Thursday, August 29, 2013
Random ruminations from your resident curmudgeon...
Once again, our nation lurches toward another debt crisis. The United States will hit its debt limit by mid-October unless Congress agrees to raise the debt ceiling. If the U.S. reaches the debt ceiling, which is currently $16.7 trillion, there is no more borrowing authority. The implications of that are sizable. The federal government could only fund operations from cash that it has on hand on any particular day, meaning that many bills would go unpaid. That would have a draconian impact on some families, as they rely heavily on government assistance to get by, whether from Social Security payments, food stamps, welfare, or other programs. To keep those programs running, there would be an immediate and drastic cut to all the programs. Additionally, the U.S. would be unable to pay the interest due on its massive debt and the principal that will come due at various maturities. As you can imagine, the disruption domestically and with those countries and institutions that buy our debt will be extremely painful if we cannot pay our bills. Treasury Secretary Jack Lew has said there is "no negotiation" on raising the debt limit- it has to be done and the Administration is not budging off that position. Perhaps if those in Washington took the opposite approach- there is no negotiation about our country living within its means and not spending wildly- we would not have to confront this dilemma. Alas, that discipline is sorely lacking in Washington, and the result will be even more spending and more debt. And you and I will pay dearly for that.
I am really getting into swing dancing. Not on purpose. Seems like some parts of my body have become prone to swinging.
Want a job that pays well? In this economy, it is difficult to find one, and this has forced many people to take minimum wage jobs. There is nothing wrong with that; along with providing entry into the work force, these jobs sometimes serve as a bridge between better paying jobs for some people. But here is a perversity of our modern welfare nation, and it should infuriate those of us that work and see our taxes go up dramatically, and that perversity is that in 35 states, welfare benefits pay more than a minimum wage job. In 13 states, welfare benefits pay more than $15 per hour, more than double the minimum wage. This information is from a new study by the Cato Institute. Michael Tanner, Senior Policy Analyst and co-author of the study said, "One of the single best ways to climb out of poverty is to take a job, but as long as welfare benefits provide a better standard of living than an entry level job, recipients will continue to choose it over work." No joke. Paying more NOT to work disincentivizes working, especially in light of higher taxes and the cost of Obamacare. Washington currently funds 126 separate programs to support unemployment benefits and support to low income workers, on top of additional welfare programs operated by state and local governments. Hawaii has the most generous benefits according to the Cato Institute, at $29.13 per hour or an annual pre-tax income of $60,590. Friends, this ludicrous situation will not change until both Congress and state governments begin to reward work and not idleness. Unfortunately, government at all levels hasn't figured out that people respond to economic incentives, and if government makes it more economically favorable to not work, then most people will respond to that incentive. All the while, you and I will pay for this screwed up system and struggle to get by financially.
I'm not letting getting older get me down. It's too hard to get back up.
Economic decisions made by governing bodies are often viewed from a static perspective. By that, Washington may say that "if we raise taxes, the government will collect more revenue." Of course, in the real world, that is not often the case, as we see people respond to changing economic conditions, laws, or regulations. As mentioned above, we have made it more economically rewarding in this country not to work than to be gainfully employed. Until that dynamic is reversed, our country will continue to struggle to get back to full employment. These trends, positive or negative, often compound and have multiple effects as well. And one of the most troubling tends is that the stagnating, and in reality- shrinking, workforce is supporting more people that are receiving social security and other benefits than at any time in the history of these programs. Here are the troubling numbers: in 1970, there were 2.56 workers for every recipient of Social Security according to data from the St. Louis Federal Reserve. That trend held steady for 30 years, as there were 2.49 workers per recipient in 2000. From 1980 to 2000, there 9.9 million new beneficiaries added while the economy roughly 30 million new jobs. As the demographics of the aging Boomer population have accelerated more people toward retirement age, 10 million new beneficiaries were added from 2000 to 2010, but the U.S. economy had a net LOSS of jobs over the same period. Currently, there are 2 workers for every Social Security recipient, and that number is expected to fall in the near future. It's obvious the program is in trouble, but we as a nation are accelerating and deepening the problem by making it more profitable not to work than to work. This means that those of us that are working full time are facing a greater tax burden to sustain the status quo in the myriad of government programs. Washington has to develop-quickly- a mindset of being frugal. Fail to do that, and the financial train wreck is going to be awful.
My memory is not as sharp as it used to be. Also, my memory is not as sharp as it used to be.
And that, my friends, is my view.