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What is “welfare” and what programs are considered part of welfare in the United States?
Anyone who collects a single dollar in unearned income is on welfare.
The Federal government does not invest money in stocks, mutual funds, venture capital, private equity, hedge funds, apartment buildings, oil wells, Starbucks, etc.
If you receive an extra dollar…that dollar was taken from someone else. That dollar was not earned by any government investment or state enterprise.
These are transfer programs. They literally transfer money from one American to another American. I am old. In my lifetime, these transfer payments have gone from pennies to trillions.
Taxing Peter to pay Paul. And Paul really appreciates it. These are unearned gifts. Welfare!
80% of all taxes are paid by the top 17% of taxpayers. The U.S. government is not a War Machine. It is a Redistribution Machine.
Ms. Ida May Fuller was a very generous lady who baked wonderful Dutch Apple pies. She grew up on a farm and attended grammar school with Calvin Coolidge. Everyone in town called her Aunt Ida.
Ms. Fuller paid into the Social Security system for 3 years. She was the very first retiree to collect Social Security. She received benefits for 35 years.
Ms. Fuller received 900x the amount she deposited.
Ms. Fuller did not earn that excess return. She did not deserve that cash windfall. That extra money was a free gift from Uncle Sam. No wonder she was always smiling.
Each one of those extra dollars was taken from another American. All those dollars were transferred from a tax-payer to a tax-taker.
Not one of those dollars was earned by labor or investment. Those transferred dollars were simply redistributed from one American to another American. One pocket to another pocket.
As you might imagine, Ida May Fuller really liked Uncle Sugar. She liked her monthly checks even more. She voted in every election until she passed away at age 100.
Ms. Fuller lived a very happy life. She smiled right to the end. Wouldn’t you?
When people hear the term Welfare Queen, many voters have the wrong impression.
They think of a shady lady from the ‘hood. Probably riding around Philadelphia in a gold-plated Cadillac with spinning wheels. She might be wearing a leopard print miniskirt and smoking a Kool cigarette.
But statistically, most welfare queens are elderly white women driving a Winnebago to visit grandkids in the suburbs. That’s where Big Welfare really goes.
Demographics and psychographics explain much of our problem. Voters refuse to admit we have a problem. And they become angry when told Social Security and Medicare are welfare.
Welfare is for sketchy people. Not Grandma! She paid into the system for years.
But numbers do not lie. Ida May Fuller was the original Welfare Queen. There are 100 million Americans who have since followed in her footsteps. They collectively received trillions in unearned benefits.
These recipients were given taxes paid by other Americans — younger Americans.
This free money was transferred from taxpayers to recipients via the U.S. Treasury.
Consider an insurance company like John Hancock, Prudential, or Mutual of Omaha. Some customers receive more than they paid, and some customers receive less.
The insurance company cannot pay out more in benefits than it receives in premiums. If they pay out too much in benefits, the company will go broke. Kaput!
The U.S. government has turned that formula on its head. With Social Security and Medicare, the government is constantly paying out more in benefits than it collects in premiums. Welfare!
That is why these programs have gone broke so many times. Over the years, they have required numerous large bailouts from taxpayers — young taxpayers.
To paraphrase an old joke: The government is losing money on every senior, and making it up on volume.
No money-losing system can grow exponentially and still exist in perpetuity. The math simply cannot work. It is impossible.
In 2018, 60 million Americans receive a Social Security check each month. Right now, 10,000 people reach age 65 each day. This trend will persist for decades. Because of aging demographics, we are moving from the frying pan into the fire.
Both Democrats and Republicans say: Well, that is why we accumulated a Trust Fund with assets. It is a lockbox. We’ve been saving for this day when Boomers would start retiring en masse.
That is adorable.
There is not one dime — one nickel — one penny of assets set aside to pay benefits to future retirees. The only items in the “lockbox” are paper IOUs from one government agency to another. Paper atop paper.
There are no actual assets. No stocks. No real estate. No gold. No nothing.
If the government does not borrow money on Monday morning, then Social Security and Medicare checks bounce Monday afternoon. Welfare programs are all based upon borrowed money. The government is kiting checks.
The FICA taxes you paid 20 years ago, 10 years ago, last month, and yesterday were all spent within minutes.
There is no Trust Fund brimming with assets. No pile of money set aside for retirees. Not in Washington. Not in New York. Not anywhere.
Retirement lockbox? My ass.
Social welfare programs are a huge Ponzi scheme — all based upon borrowed money.
Young people will be stuck with a gigantic bill. Old people (like me) will not be here…
Those in the oldest quintile have never had it so good. Thank you, America!
But those in the youngest quintile have never had it so bad. We have data for wealth distribution back to 1793. If young people could stop tweeting and twittering for 3 minutes, they might wise up.
We have screwed young people via welfare and exploding government debt for decades. The transfer of intergenerational wealth started with the Social Security Act of 1935. But it spiked dramatically after the Medicare Act of 1965.
So did our national debt.
If American youth understood math, they would be rioting in the streets. I guess they are too busy drinking Caramel Macchiato with soy milk.
For most of its history, the United States had no Federal welfare programs. The Founding Fathers would have been perplexed by demands for free food, free shelter, and free Medicare.
Today’s cancerous welfare state can be blamed mostly on Boomers. The watchword for the Greatest Generation was Duty. The watchword for Boomers is Gimme!
Ms. Fuller received a windfall. For her, it was unexpected and greatly appreciated.
Boomers came later with zero gratitude and an unquenchable sense of entitlement. They perfected welfare extortion: Give us more freebies or we will vote you out of office.
Plato first discussed this in The Republic 2300 years ago. He knew nothing about social security and gold Cadillacs. But Plato understood human nature.
Plato and Aristotle believed allowing citizens to vote themselves benefits would lead to bankruptcy of the State. They called this parekbaino. Deviant and perverse.
In Gallup Polls, young people today are very cynical about Social Security and Medicare. But Boomers have a different opinion: What’s to worry? Life is grand!
Maybe we should erect a statue to narcissistic Boomers…
We could put it in South Philly. Across from the Cadillac dealership.
The U.S. now has $21 trillion in debt. $100 trillion in unfunded liabilities.
All that $100 trillion is pledged to social welfare programs. There is no chance these promises can be fulfilled. Zero. Nada. Zilch.
Amateurs say: Cut the military! Raise taxes on the rich!
Ha! That is a good one. Not even in the ballpark.
Imagine this scenario:
- Every soldier, sailor, airman, and Marine is fired
- Department of Defense is disbanded
- Pentagon turned into luxury condos with Olympic swimming pool & Tiki Bar
What would happen financially? Very little. We would still be dead broke.
Social welfare spending dwarfs military spending, and the ratio gets worse each year.
Liberals who complain about the military budget simply do not know the numbers. They are speaking from emotion. Not fact.
Similarly, if we imposed draconian taxes on corporations and the rich, we would still be in in big trouble. And the economy would grind to a halt.
The Congressional Budget Office (CBO) is non-partisan. CBO analyzed welfare to determine what would happen if we Americans actually paid our bills.
You know…like normal people.
CBO determined Americans’ taxes would more than double. Those who now pay 35% would be required to pay 88%.
Do the math yourself. $100 trillion for social welfare is a very big number. It is bigger than the entire annual GDP of the world.
The U.S. was once the world’s banker. How did we get in this terrible situation?
Voters like free money, free food, free shelter, free retirement checks, and free medical benefits. But it gets worse. People now want even more!
Some demand free transport, free cell phones, free prescriptions, and free funerals.
We have become a nation of moochers.
Any politician who attempts to reduce the flow of freebies to his constituents has touched the “third rail” of American politics. Any politician who tries to reduce welfare benefits will not be a politician for very long.
Here is our one-and-only solution: We Americans must live within our means.
If we do not cut welfare and entitlement programs, those cuts will be forced upon us.
Our current path is not sustainable. Some people say: These programs are basically sound. We just need to tweak them and make a few changes.
These Americans are smoking crack.
Changes are coming to our welfare programs, one way or another. True believers in our political system should stop reading here. I do not want to ruin your dinner.
Will we voluntarily fix our financial problems? The chances are small.
Populists on both the Left and Right want more free benefits. Capitalists want less. This chasm between payors and payees will become larger. Anger on both sides will increase.
Even worse, our politicians on the Left and Right cannot even discuss welfare reform without being threatened. The most powerful group in Washington is not NRA, but AARP.
When the wheels come off — and they will — the crash will be spectacular.
Liberals think: Well, if that happens we’ll just tax the rich to get more money!
The coming conflict will pit:
- young against old
- poor against middle class
- non-workers against workers
- renters against land owners
- consumers against producers
- illiquid capitalists (real estate) against liquid capitalists (finance)
We have 2000 years of data. The rich do not stick around when class warfare starts. Even worse, they take their liquid capital with them. America needs that capital.
Wealthy people are smart.
They were smart in ancient Rome. Smart in Hapsburg Spain. Smart in the Dutch East Indies. Smart in Bourbon France.
Wealthy Americans are very smart. They are already planning for future fireworks.
Mayor Bloomberg had a brainstorm to fund new programs for the poor…
Let’s tax checking accounts on the first of every month.
His advisors said: Mayor, you are a bona fide Liberal genius. Just like Hillary!
Before the law had even been written, billions flowed out of New York City banks for other destinations.
Just the rumor of taxing capital causes rich people to move their money out of danger. Not surprisingly, middle class and poor people also moved their money out.
Taxing capital is dumb. Taxing investment is dumb. Mayor Bloomberg is really dumb.
Thus far, the poor and middle class have formed an uneasy alliance. The poor collected huge welfare payments from unemployment and food stamps. The middle class collected huge welfare payments from Social Security and Medicare.
This marriage of convenience will only last while freebies can be charged to America’s MasterCard.
When additional debt becomes problematic and very expensive, the poor and middle class will turn on each other with a vengeance.
Who will win this battle for scarce resources? Always bet on soccer Moms.
Many Progressives/Liberals believe welfare is the savior of the poor. Just the opposite! Our unstable debt will inevitably lead to abject misery for the poor.
There is some good news!
While the political system of the United States has been slowly failing for the last 50 years, the free enterprise system has been booming!
Our corporations have expanded around the world, zapping their sleepy competitors.
American Ninja Warriors!
The failure of our politicians to deal with exploding debt will lead to a power vacuum in the future. Politicians will lose power, capitalists will gain power. This is already happening.
Obviously, there will be new winners and new losers. 80% of Americans will be much better off. But not the Bottom 20%. Their lives (on a relative basis) will steadily get worse.
The populism we see today (on both the Right and Left) is the result of people being left behind. Wealth inequality is a real problem. But it cannot be solved with welfare. That is a fool’s errand.
Check this chart again. Notice anything odd?
Why would an academic journal for diplomats publish an article on welfare?
The answer is simple. Our 215 welfare programs are so out-of-control they now adversely affect our foreign policy and balance of payments.
Most Americans never think about U.S. government debt. Others engage in fantasy. As mentioned above, they cling to a mantra about foreign aid, military spending, and corporate subsidies. They say:
It’s the fault of Exxon. And the F-35 fighter jet. Not Grandma, Grandpa, and Aunt Ida.
Numbers do not lie. Social welfare programs are the biggest government expenditure by a huge margin. Even worse, welfare is still growing rapidly while most of the government is shrinking.
In 1988, there were 600,000 airmen in the U.S. Air Force. In 2018, the USAF has been cut in half to 300,000.
Blaming the military for debt is like blaming the doctor when you get a social disease.
The U.S. government is a welfare machine. Redistribution and debt are what they do.
Government and business can make high ROI investments or low ROI investments. Imagine asking senior citizens or food stamp recipients these questions:
Should we build another Hoover Dam or increase your welfare benefits?
Should we fix interstate highways or give you more food stamps?
You already know their answer. Plato and Aristotle knew their answer 2300 years ago. When government showers benefits on welfare recipients, there is little money left to:
- build infrastructure
- invest in R&D
- retrain a middle-aged steelworker
- help a single mom start a small business
- subsidize tuition for a college student
- ensure a first-grader gets proper nutrition
The government has limits. Every tax dollar spent on welfare is a dollar not spent somewhere else.
Welfare as we know it will slowly disappear. It will be replaced by more merit-based systems. There will no longer be 900x returns because of serendipity.
Americans will no longer face wildly different outcomes. Elders will no longer collect a cash bonanza while young people are saddled with massive debt. In 2018, young people are still treated like rented mules.
In the far future, fairness will increase. In 2100, historians will compare our welfare Ponzi schemes in 2018 to the spending of Caligula and Nero. Nutty as a fruitcake.
The Romans clipped coins to live beyond their means. We print money.
Welfare slackers will fall hard in the years to come. As capitalists further usurp power from politicians, the golden age of Gimme! will end.
Protesters will extort fewer freebies from the bureaucracy. They will be unhappy and angry.
Will this new system be fair and moral? I will leave that question to the philosophers.
Our current welfare system will not exist in 50 years. It is mathematically impossible. We Americans will be forced to live within our means, whether we like it or not.
Perhaps there will be an easy and peaceful transition to this new system.
Don’t count on it…