The Great Retirement Con

Tyler Durden's picture

Authored by Adam Taggart via PeakProsperity.com,

Frankly put: retirement is now a myth for the majority...

 

The Origins Of The Retirement Plan

Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a "pension", was again offered to soldiers in the Civil War and every American war since.

Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit -- extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.

A pension is what's referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.

Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too. 

The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.

Off-loading Of Retirement Risk By Corporations

Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.

As America's corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

Companies were eager to get this expanding liability off of their backs. And the more poorly-capitalized firms started defaulting on their pensions, stiffing those who had loyally worked for them.

So, it's little surprise that the 1970s and '80s saw the introduction of personal retirement savings plans. The Individual Retirement Arrangement (IRA) was formed by the Employee Retirement Income Security Act (ERISA) in 1974. And the first 401k plan was created in 1980.

These savings vehicles are defined contribution plans. The future payout of the plan is variable (i.e., unknown today), and will be largely a function of how much of their income the worker directs into the fund over their career, as well as the market return on the fund's investments.

Touted as a revolutionary improvement for the worker, these plans promised to give the individual power over his/her own financial destiny. No longer would it be dictated by their employer.

Your company doesn't offer a pension? No worries: open an IRA and create your own personal pension fund.

Afraid your employer might mismanage your pension fund? A 401k removes that risk. You decide how your retirement money is invested.

Want to retire sooner? Just increase the percent of your annual income contributions.

All this sounded pretty good to workers. But it sounded GREAT to their employers.

Why? Because it transferred the burden of retirement funding away from the company and onto its employees. It allowed for the removal of a massive and fast-growing liability off of the corporate balance sheet, and materially improved the outlook for future earnings and cash flow.

As you would expect given this, corporate America moved swiftly over the next several decades to cap pension participation and transition to defined contribution plans.

The table below shows how vigorously pensions (green) have disappeared since the introduction of IRAs and 401ks (red):

(Source)

So, to recap: 40 years ago, a grand experiment was embarked upon. One that promised US workers: Using these new defined contribution vehicles, you'll be better off when you reach retirement age.

Which raises a simple but very important question: How have things worked out?

The Ugly Aftermath

America The Broke

Well, things haven't worked out too well.

Three decades later, what we're realizing is that this shift from dedicated-contribution pension plans to voluntary private savings was a grand experiment with no assurances. Corporations definitely benefited, as they could redeploy capital to expansion or bottom line profits. But employees? The data certainly seems to show that the experiment did not take human nature into account enough – specifically, the fact that just because people have the option to save money for later use doesn't mean that they actually will.

First off, not every American worker (by far) is offered a 401k or similar retirement plan through work. But of those that are, 21% choose not to participate (source).

As a result, 1 in 4 of those aged 45-64 and 22% of those 65+ have $0 in retirement savings (source). Forty-nine percent of American adults of all ages aren't saving anything for retirement.

In 2016, the Economic Policy Institute published an excellent chartbook titled The State Of American Retirement (for those inclined to review the full set of charts on their website, it's well worth the time). The EPI's main conclusion from their analysis is that the switchover of the US workforce from defined-benefit pension plans to self-directed retirement savings vehicles (e..g, 401Ks and IRAs) has resulted in a sizeable drop in retirement preparedness. Retirement wealth has not grown fast enough to keep pace with our aging population.

The stats illustrated by the EPI's charts are frightening on a mean, or average, level. For instance, for all workers 32-61, the average amount saved for retirement is less than $100,000. That's not much to live on in the last decades of your twilight years. And that average savings is actually lower than it was back in 2007, showing that households have still yet to fully recover the wealth lost during the Great Recession.

But mean numbers are skewed by the outliers. In this case, the multi-$million households are bringing up the average pretty dramatically, making things look better than they really are. It's when we look at the median figures that things get truly scary:

Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013. For most age groups, median account balances in 2013 were less than half their pre-recession peak and lower than at the start of the new millennium.

(Source)

The 50th percentile household aged 56-61 has only $17,000 to retire on. That's dangerously close to the Federal poverty level income for a family of two for just a single year.

Most planners advise saving enough before retirement to maintain annual living expenses at about 70-80% of what they were during one's income-earning years. Medicare out-of-pocket costs alone are expected to be between $240,000 and $430,000 over retirement for a 65-year-old couple retiring today.

The gap between retirement savings and living costs in one's later years is pretty staggering:

  • Nearly 83% of retired households have less saved than Medicare costs alone will consume.
  • One-third of retired households are entirely dependent on Social Security. On average, that's only $1,230 per month a hard income to live on. (source)
  • 34 percent of older Americans depend on credit cards to pay for basic living expenses such as mortgage payments, groceries, and utilities. (source

As for Medicare, the out-of-pocket costs could easily soar over retirement. The Wall Street Journal reports that the current estimate of Medicare's unfunded liability now tops $42 Trillion. Such a mind-boggling gap makes it highly likely that current retirees will not receive all of the entitlements they are being promised.

And the denial being shown by baby boomers entering retirement is frightening. Many simply plan to work longer before retiring, with a growing percentage saying they plan to work "forever". 

But the data shows that declining health gives older Americans no choice but to leave the work force eventually, whether they want to or not. Years of surveys by the Employment Benefit Research Institute show that fully half of current retirees had to leave the work force sooner than desired due to health problems, disability, or layoffs.

Add to this the nefarious impact of the Federal Reserve's prolonged 0% interest rate policy, which has made it extremely hard for retirees with fixed-income investments to generate a meaningful income from them.

The number of Americans aged 65 years and older is projected to more than double in the next 40 years:

Will the remaining body of active workers be able to support this tsunami of underfunded seniors? Don't bet on it.

Especially since their retirement savings prospects are even more dim. With long-stagnant real wages and punishing price inflation in the cost of living, Generation X and Millennials are hard-pressed to put money away for their twilight years:

(Source)

Public Pensions: Broken Promises

And for those "lucky" folks expecting to enjoy a public pension, there's a lot of uncertainty as to whether they're going to receive all they've been promised.

Due to underfunded contributions, years of portfolio under-performance due to the Federal Reserve's 0% interest rate policy, poor fund management, and other reasons, many of the federal and state pensions are woefully under-captialized. The below chart from former Dallas Fed advisor Danielle DiMartino-Booth shows how the total sum of unfunded public pension obligations exploded from $292 billion in 2007 to $1.9 trillion by the end of 2016:

(Source)

And the daily headlines of failing state and local pension funds (Illinois, Kentucky, New JerseyDallas, Providence -- to name but a few) show that the problem is metastasizing across the nation at an accelerating rate.

Affording Your Future

The bottom line when it comes to retirement is that you're on your own. The vehicles and the promises you've been given are proving woefully insufficient to fund the "retirement" dream you've been sold your whole life.

That's the bad news.

But the good news is that the dream is still attainable. There are strategies and behaviors that, if adopted now, will make it much more likely for you to be able to afford to retire -- and in a way you can enjoy.

In Part 2: Success Strategies For Retirement, we detail out these best practices for a solvent retirement, including providing 14 specific action steps you can start taking right now in your life that will materially improve your odds of enjoying your later years with grace. For far too many Americans, "retirement" will remain a perpetual myth. Don't let that happen to you. Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

 

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Arnold's picture

I was retired at age 35.
And 47
And 61.
It's getting old.

Gap Admirer's picture

Pensions used to have 7% returns on their money and reasonable amounts contributed to them so they were **somewhat** solvent.  That was way back when people actually took honesty seriously and before ZIRP.  Now, pensions are MAJOR Ponzi schemes where all kinds of shit is promised knowing full well that it can't be paid. It will be somebody else's problem when the bills come due.  Especially the corrupt gubmint pensions - just fuck over the tax payer, cutting his/her retirement income, giving it to the retired gubmint slug.  "Hey, I sat in that gubmint office for 30 damn hours a week for 25 years, since I was 18, making tax payers lives hell.  Now that I'm 43 years old I DESERVE a HUGE retirement."

Government needs you to pay taxes's picture

Jew-E for 10 years has consequences.  When did you realize you were allowing yourself and your kids/grandkids to get fucked?

IH8OBAMA's picture

The obvious solution is to die early and die often.  When you run out of money do a solient green.

 

Escrava Isaura's picture

The Ugly Truth?

What did you expect from a Ponzi scheme economy?

And, when the general population has no idea of how money works.

Most cannot tell the difference between a cat and dog because of their indoctrination.

And do you expect this to end well?

And get pay for it?

 

“The general population doesn't know what's happening, and it doesn't even know that it doesn't know.” ? Noam Chomsky

 

Gap Admirer's picture

A lot of what you say in this post is accurate and true.  Did you forget to take your meds today?  :)

techpriest's picture

Until he starts suggesting solutions, and then you find out Mr. Isaura is in fact Mr. Maduro.

"If I just take money form other people and give it to myself, then it's gonna work. There's always going to be someone out there with enough money to take!"

Escrava Isaura's picture

I said this before, and here is it again on why there’s no solution:

“Brace yourself! The American Empire is over. The descent is going to be horrifying!” — Chris Hedges, 2012

“United States is becoming a failed state, and thus a danger to its own people and the world.” — Noam Chomsky, 2006.

“I do not think what we face is a problem. It is a predicament. And predicaments do not have solutions.” — Greg Machala, 2017 

 

techpriest's picture

Unless you are dead, there is always the question on what you are going to do next.

One of my colleagues grew up in a household in which some family members were constantly taking from others overtly. When he finally got away form that situation, he was a runaway with no education and no money. Then he took whatever job he could get while spending his nights learning whatever he could get his hands on. Now he earns more than the average American, lives in the country of his choice, and each time we talk he's doing better than the time before.

At some point the average American is going to look like my colleague did ~6 years ago. As in, having nothing. Where each person goes from there, we'll see.

Escrava Isaura's picture

I was talking of the big picture. And the big picture doesn’t look good.

Individually, there are many things one can do.

That’s good that is working for him.

And I hope what I am doing now will help me when the big picture turns blink.

 

Theosebes Goodfellow's picture

~"I was talking of the big picture. And the big picture doesn’t look good."~

Speaking of seeing the "big picture", nowhere is it pointed out that all of these supposed retirement savings are all denominated in US Dollars, nor that the vast majority of the monies are allocated to stawks. That in and of itself is a little more than slightly problematic.

peddling-fiction's picture

The green lantern exhibits signs of "sluggish" schizophrenia.

Retired Guy's picture

The government borrowing is taxation by another name. They buy in the here and now of what is available for sale. They fund this with ZIRP and bogus new printed bucks. Both steal(tax) from the value of savings. In the end the currency will be worthless. So saving for the long term is trying to paddle up stream. You will eventually just be washed down the river and broke.

This system is insidious. Most people think they pay little income tax and don't worry about the price of cruise missles. The soaring stock market (a product of ZIRP) works the same way. In fact the real capital of the country is being consumed making the future look grim.

New_Meat's picture

Noam certainly provides concise enlightenment to us proles.

Government needs you to pay taxes's picture

Greenspan, Bernanke, Yellen, Franken, Weiner, Weinstein.  You cant make this shit up.  Either sexually or financially, the Jews are out there fucking damn near everyone.  And in case you want to dismiss this as anecdotal and not representative of the larger population, read on.  In Israel, no less.  1 in 3 Israeli women believes she is a sexual assault victim.  In the IDF, 1 in 6 women reports being sexually harassed.   

 

https://www.haaretz.com/israel-news/report-every-third-israeli-woman-fal...

http://www.jpost.com/Israel-News/1-in-6-female-IDF-soldiers-report-being...

LibertarianMenace's picture

Ponzi scheme economy? Sounds like proggie-ism, or 'Democracy' Now!

No.Fifth.Turning's picture

Well, looks like it's almost harvest time for the IRA/401K sheep herders.  They say the 3rd time is the charm--get out while you can; don't let the bankers do it to you again!

Endgame Napoleon's picture

A larger segment of the population all the time is going from churn gig to churn gig in a part-time economy that generates new full-time jobs at a rate of 6% a year.

Now, occasionally, a churn job offers a 401k, including one churn job that, I, their second highest new business generator and their top new business generator were fired from in about 6 months, with me never missing a day of work and staying through the entire day / everyday, hence my high sales numbers and equally high account-retention numbers.

Didn’t matter.

In addition to the fact that I, as a single, childless worker had no secondary, unearned income from a spouse to fall back on—just the $12-per-hour base pay and the one bonus for all those sales, which was deeply resented by the incredibly absentee, low-selling staff members that the equally absentee manager chose to keep—I just sensed that this job was nothing but one more silly, non-work-focused, absenteeism-gang cabal.

So, why put money into a 401k, pretending that this thing was the proverbial real job?

I had an even shorter-lived job, presided over by a momma who did things like dribble out the new employee paperwork over a period of weeks, making a huge drama out of it, calling me into the conference room and gossiping in great detail about the other employees, probably trying to get me to say something bad about them so that she could fire me before I even had a chance to raise her sales. In a tone dripping with venom, she explained to me that she was not in on my hiring.

BUT, for some weird reason, she wanted me to sign up for the 401k. Maybe, they got a deal if more employees signed up or something. They certainly churned an absolute ton of employees, although this particular place had more permanent employees and more competent employees than most. They also had their share of the STAPLE of all offices: moms who can come and go as they please in an excused absenteeism ring. At least, in this case, the moms in question worked hard when there. Most don’t. Nor do most sell a lot between their lengthy, excused absenteeism jaunts.

It is all just a circus in most cases, nothing like the era where people learned a job and stayed for decades, contributing responsibly to pension plans with a high certainty of gaining a significant amount of retirement security, as opposed to a negligible crumb, served up by employers who have no intention whatsoever of keeping most of their churned hires.

Because of her 401k pressure tactics, oscillating with her snide insults on issues COMPLETELY unrelated to work, which were designed to get me to quit, I signed up for the 401k, hoping to please my new employer who was pushing it like a salesman. I don’t guess it hurt anything.

It accumulated $60-something dollars in a couple of months.

You can multiply that over years. You come up with a little extra money to take a trip or something, not enough to cover things like rent over time, assuming people even have that much left at retirement. In this churn-job economy, I have encountered many people in temp jobs who said they cashed out their 401ks and were living on it between churn jobs.

Even the ones paying rent with 401k money who held onto their jobs and 401ks for say 6 years, putting much more in than I did, amassed very little compared to what you need to retire.

Since employers in my state often bully out employees who do not fit in their excused-absenteeism gangs of moms before they qualify for UC, they often use 401k money to meet living expenses, particularly when they are not on the pay-per-birth, womb-productivity train, where rent and groceries are paid by taxpayers for sex and reproduction, with monthly cash assistance and a child tax credit of between $3,337 and $6,269 thrown on top.

The people who can spare more generous 401k contributions are the dual-earner couples—you know the ones on a babyvacation every couple of months because they are “the talent” and needed at work so much that they can can take off from work, citing kids, more than any generation of “working parents” in history.

The reason they can spare it is simple: Rent does not absorb half or more of their combined income.

The per capita income in the following states should make it evident why 1 in 4 Americans have no retirement savings:

Texas — $19, 617

https://en.m.wikipedia.org/wiki/List_of_Texas_locations_by_per_capita_in...

Kentucky — $18,093

https://en.m.wikipedia.org/wiki/List_of_Kentucky_locations_by_per_capita...

Mississippi — $20, 670

https://en.m.wikipedia.org/wiki/List_of_Mississippi_locations_by_per_cap...

Alabama — $18,198

https://en.m.wikipedia.org/wiki/List_of_Alabama_locations_by_per_capita_...

Tennessee — $19,393

https://en.m.wikipedia.org/wiki/List_of_Tennessee_locations_by_per_capit...

Indiana — $20, 397

https://en.m.wikipedia.org/wiki/List_of_Indiana_locations_by_per_capita_...

And I sincerely doubt that the bulk of the single, childless citizens with 401ks have anything like enough to retire.

It is just going to get worse, as more and more people shift to the gig economy in an oversaturated job market, where automation is the enabler of 1) enormous amounts of excused absenteeism for the busy-working parents who are “culture fits” and 2) where more people experience the joy of losing more than half of their earned-only income to their housing expense.

This does not leave much extra for betting on the future.

Beltain's picture

I too have noticed the trend you speak of. I worked for a company with a high volume of turn over and they were constantly pushing to get new employees to sign up for the 401K program. My theory is many of them leave after a few short weeks and/or months and are never heard from again and the fund or the company gets to collect that money. I may be way off base here or maybe there is some law I don't know about but after I worked there for over 12 years and then moved on it didn't take even a full year before the fund was claiming they had no contact with me and were going to start "moving the funds" yadda yadda leagalese. The never even tried to contact me before the one letter i got too. Somethign is shady in the way they are doing it.

 

Big Whoop's picture

It’s the same in the work forces all over. Way too much dead weight. Why hire more people than you can feed with two pizzas? You’ll never have more people than that actually working. And when they want to create an opening to hire someone they want to treat like the owner’s nephew, at best they just let someone go at random. It’s better to be known as someone who doesn’t like work and who goes around saying everything is not in their job description.

ali-ali-al-qomfri's picture

people are too toxic, gmo, glyphosphate, opiods, etc. Soy-lent Green.

max2205's picture

This is bs     when public pensions go away like they should we'll all save 2k per month in taxes....    fixed it 

Blue Dog's picture

You don't really think they'll give the money back to the taxpayers, do you??? LOL.

AlaricBalth's picture

The assumptions for the State of Florida Public Employees Retirement Sytem were recently lowered 10 basis points from 7.6% to 7.5%. High grade corporate bonds and US Treasuries don't currently offer anything near those returns, thus forcing pension managers into higher risk assets such as stocks. The Fed is well aware of this pension time bomb and will do everything in its power to avert a stock market meltdown or a rise in interest rates.

JRobby's picture

Exacly. There was an argument for continued solvency with reduced benefits which of course, you would have to accept at one point. Reduced benefits was never talked about of course. That might motivate "further investigation".

Now it is just a blatent, outright lie after 10 years of ZIRP/NIRP coupled with deteriorating (for some time now) contribution levels.

Surprised they haven't started work on the processing camps yet? Oh? yes, there are still all those pesky guns out there? We will see. To disgard the obvious fact that they waited for the boomer population bulge to get up there in age before they pulled this shit would be to miss something. Something quite obvious. 

divingengineer's picture

ZIRP killed every pension in the country.
Think it was an accident?
Simple transfer of funds from workers to Wall St.
Impoverishment of millions, enrichment of a few thousand.
I hope they are ALL held to account some day and left with nothing for their treason.

AGuy's picture

"ZIRP killed every pension in the country."

Not really but its accerated its demise. Pensions were never adquitely funded from the start. This why pensions in general are a bad idea: (1) Pensons are managed by money manages which rarely act in your best interest. Most Pension mgrs. are rewarded in short term/high risk gains. (2) Companies go bust all the time. when a Company goes bust, so does the pension plan since its no longer funded. (3) Lack of oversight by participants: There is a lot of fraud in pensions over healthcare, Participants don't take care of themselves and often need expensive healthcare.

The Only person that should be responsible for your retirement is you!. You are the only one that can properly fund your retirement savings & investments. Only you can manage your heath.

That said I think 401K's & personal IRA's are junk, because the gov't can change the rules at anytime. Perhaps if 401K's/IRA were admendments to the constitution, so that the gov't can't steal it away, then they might be a good idea. Also, its unconstitutional to charge a 10% penalty on early withdrawals. Its your money, not the gov'ts. Since most people end up withdrawing some cash out of their 401Ks (medical emergence, lengthly unemployment periods) 401Ks usually generate more tax revenue than non-retirement savings.

Bigly's picture

ZHrs:

A question for all of you...

ANYONE KNOW A LARGER KIND OF COMPANY STILL OFFERING A DB PENSION TO NEW PARTICIPANTS?

I am not talking grandfathered....but if you started now, stayed for 5 years, then you are fully vested....

Anyone?

Arnold's picture

Maybe still the Rail Roads.

AGuy's picture

"ANYONE KNOW A LARGER KIND OF COMPANY STILL OFFERING A DB PENSION TO NEW PARTICIPANTS?"

I believe most state/local/federal gov't still offer pensions.

Proctologist's picture

Zirp was a pension killer indeed, not to mention a killer of savers and pensioners. But since when has anyone employed in the western financial system cared about the average person. The financial system is built by elites for elites.

There won’t be any justice in the USA without a bloodletting. For my kids sake I hope the bloodletting is avoidable. It’s looking less so every day though.

Scornd's picture

we are saving, just not in the usery system.

add to this many elder folks caught on the the racket, amd divested into becoming landlords to a few over priced rental homes-- in which- they just hope people can continue to live in and maintain-- and that the market will always "rebound" in their favor. its Gamblers Fallacy.

buzklown's picture

People have to live somewhere, just not necessarily in your property.

divingengineer's picture

How can rents continue to rise in this reality?
Look at the future, do you see more prosperous workers who can pay MORE rent, or less?
You can’t borrow money for rent.

AGuy's picture

"You can’t borrow money for rent."

Yes, They can indirectly. People can use debt to pay for other essentials (Food, Clothing, Transportation) via loans and credit cards. So instead of paying cash for day to day expenses they can borrow and then pay rent.

"Look at the future, do you see more prosperous workers who can pay MORE rent"

I think people will simply do grouping for rent. instead of one or two people living in a rental, they will get more people to live with them and split up the rent. Its likely cheaper for two couples to share a 2 bedroom apartment than it is for one couple to rent a single bedroom apartment. Perhaps it will increase so that three or four people share the same bedroom. This is the way it was about 70 years ago, before couples could afford to get their own place. Usually couples lived with their parents until they saved enough & earned enough. Also elderly parents moved back in when they could no longer live on their own. Society is just reverting to Pre-WW2 households.

house biscuit's picture

Doom porn with a lack of imagination & balls

Supplement your 401k with 9mm Luger

Take a banker with you on the way

Arnold's picture

The 'three hots and a cot' surrounded by people who 'love' you plan.
I like the 'Cruise ship' plan better.

https://www.cnbc.com/2016/07/26/ahoy-matey-more-folks-retiring-on-a-crui...

Consuelo's picture

 

 

- May I suggest a cocky prosecutor looking for a conviction (any conviction by any means) and arrogant trial attorney along the way...?  

Anteater's picture

When I briefly worked for the State, they offered, in addition

to matching 401k and PERS retirement pensions, you could

reduce your tax bite by deferring income into a State trust.

That trust paid 10%. 10%! Mil.Gov live very high on the hog.

techpriest's picture

It's that "invisible tank in the driveway" that's eating everyone's savings.

AGuy's picture

"It's that "invisible tank in the driveway" that's eating everyone's savings."

Not really. Federal gov't spends $2T annually on Gov't Pensions/SS/Medicare/Wealthfare. I think by 2020 it be around $2.5T per year. Its the fastest growing gov't outlay ever.

techpriest's picture

He was talking about MIC in particular (which is also bloated), but it is true that there's an invisible grandparent in your guest room along with the invisible tank your driveway.

AGuy's picture

"He was talking about MIC in particular "

Yeah, I know. US Defense budget is about $550B a year. While it's huge, it completely over shadowed by entitlement spending at about $2T a year.

GeoffreyT's picture

More than 85% of 'entitlement' spending is a genuine entitlement - that is, Social Security (particularly OASI) and Medicare Part A and B: recipients have contributed their entire working lives, and the basis of the contribution is a pension in retirement, and health care cover.

Note that I am fully aware that there is a bunch of case law that makes it absolutely clear that SS (and Medicare) is just a tax: the BlackRobes did their paymsters' work and decreed that once you hand the money, over you have no residual rights to it (and no right to expector any returns). However that is not the understanding of most of those who make the contributions: as far as they are aware they are buying insurance (the hint is in the name) and so government, as the insurer, should be obliged to honour the contract.

Medicare is the single largest line item; pensions plus healthcare are roughly 6.7x 'welfare' - and 'welfare' is the only item where the recipients cannot presume to have 'paid in' to the system. It's also the primary valid economic justification for a transfer system of any sort: part of the function of a civilised society is to ensure that some small sliver of the fruits of material progress are used to help those who fall through the cracks.

.

If you want to point fingers at spending that is a total drain with zero (and potentially negative) long term external economic benefits: that's the military, the bureaucracy, the judiciary, and the political class and their cronies... and their pensions and entitlements.

Those are genuine, lifetime, net tax recipients: not only is every cent they take home, a transfer from the productive private sector... they do shit that gives large swathes of the rest of the world an incentive to try to fuck your life up the way that your government has fucked  up large swathes of the rest of the world. (Which of course then means that you are on the hook to fund increased 'national security' spending, and are subject to increased surveillance by the State as well).

By contrast, those who receive welfare (which is limited in both duration and amount) generally go on to pay far more in lifetime taxes, than they receive in benefits... with vanishingly rare exceptions that are highlighted to encourage the gullible to blame the downtrodden for the government's failure to stick to a budget.

.

Note: I'm not a 'big government' advocate... in fact I'm, a fucking anarchist. But the problem is not 'entitlement' spending (defined in such a way as to pretend that 'entitlement' is a dirty word, when all it is is people insisting on what they were promised): the problem is government and all its depraved, corrupt, costly doings.

Beltain's picture

I haven't looked at it in a couple of years but if you go to "All Government Spending" and include the funding from States that is made mandatory by Federal regulations then Education usually edges over the other spending areas by a good amount. Also Pensions and Medicare climb well above military spending in those instances as well.