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Is This Why Americans Have Lost The Drive To "Earn" More

Tyler Durden's picture





 

In the recent past we noted the somewhat startling reality that "the single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045." While mathematics is our tool - as opposed to the mathemagics of some of the more politically biased media who did not like our message - the painful reality in America is that: for increasingly more Americans it is now more lucrative - in the form of actual disposable income - to sit, do nothing, and collect various welfare entitlements, than to work. This is such an important topic that we felt it necessary to warrant a second look. The graphic below quite clearly, and very painfully, confirms that there is an earnings vacuum of around $40k in which US workers are perfectly ambivalent toward inputting more effort since it does not result in any additional incremental disposable income. With the ongoing 'fiscal cliff' battles over taxes and entitlements, this is a problematic finding, since - as a result - it is the US government that will have to keep funding indirectly this lost productivity and worker output (via wealth redistribution).

 

As we noted before (details below):

We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and... have the same disposable income at the end of the day.

Naturally, the topic of wealth redistribution is paramount one now that America is entering the terminal phase of its out of control spending, and whose response to hike taxes in a globalized, easily fungible world, will merely force more of the uber-wealthy to find offshore tax jurisdictions, avoid US taxation altogether, and thus result in even lower budget revenues for the US. It explains why the cluelessly incompetent but supposedly impartial Congressional Budget Office just released a key paper titled "Share of Returns Filed by Low- and Moderate-Income Workers, by Marginal Tax Rate, Under 2012 Law" which carries a chart of disposable income by net income comparable to the one above.

But perhaps the scariest chart in the entire presentation is the following summarizing the unsustainable welfare burden on current taxpayers:

  • For every 1.65 employed persons in the private sector, 1 person receives welfare assistance
  • For every 1.25 employed persons in the private sector, 1 person receives welfare assistance or works for the government.

The punchline: 110 million privately employed workers; 88 million welfare recipients and government workers and rising rapidly.

And since nothing has changed in the past two years, and in fact the situation has gotten progressively (pardon the pun) worse, here is our conclusion on this topic from two years ago:

We have been writing for over a year, how the very top of America's social order steals from the middle class each and every day. Now we finally know that the very bottom of the entitlement food chain also makes out like a bandit compared to that idiot American who actually works and pays their taxes. One can only also hope that in addition to seeing their disposable income be eaten away by a kleptocratic entitlement state, that the disappearing middle class is also selling off its weaponry. Because if it isn't, and if it finally decides it has had enough, the outcome will not be surprising at all: it will be the same old that has occurred in virtually every revolution in the history of the world to date.

But for now, just stick head in sand, and pretend all is good. Self-deception is now the only thing left for the entire insolvent entitlement-addicted world.

* * *

Full must read presentation: "Welfare's Failure and the Solution"

 

Some other thoughts on this topic: DOES IT PAY, AT THE MARGIN, TO WORK AND SAVE?

 


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Sun, 12/02/2012 - 11:50 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

DP whoops!

Sun, 12/02/2012 - 11:43 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

No one at the level I am talking about invests in a real estate project if the return level is 3%. And if the amounts taxed are solely due to inflation, I can't help that - call out Bernanke or better yet End The Fed.   But there is no reason for wage earners to subsidize the tax rates charged for investment income such as carried interests and capital gains, which is a subsidy which has come to be an "entitlement" as viewed by the wealthy.  But it is a subsidy.  By your argument, any additional tax on an annual raise which is roughly equal to the  "inflation rate" should not be taxed since it is attributable to inflation.   And no one is complaining on that side of the aisle, since they're ahead after taxes.  Obama should be equalizing tax rates, not increasing them.   If the impact falls on the wealthy, that tells you who has not been paying their fair share.

I'm no fan of Warren Buffet, but he is correct in saying in the real  world, no one declines a profitable investment if they pay a few more percentage points in tax.  It's jsut not how it is.  It might affect the analysis on a marginal investment, but there again, by having lower rates on such income, you support (arguably) malinvestment bymaking it tax-advantaged. 

Entitlements need to be trimmed, and dramatically so. Lower (or even phase out) corporate taxes to promote investment at that level, but equalize the playing field on income taxes paid for "income" whatever its source.  Of course, you need to keep tax regs in place that prevent unreasonable accumulation of earmings at the corporate level when there is a disparity between corporate and individual rates, but there is a well-developed body of tax law on that subject already.

Sun, 12/02/2012 - 10:16 | Link to Comment Gimp
Gimp's picture

Just received a notice that my social security tax is going up from 4.2% of my salary to 6.2%....only a 50% increase.

I guess some idiot (me) has to pay for all the welfare scumbags.

 

Sun, 12/02/2012 - 10:54 | Link to Comment Oldwood
Oldwood's picture

Hey, thats not a tax! That money is going into a lock box to pay for your retirement! BUt no, I forgot, they are going to means test SS, so now its just another welfare program.

Sun, 12/02/2012 - 10:54 | Link to Comment Oldwood
Oldwood's picture

Hey, thats not a tax! That money is going into a lock box to pay for your retirement! BUt no, I forgot, they are going to means test SS, so now its just another welfare program.

Sun, 12/02/2012 - 15:33 | Link to Comment Red Raspberry
Red Raspberry's picture

That's Obama's payrol tax cut expiring.

Sun, 12/02/2012 - 10:43 | Link to Comment Monedas
Monedas's picture

That a single mom making $29K lives as well (with benefits) as she would if she earned $69K .... understates the the parity .... because it doesn't consider the stress and uncertainty of competing in the market place !  My ex-wife (#2) is a single grandma who barely makes it, living in a trailer park on $75K ! She is totally stressed out and I finally talked her in to hoarding silver ! I think I saved her sanity ! She now sees a light at the end of the tunnel !  The system is so unfair to the WORKING NIGGERS .... THOSE WHO STILL TRY TO PAY THEIR OWN WAY ! 

Sun, 12/02/2012 - 10:44 | Link to Comment tedstr
tedstr's picture

Interesting how these numbers matchup so nicely to Obama's popular vote.  We have clearly crossed a threshold.  With unemployment over 8% Obama is the first sitting president to be re-elected.  People have actually lost hope for change.  Now they hope nothing changes and Obozo keeps supporting them

Sun, 12/02/2012 - 11:12 | Link to Comment Oldwood
Oldwood's picture

Its no accident. While people will argue about who is getting the raw deal, the real isue is that no one wants to acknowledge the actual results of their ideology. Supporting the "needy" is appealing to all but why is it that they put up signs warning to not feed the bears? Is it because they hate bears? We know that to pay single mothers results in more unwed mothers. We know that extended unemployment incentivises people to wait for their ideal job rather than taking what they can find, or many times allows them to take work in cash, which still defers costs to tax payers. Economic justice is a symptom of the disease of collectivism. Its the excuse used by every thief. We have become a society much like to old person who has to go without food to pay for the drugs they must take to survive and sadly 90% of those drugs are to counteract the 10% prescribed for their malady.

Sun, 12/02/2012 - 11:23 | Link to Comment Monedas
Monedas's picture

They will never cut back welfare .... the best strategy is to overwhelm it with new applicants .... bankrupt it !    You can live "well" in Kansas or Wisconsin on $40K .... in CA or NY you're fucked !  

Sun, 12/02/2012 - 11:30 | Link to Comment FunkyOldGeezer
FunkyOldGeezer's picture

Look, if you have a business that can only be profitable by having most of its employees on minimum wage or just above...you don't have a viable business. How far into the realms of fantasy would employees wages have to drop, before its fantasy status is recognised? People have to be adaequately rewarded for their work. Increasingly they are not being adequately rewarded, therefore welfare benefits are viewed as a better bet.

Something like a take away pizza joint for example.

Owners take out £100K+ per year and employ one full time manager on maybe £16K and countless part-timers on minimum wage, drawing an avearge £4-4.5K per year. Is that a truly viable business? Sure, for the owner it is, for the manager maybe but for the rest of the employees...NO WAY! That's the model that's being expanded everywhere.

Sun, 12/02/2012 - 12:08 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

"Look, if you have a business that can only be profitable by having most of its employees on minimum wage or just above...you don't have a viable business"..

you know, thats absurd, it seems your problem is that the owner gets 100,000.00/yr not a number that is the reality just one you assume is the result.

Sun, 12/02/2012 - 12:04 | Link to Comment toomanyfakecons...
toomanyfakeconservatives's picture

Let's not forget the holy grail of all welfare benefits... Section 8 housing. People wait years to get it, and when they do, they crow like roosters how they're never going to do anything that might put them in a position to lose it.

Sun, 12/02/2012 - 12:45 | Link to Comment spooz
spooz's picture

All they have to do  to continue getting rent subsidies is be old, disabled or have children.  Not many are in control of the first two qualifications, and funny thing is, the birth rate is plummeting even with this "generous" subsidy.  Wonder why that is? Could it be that the cost of raising a child isn't close to being covered by "welfare", especially since you are expected to work, like the $29,000 a year freeloader shown above?

 

Mon, 12/03/2012 - 03:53 | Link to Comment bunnyswanson
bunnyswanson's picture

Consider for a second that the corporations which provided the tens of millions of jobs Americans held considered the end result.  They projected into the future the consequence of taking the jobs that employed the working class of the USA and moving them to cheap labor and tax-friendly nations.  There undoubtedly was a moment when they realized the lack of these jobs and the money from their paychecks flowing into Main Street USA and the resultant devastation it would have on local economies right up to the federal cliff we hear so much about.

It was a plan.  This was ultimately the goal.  You have to understand that there is a worker bee work force and they now have no one employing them. 

Welfare checks are a couple of hundred bucks, a section 8 housing, food stamps.  I am certain that being on govt assistance vs having no income whatsoever was the choice of many.  Very few people in this income bracket have family members who can or will help them.  They have little education.  Factory work is what they do best.

I read remarks like yours coming in out of nowhere - the tinfoil hats, the lazy fat Americans, the "entitlement" crowd is a bad thing and corporate bail outs to CEOs who make several million dollars via sucking profits out of their companies and handing them to themselves and the shareholders is a good thing.

What is wrong with you?  How can you stop at such a juvenile conclusion in light of all of the information now available to us, clearly describing globalization's agenda.

China's highrise buildings are empty, several million units sitting unoccupied, but not for long.  What they are is part of Agenda 21.  So is the one-child policy.  The apartments will be filled with the poverty stricken who are settled in the areas we see when the floods, earthquakes and typhoons strike.  The poor are pawns and they go where the govt tells them in every country. 

There is more going on.  And you know it.  If you really love your country, and care deeply about the mechanisms in place, you should broaden your research before you size up people whom, just 15 years ago, were living the All-American dream. 

The increased gas prices will result in people moving back to the cities.  Their taxes and local purchases will subsidize the poor.  Eventually, these blue collar workers will no access to cheap vehicles thanks to Cash for Clunkers even if gas were affordable to minimum age earners and the welfare recipients.

.  Inner cities will see high rise buildings going up to house these people.  Buses/trains will be their transportation.  They'll be turned monitored, any money going to them will be returned to the "community" because restrictions will apply on where you can spend your funds.  Intake and output will be monitored, space required as well.  Obesity will not be an issue in this new world.  Statutes will be in place and the citizens will be monitored. 

Bad behavior will be deal with by the NDAA.  Disappearing people will be the talk ... when you are able to talk without being heard.  This is facism.  And you will be in the apartment next to these people.  Agenda 21 is an action plan...it is in place and operating in every nation in the world.  There is

http://www.firstpost.com/topic/place/middle-east-agenda-21-behind-the-green-mask-rosa-koire-video-GoMaYJwLyu4-259-1.html

 

If you have children, you have a responsibility to them to know what is unfolding under "smart" names.  This is so fucking important I cannot express to you how I tremble when I type this. 

You must believe this.  This is a mathematical formulation and is being implemented.  Zoning, redistricting, communitarianism, "Smart Growth" and "Going Green" can be translated into:  " THIS IS A NONHOSTILE TAKE OVER OF YOUR COUNTRY"

Sun, 12/02/2012 - 12:18 | Link to Comment thesecondslowes...
thesecondslowestantelope's picture

Zombie school....and you didnt know their was one

http://www.youtube.com/watch?v=DL-a-r7iJIU&feature=g-high

 

Sun, 12/02/2012 - 17:28 | Link to Comment FunkyOldGeezer
FunkyOldGeezer's picture

Pray tell.

If you're earning minimum wages, paying circa 55% - 65% in direct and indirect taxes (divide GDP by governemnt spending), unable to save much or enjoy many of the finer things in life that your boss/those higher up the chain take for granted, where IS the incentive to work? You could do a 70 hour week and STILL not be able to move on, or up in the world.

That is what defines poverty and exploitation.

Sun, 12/02/2012 - 20:58 | Link to Comment SuccorMoney
SuccorMoney's picture

"earning gross income of $29,000" isn't the same as "to sit, do nothing".

Mon, 12/03/2012 - 05:13 | Link to Comment Porcoimundo
Porcoimundo's picture

This is also true in Ireland:

Many would be better off on the dole rather than working, says ESRI

http://www.thejournal.ie/many-would-be-better-off-on-the-dole-rather-tha...

And the same is most probably true of the UK.  Unlike in the US the UK population is growing at its fastest rate in history, thanks to immigration; post war immigrants now account for more than 2/3 of UK births, and also suffer higher rates of deprivation.

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