I.  These wars saw millions of men in uniform (except for the Revolutionary War).  Away from their wives for years.  Which put a crimp in baby making.  And the large number of wounded and dead compounded that problem.  Resulting in large dips in the population growth rate during these wars.  Despite the large loss of life in numbers of America’s other wars those losses were all less than 0.10% of the population.  Making the impact on the population growth rate negligible.  One thing these numbers don’t explain, though, is the decline in the population growth rate after 1960.  During the Sixties and the Seventies the growth rate fell from 19% down to 11%.    But it wasn’t the Vietnam War that caused that decline.  So what did?  Birth control.  And abortion.

Couples having only 2 Children can’t Support an Expanding Welfare State but Couples having 3 Children Can

The U.S. approved the sale of the birth control pill in 1960.  Which corresponded with the era of free love and the sexual revolution.  People were having more sex.  While having fewer babies.  Then Roe v. Wade made abortion legal in 1973.  Since then there have been on average about 1.4 million abortions a year.  Dwarfing the 156,250 killed a year in America’s most devastating war.  The American Civil War.  Which has brought the population growth rate to its smallest numbers that weren’t due to war or depression.  Because of that compounding nature of babies (growing up to have babies of their own).  And because babies become taxpayers this has a big impact on future tax revenue.  We can see this by looking at how 100 abortions ripple through the population.

Let’s assume those 100 abortions happen in Year 1 (Y1).  Had these abortions not happened these babies would have grown up and entered the workforce about 20 years later (Y1+20).  And split off into pairs to have babies of their own.  (If each couple has one baby they have a total of 50 babies.  If each couple has two babies they have a total of 100 babies.  Etc.)  Who would grow up and enter the workforce about 20 years later (Y1+40).  And so on.  The above graph adds up all the people for each 20-year period produced by the Y1 babies (children, grandchildren, great grand children, etc.) divided by 100 (those original babies not aborted).

If the Y1 people only have one baby they and their descendants disappear from the world in about 2 centuries.  If they have 2 children the population never grows larger than 4 times the original Y1 people.  Two children to replace two parents.  It’s not until you get to three children that you see an increase in population.  As well as an increase in tax revenue.

Assume each of the people, or taxpayers, at 20-year intervals earn a median income of $50,000.  They pay an effective federal income tax rate of 18%.  In addition to 12.4% for Social Security taxes (both employer and employee).  And 2.9% for Medicare.  Added together they total 33.3%.  This tax rate on total income at each 20-year interval produces the tax revenue in the above graph.  Note the revenue graphs are the same shape as the population graphs.  Showing a direct correlation between tax revenue and the population growth rate.  The tax revenue provided by couples having only one child disappears within two centuries.  Revenue provided by couples having only two children peaks out at $6,660,000.  As couples only have enough children to replace themselves.  Maintaining a constant of 4 taxpayers (2 parents and 2 children) after 80 years.  Showing that couples having 2, 1 or 0 children cannot support an expanding welfare state.  But a couple having 3 children can.  As long as it’s not too big of a welfare state.

You just can’t have an Expanding Welfare State with a Falling Population Growth Rate

The more children a couple has the greater the tax revenue.  For the more children they have the more people enter the workforce and become taxpayers.  If 50 couples have 3 kids each (as do their descendants) they will add $30.4 million in federal tax revenue in one century.  If they have 4 kids they will add $99.9 million in revenue.  If they have 5 kids they will add $264 million.  And if they have 6 kids they will add $599.4 million.

In two centuries these numbers are even more profound.  Couples having 4 kids will provide $3.2 billion in federal tax revenue.  While couples having 5 kids will provide $25.8 billion.  And couples having 6 kids will provide $145.6 billion.  If, that is, 100 pregnancies weren’t aborted 2 centuries earlier.

In the long-term revenue would soar if people simply started having babies again.  For birth control and abortion have greatly reduced the number of babies we’re having.  Causing tax revenue to fall.  We can bring revenue back up by having more babies.  But after some 30 years this baby dearth has pushed us into the flat part of these graphs.  Requiring up to a century or more to make large population gains.  And large gains in tax revenue.   And without these gains in revenue we simply cannot afford an expanding welfare state.

It is rather ironic that two tenets of liberalism clash here.  Liberals believe in both a welfare state.  And free birth control and abortion on demand.  They believe in one thing that requires women to have a lot of babies.  And another that helps women to have as few babies as possible.  Which is another reason liberalism will ultimately fail.  Paradoxes like this.  For you just can’t have an expanding welfare state with a falling population growth rate.  If you try you get trillion dollar deficits.  And $16.4 trillion in accumulated debt.

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China has no Pension or Health Care Benefits for their Rapidly Aging Population unlike in the West

Posted by PITHOCRATES - September 22nd, 2012

Week in Review

The Chinese economy is cooling off.  Worse, they have some even more bad news in their future (see Ageing China: Changes and challenges by Damian Grammaticas posted 9/20/2012 on BBC News China).

Life expectancy in China today rivals that in the West – it is one of this country’s impressive advances. Except China has not yet built a social safety net to provide pensions, affordable healthcare or homes for all its elderly.

Yet another reason why the Chinese economy is outpacing those in the West.  While Europe and the United States have suffered from the effects of an aging population China hasn’t.  At least, not yet.  While those in the West keep raising taxes and selling sovereign debt to pay for pensions and health care for the elderly and retired China has been growing their economy and using its proceeds to buy the sovereign debt of those Western nations.

So what is it like living in a nation without a social safety net?

“We don’t get a government pension because I never paid taxes. We don’t have any savings,” he says.

Because he has children and a wife, he does not qualify for a place in a care home – only those without relatives are eligible.

Of Henan’s 8.5 million elderly, just 2% are cared for in nursing homes. So Niu Yubiao and his wife fend for themselves.

The couple have seven grown-up children. But like other young people in the area, they have left home to look for work. Niu Yubiao has no idea where they are.

The reason why they don’t have any savings is not because they are greedy and materialistic.  It’s because they live in abject poverty.  And barely earn enough to survive.  This is what it’s like in China once you leave the modern cities on the coast.  The economic miracle of China has not reached the impoverished masses in their interior.

Today, there are 180 million Chinese aged over 60, just over 13% of the population. That will double to 360 million in fewer than 20 years, when China will have more retirees than the entire population of the US.

By the middle of the century, their ranks will soar again to 480 million.

China is ageing so fast that a process that took up to a century in the West will happen in the coming 30 years here. And as the ranks of the elderly swells, the working-age population is starting to shrink…

China’s incredible economic growth has been built on its vast, cheap labour supply. But the numbers entering the workforce have started falling. China’s birthrate has collapsed – at its peak in the mid-1980s 25 million babies were born every year. Now there are about 15 million births a year. The dramatic drop is the result of a richer, developing society and of the one-child policy…

Currently, China funds only meagre pensions, and there are six workers paying taxes for each retiree – in 20 years’ time, there will be just two workers for every pensioner.

This is the current problem in the advanced economies in the West.  A declining population growth rate following the post-World War II baby boom is bankrupting their nations.  For those social safety net programs the Chinese don’t have were implemented in these Western countries before the baby boom turned into a baby bust.  Now the elderly generations in these nations grow faster than the younger generations.  More seniors are retiring and consuming government-provided pensions and health care while fewer are entering the workforce to replace them and pay the taxes to fund these programs.  So they have increasing government expenditures at a time of declining government revenue.  Thanks to a lower population growth rate.  Which has overwhelmed governments.  Causing greater budget deficits and soaring levels of debt.

As bad as things are in the Western countries what’s waiting for China is of such a massive scale that one shudders to think what will happen.  For even if China continues to enjoy high economic growth their aging population will bankrupt them.  Either by caring for the elderly.  Or by driving up labor costs and/or labor unrest as their baby bust fails to replace those leaving the workforce.  Bringing that economic juggernaut to a crashing halt.

But the scenario is even bleaker.   For they have driven much of their economy with artificial economic growth.  Fueled by Keynesian policies.  Artificially low interest rates.  And government interference into the private sector.  Much like what gave the U.S. the subprime mortgage crisis and the Great Recession.  And much like what gave the Japanese their asset bubble and their Lost Decade.  For all demand-side stimulative growth (i.e., Keynesian growth) ends in Great Recessions or Lost Decades.  Because this kind of growth is inflationary.  And when you inflate asset values you make asset bubbles.  Which ultimately burst.  And when they do they bring down those inflated values to market prices.  The longer those inflationary policies were in place the higher those asset values soared and the more painful the deflationary fall.  Just ask anyone in Japan.  Or in the U.S. with an underwater mortgage.

So China has some unpleasantness in their future.  Perhaps a deflationary spiral.  Along with an accelerated aging population.  Either one by itself is bad.  But together it could be more than the Chinese economy can handle.  And the fallout of any Chinese crash will ripple through every other nation’s economy.  Where we all will feel it.  And suffer the consequences.  Because we are all Keynesians, too.  At least, the economic policies of our governments are.  And when China can no longer buy U.S. sovereign debt there will be no more deficit spending.  Just massive spending cuts.  Or, if they choose to simply print money, massive post World War I Germany inflation.  Where it will take a wheelbarrow full of money to buy a loaf of bread.  Like in post World War I Germany.

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FT136: “Unions only represent those who pay union dues.” —Old Pithy

Posted by PITHOCRATES - September 21st, 2012

Fundamental Truth

The Cost of Teachers’ Salaries, Health Care and Pensions are so Costly that there is Little Left to Spend on the Children

The Chicago public school teachers’ strike is over.  And the teachers got enough of what they wanted to go back to the classroom.  Or else they wouldn’t be going back to the classroom.  Which proves the benefit of belonging to a union.  In exchange for those union dues they get a lot of political muscle.  Which they greatly leverage by having children out of the classrooms.  Suffering.  For the kids are losing out on their education.  Worse, parents are stuck with their kids longer.  And must wait longer before they get their break from having their kids home all day long.

And speaking of the children one thing you didn’t hear in the list of demands was more supplies for the classroom.  Despite good teachers everywhere dipping into their own pockets to pay for classroom supplies.  Why?  Because the cost of teachers’ salaries, health care and pensions are so costly that there is little left to spend on the children.  And that pay and those benefits are pretty generous.  Especially considering with all the time off teachers get they’re technically working part-time jobs (30 hours a week or less).  With about two and half months off during the summer and the breaks during the school year teachers work about 9 months out of the year.  Which comes to about 1,548 hours a year.  Compared to the 1,560 hours (30 hours X 52 weeks) a year a part-time worker can work.  With far fewer benefits.

But yet it’s always about the children.  Higher pay and benefits for teachers benefit the children.  At least that’s what they tell us.  The ability to retire with nearly their full salary.  And free health care until Medicare kicks in.  All paid by the taxpayers.  That’s what’s important to maintain.  So the children get a quality education.  By having their teachers live a higher quality life and retirement than these children’s parents.  Who are paying for both their own quality of life and retirement.  As well as their kids’ teachers.

Big Cities set up Generous Public Sector Pay and Benefits based on an ever Expanding Population Growth Rate

Whenever a city is having trouble paying their bills they always threaten to lay off police officers and firefighters.  As if that is the only expense a city has.  They never talk about cutting back on their health care plans or their pension plans for all city workers.  Like everyone working in the private sector has gone through.  How many times have you been told by your employer that they cannot make a contribution to your 401(k) retirement plan this year because business was down?  It happens a lot.  And that’s the retirement plan most people have today.  It’s mostly what you put away for your retirement.  Pensions in the private sector are long gone.  Only those unionized sectors with enough political clout still enjoy generous pension plans.

Recessions reduce tax dollars flowing into city coffers.  But that’s only part of the problem.  The bigger problem they have is a flat population growth rate.  All these big cities set up generous public sector pay and benefits based on an ever expanding population growth rate.  But that growth rate flattened out in the Sixties and Seventies.  Thanks to widespread use of birth control and, to a lesser extent, abortion.  Women stopped having a lot of babies.  Which means there are a larger number of people retiring than there are entering the workforce to replace them.  So you have a higher growth rate of those consuming taxes.  While you have a lower growth rate of those paying taxes.  Which means cities will pay more out than they collect unless they raise tax rates.  Which they often try to do.  While threatening to lay off police officers and firefighters if voters don’t approve a new millage.

Things can be especially hard for some city workers because of that flat population growth rate.  Not to pick on the firefighters but look at a typical firehouse.  Say a firehouse with one engine/ladder truck and one rescue squad.  That’s about 6 firefighters.  If a city has 30 firehouses that’s 180 firefighters.  If they are 24 hours on duty and 24 hours off that brings it up to 360 firefighters.  If a firefighter academy graduates 100 new firefighters a year that’s about a third of all firefighters.  Now unless each firefighter only works 3 years there will always be more firefighters than open positions.  New building technologies and fire alarm/suppression systems have greatly reduced the number of building fires.  All of this on top of a flat population growth rate makes it very difficult for anyone wanting to be a firefighter these days.  Making matters worse a lot of the old cities are actually seeing population decreases.  Which cities respond to by closing firehouses.  Which reduces the number of firefighters.  Making it even harder for aspiring firefighters.

A Union Represents those who pay Union Dues—not Children, Taxpayers or Patients

Cities collect property taxes to pay for the services they provide.  As well as other taxes and fees.  From that pot of money they collect they divide it between the various departments they have.  Such as for education.  From that money educators have to pay all their bills.  From classroom supplies.  To teachers’ salaries, health care and pensions.  They can only spend this money once.  So if they give more to the teachers there is less for the classroom.  So when teachers strike and say it’s for the children it is probably not for the children.  For the children pay no union dues.  As unions don’t represent the children anymore than they represent the taxpayers.  They represent the teachers.  Because they pay the union dues.  And it is their job to get as much of that money spent on education to the teachers as possible.

There are some moves to unionize nurses and other health care workers.  In fact, that will happen under Obamacare as health care workers will all become government workers.  And eligible to join public sector unions.  Which is why all the unions were so adamantly for Obamacare even though many of them have gotten waivers to opt out.  Because it will swell the ranks of the public sector unions.  While greatly increasing the cost of health care.  And hurt the quality of our health care system.  For if we pay nurses like government bureaucrats we will shift more health care money to these new public sector workers while leaving less to spend on patients.

It is remarkable how selfless all public sector workers are.  For they never want more taxpayer money for their own selfish needs.  It’s always for the children.  The safety of our citizens.  And when Obamacare fully kicks in, the quality of health care our patients receive.  It’s just a coincidence that while protecting the children, the taxpayers and our patients that they benefit, too.  Funny how that works.  Which is what happens when you belong to a union and pay dues.  For a union represents those who pay union dues.  Not children, taxpayers or patients.

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Birth Control and Abortion have reduced Tax Revenue and House Values for Seniors

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Birth control and abortion will bankrupt Social Security and Medicare.  And they will bring down Obamacare, too.  When Social Security became law we had a growing birth rate.  More people were being born each year.  So the population was expanding.  And the Roosevelt administration thought it would keep expanding.  So they created a Ponzi scheme.  Social Security.  Where more young people (i.e., taxpayers) pay into the system than retirees (i.e., tax consumers) collect from the system.  A foolproof system.  As long as the population continues to expand.  Keeping the base of the pyramid growing larger than the top of the pyramid.

Well their assumptions didn’t hold.  Women stopped having babies beginning in the Sixties.  Just as the Johnson administration gave us the Great Society and Medicare.  Based on the previous assumption that women would keep having babies.  So the funding mechanism was a flawed as it was for Social Security.  And now Obamacare is going to expand the Medicare model.  In the face of what is now a declining population growth rate.  Meaning the number of taxpayers will dwindle as the number of tax consumers retiring will explode.  Causing the aforementioned bankruptcies.  And that declining birth rate is causing even more financial damage (see Is Our Aging Population Partly to Blame for the Slow Recovery? by Philip Moeller posted 8/21/2012 on U.S. News & World Report).

As the unusually weak economic recovery continues, you’ve at least got to wonder if future studies of what ails us will include our aging population as a material cause. Simply stated, older people tend to liquidate assets to fund their retirements. Younger people tend to acquire financial assets as their personal wealth rises and they build their own nest eggs.

The United States has enjoyed nearly 40 years where the number of people acquiring assets was greater than the number of people disposing of them. This condition is being turned on its head. We now face roughly 40 years where there will be more people in this country wanting to sell financial assets than buy them. This supply-demand shift could put a lid on asset values and depress overall economic growth.

So on top of the government failing us in our retirement even our own retirement savings are going to fail us.  It will be like being on the far side of a housing bubble after the bust.  Where seniors want to sell their houses to finance their retirement.  Only to get tens of thousands of dollars less than they had planned.  For just as there are fewer taxpayers to pay the taxes to support an aging population there are fewer homebuyers (as well as other asset buyers) to buy the houses of an aging population.  Lower demand means lower selling price.  And a less comfortable retirement.  All because of that generation of greed and selfishness.  The baby boomers.  Who were all about sex, drugs, rock & roll, birth control and abortion.  And not so much about raising children.  Of course they, too, will suffer the effects of their selfish ways.  As there will be fewer taxpayers to support them in their retirement.  Or to buy their houses.

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Tens of Thousands of NHS Patients waiting up to 12 Hours on A&E Gurneys for a Hospital Bed

Posted by PITHOCRATES - August 19th, 2012

Week in Review

There are times in American emergency rooms where patients are waiting on hospital gurneys (or trolleys) for a bed to open up in the hospital.  Sometimes emergency rooms get overwhelmed one day.  While another day they have empty beds and time to kill.  For it is hard to forecast health emergencies.  In the UK, however, it appears budget problems are exasperating their problems.  And they are trending in the wrong way (see 67,000 NHS patients forced to wait up to 12 hours on A&E trolleys by Telegraph Reporters posted 8/15/2012 on The Telegraph).

Almost 67,000 patients during the first half of this year endured long waits for emergency beds, an increase of nearly a third, according to the government statistics…

Over a six-month period to June, 66,845 patients were found to have waited for between four and 12 hours for a bed once doctors decided they needed to be admitted.

During the same period the previous year, nearly 51,000 patients endured similar waiting times, the equivalent of a 31 per cent rise, according to the DoH…

Tim Curry, the assistant head of UK nursing at the Royal College of Nursing, described the scale as “startling”.

He blamed the rise in the figures on a “perfect storm” of increased patient expectations, financial pressures and NHS reforms.

“You need skilled nurses and vacant beds, and both of those are under huge pressure,” he said.

To be fair they just don’t park these patients up against a wall while they wait.  Doctors and nurses are still assessing and treating them while they wait in Accident and Emergency (A&E) departments.  But there is a trend.  And it’s going in the wrong way.  Longer waits.  Because, of course, of financial pressures.  Caused by an aging population that is stressing their health system at the same time fewer workers are entering the workforce to pay the bills.  Fewer dollars (or pounds in this case) being spread out to cover more patients.  You don’t need to be a financial analyst to see what this will result in.  Longer wait times.  And rationing.  Including a shortage of skilled nurses and vacant beds.

The NHS has the same problem the Americans have with Social Security and Medicare.  All three of these programs were set up during a time of an increasing population growth rate.  People were having babies.  More workers were entering the workforce than were leaving it.  So each retiring generation had more workers in subsequent generations to pay the bills.  But after the baby boom this all changed.  People stopped having babies.  And throttled back the spigot of new taxpayers entering the workforce.  Which is causing budget deficits and mushrooming debt in every social democracy.  And until the baby boomers leave this world governments will struggle to provide for them with fewer resources.

So this would be the absolute worst time to introduce a new large government program.  Indeed only a fool or one blind of history and utterly ignorant of economics would propose a new massive entitlement program in this day and age.  Which, incomprehensively, the American Left did.  Giving the Americans Obamacare.  The biggest government program in American history.  And the Americans will have no hope of ever paying for it.  Not with an aging population.  And they did this while Social Security and Medicare are already projected to go bankrupt.  In fact, Obamacare even takes some $700 billion from Medicare.  Talk about your perfect storms.  If the Americans don’t repeal Obamacare (and reform their entitlements) their spending obligations will bankrupt them and transform America into a shell of her former self.

Some would say we should learn by Britain’s mistake.  The folly of national health care, especially with an aging population.  Instead the Obama administration seems intent on being the example of ‘what not to do’ for others to learn by.  For Obamacare is clearly something the Americans should not have done.

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FT119: “To save American jobs the Left tries to keep out low-priced Mexican imports but does little to keep out low-priced Mexican labor.” -Old Pithy

Posted by PITHOCRATES - May 25th, 2012

Fundamental Truth

The Left opposes Cheap Mexican Labor in Mexico but they like having it in the U.S.

One of the more interesting things about the political left is their inconsistency about their opposition to free trade.  They opposed the North American Free Trade Agreement (NAFTA) because they said all the good manufacturing jobs would go south of the border.  They said Mexicans work too cheap.  And that was unfair to the American worker.  For the American’s generous wage and benefit packages could never compete with the Mexicans who are willing to work for so much less.  With NAFTA rich American capitalists would just screw their American employees and move their operations to Mexico.  Where they would exploit the poor hapless Mexican workers.  Forcing them to work at a fraction of the American wage and benefit package.

Of course that’s not the way the poor hapless Mexican workers see it.  They loved those manufacturing jobs.  Because those jobs had some of the most generous wage and benefit packages available in Mexico.  They flooded those factories.  And the lucky few to get those jobs did quality work.  The things they made in these Mexican plants were as good as anything in the U.S.  And they cost less.  Allowing the American consumer to buy more.  Which raised the standard of living for everyone.  The American consumer.  And the Mexican consumer.  The only ones who lost were the few working in those U.S. plants that closed.  Who became bitter.  And demanded the government impose tariffs on those low-cost imports.  To save American jobs.  While lowering the standard of living for the American consumer.  And the Mexican consumer.

So the Left opposes this cheap Mexican labor.  In Mexico.  They don’t seem to mind it so much, on the other hand, when it’s in the U.S.  The Left opposes building a wall on the border.  They oppose asking for proof of citizenship from anyone who looks Mexican in a region with a high concentration of illegal aliens.  They oppose requiring a photo I.D. to vote.  They oppose deportations of illegal aliens who’ve been living and working in the U.S.  While they are in favor of blanket amnesty for those here illegally.  And providing them a fast-track to U.S. citizenship.  Which is rather odd considering the way the Left feels about that cheap Mexican labor.  So why are they opposed to imports manufactured by low-cost labor while they are in favor of bringing that low-cost labor into the United States.  For either way it will displace a higher-paid U.S. worker from a job.

The Lost Tax Revenue from Abortion and Birth Control comes to about $155 Billion per Year 

 Yes, that is a good question, isn’t it?  Some, I’m sure, will say once those illegals become legals they’ll join unions.  Which would make them no longer cheap labor.  Perhaps.  But with the decline in U.S manufacturing there aren’t a lot of union jobs anymore.  It is more likely that they will go to where there are good manufacturing jobs.  In the nonunion South.  So it is likely they would add further pressure on those high union wages and benefits.  So why, then, would the Left want to grant citizenship to those here illegally while at the same time opposing cheap Mexican labor?  Two reasons.  Abortions.  And birth control. 

As it is in most things in life it’s about the money.  The Left likes to tax and spend.  Well, not so much like but love.  It’s what they live for.  They want to spend money to provide pensions.  Health care in retirement.  And now health care before retirement.  They want to spend money to end poverty.  They want to spend money to give everyone a college education.  They want to spend money to subsidize green energy.  They want to spend money for school lunches, childcare, art, public television/radio, birth control, abortions, etc.  If it’s something they can spend money on they want to spend money on it.  Of course to spend all of this money you need what?  That’s right.  Money.  And two of the Left’s defining issues have actually reduced the available money to spend.  Birth control and abortion.

According to Public Agenda the number of abortions increased during the Seventies until they totaled approximately 1,300,000 by the end of the decade.  They stayed at or above this level for a little over a decade and then started falling in the late Nineties.  Let’s take one year of these numbers and crunch some numbers.  If 1.3 million abortions didn’t happen and the women carried these babies to term and they earned the median income of $46,000 (and paid $7,530 in federal income taxes) today that would have come to an additional $8.4 billion in tax revenue per year.

According to the Guttmacher Institute there were 62 million U.S. women in their childbearing years (15-44) in 2010.  Approximately 62% of these women were currently using birth control.  Bringing the number of women using birth control in 2010 to 38,440,000.  If birth control was unavailable let’s assume 50% of these women would have stopped having sex.  And let’s assume the women who continued to have sex became pregnant and carried their pregnancy to term.  Bringing in 19,220,000 new babies into the world.  Based on the median salary of $46,000 they would have contributed another $145 billion in tax revenue.  Added to the lost tax revenue from abortion that comes to a grand total of $155 billion in lost tax revenue per year.  Over a decade that comes to $1.5 trillion.

Granting Amnesty to Millions of Illegal Aliens can make up for Lost Tax Revenue due to Birth Control and Abortion 

During the Obamacare debates the Congressional Budget Office (CBO) projected the cost of Obamacare over a 10-year period at $940 billion.  They have since revised that up to $1.76 trillion.  The opponents of Obamacare say it is too costly.  With a national debt of already $15.7 trillion we simply can’t afford to pay for Obamacare.  The proponents of Obamacare have been using questionable accounting practices to get that number down.  Such as collecting new taxes before paying any benefits in some of those years in that 10-year projection.  But the interesting thing to note here is that these discussions would be moot had it not been for birth control and abortion.  Which has cost the nation in tax revenue what Obamacare will cost.

These numbers are only crude calculations.  A more detailed mathematical analysis would have produced a far greater number in lost tax revenue.  Because the population would have also been expanding.  So the numbers used as constants in the 10-year projections above would have been growing larger in each year of that 10-year projection.  And producing larger amounts of tax revenue in each of those 10 years.  This is why Social Security worked so well for the first few decades.  There was a growing population.  And there was always far more new workers entering the workforce than leaving it.  What changed that was birth control and abortion.  And people choosing to have smaller families.  Not a bad thing in itself.  But this decision to have smaller families has doomed Social Security and Medicaid.  For they created those programs based on larger population growth rates.  That simply no longer exist.  And the only way to fix that is by having a lot more babies quickly.  Or for the baby boomers to die off quicker.  Which critics of Obamacare say Obamacare will help do via death panels.

Or you could try something else.  You can jumpstart the population growth rate by granting amnesty to millions of illegal aliens.  To make up for lost tax revenue due to birth control and abortion.  And what makes the illegals from Mexico so attractive to the Left is that many of them are devout Catholics.  Thanks to the Catholic Spanish Empire who brought their language, culture and religion to the New World.  And Catholics frown upon the use of abortion and birth control.  But this can be a risky bet for those on the Left.  Yes, they could really boost the population growth rate.  And they may get these new citizens’ votes in the early years out of gratitude.  But eventually the Left’s attacks on religion may eventually make these people vote Republican.  So they may get a large increase in tax revenue to spend.  Just as they lose power in Washington.

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The Weight of Europe’s Sovereign Debt Crises forces Rich People to flee with their Wealth to Escape ever Higher Taxes

Posted by PITHOCRATES - April 21st, 2012

Week in Review

The problem with the European sovereign debt crisis is the population growth rate.  These nanny states set up their social democracies when people were having babies.  And based their calculations on a continuing rising birthrate.  Which would have paid for their social democracies until the cows came home.  But then something happened.  They stopped having babies.  And now have a declining birthrate.  Which means they have an aging population.  There are more people becoming seniors than there are being born.  There are more people leaving the workforce than there are entering the workforce.  And worse of all is that they have better health care.  And are living longer.  Put it all together and you have a real big problem (see Europe’s old wealth seeks new home in Asia by John O’Callaghan and Charmian Kok posted 4/17/2012 on Reuters).

Wealthy people from Europe and the Americas have long looked to the East for ways to build and preserve their fortunes. But only recently have they started opening family offices – private companies that manage the trusts and investments of rich households – in the region in earnest…

Campden Wealth, which provides research and data on family offices, says up to 10 European family offices have moved to Singapore since the financial crisis in 2008, bringing $5-$10 billion worth of assets with them.

Singapore, a global banking and investment centre in the heart of Southeast Asia, is an attractive base for its efficient registration process, relatively benign regulations, smooth movement of money, financial infrastructure and low tax rates…

Asia’s prospects are alluring as economies in Europe and the United States look weak. After the crisis, regulatory pressures in the West and a crackdown on offshore centers have hastened the pace of family offices moving to Singapore and Hong Kong…

The Spinolas are clubbing together with two other family offices to cut costs and leverage on efficiencies. Parly officials declined to identify the partners, other than to say they are “household names” in Europe – one is an English entrepreneur who has donated much of his money to charity and the other is a Swiss-based family…

Concerns about the health of big banks and dismay at their hard-sell tactics that pushed products of dubious merit onto high net worth clients – such as mortgage-backed securities that turned toxic – are other factors.

The tax-consumers are growing at a greater rate than the taxpayers.  Which means you have to raise tax rates on taxpayers.  Find other things to tax.  Or cut back on pensions and health care for retirees.  Not a difficult decision for the politicians to make.  They’re going to raise tax rates.  And find other things to tax.  Precisely because the population is aging.  For they’re just not going to cut any benefits from the largest voting block out there.

And, of course, the fallout is that rich people will finally say enough is enough.  They’ll take their wealth and leave.  Because they’re tired of being screwed.  Whether it was the American government passing off toxic subprime mortgage backed securities as safe investments through their GSEs Fannie Mae and Freddie Mac.  Or government taking an ever larger piece of their wealth through ever higher taxes and costly regulations.  They’ve had enough.  So they’re taking their wealth (i.e., much coveted investment capital businesses so desperately need) to greener pastures.  Investing in economies in other nations.  And donating large sums of their wealth to charities in other nations.  Which, of course, will cause ever greater budget hardships.  Because contrary to popular belief rich people pay the lion’s share of a nation’s income tax.  So when a big chunk of their wealth leaves the country it will explode budget deficits.

The sad truth is this.  There isn’t enough wealth to confiscate to pay for rising pensions and health care benefits with a declining birthrate.  There just aren’t enough rich people.  No matter how you crunch the numbers.  You just can’t have a declining number of taxpayers pay for a growing number of tax consumers.  It will only lead to deficits.  And sovereign debt crises.  Kind of like what they’re having in Europe right now.  Because of their unsustainable social democracies.  And unless they start having babies like they once did there is no way to sustain the unsustainable.

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