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Archive for the ‘Entitlements’ Category

Entitlement Mentality Affecting US Military Preparedness

Posted by Steve Markowitz on October 1, 2013

Today the focus is understandably on the US government shutdown.  President Obama blames the Republicans and the Republican Congress blames the President.  Both contentions are political mere sideshows to the real economic problems facing the Country.  The United States’ overall fiscal problem is that we spend too much money, more each year that we bring in in tax revenues.  How the money is spent or wasted is secondary to the fact that we are stealing from our children’s future to our benefits today.

There are times when it is reasonable for a country to spend more than it brings in such as real economic crisis and war.  However, when a Country continues to run deficits year after year and ignores the perils of the excessive behavior, it is a clear sign of a country degenerating, both economically and morally.

As the federal government grew during the past hundred years, accelerating in the past fifty, it found new ways to generate revenues, i.e. taxes.  Some of these revenues were used appropriately to build infrastructure and supply Americans with essential services.  However, more recent the taxation system became a methodology to redistribute wealth from some Americans to others.  This includes corporate welfare with companies given special tax breaks, as well as entitlements to individuals, some of who are deserving and others who are not.  Also, as the federal government grew, a greater number of Americans became employed by that government and are now dependent on it for their livelihood.  Finally, when enough funds tax revenues could not sustain this perverse payments system, the government began running ever larger deficits.

One’s personal views and needs will likely affect who one believes is truly deserve it of the government’s sugar. This is irrelevant to the fact that when a government takes resources from some Americans and gives it to others it is a corruptive force.

Often those on the Right focus on entitlements given in the form of social programs as being corruptive to the capitalistic system.  While this assumption is correct to an extent, the social welfare given businesses, i.e. the military and other pet projects of the Right, are just as corruptive and damaging to the overall economy.

McKenzie Eaglen and Michael O’Hanlon wrote an interesting piece in the Wall Street Journal last summer titled Military Entitlements Are Killing Readiness that reviews how the corruptive entitlement mentality is damaging the United States’ military and its preparedness.  Eaglen O’Hanlon list some of the entitlements military personnel currently receive including: 1) health coverage for life with minimal cost sharing, 2) retiree pensions and 3) housing allowances, grocery discounts, tuition assistance, and tax breaks more.

While many contend that our military personnel deserve such perks for serving the Country, the same argument can be made for many parts of society including police officers, firefighters, etc.  In fact this same argument has often made for municipal workers and has resulted in many cities and municipalities having to cut services in order to honor these entitlement benefits.

Now, the increasing cost of the entitlements is beginning to squeeze out the United States’ military capabilities and preparedness.  Here are facts presented by Eaglen and O’Hanlon:

  • The Navy will retire more ships over the next five years than it will build, with the fleet now at only 285 vessels.
  • The Air Force has one-third the number of bombers it had during the early 1970s and is currently is aging.  The relatively newest B-2 stealth bombers are two decades old.
  • In 2014, active duty Army and Marine Corps personnel are set to decrease by over 10% from 2010.

Should the above decreases be the result of a shrinking budget, while it may be bad policy, it would be an understandable economic decision. However, these decreases are more problematic when considered in tandem with the pay/benefit increases given military personnel that according to Eaglen and O’Hanlon include:

  • From 2001 to 2012, inflation-adjusted compensation cost per active-duty service member grew 56%.
  • From 2000 to 2010, the military’s health-care costs skyrocketed 180%, to $49.8 billion from $17.8 billion—more than double the rate of the national increase.  Tricare, a highly subsidized health care system for military retirees, provide members free health care for life.   This had led to over use. For example, in 2004 benefit recipients used outpatient services 44% higher than in civilian plans; with the inpatient rate 60% higher.
  • Military retirees have very generous pension benefits.  One benefit includes receiving 50% of the average salary for the three highest pay years after only 20 years of service.  This benefit also includes a cost-of-living adjustment.  In 2011 this system cost $20 billion, but also has a perverse impact on combat veterans who rarely serve for a full 20 years and therefore receive no pension benefits.
  • There are currently 760,000 civilians working for the military, a number that continues to increase even though the number of active-duty military personnel has decreased.

Certainly our Country should take care of its military servicemen and women, especially those that served in combat.  However, that does not justify pay scales or benefits that are considered sacrosanct by some.  As these pay and benefit costs squeeze out available funds for weapons and training, we are not only doing the Country an injustice, but also those that serve.

It is politically impossible to rein in the cost of any significant governmental program as long as the government is allowed to deficit spend..  Only when we stop robbing from future generations will true political wrangling and compromise be allowed to assist in bringing government spending under control, a requirement for any successful democracy in the long term.


Posted in Entitlements, Military | Tagged: , , , , , | 2 Comments »

Governmental Spending and Handouts are Destroying America’s Work Ethic

Posted by Steve Markowitz on October 30, 2012

Thetimes-tribune.com posted a fascinating, yet disturbing article titled U.S. loses to disability gamers concerning the degradation of work ethic in the United States.  It reviews a report by economist Nicholas Eberstadt of the American Enterprise Institute who presents the following evidence/conclusions in his “A Nation of Takers: America’s Entitlement Epidemic.”

  • For 2010 total government transfers exceeded $2.2 trillion in money, as well as goods and services to Americans.  This amounts to $7,200 per individual and $29,000 per family of four.
  • Today’s transfers exceed the total of all other federal expenditures.  Prior to 1960, only in the 1931 and 1935 did federal transfer payments exceed total other costs.  To put this in perspective, during FDR’s presidential years these transfers were less than a third of total spending.
  • From 1960 to 2010 transfers (entitlements) increased from 28% to 66% of total spending.
  • Male work force participation has sunk to 73% today from 89% in 1948 with many men not wanting to work.  At 73% this is lower than its counterpart in Europe.
  • The disability rate has skyrocketed in the United States from 455,000 in 1960 to 8.6 million in 2011, four times the number of Americans on welfare.  About half claiming disability are from “mood disorders” or “musculoskeletal system and the connective tissue” issues.  In 1960 about 134 Americans were employed for every disabled worker.  In 2010 there was one disabled for every 16 employed.

The degradation of American work ethic is a tragedy that is draining the Country’s spirit and wealth.  While many on the Right would blame the governmental programs that helped foster this slide on Democrats, Republicans have been complicit with significant growth in related programs occurring under the Nixon, Ford and George W. Bush administrations.  In fact, Eberstadt concludes that between 1960 and 2010 entitlement spending was 8% higher under Republican presidents.

In addition, many “industries” have benefited from the various governmental handout programs including the medical profession, pharmaceutical companies, lawyers, governmental employees and social workers.  It is telling that with all of these groups supposedly working for the good of society that the disability rate has skyrocketed.  The actions of these special interest groups have either hindered the publics’ health and/or foster a growth in dependency.

As this Blog has proffered previously, the only way to address the evils that come with excessive governmental spending is to strictly limit Congress’s ability to spend in any year more than the government brings in that year’s revenue.  Any spending beyond that threshold is corruptive to a democratic society.

Posted in Entitlements | Tagged: , , , , , | 1 Comment »

Economic Reality Check for Younger Americans

Posted by Steve Markowitz on September 2, 2012

Most Americans do not require more economic data to realize the economy is weak five years after the economic meltdown.  At the same time certain granular data offers a broader context for of the long-term implications of the economy’s challenges.

Economists John Mauldin posted an article titled Boomers are Breaking the Deal that offers interesting data on how different segments of society had been affected by the downturn.

  • According to the Associated Press 54% of bachelor degreed Americans under the age of 25 are either unemployed or underemployed.  It is also projected that by 2020 that the majority of largest job opening occupations will not require college degrees.  This will be caused by ongoing computerization that is eliminating the need for highly trained professionals in many jobs.
  • While President Obama promotes class warfare, the real growth in societal inequities is age-based.  The Baby Boomer generation is taking a greater share of wealth through entitlements like Social Security and Medicare.  They now also take a greater bite of the job market.  The chart below shows the employment level of those 55 years and older since 2007, which has continued to rise at a steady pace.  At the same time, the total employed in the United States has dropped by 4 million, as indicated by the red line showing that Baby Boomers are taking a larger percentage of available jobs.
  • As of June, 2012, the total civilian labor force in the United States was 155 million with 111 million being in the private workforce.  There are approximately 56,000,000 Americans either on Social Security or disability benefits equaling a staggering 50% of the private workforce.
  • One in eight households receive food stamps and over 50% a government check of some form.  It doesn’t take a PhD in economics to understand this trend is a train wreck.

While the above are unsustainable, they continue only because of United States ability to borrow and print money.  Believing that this Ponzi scheme can continue is akin to believing in alchemy.

It is remarkable that younger Americans have failed to understand the implications of the massive entitlements going to Baby Boomers.  The government uses handouts, such as subsidized college loans, to keep mollify them.  This sleight-of-hand is running out of steam as young Americans find it increasingly difficult to find jobs.  When they wake up to reality of their plight they will become a powerful political force that will likely be adversarial to the interests of the Baby Boomers.

Posted in Baby Boomers, Entitlements | Tagged: , , , , , | Leave a Comment »

Paul Ryan’s Spanks Debbie Wasserman-Schultz

Posted by Steve Markowitz on August 17, 2012

The video below helps demonstrates Paul Ryan’s understanding of America’s debt problem and the related entitlement programs.  In a September 2010 mini debate with Democratic National Committee chairperson, Debbie Wasserman-Shultz, Ryan refers to the unsustainable trajectory of the debt and entitlements.  In typical Leftist rhetoric, Wasserman-Shultz ignores the argument and instead accuses Ryan of attempting to address the financial problems on the backs of the less fortunate.

Given the trajectory of America’s deficits and debt, without addressing the entitlements problems soon, the money will run out for funding them in the future.  Democrats and some Republicans would continue kicking the can down the road on these serious issues to push them off to someone else’s watch.  Paul Ryan has more character than that.

Posted in Entitlements, Fannie Mae | Tagged: , , , , | Leave a Comment »

The United States of Entitlement

Posted by Steve Markowitz on January 16, 2012

There is much evidence of a change in the basic tenants of the United States from one of self-reliance to one of entitlements.  The election of Barack Obama to a great extent occurred because of his very liberal agenda that included promises for a bigger government with more handouts for all sorts of special interests.  How to pay for these “gifts” from the government was not discussed.

Late last year, professor Jack Chambliss of Valencia College, Florida, held an exercise in his Econ class of 180 students that showed how ingrained the entitlement mentality has become in the United States.  Each student was asked to write a 10 minute essay to explain their definition of the American Dream and how they expected the federal government to help achieve that dream.

According to Professor Chambliss, responses to the first part of the essay included most students indicating a desire to have a good job, a home, a family and the ability to comfortably support themselves in the decades to come.  In response to the second issue as to how they saw the federal government’s role in their future, many students indicated that they wanted government to “pay for my tuition,” “provide me with a job,” “give me money for a house,” “make sure I get free health care,” “pay for my retirement,” “raise taxes on rich people so that I can have more money” and other items related to entitlements or government handouts.  One student went so far as to say: “We all know that there are many bad side effects when regulations take place, but as human beings, we are not really responsible for our own acts, and so we need government to control those who don’t care about others.  It makes sense that our freedom is reduced every day with the new regulations.”  Yikes!  The video below offers more details.

There is straightforward data that supports the notion of significant growth in the entitlement mentality in the United States.  In 1983, only 29% of Americans received some form of government assistance.  Today that number has grown to over 44%.  In addition, it is reported that over 50% of Americans will not pay any income tax for 2011.  However, even with this growth in government, Americans dissatisfaction with the economy, their government and the inequities in society seem to be increasing.  While this is clear evidence of the failure of Progressive government, many of our young people seek more the same failed strategies.  Obviously, their education in the subject of economics is not important to their Progressive educators.  Given some of the radical views expressed by teachers unions, this is not a surprise.

Significant blame for the growth of the entitlement mentality in the United States also rests with us Baby Boomers.  The children of the ’60s grew up to become the greatest materialists of all time.  In addition, the love and peace generation learned how to use credit like drunken sailors, both as private consumers and voters.  Given that we forgot Crosby stills and Nash’s lyrics, “Teach the Children Well“, the video is also posted below.


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Generational Wealth Gap Hits Record

Posted by Steve Markowitz on November 9, 2011

While historically it is typical for older Americans to have more wealth than younger ones, the gap has significantly increased over recent decades and is now at historic levels.  Here are some facts published by CNN Money:

  • Older Americans currently have 47 times the wealth, as compared to America’s youngest generation of workers.
  • Households of 65 years and older in 2009 had median net worth of about $170,500, compared to about $3,700 for households headed by adults 35 years and younger.
  • In the last generation, the older group had a 10-to-1 wealth ratio over the younger generation.  It has since spread to 47-to-1.
  • Since 1984, the same age group comparisons show that the younger generation’s wealth has declined by 68% while the older group increased by 42%.

The age wealth-gap has significantly widened for a variety of reasons including the housing meltdown and increased cost of higher education.  Most elderly people bought homes at pre-bubble valuations and therefore were not hurt as much by their more recent drop in value.  With the significant increase in the cost of a college education, the younger generation took on much higher school debt.

Both of the above issues were exasperated by governmental meddling in markets.  In the case of the housing market, the low interest policies promoted by the government and Federal Reserve led to the housing bubble.  Similarly, easy government money in the form of educational loans allowed colleges to increase prices faster than inflation.

It is ironic that the two largest portions of America’s debt are the entitlement programs of Social Security and Medicare.  Both mainly benefit older Americans, the group that has fared the best economically in recent decades.  Should the Occupy Wall Street protesters actually consider the real challenges facing them, they might come to conclusions that could lead to problem resolution; i.e. cutting entitlement programs.  In addition, we Baby Boomers will be on the receiving end of the Occupiers.

Posted in Debt, Entitlements | Tagged: , , , , , , , , , | Leave a Comment »

Judge Judy Exposes Entitlement Fraud

Posted by Steve Markowitz on July 30, 2011

Henry sent in this rather incredible piece of video.  While Judge Judy does her thing to sell television commercials, she does help expose the reality of what is becoming America.

Here we have a college student receiving $22,000 per year in student aid, $5,400 per year in housing support, $12,000 per year in other stipends for a total of about $40,000 per year in aid.  He then picks up with an older lady and lives together, but neither is paying the rent they owe.

The young man on this video clearly believes that taxpayers owe him the money.  Many others in this Country take the same entitlement mentality.  This example tells the tale of the problems in America.  And what to the Progressives in Washington want to do with this growing reality?  Borrow more money from our children and create still more to live off the hard work of others.

Posted in Entitlements | Tagged: , , | 1 Comment »

Riots in LA; No, It’s not the Debt Ceiling

Posted by Steve Markowitz on July 28, 2011

Yesterday saw a riot in the Hollywood section of Los Angeles, California.  Were the people worked up about the debt ceiling debacle in Washington?  How about the ongoing wars in Libya or Afghanistan?  Or maybe it was worker benefits cuts?  No, none of these trivial issues got the LA’ers worked into a frenzy.

These LA’ers have real issues of concern.  They were turned away from an invitation-only party and movie screening of Electric Daisy Carnival rave.  Imagine the audacity of a party thrower limiting attendees to invitation holders!  For this indiscretion rocks were thrown at police and fires were set on Hollywood Boulevard.

The good folks in LA have taken the entitlement American’s mentality in to a new level!

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Reality and U.S. Debt

Posted by Steve Markowitz on July 9, 2011

The news media is fixated on the Washington negotiations to raise the federal debt ceiling.  Their simplistic narrative is that with compromise between the President and Congress, America’s financial challenges will miraculously dissipate.  If only it was that simple.

America’s debt, while put on steroids by President Obama, has been decades in the making.  It will require time and pain to unravel.  Given that neither the President nor most in Congress mention this reality, it is unlikely that much more than smoke and mirrors, i.e. accounting trickery, will come of the negotiations.

Lawrence Lindsey, a former Fed governor and economic assistant to President George W. Bush, published an op-ed this week in the Wall Street Journal titled “The Deficit Is Worse Than We Think that includes sobering facts about America’s debt.  Lindsey points to three issues that make the deficit worse than the raw numbers:

  • The interest that the United States currently pays on the debt averages 2.5%, historic lows.  The average interest rate over the past 20 years has been 5.7%.  Should we revert to this average the annual interest expenses in 2014 would increase by $420 billion and $700 billion by 2020.  Over ten years this would increase America’s interest expense alone by about $5 trillion.
  • The government has projected rather aggressive economic growth in the coming years.  Growth over the long term has trended 2.5%.  Obama’s new budget assumes over 4% growth for the next three years.  It is estimated that the 10-year cost of a 1% miss on this number is $750 billion.
  • The cost estimates for ObamaCare are wishful thinking and does not account for many companies that will drop ther medical coverage, pushing millions on the public system.  Lindsey estimates the cost implications to the government not accounted for are between $70 and $90 billion.

Lindsey’s conclusion: the $2 trillion in long term deficit reductions currently being discussed in Washington is likely to only offset a portion of the deficit increases to come that are not being accounted for.  Once this reality hits the bond markets, it will be more difficult and expensive for America to finance its debt.

The bottom line: Unless the government radically cuts spending, which includes the entitlement programs, America’s deficits will continue spiraling out of control.

Posted in Debt, Deficits, Entitlements | Tagged: , , , , , , , , | 1 Comment »

Boomers Create an Economic Storm

Posted by Steve Markowitz on June 28, 2011

Attempting to wade through and interpret the mass of economic data available is a daunting task, even for expert economists.  That becomes clear when considering the fact that most experts did not foresee the 2008 economic meltdown until it was already upon us.

This writer recommends economist John Mauldin’s website, Investorsinsight.com, for concise information and insights of our economic world.  John not only has a unique way of explaining complex economic matters in understandable ways, but his calls are right in most cases.

Investorsinsight.com often includes guest writers in its Out-of-the-Box section.  This week there is an especially thought-provoking piece titled “The 3-D Hurricane and the New Normal written by Jason Hsu, Chief Investment Officer, Research Affiliates, who has a PhD in economics and is a professor at UCLA.  Hsu’s article concisely ties together the significant macro-economic challenges that Western countries face.  In order to wet your appetites, included below are some quotes from The 3-D Hurricane and the New Normal.

  • Debt, deficit, and demographics – the 3-D hurricane – is heading to the shores of all developed economies.
  • More importantly, the emerging economies will demand their fair share in the consumption of resources and goods.  That competition for resources and goods will lead to higher prices at a time when developed countries are less able to further finance their consumption.
  • Democracy is one of the great equalizers for income inequality in the cross-section of population.  The poor have a mechanism to instigate wealth transfers by voting for welfare and public goods production and to avoid exploitation by voting for pro-labor regulations.  Democracy seems to serve quite the opposite role, however, when it comes to equalizing the inequality between generational cohorts.  There is no doubt that our future generations have become extremely poor; they are each responsible for tens of thousands of dollars in national debt – in some countries, Gen Xers are staring at outright national bankruptcy.  But today, our political process continues to allow the Boomers to pile on new debt for the next generation in order to fund their current consumption and future retirement.
  • It is projected that the support ratio in developed countries will decline from 3.5 working age adults per retiree to below 2:1 by 2050. In comparison, in 1970, the support ratio was 5.3:1.  By 2025, at the height of Boomer retirement cycle in the United States, there will be 10 new retirees for each new entrant into the workforce.
  • Thus, the trade deficit between developed countries and the emerging countries must continue to widen aggressively or the standard of living for developed countries must decline precipitously.  However, the only way for most developed countries to maintain (and increase) their trade deficit against the emerging countries is to borrow heavily from the emerging countries.

Hsu profound conclusions are hard to find fault with.  It is evident that the entitlement programs that the Boomers have given themselves are Ponzi Schemes teetering on the unsustainable weight of an inverted triangle.  (And yes, Social Security has become an entitlement since Boomers will get far more out than they pay into it.)

Those that receive incomes from the government through salaries or entitlement programs, including those 47% that pay no federal Income tax, will offer great resistance to macro-economic problem resolution.  That makes for a dicey road ahead.

The 3-D Hurricane and the New Normal, by Jason Hsu

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