Week in Review
President Obama isn’t worried about the deficit. Or the debt. Neither are Democrats. Who see no problem with increasing federal spending even more. Probably because there are Nobel Prize winning economists like Paul Krugman saying deficit spending is a good thing. Because what can possible go wrong with spending money you don’t have? No doubt the very same things they were saying in Greece. Italy. And Cyprus (see Analysis: Cyprus bank levy risks dangerous euro zone precedent by Mike Peacock posted 3/17/2013 on Reuters).
A hit imposed on Cypriot bank depositors by the euro zone has shocked and alarmed politicians and bankers who fear the currency bloc has set a precedent that will unnerve investors and citizens alike.
After all-night Friday talks, euro finance ministers agreed a 10 billion euro ($13 billion) bailout for the stricken Mediterranean island and said since so much of its debt was rooted in its banks, that sector would have to bear a large part of the burden.
In a radical departure from previous aid packages – and one that gave rise to incredulity and anger across Cyprus – the ministers are forcing the nation’s savers to pay up to 10 percent of their deposits to raise almost 6 billion euros…
The decision sent Cypriots scurrying to the cash points, most of which were emptied within hours. Most have been unable to access their bank accounts since Saturday morning, a move unlikely to engender calm…
A Cypriot bank holiday on Monday will limit any immediate reaction. The deposit levy – set at 9.9 percent on bank deposits exceeding 100,000 euros and 6.7 percent on anything below that – will be imposed on Tuesday, if voted through in parliament…
“I understand that electorates in Germany and northern Europe demand some sacrifice. However, when you accept a solution that basically expropriates 10 percent of deposits, you set a dangerous precedent,” Vladimir Dlouhy, former Czech economy minister and now international advisor for Goldman Sachs told Reuters in Berlin. “If we get into deeper trouble, God help us, they may try to take 50 percent.”
Ouch. That’s what can go wrong with too much government spending. And too much debt. The government will just seize your money. Scary. Hearing stuff like this makes you pay a little more attention to that idea someone floated about the government expropriating 401(k) retirement accounts. Taking our retirement money. But being magnanimous enough about it to give us something valuable in return. A promise to pay us a fixed retirement benefit. Something as reliable and solvent as Social Security. Preferably like it used to be. Before they began forecasting it was going bankrupt.
So this is the downside to spending money you don’t have. Bank runs. As people pull their money out of our banks before the government can seize it. Causing banks to fail. Crashing the economy into a depression. Just like all those bank failures in the Thirties caused the Great Depression. But other than this there is little to worry about spending money you don’t have.
Tags: bailout, bank failures, bank runs, banks, Cyprus, debt, deficit, deficit spending, depression, expropriation, retirement
Week in Review
When the actuaries first crunched the Social Security numbers do you know what they did? They built a system that would start paying benefits to people who on average were already dead. That is the retirement age was pretty close to the average life expectancy. Which meant few people would live long into retirement. So if you’re collecting taxes from everyone but only have to pay about half of them in retirement (as the other half would already be dead) it wasn’t that hard to keep Social Security solvent. But then something happened. We started living longer. Which the actuaries never thought would happen. Worse, people were having fewer babies. So as more people lived longer into retirement there were fewer people entering the workforce to pay the taxes to pay for their long retirement. Creating an aging population. Something else the actuaries never thought would happen.
Put it all together and you have a financial mess. With both Social Security and Medicare projecting to go bankrupt. But it’s just not in the United States. It’s everywhere (see Britain ‘woefully’ under-prepared for rising number of elderly people by Juliette Jowit posted 3/13/213 on the guardian).
Britain is “woefully under-prepared” to cope with an expected explosion of older people and ministers need to respond by raising the retirement age and tackle the costs by reviewing pensioner benefits, a House of Lords inquiry concluded.
A special committee of peers blamed successive governments for their failure to tackle policy issues generated by the ageing population, warned that the biggest threats are to already stretched health and social services, and proposed a raft of new policies to help people cope.
Led by Lord Filkin, the group did not put forward a specific timetable for increasing the state pension age – already set to rise from 60 for women and 65 for men, to 66 in 2020 and 68 by 2046 – but the body did cite recommendations made by Lord Turner, chairman of the pensions commission, who had said the threshold could rise to 70 by 2030…
The wide-ranging inquiry heard startling evidence about the scale of the demographic change coming. Between 2010 and 2030 there is expected to be a 50% increase in people aged 65 or older, and a doubling of people aged 85 or older.
The consequences are predicted to be a 50% increase in people with arthritis, coronary disease or strokes, and an 80% rise in people with dementia to nearly two million.
So the British are talking about raising retirement ages. And means-testing their benefits. One thing they don’t mention is their Liverpool Care Pathway for the Dying Patient. To help the dying to die with dignity. Though many call it a quasi death panel. To help unburden the NHS with a lot of costly patients. Helping them to stretch their limited resources to cover more people. Obamacare includes something similar. Some bureaucrat will make life and death decisions to determine whether medical care will have an acceptable cost-benefit ratio. If not, well, there will be something similar to Liverpool Care Pathway for the Dying Patient in Obamacare. For it will be the only way to cut costs with an aging population. Unless you force health care workers to work at bargain discount pay rates. Like they do in Cuba. And North Korea.
This will be the future of Obamacare. For it is the present of the NHS. And we both have aging populations.
Tags: aging population, Britain, death panel, life expectancy, Liverpool Care Pathway, Liverpool Care Pathway for the Dying Patient, NHS, Obamacare, retirement, retirement age, Social Security
Week in Review
Britain is a social democracy. Not as much as they were before Margaret Thatcher. But still a social democracy. They have national health care. And state pensions. Something the American Left always wanted in the United States. They got the state pensions—Social Security—a long time ago. But they’ve been waiting a very long time for their national health care. Now they’ve got something like it in Obamacare. And now the Left can follow in the footsteps of that social democracy they so admire. Who has no problem whatsoever in providing those lavish benefits onto their people (see Start retirement saving now or the government may make you by Sarah Mortimer posted 1/25/2013 on Reuters).
Britain may soon have to force workers to start saving for retirement to cut a soaring pensions bill set to reach 120 billion pounds in 20 years…
The government’s current pension legislation is an attempt to tackle the country’s ballooning pensions bill, set to hit 8.5 percent of economic output by 2060, from 6.9 percent now…
Britain lags behind countries including Denmark, the Netherlands and Australia in global pension rankings. Its pension system ranks seventh out of 16 countries in a global comparison of national schemes, according to data from consulting firm Mercer. Its lowly ranking reflects an ageing population, low investment returns and large government debt…
“One way or another, long-term pension contributions will increase,” Paul Macro, defined contribution retirement leader at Mercer said. “The government are trying to stop people relying on the state to support them in retirement.”
An aging population, low investment returns and large government debt? Sounds like they’re talking about Social Security.
Note how Britain is trying to make their people less dependent on government while the U.S. is trying to make their people more dependent on government. Even though both countries face the same problems. An aging population, low investment returns and large government debt. So it would appear one country—Britain—is trying to be responsible. While that other country—the United States—isn’t. Why? Because Social Security, Medicare and Obamacare are not about taking care of people. They’re about increasing the power of government. Which is why the U.S. continues to increase their spending obligations no matter how much they can’t afford to. Because spending money buys votes. And winning elections give them power. Which is what they want. So they will ignore the responsible governing Britain is doing. While implementing the kind of programs that caused Britain’s financial problems in the first place.
Tags: Britain, dependent on government, Great Britain, National health care, Obamacare, pensions, retirement, social democracy, Social Security, state pensions
FDR Transformed the Country because he had a Great Crisis to Exploit like the Great Depression
Once upon a time in a place that seems far, far away there was once a people that saved for retirement. The savings rate was so high in this mystical land that businesses were able to borrow money at low interest rates to expand their business. And there was great employment. Then came an evil ogre who hated savings. And responsible behavior. He saw money saved as money leaked out of the economy. Hurting economic activity. His motto was spend don’t save. And don’t worry about how you will take care of yourself in retirement. So this evil ogre set out to destroy savings and responsible behavior.
That evil ogre’s name was John Maynard Keynes. Who empowered governments with his inflationary monetary policies. Allowing governments to spend a lot of money. Giving them a lot of power. By getting as many people dependent on the government as possible. Keynes met with Franklin Delano Roosevelt during the Great Depression. To offer him ideas of how to spend his way out of the Great Depression. FDR didn’t think much of Keynesian economics. For he did try to maintain the gold standard. But he loved spending money. And getting people dependent on the government.
FDR gave us Big Government. He did the things Woodrow Wilson wanted to do. But Wilson couldn’t because he didn’t have a crisis like the Great Depression to exploit. FDR did. And he was able to transform the country because of it. People saved less. And government spent more. Which led to deficit spending, massive debt and inflation. And perhaps the cruelest thing he did was impoverish the retiring class. By taking their wealth through taxes and inflation. And making them dependent on a meager Social Security benefit.
Social Security Contributions would create a Bigger Nest Egg if Invested in the Private Sector
After seeing so many poor, hungry, homeless, etc., during the Great Depression government did something. They punished those who saved responsibly for their retirement. By redistributing their wealth to those who didn’t. It seemed fair and just and kind. And there was an element of that in providing a social safety net for our most vulnerable people. But that wasn’t the intent of Social Security. FDR wanted to transform the country. Which he did. And today they forecast Social Security will go bankrupt in the coming years. Requiring ever more wealth redistribution. All while making Social Security recipients live a more impoverished retirement than they would have. Had they saved for their own retirement. A true transformation of the richest country in the world.
So let’s look at the numbers. Your Social Security contributions are technically saved in a ‘retirement account’ that accrues interest. Each payroll period both employer and employee contribute to this ‘retirement account’. Via a tax rate on a person’s gross pay up to a maximum amount (see Historical Payroll Tax Rates). So let’s see what this would have done in the private sector. Year by year. With the following assumptions. The worker enters the workforce at 18 and works until retiring at age 65. The worker earns the maximum amount for Social Security taxes. So all of his or her earnings are subject to the Social Security tax. With each successive year we add the current contribution to the running balance in his or her retirement account. The annual balance earns interest at 6% (including anywhere from 2-4% real return on their retirement investment and the rest of that 6% accounts for inflation). The following chart shows the beginning 5 years and the final 5 years.
Here we can see the power of compound interest. As we earn interest on both our contributions and the previous interest we earned. Note that the total contributions for 48 years of work total $282,608.38. Which earned a total of $540,413.12 in interest. Bringing the retirement nest egg up to $823,021.50. Again, this is assuming that the Social Security contributions were actually private retirement savings. That thing John Maynard Keynes hated. So this is what a retiree would have to live on in retirement. Had his or her money not gone to the government.
The Purpose of Social Security was to make People Dependent on Government and Redistribute Wealth
Now let’s look at what kind of retirement that nest egg will provide. Starting with some more assumptions. Let’s say the retiree lives 35 years in retirement. Reaching a grand old age of 100. Not your typical retirement. But one this retirement nest egg can provide. For someone with fairly modest means. Each year the retiree lives on $53,553. At the end of the year they earn interest on their remaining balance. Which helps to stretch that $823,021.50 over those 35 years. The following chart shows the beginning 5 years and the final 5 years of that retirement.
Note how that $282,608.38 in retirement contributions can provide $1,874,355 in retirement payments. Again, that’s the miracle of compound interest. So what kind of retirement would Social Security have provided? Someone who retires after working till age 65 who was earning $110,100 near retirement will receive approximately $24,720 annually in retirement. Over 35 years of retirement that comes to $865,200 in retirement benefits. Which is $1,009,155 less than someone would get investing in a private sector retirement plan. Or a reduction of 53.8%. Which is what people lose when letting the government provide for their retirement. So Social Security is a very poor retirement plan. Besides going bankrupt. Which is why the Republicans want to give younger workers the option to opt out of Social Security and provide for their own retirement. Which makes sense. And would probably increase their quality of life in retirement. As shown above. So why are the Democrats so opposed to privatization of Social Security?
Because the purpose of Social Security was not to provide a quality retirement. It was to make people dependent on government. To redistribute wealth. Increasing the power of government. And for those things Social Security is a resounding success. But there is one other thing why Democrats oppose privatizing Social Security. What would happen if the person that built up that $823,021.50 nest egg died 5 years into retirement? Who would get the remaining $781,392.18? The retiree’s family. Whereas if a Social Security beneficiary dies 5 years into retirement the government keeps their money. To spend as they please.
Tags: compound interest, contributions, Democrats, dependent on the government, FDR, Great Depression, inflation, investment, John Maynard Keynes, Keynes, nest egg, private sector, retirement, retirement account, retirement investment, retirement nest egg, savings, Social Security, Social Security benefit, Social Security contributions, Social Security recipients, Social Security taxes, wealth redistribution, Wilson, Woodrow Wilson
Small Business Owners may have Nicer Homes but Chances are they are Mortgaged to the Hilt
A lot of people think business owners are cheapskates. Greedy bastards. Who hate their employees. And try to pay them as little as possible. Not for any business reasons. But just because they are so greedy. And hateful. During bad economic times when the employer has to make some cuts labor leaders will tell the rank and file don’t believe the employer. “Just look at the house the boss lives in. And the house you live in. Whose is better? Bigger? That’s right. The boss’ house is. Always remember that.”
Yes, bosses may have nicer homes. But chances are they are mortgaged to the hilt. Not to mention the fact that these bosses may be working an 80-hour week. Which is not uncommon for a small business owner. Especially during bad economic times. As they may be negotiating with creditors, their banker, their vendors, keeping their customers happy and trying to find new customers. While the rank and file work their 40 hours, collect their paychecks and enjoy their free time.
So it’s not easy being the boss. That’s why so few people want to be the boss. For it’s easier being an employee. You work. You get paid. And you leave work at work. Even if you think you’re not being paid as much as you deserve to be. Something most employees feel. That they’re overworked. And underpaid. But they never look at things through their employer’s eyes. And see what they really cost their boss.
Most Businesses have gone from a Defined Benefit Pension Plan to a Defined Contribution 401(k)
What an employee gets paid and what an employer pays for that employee are two different things. To begin with an employer pays for more hours of an employee’s time than he or she actually works. When you factor in vacation time, holidays and sick days an employer may pay for 2,080 hours while the employee only works 1,896 hours. If an employee makes $35 an hour those nonworking hours can add up to $6,440. Which an employee gets for doing nothing. We call them fringe benefits. Just an employer’s way of saying, “Hey, I don’t hate you. Here’s some money for doing nothing.”
Why do they pay this? Because of free market capitalism. If they don’t pay it someone else may. And attract their good workers away from them. Because if there is something employees will do is jump ship the moment they get a better offer. Which is a good thing. This is supply and demand. And despite workers feeling overworked and underpaid this free market dynamic makes sure employees get paid as much as they can while helping employers pay as little as they can. That equilibrium point where employees will keep working. While leaving employers still competitive. Though that’s getting harder and harder to do these days. As the cost of doing business has never been higher.
In addition to these fringe benefits there are also health insurance, life insurance and retirement contributions. With health care often being the greatest single employee cost to a small business owner. Which is why most now make employees pay a small portion of their health care these days. Retirement contributions have also gotten very costly. Few people still have a defined benefit pension plan these days. Typically an owner will offer a defined contribution 401(k) for the employee to contribute to. And if times are good the employer may match their contribution up to a certain amount. But employers will call this a discretionary contribution. And it will be one of the first things to go when they are having cash flow problems in a bad economy.
The Last Thing a Business Owner needs while trying to Deal with Soaring Labor Costs are more Costs and Taxes
In addition to fringe benefits there are payroll taxes and insurances. Such as Social Security. Which the employer and employee split. At least in theory. The employer currently pays 6.2% on the first $110,100 in an employee’s earnings. The employee kicks in 4.2% (which may go up another 2 points after the fiscal cliff, as that tax cut expires). In reality the employee doesn’t pay any of this. They get their check and go on their way while the employer has to find the cash to pay the 10.4% due. For an employee earning $66,360 that Social Security tax payable comes to $7,571. Another big check the owner has to write is for state unemployment. Which can be anywhere around $4,000. The following chart summarizes these and additional labor costs (note: the retirement contribution is probably between a 401(k) matching contribution and a defined benefit pension contribution).
An employee with a pay rate of $35/hour will gross $66,360. Deductions will lower actual take-home pay. But the employer’s total cost for this employee in this example is $108,252. Or an additional $41,892 than the employee grosses. Which comes out to another $17.04 an hour. Something the employee never sees. This is why labor is so costly. And why employers want to hire as few people as possible. For each additional employee they hire (in this example) they have to pay an additional 22.2% in payroll taxes/insurances. And an additional 41% in fringe benefits. Or a combined 63.1%. In addition to what they’re paying the employees for their actual work.
And this is why employers want to offload health care (especially for their retirees). And their pension liabilities. As they can add an additional 30% (or more) to their labor costs. What started out as fringe benefits to attract some of the best workers is now bankrupting many companies. People are living so long into their retirement that these cost are growing faster and larger than any other cost a business has. And it’s also why small business owners are very worried about new regulations and taxes. For the last thing they need while trying to deal with these soaring labor costs are more costs. Or taxes. Which doesn’t make them cheap or greedy. It just makes them very cautious business owners who are trying to keep their businesses afloat in an ever more difficult business environment.
Tags: 401(k), boss, bosses, business owners, defined benefit pension plan, defined contribution 401(k, employee, employer, free market, free-market capitalism, fringe benefits, health insurance, insurance, labor, labor costs, overworked, payroll taxes, pension, retirees, retirement, retirement contributions, small business, small business owner, Social Security, underpaid
Week in Review
Raising a family is expensive. Once upon a time you could do it on one income. But now with huge welfare states requiring heavy taxation one income rarely cuts it anymore. It takes two. Childcare. And more cooperative employers. For without all of this young people just won’t be able to afford to raise a family (see Survey: 50% couples not have babies because ‘Money No Enough’ posted 10/6/2012 on TR Emeritus).
According to a recent survey conducted by voluntary welfare organisation ‘I Love Children’, about 1 in 2 couples (50%) said not having enough finances is the main reason for not having children…
‘I Love Children’ is a voluntary welfare organization set up in September 2005 with a purpose of keeping Singapore young — by advocating a higher priority to having children, and promoting a society where children are loved and mainstreamed. It hopes to inculcate the value and importance of parenthood and family among Singaporeans, as well as encourage a children-friendly environment in Singapore.
To keep Singapore young. All nations would like to keep their nations young. To have an expanding population growth rate. So they have more young workers entering the workforce than older workers leaving the workforce. Why? To avoid the financial crises they’re having in Europe. Japan. The U.S. And like they will probably soon have in China. Where all of these nations have an aging population. Where more people are leaving the workforce while fewer are entering it to replace them. So the tax base is shrinking. As is tax revenue. And this at a time when government spending on pensions and health care for the elderly is rising. Which means fewer and fewer people will have to support more elderly people in their retirement. As the tax base dwindles governments replace that lost revenue with more and more borrowing. Leading to those financial crises.
At the dialogue session, 26-year-old Ms Gillian Neo, said, “Currently, infant care in Singapore is still quite expensive. Even the more affordable ones, after government subsidies, is still $700 a month…”
During the the dialogue session, young parents also said that flexi-work arrangements are a major incentive as that will enable them to spend more time with their children…
However, there is still a lot of resistance in the mentality of some of the management of companies towards this mode of working.
“I was offered a full-time work from home arrangement with my previous employer… Six months into it, it really fell flat on the ground. One of the reasons was my immediate supervisor was really not supportive of the arrangement,” said Mandy Loh, a freelance writer…
She said, “In fact, there have been studies done by the employers federation, for instance, to show that for every dollar spent on flexi-work options, the return is S$1.68.”
Madam Halimah also suggested that flexi-work arrangements could be used to attract people to work for SMEs [small and medium-sized enterprise], which are currently facing a labour crunch.
The problem is not lack of affordable childcare. The problem is that a high level of taxation (often to support an aging population) requires two incomes to raise a family. Children are not supposed to be a nuisance that we dump off at childcare while we go to work. They should be raised in a loving family with a full time stay-at-home parent. A role typically filled by the mother. The CEO of the house. While the husband works full time to pay the bills. Parenting is a team. It takes two to raise a family. A mother and a father. Not a childcare facility. And, no, this isn’t discriminatory to women because they can’t have a career and be a mother. It’s what’s best for the children.
The working mom also comes with some baggage. Especially if she is a key person on a project. Because a snow day may pull her out of the office when they call an emergency meeting. If a child falls ill she may be out of the office for a few critical days of the project. If a meeting runs long because of a crisis she will still have to leave at 4:00 PM to pick up her kids from daycare. If a project requires an emergency trip to another state she will not be able to go. School holidays and half-days will take her out of the office, too. These aren’t hypotheticals. Many of us have probably experienced this in the workplace. This is why employers are reluctant to hire single moms or single dads. And a little reluctant to hire a married mom with young kids. Because it is often the mother and not the father that will miss work for the kids. As the father’s career will be more established because of less time missed for the birth of their children. It’s not unfair. Men and women are just different. Women give birth. Men don’t.
Emphasizing a woman’s career over her children has put more women into the workforce. Which has allowed greater government spending. This is why governments want state-provided childcare. Because they want to get women back into the workforce as quickly as possible so they can resume paying taxes. Which governments can never seem to collect enough of with an aging population. Making it ever more difficult for young people to have the children governments want them to have. To bring new taxpayers into the workforce. So bringing women into the workforce probably hurts in the long run more than it helps. For it allows the government to spend more. But it also discourages young people from raising families. Leading to fewer children. An aging population. And a shrinking tax base. Which will probably be made up with more government borrowing. As more nations join those in Europe, Japan, the U.S. and probably China who are suffering from the pressure of aging populations. And the financial crises they cause.
Tags: affordable childcare, aging population, borrowing, childcare, children, elderly, expanding population growth rate, family, father, financial crises, government spending, mother, older workers, raising a family, retirement, Singapore, tax base, tax revenue, taxation, taxes, workforce, working mom, young workers
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.
Tags: children, classroom, classroom supplies, education, firefighters, firehouse, Health Care, kids, nurses, Obamacare, patients, pensions, police officers, population growth rate, public school teachers, public sector, public sector unions, retirement, salaries, strike, taxes, taxpayers, teacher, teachers, union, union dues
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.
Tags: abortion, babies, birth control, birth rate, declining population growth rate, Medicare, Obamacare, population, population growth rate, pyramid, retirees, retirement, retirement savings, Social Security, tax consumers, taxpayers
Week in Review
While the Europeans, the Japanese and the Americans all struggle with an aging population and pension and health care systems approaching insolvency Singaporeans are enjoying comfortable retirements. How? Because they did something crazy. They acted responsibly and saved for their retirement and their health care. Instead of depending on the state (see Singapore’s got some good ideas posted 5/17/2012 on ctpost.com).
…Singapore makes no promises but instead requires all citizens to save up to 36 percent of their income for their own retirement and health care. The government invests the savings in stocks and bonds; the money is not used for current expenditures.
The result? Singaporeans have comfortable retirements. Their health-care system delivers better outcomes while costing 80 percent less than ours, according to 2010 findings from the World Health Organization, and all of it is financed without imposing debt on the next generation. Singapore even reported an uptick in medical tourism last year.
Now, compare Singapore’s system to our own. When Medicare was debated and enacted, Paul Samuelson was America’s most influential economist. He was an adviser to presidents Kennedy and Johnson, author of the nation’s best-selling economics textbook and a soon-to-be Nobel laureate. In 1967, Samuelson wrote in Newsweek about the funding mechanism for Medicare and Social Security: “The beauty about social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. . . . Always there are more youths than old folks in a growing population. More important, with real incomes growing at some 3 per cent per year, the taxable base upon which benefits rest in any period are much greater than the taxes paid historically by the generation now retired. . . . A growing nation is the greatest Ponzi game ever contrived.”
Samuelson was right about social insurance being a Ponzi scheme even though he was wrong on his economics. He was a Keynesian. And it was Keynesian economics that is responsible for so many of our problems today. Encouraging governments to intervene into the private economy. And to tax, borrow and print money to spend. Which has given Japan their Lost Decade. Gave the U.S. (and the world) the subprime mortgage crisis. And gave the Europeans their sovereign debt crisis.
So here is one of the Keynesians’ greatest and most admired economists admitting that social spending is what it is. A Ponzi scheme. Of course the fatal flaw in the Keynesian model was women’s liberation. The world changed. Women stopped having babies. And when they did we went from having a young population (more people entering the workforce) to having an aging population (more people leaving the workforce). A baby bust followed the baby boom. Which smashed apart the Ponzi scheme. Because there are now more old folks drawing benefits than there are youths entering the workforce to pay for them. So governments are spending more than they collect in taxes. And the rate of spending is growing greater than its population growth rate. Which is a big problem. As Mr. Samuelson pointed out in Newsweek.
Meanwhile those who are saving for retirement are not having the same problems as they are in Keynesian economies with state pensions and national health care. Of course a Keynesian would never approve of this. For savings is to a Keynesian what sunshine is to a vampire. And they will do everything within their power to prevent people from saving. Despite their incredible record of failure. But they keep plugging along. Why? Because governments love them. They keep hiring them. And they keep listening to their advice. For they give legitimacy to their irresponsible spending ways.
Tags: aging population, Health Care, Keynesian, Keynesian economics, Paul Samuelson, pension, pension system, Ponzi scheme, retirement, Samuelson, savings, Singapore, Singaporeans, social insurance, Social Security, women's liberation, workforce
Week in Review
So who isn’t paying their fair share? I know who you’re probably thinking. And if you are you’re wrong. For here it is direct from a Democrat mayor’s mouth (see Steven Malanga: How Retirement Benefits May Sink the States by STEVEN MALANGA posted 4/27/2012 on The Wall Street Journal).
Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state’s future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, “You won’t recruit a business, you won’t recruit a family to live here.”
We’re likely to hear more such worries in coming years. That’s because state and local governments across the country have accumulated several trillion dollars in unfunded retirement promises to public-sector workers, the costs of which will increasingly force taxes higher and crowd out other spending. Already businesses and residents are slowly starting to sit up and notice…
Government retiree costs are likely to play an increasing role in the competition among states for business and people, because these liabilities are not evenly distributed. Some states have enormous retiree obligations that they will somehow have to pay; others have enacted significant reforms, or never made lofty promises to their workers in the first place.
Indiana’s debt for unfunded retiree health-care benefits, for example, amounts to just $81 per person. Neighboring Illinois’s accumulated obligations for the same benefit average $3,399 per person…
Back in Illinois, Dana Levenson, Chicago’s former chief financial officer, has projected that the average city homeowner paying $3,000 in annual property taxes could see his tax bill rise within five years as much as $1,400. The reason: A 2010 Illinois law requires municipalities to raise the funding levels in their pension systems using property tax revenues but no additional contributions from government employees. The legislation prompted former Chicago Mayor Richard Daley in December to warn residents that the increases might be so high, “you won’t be able to sell your house.”
What was that about the 1%? Just who is it living off of the generosity of the 99%? Who isn’t paying their fair share? And is asking others to pay far more than their fair share? Who is it that has pension and retiree health care plans worth several trillions of dollars? All funded by tax dollars from the 99%? As well as the 1%? Our government workers. That’s who. Those people who have made themselves more equal than the 99%. Even though they claim to be a part of the 99%. While living more like the 1%. But one thing you can say about the 1%. They’re not bankrupting their cities and states like these government workers are. Or destroying our lives to pay for their lives.
You want to talk class warfare? Let’s talk class warfare. The richest 1% pay approximately 30% of all federal income taxes. The richest 10% pay approximately 70% of all federal income taxes. And we don’t pay any of these rich people with our taxes. They get it however they get it. But they don’t get it from us. The taxpayers. So they providing a huge net good for us. Paying the lion’s share of taxes. And not taking our money from us. And yet these are the people that we vilify. While those who are harming us the most get a free pass. Now that’s some clever class warfare. Making it sound like it’s the rich who are oppressing the middle class. While it is the wealthy government class oppressing the middle class. And they do it very well. You’ll hear people everywhere say that the government should stick it to the rich. But they never say a word about these government workers who live a better life than they do. Even though they are paying for that better life. Through ever higher taxes.
So when your property taxes go up think about your retirement plans. And though you may not have much be comforted in the fact that your government workers do. Thanks to you. So even though you may not be able to travel the world in your retirement you’ll know that somewhere a retired government worker is. Because that’s only fair. And being fair is important. Fair share sacrifice. That’s all they want. As long as, of course, your share of sacrifice is greater than theirs. The wealthy government class.
Tags: 1%, 99%, class warfare, fair, fair share, federal income taxes, government class, government employees, government workers, middle class, pension, property taxes, public sector workers, retiree health-care, retirement, rich people, sacrifice, state and local governments, tax bill, taxes, taxpayers, wealthy government class
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