Sandbaggers

Collecting Disability Becomes A Career Choice For Men - Michael Barone

Between 1996 and 2011, the private sector generated 8.8 million new jobs, and 4.1 million people entered the disability rolls.

Social Ponzi Scheme

Poor Tom Friedman. When the genius, Pulitzer Prize winning, New York Time columnist is cornered by Rick Santelli on Social Security, he resorts to insults rather than admit that Santelli is right.

You’re idiotic, he explained - Scott Johnson

Federal Red Ink

Medicare: $24.8 trillionObligation per household: $212,500 - Dennis Cauchon

This demographic burst — combined with the addition of a prescription drug benefit in 2006 and rising health care costs generally — has created an unfunded liability of nearly $25 trillion over the lifetime of those now in the program as workers and retirees. That is the taxpayers' obligation, beyond what Medicare taxes will bring in or seniors will pay in premiums for Medicare Part B — also called supplemental coverage — that helps pay for doctor visits and other expenses outside the hospital.

That $25 trillion is likely an underestimate, Medicare's actuaries say, because it counts on 165 cost-saving changes in the health care reform law. Many of these are unlikely to occur — such as cutting physician payments 30% by 2012.

Even with savings, Medicare's financial hole grew $1.8 trillion last year, more than the federal deficit.

U.S. funding for future promises lags by trillions - Dennis Cauchon

The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.

This gap between spending commitments and revenue last year equals more than one-third of the nation's gross domestic product.

Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.

Social Security added $1.4 trillion in obligations, partly reflecting longer life expectancies. Federal and military retirement programs added more to the financial hole, too.

Federal Debt

The Millionaire Retirees Next Door - John Cogan

According to my calculations based on government data, such married couples will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.

We cannot even remotely afford to make good on these promised benefits. Although our system of personal liberty, free enterprise and limited government has made us an affluent and upwardly mobile people, we are not yet a nation of John Beresford Tiptons.

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Under the federal government's fee-for-service Medicare program, every time a senior citizen meets with his physician or health-care provider for a check-up, lab tests or surgery, somebody other than the patient foots most of the bill. That such a program should produce runaway costs is hardly surprising.

Social Security Reform

Chile's Private Social Security System Turns 30 - Monica Showalter

May 1 marks the 30 years since Chile became the first nation to privatize its social security system. By turning workers into investors, the move solved an entitlement crisis much like the one America faces today.

"I like symbols, so I chose May Day as the birth date of Chile's 'ownership society' that allowed every worker to become a small capitalist," wrote Jose Pinera, former secretary of labor and social security and the architect of this pension revolution. He is now a senior fellow at the Cato Institute in Washington, D.C.

What he designed has succeeded beyond all expectations. Yet Congress remains reluctant to adopt anything like it, despite efforts by Presidents Bill Clinton and George W. Bush to partially privatize an American system.

Instead of paying a 12.4% Social Security tax as we do here, Chilean workers must pay in 10% of their wages (they can send up to 20%) to one of several conservatively managed and regulated pension funds. From the accumulated savings, they get a life annuity or make programmed withdrawals (inheriting any funds left over).

Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers.

Retirement Plans

Even U.S. can't afford generous defined benefit systems - Michael Barone

Pensions are not the only defined-benefit system in our society. Social Security is a defined-benefit system: You pay money in and you get retirement benefits when you reach a certain age. Medicare is a defined-benefit system as well, though when you become eligible you may be surprised to find it doesn't cover everything: that's why elderly people buy Medigap insurance policies.

Many on the political left decry the disappearance of defined-benefit pension plans from the private sector and strive mightily to maintain them for public-sector employees. They argue that people with defined-contribution plans often don't save enough for a comfortable retirement or make bad investment choices.

They argue that defined-benefit plans and defined-benefit public policies provide you with absolute 100 percent security and eliminate all risk. Unfortunately it's becoming clear they don't.

The people who put defined-benefit plans and policies in place assumed there would always be someone able to pay for them.

There would always be enough new workers to pay for retirees' Social Security and Medicare. Benefits were raised on the assumption that the baby boom generation would produce a baby boom of its own. Oops. Birth rates near replacement levels, which we have now, are not enough. The ratio of workers to retirees is in inexorable decline.

General Motors would always be a big enough company to pay for the pensions and health benefits promised to hundreds of thousands of retirees. Turned out it wasn't.

10 States Where Pensions Are Running Out of Money - Douglas A. McIntyre and Charles B. Stockdale

24/7 Wall St. reviewed the pension funds of all 50 states collected by Pew as of 2009, the latest period when data is available for all of them. We looked for how much the most underfunded pensions were compared to the level that actuaries suggested in 2009. We also looked at the recommended amounts of annual contributions that each state made. 24/7 compiled a list of The Ten States Where Pensions Are Running Out of Money based on state pensions that are underfunded and which have a shortfall of the 2009 recommended level.

Government Handouts

Government Cash Handouts Now Top Tax Revenues - Elizabeth MacDonald

U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.

But that’s more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans' benefits.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments--for things like the income and payroll tax, among other taxes--have fallen by $312 billion.

The Economy - December 2010

The Economic Incompetence Of The Political Class - Charles W. Kadlec

The sovereign debt crisis now threatening Europe, as well as major American states and cities, discloses the sheer incompetence of a political class that has over-promised, under-delivered and squandered vast amounts of their citizens' wealth.

Greece, Ireland, Spain, Portugal, California, Illinois, Los Angeles and Chicago are simply the poster children for what happens when elected officials engage in reckless and irresponsible management of their economies, their banking system or their respective government's public finances.

U.S. Debt Clock
As predicted, The U.S. unfunded liabilities per taxpayer exceeded $1,000,000 during 2010. As Glenn would say, another grim milestone.

This is a good opportunity to quote myself:

We are promising benefits which cannot be delivered while simultaneously burdening future generations with expenditures they cannot afford.

The next time someone asserts that 'We are such a wealthy nation, surely we can afford to fund [insert pet social program here]" feel free to say "Well, no. Actually we can't. The total debt per U.S. household already exceeds $680,000. In addition, if you include unfunded future obligations for things like Social Security and Medicare, that number exceeds $2,000,000 per family. Just who exactly is going to pay that? Nobody can and nobody will. It's a Ponzi scheme and must eventually collapse like a house of cards."

Government liabilities rose $2 trillion in FY 2010: Treasury - by David Lawder

The biggest increase in net liabilities in fiscal 2010 stemmed from a $1.477 trillion increase in federal debt repayment and interest obligations, largely to finance programs to stabilize the economy and pull it out of recession.

A remedy for beggar states - George F. Will

A study by Northwestern University's Kellogg School of Management calculates the combined underfunding of pensions in the all municipalities at $574 billion. States have an estimated $3.3 trillion in unfunded pension liabilities.

Nunes says that 10 states will exhaust their pension money by 2020, and all but eight states will by 2030.

States' troubles are becoming bigger. Hitherto, local governments have acquired infusions of funds from federal budget earmarks, which are now forbidden. Furthermore, states are suffering "ARRA hangover" - withdrawal from the American Recovery and Reinvestment Act, a.k.a. the 2009 stimulus. With about $150 billion for state and local governments, it raised the federal portion of state budgets from about a quarter to a third. Also, in 2009 and 2010, states and localities borrowed almost $200 billion through the ARRA's Build America Bonds program, under which Washington pays 35 percent of the interest costs. Republicans, in another victory over the president in negotiations on extending the Bush tax rates, extinguished that program, which they say primarily produced more public-sector employees.

States taxing themselves to death - Dick Morrix & Eileen McGann

High taxes kill states. There can be no better evidence than the 2010 Census. The states that lost House seats -- because they're shrinking, relative to the nation -- had taxes 27 percent higher than the ones that gained seats.

Of the seven states that don't have a personal income tax, four (Texas, Florida, Nevada and Washington) account for eight of the 12 seats apportioned to the fastest-growing states.

New York and Ohio lost two more seats. Other losers -- down one each -- are Massachusetts, Missouri, Michigan, New Jersey, Pennsylvania, Illinois, Louisiana and Iowa. What do they all have in common? High taxes.

Texas, with the second lowest taxes in the nation, gained four seats, Florida picked up two and Arizona, Georgia, Nevada, South Carolina, Utah, and Washington state each gained one. All have low taxes.

The states that lost seats ranked an average of 24th in taxes and had an average tax burden of $2,267 per capita (weighted more toward the states that lost more than one seat).

The states that gained seats ranked an average of 39th in taxes and had an average tax burden (weighted) of $1,788 -- 27 percent lower than the losing states.

People vote with their feet and flee to low-tax states. It's not the climate; it's the taxes.

The West and the Tyranny of Public Debt - Jacques Attali

The history of public debt is the very history of national power: how it has been won and how it has been lost. Dreams and impatience have always driven men in power to draw on the resources of others—be it slaves, the inhabitants of occupied lands, or their own children yet to be born—in order to carry out their schemes, to consolidate power, to grow their own fortunes. But never, outside periods of total war, has the debt of the world’s most powerful states grown so immense. Never has it so heavily threatened their political systems and standards of living. Public debt cannot keep growing without unleashing terrible catastrophes.

Anyone saying this today is accused of pessimism. The first signs of economic recovery, harbingers of a supposedly falling debt, are held up to contradict him. Yet we wouldn’t be the first to think ourselves uniquely able to escape the fate of other states felled by their debt, such as the Republic of Venice, Renaissance Genoa, or the Empire of Spain.

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Still, accumulating excessive debt is far too easy. Spending naturally rises faster than revenue. But once the fatal spiral begins, how can a state escape disaster? There are only eight options: (1) higher taxes; (2) less spending; (3) more growth; (4) more lenient interest rates; (5) worse inflation; (6) war; (7) external aid; or (8) default. All eight options have been used in the past, but only one of them is both plausible and desirable today: growth. A growing economy (which raises tax revenue) permits the absorption of debt and restores sustainable public finances. Then borrowing can resume—if it will encourage further growth. Responsible governments do not finance their everyday expenses by borrowing, and they keep their investments at a level they can repay.

Catching On to the Entitlement Disaster - John Hinderaker

The picture with regard to Social Security is considerably bleaker, if you are a baby boomer:

The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.

A reader who is highly sophisticated in financial matters emails:

Another way of looking at it is that on the most conservative assumptions they are receiving no more than a NEGATIVE return of minus 1.9% on their "contributions"! LITERALLY....if they had buried the "contributions" in the backyard they would be better off!