Have We Reached Peak Entitlements?

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Have We Reached Peak Entitlements?

There is no way an economy that grows by 75% every 25 years can fund entitlement programs expanding by 500% or more over the same time period.

One aspect of Peak Government is Peak Entitlements: the ability of the government to fund its social program promises out of current tax revenues. Recall that Federal entitlement programs--Social Security, Medicare and Medicaid, to mention the largest--are all "pay as you go," meaning they are funded out of current tax revenues.

The Social Security and Medicare "trust funds" are politically useful illusions: as the securities within the so-called trust funds are non-marketable, the government funds shortfalls in these programs the same way it funds all its other deficit spending, by selling Treasury bonds.

As the charts in Have We Reached Peak Government? show, government spending has soared to levels that no longer reflect the growth of the real economy. Government spending has risen by 300% or more since 1990, while the economy has grown by 75% in that time.


Federal spending:

Let's zero in on entitlement program spending. Personal Current Transfer Receipts (PCTR) include all transfer payments to individuals, a category that includes all social welfare programs such as Social Security, Medicare and Medicaid.

Social Security:



Since Social Security and Medicare are funded by payroll taxes (15.3% of all earnings paid by employers and employees, up to $113,700, and another .9% on earned income above $200,000 annually) and the majority of individual income taxes are also derived from earned income, the key metrics behind entitlement tax revenues are full-time employment and productivity: the number of people who are paying substantial payroll taxes and the productivity of the economy, i.e. the ability of the economy to support more workers and higher wages.

Full-time employment and the number of Social Security beneficiaries:

Output per person:

Clearly, full-time employment is stagnating while the number of entitlement beneficiaries is climbing steadily as the baby Boomers retire en masse. At the same time productivity since 1990 has advanced 58%, a pace that cannot support program costs rising by 500% over the same time frame.

If we are not yet at Peak Entitlements, we are getting close. Short of the Federal Reserve printing $1 trillion a year and distributing it to entitlement beneficiaries directly (with all the unintended consequences of such blatant money-printing), there is no way an economy with stagnant employment and modest productivity growth (roughly 60% in 25 years) can fund entitlement programs expanding by 500% or more over the same time period.

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Pool Shark's picture



Simple physics:

Too many people in the wagon; too few pushing it. More and more of those pushing are getting tired of pushing and climbing into the wagon themselves.

Result: Wagon stops.


Spastica Rex's picture

Watch out fit producers, the wagon might roll back.

CH1's picture

Peak entitlement is in the rear-view mirror. The entire game is being sustained with fiat money. When that cracks, it's game over, and fast.

Pure Evil's picture

And with all the fat assed Merxicans jumping on board, the axels of those wagons are at maximum load limit.

Spastica Rex's picture

Well, to take the analogy a step further, I reckon one could hope that the axles do break, and that the elect are then free to walk along their merry way.

Pure Evil's picture

Are you kidding me?

Its the Scooter Store to the rescue!!!

Why should fat assed Merxicans have to walk when Uncle Sugar will pay for a free Lil' Rascal.

Now I just need someone to haul my fat ass to the Grand Canyon.

Spastica Rex's picture

When I said "elect," I meant the people who were pushing the wagon. My vision is that all those in the wagon are stuck there, unable to move due to their complete lack of fitness as "human beings." Imagine them being eaten alive by insects, rodents, and birds as the producers stroll off into the sunset of the brave new world they are about to create.

Bobbyrib's picture

Everyone is gaming the system. We shouldn't be looking at the ethnicity of our immigrants, we should concentrate on not flooding our labor pool with too many applicants.

Urban Redneck's picture

The size of labor pool is immaterial (and the smaller the labor pool the less the purchasing power of its participants). The messier problem is the incontinent members of the Gov family (Uncle Sam, Uncle Ben, Aunt Katherine, et. al.) who are incessantly dropping turds into the pool and acting like it isn't them or it doesn't need to be cleaned up...

Whatever size the labor pool is, appropriate capital needs to be married to productive opportunities at a reasonable cost in order to create jobs.

Nick Jihad's picture

That's unfair to Mexicans. The ones that i see, have an exemplary work ethic.

CH1's picture

That's unfair to Mexicans. The ones that i see, have an exemplary work ethic.

Quite right, but these guys don't actually care, they just need someone to blame, and "the other" is always an easy target.

Alcoholic Native American's picture

I'm not sure if my part time minimum wage job is pushing anything.  Most of the people that come into my store are those on SS, welfare, or government employees.

I'm just getting run over by the wagon.

DoChenRollingBearing's picture

Neither Mrs. Bearing nor I are even eligible for any of them: Social Security, Mediacre or Medicaid.  We didn't work enough hours (= pay enough tax into the system) in the private sector, sending that money away for good.

Let 'em all burn.  I didn't pay, I don't want or expect anything.

disabledvet's picture

if we went to war over oil why do we now have more oil than we know what to do with? and now that we have more oil than we know what do with...why are we fighting amongst ourselves again? I mean "Dow 20,000 on this news"?

booboo's picture

I'm the guy sitting in a lawn chair on the side of the road eating an omelette, laughing and yelling faster bitchez. 50 years of scrimping and saving, driving used cars and paying no interest to fucking jew bankers has paid off. Yea, I know, they are going to steal it in the end, but the Sheriff of Nottingham is going to be short a few when he finally collects.

Keep the faith amigo's, they had a great plan until you hit em in the fucking mouth.

Bob Sacamano's picture

Agreed.  Live well below your means (aka not spending money) for the first 20+ years of your career and you can make it. 

Thanks for taking care of yourself and not being a burden on others.  If only everyone would do so.....

Melin's picture

Others stopped pushing wagons and started building teleportation devices instead.

Lost My Shorts's picture

But those simple physics can be trumped by a population ponzi.  As long as your population is doubling every 25 years, etitlements for the old aren't such a trouble.  That always worked before.

By the way, Mr. Charles Hugh should call his blog 0.5 minds until he learns to stop comparing real and nominal time series.

Marco's picture

Thanks for pointing that out, I was wondering why the numbers didn't add up ... he uses inflation corrected GDP, but non inflation corrected expenditures.

He's quite an idiot.

mkhs's picture

I beg to differ.  0.5 mind = halfwit.

yogibear's picture

No problem, King Obama will get his goons to tell everyone still working to produce more.

Unknown User's picture

Soylent Green mmm good! 


"Too many people in the wagon; too few pushing it."  Is a factual BS, considering the exponential growth in productivity. As a matter of fact we don’t have jobs for all the people already.


dizzyfingers's picture

Are you one of the "useless eaters" crowd?

saucy's picture

Simple math:

When corporate America spend billions lobbying to legally cut employee wages and benefits to the point where it makes no point to work, people jump into the wagon. The restaurant industry is a perfect example. How'd you like to work for $2.13 an hour? The customer is expected to pay the restaurant worker wage.

Result: No one has money to spend and the wagon stops.

Bob Sacamano's picture

So corporations and/or government are suppose to take care of you even if your only skill set is one that the market really does not value.  It is important to get a marketable skill set that pays more than $2 per hour.  Unless that is someone elses responsibility too. 

But you are absoutely correct that the customer pays the restaurant workers' wage.  As well as the cost of food, rent, etc and most notably all the taxes that corporation pays.    Those damn customers will not pay you what you want.

You might try starting your own restaurant and pay the staff $25+ per hour and stick it to those pesky customers.  That will show them.

hedgeless_horseman's picture



Mrs. Horseman and I do not receive any entitlements, so we have not reached the peak.

What type of entitlements are you looking for?

Child Care/Child Support
Disability Assistance
Disaster Relief
Employment/Career Development Assistance
Energy Assistance
Environmental Sustainability/Conservation
Living Assistance
Loan/Loan Repayment
Military: Active Duty and Veterans
Social Security/Retirement
Tax Assistance
Volunteer Opportunities
All of the Benefit Categories

Oquities's picture

excellent list - don't forget foreign aid to our enemies

Clowns on Acid's picture

and massive illegal immigration for 20 years.... with amnesty for all being pushed by DEMs and RINOs right now....

Pool Shark's picture



But, of course!

Demicans want guaranteed left-wing voters, and Republicrats want cheap labor for their corporate overlords.



natty light's picture

Mortgage interest deduction

malikai's picture

Being able to keep your own money is an entitlement?

gbresnahan's picture

Yep, I fear that education could be the next one (a-la obamacare).  You can pretty much predict their sales pitch.. "It's not fair that young people are saddled with over $50k of debt just to get a college education.  The entire country benefits from higher education, so it's only fair that everyone pitch in to pay for it."

No. No. No. No. No.

DoChenRollingBearing's picture

"I'll take Education for $1000, Alex."

"And the answer is: Private school."


(Where will we go to get a decent education?)

Spastica Rex's picture

Not Catholic schools (wife is a teacher). Our Bishop is taking his orders from the Washington State Department of Education and Bill Gates. Our Catholic school is going to look just like the public  schools except it will have a religion class.

Really, I should say public/private partnership schools.

Never One Roach's picture

Problem is most public schools are too dangerous...kids are afraid even to go to the toilets there for fear of being asaulted.  Think twice before sending your kids to any school where they have three policemen at the door and metal detectors every ten feet.

That's why many folks send their kids to those Catholic Schools. At least they have some discipline and your daughter wont get raped in the bathroom.

[But the little Boys should avoid Father O'Mallory....never know about him]

Spastica Rex's picture

My 13 year old daughter attends a minority-majority public school and she hasn't been raped, yet. My wife's Catholic school has declining enrollment (and my daughter refuses to attend).

Please do not take this as an endorsement of my daughter's shitty public school, or shitty public schools in general. I know a thing or two about shitty public schools.

grid-b-gone's picture

Khan academy = tuition-free, no reported violence to-date, and you get to work at your own pace. They don't serve meals, though.

Spastica Rex's picture

Public/private McSchools

I'm sure their educational product will be just as profitable, tasty, and nutritious as Big Macs.

Mclearnin' - I'm lovin' it!


Bangin7GramRocks's picture

 Jesus Christ On A Popsicle Stick! Where the hell do you live? I think it's time to relocate the bunker to a safer school district!

Umh's picture

I live in a school district that meets this description. On the other hand I moved here after my children were gone. Actually this area is improving, well improving is about all you can do when things have become really bad and it was really bad.

Groundhog Day's picture

"where will we go to get a decent education?"





Even Private schools are biased by the state requirements.  The only thing you get is a better teacher/student ratio with better technolongy in some schools.  


But above all...PARENTS.  Parents teach using the tools available and teacher's plug in the missing pieces.  I've done this with my children and they are years ahead of all the kids in thier class.

McMolotov's picture

Good to know where to sign up for free HIV/AIDS.

Disenchanted's picture

HH I don't see bankster bailouts and corporate subsidies on that list.

Have those peaked yet?

falak pema's picture

look at this way if the GDP shrinks by 10%, Entitlements will shrink by 300%.

Now that is what the Oligarchs want. 

But what will they get? 

Only the market can decide that if the FED goes belly up!

Oquities's picture

nothing can shrink more than 100%,

Oquities's picture

if you have an 85 IQ and i take 90 points from you, are you negative stupid, therefore smart?

McMolotov's picture

No, that would just be Maxine Waters.

Pure Evil's picture

With Obama as the scarecrow still waiting in the wings to get his Certificate of Achievement from The Wizard of OZ.

monad's picture

Welcome to the Monkey House