Morgan Stanley On America's Biggest Challenge: Entitlement Spending

Tyler Durden's picture

There are some who will take up hundreds of pages to explain something as simple as the complete bankruptcy of the US entitlement program. Others, like Morgan Stanley in this case, present it succinctly- why write and write and write when a one page income (well, loss technically) statement will suffice? In a presentation, oddly focusing on Internet Trends, the MS team puts up an appendix page that probably should make the inbox of every politician in America. In a nutshell, when analyzing the math of entitlement spending, even as revenues flatline (at best), and decline (realistically), the expenses are quite literally growing geometrically. At this rate of deterioration, the Loss on the entitlement P&L will be at ($3 trillion) a year by 2013. For those who don't buy this estimate, here is a refresh: it was +$128 billion in 2001, (318) billion in 2005, and ($1,413) billion in 2009. Then there are some like former Western Asset Management personnel, who are so confused by numbers so massively negative, that they #Ref out their excel spreadsheets, and tend to ignore them altogether. Which brings us to the topic of the night - those who find the most efficient way to short Western Asset Management (and its retention policy of never hiring those proficient with positive and negative integers... forget about floating point) will win a free Zero Hedge hat.

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Rusty Shorts's picture

 - yes it is, I could feel it.

Heavy's picture

Really gets the old brain fired up with all those strands tied together so intricately.  Funny too: "the curr she fed well" "I wondered where I could find another".  Outstanding.  Solution found, to action! "And this would be a glorious day"

Popo's picture

Slightly OT:  But 2 Million Protesting in Spain right now due to cuts in entitlement spending...


nmewn's picture

You know the end is near when a DECREASE in the amounts extorted from the productive is met with protests from the unproductive...LOL.

WaterWings's picture

Despite the controversy the New Black Panther Party continues to grow and expand. The National Black Power Conventions impressive lineup of guests and organizations is a testimony that the New Black Panthers Leadership has support in wide circles in the Black Community, particularly amongst grassroots organizers and entertainers.


“With the rise of the Tea Party, the white-right and other racist forces. With gun sales nationwide at an all time high amongst whites, with a mood that is more anti-Black than any time recent, it is imperative that we organize our forces, pool our resources and prepare for war!” Chairman Malik Zulu Shabazz, Esq. Convention Convener and Party Chairman.

Now we're talkin'!!! We're HuffGlue when you need 'em! Shoot the racists that want to take our money!

Zina's picture

With the growth of the nazi Tea Party, blacks have reason to be concerned...

Tea Party will lead the US to a civil war.

Greyzone's picture

And massive deficit spending won't? The New Black Panther Party won't?

There will be war, Zina, but it won't be because of the Tea Party. The Tea Party is a symptom, not a cause. If you don't understand that, then you're hopeless.

Geoff-UK's picture

First person to use "Nazi" to characterize the other side automatically loses. 


Also, you made what is called an assertion without evidence.  Or do none of your friends ever disagree with you and ask you to explain yourself?

Zina's picture

By "the productive" I think you mean owners of "pet spas", "pet daycare", "dog boarding and grooming", or some kind of business as "chocolate massage" or similar...

By "the unproductive" I think you mean teachers and doctors from the public sector.

Your concept of "productivity" is surely funny.

Zerozen's picture

productive = people who work jobs and pay income taxes from their wages.

unproductive = on the dole, pay no income taxes (and there's plenty of those in Spain).

Geoff-UK's picture

"Productive" = you generate income that is taxed

"Unproductive" = you are paid out of the money that was taken via taxation


I'm "unproductive" to the economy as a member of the military.  So don't take any of this personally, if you happen to be unproductive also.  Paying me to defend the nation is, economically speaking, nothing more than a necessary evil. 

nmewn's picture

Socialists and communists are doomed to the abyss by their own lack of humor...poor babies. You are one of the most ignorant troll's on ZH...and that's saying something, your running neck and neck with "Harry Dangler" and some self identified "Indian" dude (the Sub-Continent Asian type) who regaled ZH recently with his hatred of the "white" race, apparently uninformed of what self loathing or a Caucasian actually is...LOL. Yeah...those "productive" teachers are doing a bang up job don't ya think ;-) And doctors from the "public sector"???...I've never been to a "free clinic" in my life, so tell me, do doctors really work for free in there??? they buy those funky white coats themselves with their own money???...if not, with what???...chickens, goats, pigs??? this where that mild "pandemic" swine flu started??? FREE CLINICS???...reusing pig tongue depressors???...I knew it...LOL. You apparently believe money is just printed by governments and then given to teachers and free clinic "doctors" as needed...if this is the case, we have no need for a bond market do we??? need to borrow...or have any concern about debt whatsoever...or any need to account for that debt...(your bean counting friends are not amused right now...LOL)...we simply print more...easy right??? Your a fool and most fools these days have no sense of humor...we'll see who laughs last.

Ragnar D's picture

I'm surprised to see them lay it out so simply like this.  I thought the game was to ignore it and not mention it, or at best speak vaguely about "challenges" to face or some other nonsense.


Actually handling the problem necessarily means cutting government back to size, which I can't see them being fans of.

chistletoe's picture

If it mainly consisted of "cutting the government" it would not be so difficult. Consider the tea partier in Kentucky who recently said, "Get the government off my back and keep their hands off my Social Security!"

SWRichmond's picture

It's time to prepare the public for the reduction in entitlements.  Of course, the banks will continue to receive massive, limitless generosity and largesse from the public purse.  No expense will be spared when it comes to the goddamned precious fucking banksters.

Endless free money for the banks, austerity for the middle class.  Count on it.

What we have to do is figure out how to make the bulk of the austerity fall onto those less entitled; I mean people who never paid in, or who are receiving ridiculous public pensions.  I know that won't be enough, but in order for the middle class to be able to swallow this at all they must be certain that it is happening.

Apostate's picture

Never fear.

Chairman Ben will make everything alright.

P-Krug & Jimmy G-braith will lay it all out for you. It's as simple as punching in a few extra digits. People who complain about "fiscal responsibility" are just small-minded fools.

snowjax's picture

I love how it is called "Entitlement" - They took the money out of my paychecks for countless years and now I should feel as if I am receiving a reward.

downwiththebanks's picture

Isn't that the point:  you're ENTITLED to it, because you paid in.  

One easy solution to this phony crisis is to lift the salary cap on income paid into Social Security.  If Bill Gates and Lloyd Blankfein paid into the till on the basis of their income rather than the income of a Wal-Mart store manager, nobody would be talking about a crisis.

Ragnar D's picture

No, the point is to get as large a constituency as possible conned into believing they're "Entitled" to receive something no matter what.  They become dependent on government handouts, and thug politicians never have to run for reelection again.

It's just like any other pyramid scheme.  You start it out with very low pay ins and generous benefits, so of course people go for it.  The first in pay next to nothing and cash out huge.  Then it starts to go bankrupt, but you can never get rid of it, so it's a ratchet stealing more and more from those who work for a living.

There aren't enough Bill Gates in the world to make a dent in the geometric growth.  But the cap will still be raised, and the middle class who're already losing half their earnings will get hit even harder to pay for someone else's been-uh-fits.

The Wal-Mart store manager will have that much less of his paycheck left, in exchange for the promise of negative returns for a few more years until even that collapses again.

Kali's picture

I would be happy if they just returned the money I paid in and get rid of SS.  SS was never meant as sole support in retirement anyway, it was supposed to be a supplement.  And no one likes to talk about the biggest "entitlement" of all, the Military budget. 

IrishSamurai's picture

"The problem with socialism is that eventually you run out of other people's money [to spend]."

- Margaret Thatcher

EscapeKey's picture

Thatcher and Churchill were the best PM's this country ever saw.

Brown's "elimination of boom and bust" (although those "wise" words were during his reign as Chancellor) will be up there with Chamberlain's "peace in our time".


quintago's picture

before you read any lower....take 6 shots of tequila.

downwiththebanks's picture

The problem with Margaret Thatcher is that her asinine economic theorizing accelerated the terminal decay of the world capitalist system.

Outside of tea and crumpets, she's hardly an authority on anything.

IrishSamurai's picture

You'd probably say the same thing for Von Mises or Hayek or anyone who doesn't ascribe to your obvious socialist bent.

BTW, the world has never been a capitalist system ... never.

downwiththebanks's picture

Von Mises and Hayek cannot explain how a growth-based system is sustainable in a finite universe.  

I suppose saying that capitalism (i.e., a specific, historically defined method of production and distribution in which labor is bought and sold for the purpose of generating surplus) isn't real makes it easier to justify the ghastly atrocities committed in the name of the market, doesn't it?

IrishSamurai's picture

Actually Von Mises explains the theory of growth-based systems and sustainability in a finite universe very well ... you should read his work before making an idiotic comment like the one you just made.

You have an odd definition of capitalism ... probably the result of a U.S. education.

downwiththebanks's picture

Your definition of capitalism is a phantasm, totally and utterly disconnected from Capital.

Obviously you do so in order to keep your apologetics purely philosophical. 

Burnbright's picture

You obviously don't understand what capital is, capital is labor, nothing else. Capitalism is the idea of having individual property rights ownership.

Whats your beef with capitalism?

downwiththebanks's picture

Capital is not only labor, though the owner of labor-power most certainly has the most critical source of capital in her or his hands.

A lathe is capital, so long as it's used to make commodities for the market.

Land is capital, whenever the fruits it produces go to a market. 

This is Econ 101 stuff.

IrishSamurai's picture

Thanks for another book definition.  Congrats you know how to read. 

Get back to us when you know how to think.

Burnbright's picture

Your understanding is so silly because you tell me with your own words why you are so brainwashed. Your doublethink is very apparent in these lines.

A lathe is capital, so long as it's used to make commodities for the market.

Yes that is right, who do you suppose uses a lathe? Gee I wonder maybe a person? Someone had to use the lathe right? That is called LABOR. SAY IT WITH ME NOW... LABOR.

Land is capital, whenever the fruits it produces go to a market.

And who tills the land and carries the apples from the orchard to the market...santa clause?

This is Econ 101 stuff.

No shit!

downwiththebanks's picture

My labor isn't capital if I'm working in my garden.  My labor is capital if I'm producing something for the market.

Only an ignoramus thinks that all labor, all the time is capital.  The whole point of capitalism is to absorb all labor into the market that can be exploited.  And the way to most optimally exploit (not in a value sense, necessarily) labor is by combining it with other types of capital.

The name of the game is efficiency.  A worker with a needle and string is much less efficient than a worker with a loom.  Both workers are performing a type of labor, but their output is determined by the other categories of capital involved.

Burnbright's picture

My point was that all capital is the product of Labor. And actually working in your garden does make an improvement relative to your desire, or at least should cause it would be pointless to create some effective change you didn't want. You are in fact also your own market as you can labor to create the things you need.

downwiththebanks's picture


It's not about "desire" or any other fanciful thing.

It's about production, pure and simple:  who produces what for whom?

If I'm producing for the market, my labor is capital - something for use in the 'market'.  If not, it's not.  

What you're calling labor is actually 'life', our time not controlled by anyone or anything.  And as much as capitalism wants to own every space of existence, it doesn't own our life by fiat.   We have to "buy-in".

"Unfortunately", you add.

Zina's picture

Do not waste your time with people who believe in "marginal utility". They live in a fantasy universe.

downwiththebanks's picture

Like I said before, calling capitalism "an idea" (i.e., not real) exonerates it from the grotesque devastation of our planet is has wrought.

Capitalism is a specific mode of production and distribution that produces surplus for the possessor of capital - precisely the people FDR kept in charge.

Burnbright's picture

What? Did you even read the new deal? FDR was all about having a controlled economy, that is not capitalistic at all.

downwiththebanks's picture

What industries did FDR nationalize as part of the New Deal?

Of all those alphabet soup opiates he offered to a decaying corpse of a system, which ones took control over entire industries?

Burnbright's picture

Money is capital as all things derived from capital can be used as money, it is why money is interchangable with a product. Most common forms of money are simply the most desirable forms of capital as they are the most liquid or exchangable. So when you end up controlling a large portion of the "money" within a market you direct the flow of capital and thus create imbalances. You don't need to nationalize a single industry when you control the flow of money because you become the market maker. Get it yet? When you control money you control capital, when you control capital flow you have a controlled economy.

faustian bargain's picture

Shhh, he wants to play semantic games to demonize this thing called 'capitalism'...don't spoil his fun.

downwiththebanks's picture

Here's my trick, FB:

Associate capital with capitalism, and apply it to the real world.  

I know, I know:  I hear you already:



"So much better to play make believe."  

"Timothy Geithner doesn't work for Goldman Sachs!"

Get over yourself.

WaterWings's picture

Apply socialism to the real world. Now shoot yourself in the nape and fall in a ditch.

Zina's picture

Do not waste your time with people who say that capitalism has never existed in any country in the world.

Their "capitalism" is just an utopia wich does not exist in the real world.

If no country in the world was never capitalist at any time, then we have two options: either Feudalism continued to exist after the Industrial Revolution, or socialism dominates the world since the French Revolution. Lunacy...