Wednesday, June 10, 2009

$100,000,000,000,000

That is a big number. It is also a very real number, representing the unfunded entitlements of the Federal government according to economist Arthur Laffer. In other words, $100 trillion of promises made by Uncle Sam to various recipients of Medicare, Medicaid, Social security, various pensions, etc. without a way to fund them. That number is so huge, so staggering that it boggles the mind and impedes conversations.

We desperately need to have a real, adult conversation here about that number. It is not getting smaller and it is not going away. No one wants to take a stand that will cost them reelection (or at least there are too few people to make a dent) and the public doesn’t seem to care as long as they perceive that they are going to get what is owed to them. The only options are all unpalatable and are going to make someone angry, so year after year our elected representatives punt on the issue so that they can stay in office, even though that means the problem is growing worse and being passed on to later generations until it blows up. It is like a $100 trillion hot potato.

The demographics in this country compound the problem. We are already seeing a massive generational shift. I read the other day that 78,000,000 baby boomers are starting to leave the work force and begin receiving benefits. Instead of putting money into the system in the form of tax revenue, they are taking money out in benefit payments. The birth rate has plummeted so we have a shrinking pool of workers to replace the ones that are retiring. The retirees are living longer and longer (although under Obamacare that will probably change). If you can picture the population of the United States on a giant teeter-totter with people contributing to the system on one side and people withdrawing from the system on the other, the weighting is rapidly shifting to the withdrawal side. The ratio of workers to retirees is heading in a bad direction and getting worse by the minute.

I fear that it is far too late for America. Birthrates cannot be turned around at the drop of a hat. The economy is in shambles and rapidly turning into a European style socialism that has been failing for decades (which has not dissuaded the Obama administration). Because of government tinkering, there are fewer and fewer decent paying jobs for low skilled workers. We are turning into a nation of Wal-Mart employees. Having people work at Wal-Mart is fine as long as other people are able to make decent wages and buy stuff. Thanks to indifferent management that refused to make hard decisions and unions that are only interested in keeping their coffers full and their bureaucrats employed, the American worker in 2009 finds himself priced out of competitiveness. With ridiculous wages and unsustainable benefit promises, the auto workers led the way to American industrial obsolescence. The days of the American worker as being the standard bearer are over. You can pay someone in India or China a fraction of the wages and get the same result. Conservatives have been waging a fighting retreat for decades to stop socialism but now we have run out of fortified positions and are in full retreat or surrender on a number of issues.

America may continue to chug along on inertia and accumulated wealth for a while but ultimately we are headed for decline and ruin because the American spirit that made this country the envy of the world has been sapped out of generation after generation until all that is left is a shell of former glory and millions of Americans addicted to entitlements.
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