Younger American Generations Beware . . . “Entitlement Slavery” Awaits

Finding Freedom

Every American under the age of 40 should shudder at this quote from a Foxnews story–NY Dem Wins Seat in Heavily GOP District:

Hochul’s victory gave a lift to Democrats still reeling from an electoral drubbing last November that cost the party control of the House. It also bolstered their resolve to push back on GOP efforts to cut Medicare and other entitlements — efforts that have drawn support among some tea party members but are widely opposed by independent voters.

“The three reasons a Democrat was elected to Congress in the district were Medicare, Medicare and Medicare,” Democratic Congressional Campaign Committee Chairman Steve Israel, D-N.Y., said in an interview . . .

Hochul said she would work to balance the federal budget but refused to “decimate” Medicare . . .

Her supporters at a union hall in Amherst, outside Buffalo, chanted “Medicare! Medicare!”

Folks, this may make for good politics, but it is an economic impossibility.  This chart from the Heritage Foundation shows that all revenue post-2049 will be consumed by entitlements.  From the chart caption:

If the average historical level of tax revenue is extended, spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will consume all revenues by 2049. Because entitlement spending is funded on autopilot, no revenue will be left to pay for other government spending, including constitutional functions such as defense.

If this election becomes a national trend, then folks under the age 40 may be staring a form of indentured servitude right in the face–lets call it “entitlement slavery” . . . brought to you by the ballot box because there are simply more voters over 40 (who also have a higher voter turnout rate) than those under 40.

How to Defeat the Wealth Alchemists

Lawrence W. Reed, president of the Foundation for Economic Education, tells us that we are our own worst enemy when it comes to fixing the Federal deficit.  I think he hits the nail on the head because I too see a disconnect between folks who say they want “freedom” but act in way that is contrary to that very freedom.  Take Social Security/Medicare for instance.  You can explain until you are blue-in-the-face that those programs will either go bankrupt or enslave following generations to dramatically higher taxes.  Yet, among older folks, you’ll more often than not get the same response I’ve heard too many time . . . “I don’t care as long as I get mine.”  That attitude puts a smile on the face of Wealth Alchemists.

Restoring true freedom and defeating the Wealth Alchemists will take hard work.  It will require that we all follow Reed’s seven step plan:

  1. I pledge myself to a lifetime of self-improvement so I can be the model of integrity that friends, family, and acquaintances will want to emulate.
  2. I resolve to keep my hands in my own pockets, to leave others alone unless they threaten me harm, to take responsibility for my own actions and decisions, and to impose no burdens on others that stem from my own poor judgments.
  3. I resolve to show the utmost reverence and respect for the lives, property, and rights of my fellow citizens. I will remember that government money is really my neighbors’ money, so I will not vote to loot them. I will stand on my own two feet, behave like an adult in a free and civil society, and expect the same of my children.
  4. If I need help, I will ask my family, friends, faith network, neighbors, local charities, or even strangers first – and government last.
  5. If I have a “good idea,” I resolve to elicit support for it through peaceful persuasion, not the force of government. I will not ask politicians to foist it on others because I think it’s good for them.
  6. I resolve to help others who genuinely need it by involving myself directly or by supporting those who are providing assistance through charitable institutions. I will not complain about a problem and then insist that government tinker with it at twice the cost and half the effectiveness.
  7. Finally, I resolve that the highest authority in which I place my strongest faith will not be the United States Congress.

Fiscal Federalism IV: Federal Retirement and Disability

Following on my previous blog which showed overall federal spending as a percent of personal income . . . this blog shows federal “retirement and disability” spending as percent of personal income. What is this?

According to the Consolidated Federal Funds Report (pdf) from which this data is drawn from:

Retirement and disability programs include federal employee retirement and disability benefits, social security payments of all types, selected Veterans Administration programs, and selected other federal programs

The table below shows the wide range of federal “retirement and disability” dependency by state. The states that are most dependent are: West Virgina (12.8 percent), Alabama (10.4 percent), Arkansas (10.1 percent), Mississippi (10 percent) and Kentucky (9.8 percent).

On the other hand, the states that are least dependent are: Alaska (4.6 percent), Connecticut (4.7 percent), California (4.8 percent), Massachusetts (5.1 percent) and New Jersey (5.1 percent).

Federal Retirement and Disability Spending as a Percent of Personal Income by State for 2008

The State of America’s Private Sector I

The ability of America’s private sector to generate income and create wealth has been unparalleled in the history of the world.  More amazingly, the private sector continues to do this despite its ever diminishing role in the overall economy.

The chart below shows the private sector share of personal income since 1929 (the first year of available data) to 2009 (the last year of available data).  The opposite of the private sector is the public sector which is defined as all government compensation paid to employees (military and civilian) plus all personal current transfer receipts (Social Security, Medicare, Medicaid, Welfare, etc.).

As the chart clearly shows, the private sector has been steadily crowded-out by the public sector.  Nationally, the private sector has plummeted 24 percent to 69 percent of personal income in 2009 from 93 percent in 1929.

Additionally, the decline in the private sector can vary dramatically by state.  The chart shows my two favorite states for making such comparisons–New Hampshire versus Maine.  These two states are alike in so many ways, yet differ in one major area which is the size of the public sector.  New Hampshire has the 2nd largest private sector in the country while Maine has the 39th largest private sector in the country.

Why is this important?  At the end of the day, a bigger private sector means a bigger economy.  New Hampshire’s economy (as measured by personal income) is $8.3 billion larger than Maine’s despite having identically sized populations.  As a result, New Hampshire has the 8th highest per capita personal income while Maine has the 28th highest.  In dollar terms that amounts to an additional $6,085 more for every man, woman and child in New Hampshire.

This is an extremely important measure to keep abreast of.  As a result, this will be a regular series here at Wealth Alchemy . . . stay tuned for more analysis and updates using the most recent data.

Private Sector Share of Personal from 1929 to 2009