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PAST EXCESSES BEING PAID FOR TODAY |
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Wednesday, April 13, 2011
Past Excesses Being Paid for Today
By Steve Stringer
Los Alamos
In his April 4 commentary headlined "Budget Deficit Panic Masks Real U.S. Problems," the University of New Mexico's Nick Estes writes, "What our children really need now is more government spending to help their parents get back to work." He asserts that the debt burdens to be borne by the next generations are due not to excessive spending, but to "wimpy trade policy," the Bush tax cuts, and escalating health care costs.
Perhaps it is to shame us into eschewing spending cuts that he asks, "Did the 'Greatest Generation' impose a terrible burden on us ... to pay for victory in World War II?"
Well, yes. They did. And they had help from their children, the Boomers.
As Estes observes, America did not deliver its growth economy and its social benefits by cutting spending to balance the budget, not by a long shot. The Greatest Generation and the Boomers — the 50- to 80-somethings – instead locked in a public spending expansion for themselves at the expense of the Gen X's, the Gen Y's, and the Millennials — the newborns to 40-somethings. Not satisfied to pay what one might objectively call a prudent fair share for those benefits, the Greatest Generation and the Boomers have relentlessly lobbied, legislated, and unionized to deliver a basket of progressive goodies to themselves for pennies on the dollar.
Medicare. Medicaid. Prescription Drug Care. Social Security. All laudable, all desirable, all understandable. All for a cost, but just not at anywhere near full price.
In exchange for votes, 20th-century Republicans and Democrats engineered a society where once upon a time you could have a career for 25 to 30, retire in your mid- to late 50s, and then collect benefits for another 20 to 35 years. Pretty slick! The total cost of those 20-35 years of post-career benefits can easily exceed a million dollars per person even without extreme medical treatments, yet all you have to pay out of pocket while you are working is less than 15 percent of it. In many cases, far less.
And oh, by the way, since private corporations have to inflate salary and hourly wage costs with a steep but nevertheless insufficient co-payment for those benefits, and since the government has to issue bonds to subsidize the full, real world cost beyond those co-payments, Americans have become the world's most expensive work force. Not only do jobs go overseas, but as Estes admits, commercial bonds for business expansion are crowded out by competition from U.S. Treasury bills. The net result is that businesses cannot and will not create new jobs in the U.S. as fast as they might because they are kept busy minimizing labor costs per government tax policy, trying to get the highest productivity possible out of the employees they already have.
High productivity is great for stock returns. Just look at the run up in stocks that Wall Street is having ever since it hit bottom two years ago. But high productivity driven by government fiat — not by competitive market pressure — is lousy for anyone trying to get their first job, and even worse for anyone who has been laid off.
So today we have nearly 1 in 5 people living in the "new normal." They are unemployed, or working full time but at a much reduced salary compared to what they had before their layoff, or working part time when they would rather work full time, or working two or three part-time jobs to make ends meet — and not qualifying for benefits from any of them because they're all part time.
America is in the perfect storm. Its unsustainable social infrastructure is putting the brakes on both investment and on consumption simultaneously, and job growth has slowed below the rate needed to keep up with population growth. On top of that we have people like Estes telling us we have to raise taxes and spend our way out, which raises business costs even higher, which means fewer jobs, which means even more unemployment even faster because people keep making babies, which means higher social costs, which means higher taxes.
Mr. Estes' commentary is laudably compassionate, but he is telling us to keep doing more of the same thing and hope that the results will change. At what point does such advice cross over from being merely insane, to being a conspiracy by the older generations to perpetuate a civil crime upon the younger?
Judging from the high unemployment odds that our children face, and with the assurance of their future benefits a fading dream, I submit that we are at that point already.
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