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"The Government Comes Up With the Money"
Submitted by Adam Taggart of Peak Prosperity blog,
I'm half-heartedly watching the State of the Union address right now. What a cynic I've become.
My younger self would be shocked and saddened to learn how I've come to view these annual addresses as little more than a game of charades. The President (not just Obama, but his predecessors, too) reads a carefully and expensively constructed script designed either to elicit self-congratulatory applause from the echo chamber side of the hall, or to lob political harpoons into the other.
But in the end, it's nothing more than a game of words. And the real issues that desperately need addressing get ignored, glossed over, or showered with pablum and over-promises that will never materialize.
A few minutes ago, the President just announced his new executive order to raise the minimum wage by nearly 40% for those employed by federal contractors.
Now, I'm not going to make this article about the rightness or wrongness of such a move. And I'm very sympathetic to those earning the current minimum wage amount of $7.24/hour. In a world where the basics of living like food, health care, housing, energy, and education have skyrocketed in cost (due in no small part to the intervention of central planners), yet real wages have actually regressed, how the heck does one get by on the minimum wage?
But I will share the thought that enters my mind whenever I hear a politician make such a magnanimous and grandiose claim: How is this going to be paid for?
I think I'm shocking no one when I emphasize that our political leaders act as if money is magically produced whenever the need is great enough. Weak economy? Print money to bring interest rates down. Banks unstable? Print more money to buy their bad assets from them. Can't balance the budget? Run the country at a deficit (as they don't matter anyway, right?).
But I'll share a recent personal experience with the government that still managed to shock me. And I think it captures well the magical thinking at the heart of our national dysfunction.
A relative of mine is in her senior years now without any savings to lean on. (By the way, that puts her in the company of 22% of US seniors over 65. In fact, a shocking 4 out of 5 of all U.S. working households have retirement savings totaling less than one year's worth of income – so it looks like there will be many more in her situation soon)
There's no way to sugar-coat her financial condition. She's in a tough situation with limited options. But we're doing what we can to support her.
Which led my ears to perk up when a friend suggested there may be a relatively easy way to boost her monthly Social Security payment. It turns out that, despite being divorced for over 40 years from her former husband, she can claim a portion of his Social Security benefits. If you were married for over 10 years, the government allows this.
Okay, I thought. Good for her. But what about her ex-husband? I doubt he's going to be happy seeing a drop in his Social Security check, and even less happy learning that it's because the government decided to give the difference to someone he divorced four decades ago.
But here's the thing that bowled me over: His doesn't drop.
The government makes it clear that if a divorced spouse is awarded any claim to your Social Security benefits, the benefits you receive remain untouched. From the SSA.gov website:
Note: The amount of benefits your divorced spouse gets has no effect on the amount of benefits you or your current spouse may receive.
As the one investigating this opportunity, I spent a day on the phone with the Social Security Administration, and, sure enough, that's the way it works.
I couldn't help asking the nice folks at the SSA: Who funds this? Where does this extra money come from?
In theory, the Social Security trust fund is a kitty paid into by workers as they earn income during their lifetime. (In practice, we know the kitty is empty, having been raided by politicians for decades). In this case, the ex-husband worked for a certain number of years and had a certain amount of his income directed into Social Security to finance the payments he would later receive in retirement. Payments that he now is, in fact, receiving.
So, if the government later decides that his ex-spouse should also get a check based on his years of employment, but no extra hours were worked to fund that second check, how does that math work?
Well, as probably comes as no surprise, math doesn't factor into the answer I received. "It's just how the system is set up" I was told. "The government comes up with the money."
And that – to me – succinctly sums up why we deserve the economic predicament we find ourselves in: too many of our leaders and too much of the populace look at the government as a perpetual font of money. The curiosity to ask the questions: Is this sustainable? Is this wise? isn't there. Either because we're too lazy or too fearful to learn the answers.
For the record, I did prod further into how such a payment system could remain solvent. But it was clear to me that, not only was this a strange question to the folks I was asking it of, but it was something they had never even thought about before. It didn't take very long before they conceded that it probably doesn't make sense, but folks who qualify for the extra money would be crazy not to take it.
In the end, my family member did qualify. But not for very much. (There were uncommon exceptions that ended up reducing her claim)
And while I understand why she feels the need to take the money, I'm conflicted about my role in the affair. Because it's this very behavior of treating the government like a free money ATM (or a benevolent uncle with a bottomless wallet – use whatever analogy you like) that's ruining us.
Which makes it all the harder to hear of 40% hikes in the minimum wage, or health coverage for all through the "Affordable" Care Act, or extension of the expired unemployment benefits for those who have been out of work for over 99 weeks, without asking: How are we possibly going to afford this?
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The Chinese will just have to work harder and the corporations need to be forced to bring their profits back to the U.S. to be taxed.
The same way everything gets paid for ... by somebody else! Duh.
"how is this going to be paid for?"
Oh come on, that's easy. Simply tap the "1" on your key board, then press and hold down the "0" button for as long as you like. Uncle Ben taught us how, and by now, it's certainly nothing new.
The next part is a little tricky, though. Now you have to arrange it so that all the "1's" and "0's" are directed to Democratic contributors and and corporate cronies. With this, they can buy up on the cheap all the faltering businesses cratering because of the their vastly increase labor and medical costs, and thus consolidate their wealth and power, so they can make even more canpaign contributions and bribes to politicians to make more money and consolidate more power, so they can make more campaign contributons to and bribes to politicians to make more money and consolidate more power, so they can.... oh well, you get the drift.
The cute little unicorns will shit 24K rainbow Skittles?
You're looking at this wrong.
Give the plebs another couple of bucks and they will turn around and spend it on some shit they don't need. You see? Right back into the pockets of the fat cats.
Will more of the same really work? Perhaps we need to overhaul the economic system.
http://www.planbeconomics.com/2013/06/cure-for-capitalism.html
The minimum wage argument has been around for many decades. Is there any evidence anywhere that shows it does any good?
It doesn't take much to get votes these days considering how ignorant the populace has become. The more people are cared for & entertained, the less critical thought is required. After a while critical thinking completely goes away. Politicians can now piss all over the people and the mainstream thinking is "Who doesn't like a nice warm shower?".
"Farm raised" voters.
Raising the minimum wage is a "too little too late" response to inflation.
Usually there is a net loss.
I'm not sure about a 40% increase, though.
It seems like rewarding bad behavior, to me.
Mandating higher pay for the underachievers.
BTW, you're not supposed to "be able to live" on minimum wage.
It's always been the result, historically, that this is inflationary. The real 2% inflation that the Fed wants and needs; this is just another angle of attck; QE didn't have enough empact; but raising wages is the start of every inflationary spiral in history. In short, it;ll be done with ctrl+P.
...my role in the affair. Because it's this very behavior of treating the government like a free money ATM (or a benevolent uncle with a bottomless wallet – use whatever analogy you like) that's ruining us.
Lighten up, Francis; this ship is holed and going down. Best loot all the silverware and dinner rolls you can then throw some elbows on the way to the life boat.
Nature magically provided for our ancestors for millions of years.
The forager mindset isn't going away soon - not when it's still possible to forage.
Our ancestors also didn't need a foraging permit from DEC.
Uncle Sam doesn’t get to use the magic keyboard though. Uncle Sam can write magic IOUs for which the Fed types 1’s and 0’s on the magic keyboard. The only tangible thing in this swop of magic stuff is that the taxpayers have to pay real money for the interest on Sam’s IOU’s. If only Sam listen to his fathers who told him that he has “power to coin Money, regulate the Value thereof, and of foreign Coin”.
"The same way everything gets paid for ... by somebody else! Duh."
TRUE - the government worker was wrong Social Security does not get any government money NADA dime. The fund doesn't have the power to tax so this money is redistributed from other's in the fund. Means testing is also redistribution.
The spouse of a wage-earner is entitled to compensation for years of unpaid labor taking care of children, the household, etc. which contributed to the wage-earner's capacity to create the income for the family. Note especially, "woman's work".
And to think that women did not have universal right-to-vote in the US until 1920. How moderne! How avant-garde ! The author has some catching-up to do to unshock his faculties. He prolly just forgot. Eh?
and goodbye carried interest deduction, DH.
America rejects tyranny
America votes for tyranny by a landslide
The second.
Both knowingly and unknowingly.
But this shit has gotta stop!
Whatever it is.....
when's the boxing come on?
muff munchers and mexicans 2016
Its easier to print than going through all this trouble.
I'm with you. Ten dollars an hour sounds fair to me. It ought to be more like 15. We're a service economy. We can't go around pretending that the folks still have the same shot of succeeding back when we had manufacturing.
It's funny how people propose things like this yet never show the math how it works. But do-gooders certainly have more heart and empathy than mathematicians.
Miffed;-)
My bad, they need to start another trillion dollar war to create good jobs and profits.
How are we possibly going to afford this?
You're going to pay for it.
If YOU, means the next several generatioNs, then ya. If you means current retirees, or taxpayeRs. No
YOU means everyone on the grid.
Not where I'm going to be in 5 years.
I'll drink to OTG however, what will that accomplish? You may not have an interest in politics, or government. They both have an interest in you.
Moar War........Moar money
Is your relative receiving two checks from Social Security? One from her own SS and from her ex-husband.
America's petty dictator now rules by executive order.
Let the little people get their bogus SSI, EBT, disability, crazy checks and what not. It is a drop in the bucket and if you could take it all away will not stop what is going to happen. Maybe make it happen quicker.
We should all be thanking the fed. Before money printing, we had to invade shit like Iraq and kill as many as a million civilians to make our rich overlords happy. Now we just debase the dollar. Our masters are satisfied and nobody dies!
So Adam, are you saying that one way for a couple to boost their SS income is to get divorced, then have have the (ex) wife claim part of hubby's SS? She gets slightly more and his stays the same. Voila! instant bump up. Nice scam, thanks for the tip. I think I'll go tell my Mom.
BTW, it gets paid for the same way everything has been paid for all these years: FM
Better yet, get divorced. Marry another SS receipent. And all move in together.
Dismal. As this thing spins deeper, continuity of government will be paramount, and funding the UN and IMF to manage the devolution and downgrades of the EMs. Must be important now.
Silly boy! We just print more money of course.
The pledge to increase the minimum to federal workers is all hot air. Most federal employees already earn more than what Obama wants to raise the minimum wage to. So the cost is essentially zero. He is just trying to improve his poll numbers.
It would be interesting to see how many federal employees and contractors make less than $10.10 right now. I bet the number would be less than 100.
I was looking for the first Intelligent post and you win.
But the answer is 0%
When I did construction work, Drywall workers made 3x as much working public vs private and I bet this is still the case.
Davis - Bacon Act dictates those wages on Federal contracts /projects be Union scale. Way above $10.00 p/hr.
Raising minimum wages blocks entry level workers from being hired and lays off workers in marginal enterprises. It doesn't help.
Yes, assuming an efficient labour market. And assuming an efficient labour market, Blankfein earns and deserves every cent of his pay.
So I ask you, do you think what we have is an efficient labour market?
No. Because as the workers get richer, so do the customers. The minimum wage goes to everyone. Yes, you lose jobs to foreign countries that don't raise their minimum wage, but unless you're making less than fifty bucks per week, you're losing jobs to them anyway. On the local level, the percent price increase needed to cover the percent wage increase is less than the wage increase so yes you get inflation, but the percent wage rises more than cover it. This continues until another variable dominates the equation, for example, when you run out of resources.
Under normal circumstances, the worse thing that can happen after a minimum wage increase is that every one else demands a proportionate increase themselves and drives relative pricing right back to where it was before - bigger numbers on the price stickers but no-one is any better / worse off.
Except for debt. If wages double then debt is only half the problem that it was before. A lot of people who would have previously defaulted can now make repayments. Banks hate minimum wage increases because it inflates away their interest payments so they would retaliate by increasing interest rates. But if they really want their mortgage bonds and CDOs to be worth something, then they might be open to a minimum wage increase.
But let us get something straight here. For the last decade and a half that I know of, the banks have been lending more than what people can afford to repay, and then getting bailed out when it all goes belly-up. Idiots have been bidding prices beyond sustainable levels with unaffordable debt. Houses have been kept off market in order to keep prices unsustainably high. You are facing either default, or inflation to bring the debt down to more manageable levels. But you can have as much inflation as you like, as long as banks can lend exhorbitant amounts of cash to idiots who bid prices too high, the problem ain't going away. Minimum wage hikes are not the problem. They are a desperate attempt to combat the problem. Like trying to fill a bucket with water while some bankster fuckwit is drilling more holes in the bucket. Stop drilling the holes. Stop lending huge amounts of money to idiots who can't do maths. Stop bailing out insolvent banks who insist on lending to idiots.
Raising minimum wages blocks entry level workers from being hired and lays off workers in marginal enterprises. It doesn't help.
Just pay me $20 an hour to act as a liability shield okay? Otherwise it's fucking 50+
Takeaway: marry early and often, claim benefits on all of them.
Just remember it has to last 10 years each one.
But, the way it really works is that she can only adjust her SS upward against the one that collects the most SS out of all of them and it has to be more than the amount she collects, not against each one she married.
If they each individually collect less SS than she does then there won't be an upward adjustment. She's collecting the max allowed by law.
So the lesson here is to marry someone that paid into the fund the max amount of payroll taxes that could be paid every year. That's somewhere slightly north of 100k per year and goes up every year.
That way when your spouse dies after working their ass off to make your life comfortable the living spouse can now collect what that deceased spouse would have collected.
Of course this applies to any spouse whether male or female.
They want inflation, they want to get the economy going? Good, pay working people a living wage. Fucking genius!
It will be paid for with FIAT, which can be pulled out of the US governments asshole forever.
*
Why even bother with these rhetorical questions anymore?
WHere will it come from? When will it end?
The end of history is here, and it will end, when they can't play anymore, given that Japan is 20+ years ahead of the USA in STAGFLATION, its probable that it can be played for generations,.e.g. until the OIL is gone, or the planet is so polluted you cannot create 'food'.
"FEDERAL CONTRACTORS/EMPLOYEES" are the new PRAETORIANS
Anything else and OBAMA might have a little tea-party on his hands,
I say make everybody who works for the police-state a millionaire, and then send them out to move the lice to CAMP-FEMA.
Yup, a race to the bottom, and the fucking idiots on top are so deluded in their grandiose towers with all their toys think they are immune.
Can we fix the true problem: The rapid devaluation of the USD, please?
All of this "minimum wage" and MyRA programs sound so African..... except the name of the Sec of Treasury is Jacob Lew from Queens, and head of Central Bank is Janet Myra Yellan from Brooklyn.
Weird.
The money should come from corporate profits ... and since they won't pay their fair share of taxes (see Apple), then it will have to come through wages.
WE pay the corporate taxes in everything we buy.
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UItimately, we won't be able to pay for this reckless spending.
I hear you. I hear the angst. There are a lot of people who are caught in this dilemma. And the ones who are in it? They don't have a clue, like your relative.
You and I do. I'm terrified of the future.
We are 17 trillion, and hundred of trillions unfunded, in the hole.
We. Are. Not. Getting. Out. Of. This.
Simple as that.
I said to friends in 2008, in 4 years we're going to be 15 Trillion in the hole. They laughed. They laughed harder when I said 20 Trillion in 2016.
Nobody will be laughing in 2024 @ 28 Trillion. If rates don't skyrocket up to 4 or 5%…
Robots will be taking over the economy by 2020. There will be a permanently under and unemployed underclass of 10-15% and growing, if were lucky. Current thought holds 50% of the jobs will be gone in 20 years.
Let's hope I'm wrong.
We both know this ends in (hyper?) inflation.
All we can do is prepare. By something that you hope, if you have the money, will serve as a store of wealth, or growth of it.
Otherwise…
We're doomed.
•?•
V-V
There are things that need to be done.
There are people who can do what needs to be done.
A reasonable balance can be achieved.
Add in a predatory central banking system that just takes a percentage for doing nothing and add a government system that is owned by said banking system and gets to decide that it has the right to skew the whole thing........
Welcome to the modern world.
Power has corrupted. Not much to do now but watch it slowly self destruct, along with it's credit system.
The same way it was paid for until Reagan. How was it ever possible?
"How was it ever possible?"
It wasn't. It had reached the end of the line with the abandonment of the gold and silver standards.
Adam, nicely done!
The federal government now operates on the principle that it has unlimited money. Crazy, but true.
I agree it will end badly.
"And the real issues that desperately need addressing get ignored, glossed over, or showered with pablum and over-promises that will never materialize."
Thank you for the fine and insightful article. However, the "real issues" are all of the government and their puppet masters' doing. Being that government is an organized crime syndicate and the banksters are a cabal of theft, they can only be a solution if they go away.
And they call it "printing," but is theft. So anyone reading this article should go back and reread it and substitute "theft" for the word "print." Doing so will clarify things further for the reader.
"Who's your guillotine?!"
This would affect every garbage collector in the DC area, even the people who clean the offices of government contractors. If they get a higher wage out of the same budget, their hours will have to be cut, and the District is already notorious for its enormous rat population. You can't keep them out of your house -- they'll hold their breath and crawl up out of the toilets!
Well, by the tax payer of course. Taxing 0.1% of every financial transaction perhaps could help but of course that is a no no. So therefore the tax payer will suffer.
"I'm half-heartedly watching the State of the Union address right now. What a cynic I've become."
I admit I didn't read any further.
I mean, really... what kind of tool could ever watch a SOTU address without gagging on their own vomit*.
*[Well, maybe just for the last fourty or fifty years, I'll concede that possibility.]
How's it going to be paid for? By moar debt, of course...which will gladly be purchased by suckers at a return lower than inflation via MyRA. President OBarnum loves him sum serf suckers!
YOu all think this is something? Check the new ag bill that will be passed. We know who themoney will come from and it's plain as freaking day who it will go to.
In the end I suspect the employers will win out and lower wages will become the norm for the coming decade, the alternative is people will just continue not to work. Like many employers I have become skeptical, I have been told many times by job seekers of their outstanding skills to later be disappointed. It is easier to brag and talk a good game then actually produce results. Bottom line is that till this discrepancy is resolved do not be surprised if many businesses chooses to pass on more hiring. Yes many people will do anything for a job, but it seems, they won't do that! More on this subject in the post below,
http://brucewilds.blogspot.com/2012/04/jobs-unfilled-at-time-of-high.html
Consider using 1099 contractors. Person will be commited to work when by contract THEY have to perform a specific action in a specific allowed time and cost to be paid themselves. You also get away from hard costs that THEY incur as a contractor. Make them be licensed, bonded, and insured themselves.
Commit to short term assignments w/ the possibility of more work IF THEY PERFORM.
Fill a Rolodex w/multiple names so you can use on demand.
Consider using a placement agency w/specific parameters to be met by their employee. You then know your costs and agency will make sure they keep you as a client by at least trying to make you happy.
And you can dismiss for any reason at any time.
I would guess you could find good workers using that approach.
IT'S A COOKBOOK!!!
Q: how is this going to be paid for?
A: Like all good Leftists, (1) Obama has never asked this question because he's never thought of it, and (2) He know he's backed by an unlimited source of money: Yours.