Western Hero: Other People's Babies

Wednesday, January 2, 2013

Other People's Babies

Global Fertility Replacement Rate = 2.33

The problem with socialism is that you eventually run out of other people's money.

Bill Frezza has a slightly different take on a slightly different problem: Entitlement Democracy. The problem with Entitlement Democracy is that you eventually run out of other people's babies. If you think the current fiscal cliff is bad, just wait:

The aggregate U.S. federal and state unfunded liabilities required to pay for all the entitlements promised by politicians past-namely Social Security, Medicare, and defined-benefit pensions for public employees-now exceed $100 trillion. Tomorrow's workers, including those yet unborn, have no particular kinship to the people who will be feasting on their paychecks.

And it only gets worse, as you can see on the graph above the world as a whole is hovering just above the replacement fertility rate, the United states is hovering just below.

It takes a live birth rate of 2.1 children per woman to maintain a stable population. Birth rates across Southern Europe have plunged below 1.5, and are expected to drop even further as Euro Zone economies continue to contract. Hong Kong, Singapore, Taiwan, and Japan are converging on birth rates closer to 1.0, literally halving their population each generation. Even the Black Plague didn't do that

Like the Titanic, we are steaming full speed ahead oblivious that we are about to capsize. Yes, the support pyramid is about to turn upside down.

The fatal flaw in this scheme is the skyrocketing dependency ratio. The number of young people entering the workforce (should they be lucky enough to find jobs) is not growing fast enough to support the exploding population of non-working 60, 70, 80, and 90-somethings.

There is no denying it, as Baby Boomers age out of the workforce, the only way to maintain the entitlement status quo is to either increase revenue or increase debt. The cliff we are approaching is far higher than the "fiscal cliff" we approach today, in fact the "fiscal cliff" is more of a bouncy house than a cliff. The true cliff we are hurtling towards is more like the Grand Canyon.

Bill Frazza's article can be found here: http://www.realclearmarkets.com/articles/2012/12/10/will_aging_childless_voters_enslave_my_future_grandchildren_100034.html

.And an interesting study on the global implications can be found here:

http://www.newgeography.com/files/The%20Rise%20of%20Post-Familialism%20(ISBN9789810738976).pdf

READY, SET, GO !!!

The problem with Entitlement Democracy is you eventually run out of other people's babies.

Photo: DonVick, Acapulco's La Quebrada Cliff

Cheers!

~Finntann

28 comments:

Always On Watch said...: The aging of the Baby Boomers has long been the elephant in the room. Neither of the two major political parties has tried to do a damn thing about the tsunami that's coming.

For decades, the Boomers were driving the economy. No more!

Socialism aside, we are about to see an economic upheaval as traumatic as the transition from the Agricultural Age to the Industrial Age.; 1/2/13, 4:54 AM
Jersey McJones said...: This is a very narrow perspective on a very broad set of issues.

For instance, the Baby Boomers control a historically disproportionate share of the nation's wealth, so as they retire they will divest that wealth and it will spur growth in the sectors into which they divest.

On top of that, as they sell their expensive homes with high property taxes in the major metropolitan areas of the North, their will be a depression of real estate prices in those regions with a commensurate drop in property tax revenues. This will open the opportunity for Gen-X and Gen-Y to purchase homes in these regions in the near future that they couldn't afford today.

There is also a bit of a myth out there that everyone is living longer. That is not true. The mean life expectancy has been flat for a generation. What has driven up the average age are the wealthy, and again remember, most of the wealth is controlled by the Boomers. The wealthier you are, the longer you live. So, if we simply means-tested entitlements to some fair extent, the rising life expectancy will have little effect on the sustainability of entitlements.

Then, of course, there is always the problem with real growth, rather than just staring intently at the GDP. If you want real growth for most workers, we have to invest in infrastructure and education, something most of the developed and developing world does far more than we. If you want to see growing American families, they will need schools, roads, hospitals, etc. With those investments will come the natural development of private sector jobs.

There are, as well, two forces driving down the birth rate. One is wealth - the wealthier people are, the less children they have, and the other is the working poor - people who struggle to make ends meet and so can not afford more children. There's nothing we can do about the former as it is a natural phenomenon, but the latter would be served tremendously by national investment, and stronger government labor advocacy.

In order to realize the funds required for national investment, the military estate must be drastically curtailed, taxes on the historically wealthy must be raised.

I could go on and on, but suffice to say, to say "socialism" is the cause of the broad spectrum of problems observed here is to be an blind ideologue.

JMJ; 1/2/13, 5:51 AM
Silverfiddle said...: Wow Jersey. Thanks for clearing that up. Now, if only the numbers and the cold hard facts would listen to you...; 1/2/13, 6:28 AM
Les Carpenter said...: When is your book hitting the selves jmj? I'm sure many will be interested in your insights.; 1/2/13, 6:39 AM
Jersey McJones said...: Silver, you conservatives have a cartoonishly simplistic view of the world.

I have news for you geniuses - there are other numbers and facts out there too, not just the few you stare at intently.

I did not attempt to clear anything up. I was pointing out just a few of the of the other facts out there that will effect our economic future. Rather than clearing anything up, I was making more the conversation more complex, and so, as complexity is the bane of conservatism, you reacted as you did.

JMJ; 1/2/13, 8:16 AM
Finntann said...: "the Baby Boomers control a historically disproportionate share of the nation's wealth"

Care to back that up with some facts? Disproportionate to what? Past generations? What percentage of Baby Boomers? You make it sound like the Baby Boomers are the 1%, when in fact the majority of them are middle class.

So care to explain how, that as northern property values fall (along with the corresponding tax base) how this is going to do anything other than add fuel to the fire in regards to the solvency of northern cities?

Also care to explain how you consider this graph as flat?

https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_dyn_le00_in&idim=country:USA&dl=en&hl=en&q=us%20life%20expectancy

In 1970 the US life expectancy was 70.81, in 1980 it was 73.66, in 1990 75.21, in 2000 76.64, and in 2010 it stood at 78.24.

Your seem to be as adept at actuarial science as you are at economics. Want a cartoonishly simplistic view, examine your own argument, or lack thereof. All you do is toss out fact with the hope that something sticks.

Yeah, the dollar is declining , but trees are green, and the population of Alaskan salmon is up this year.

Socialism isn't the problem... socialism is a noble concept, the spending that goes along with it, however, appears to be unsustainable.

Want a list of defaulting democratic socialist states again?

Cheers!; 1/2/13, 8:56 AM
rncscab said...: Hmmmm.... the graph almost appears to be approximating a Fibonacci series... approaching a 1.618 average.; 1/2/13, 8:58 AM
rncscab said...: Perhaps we have achieved the "optimum" population limit for the capitalist "form" of world order.; 1/2/13, 8:59 AM
conservativesonfire said...: When there is no more money and no more people to make money needed to support socialism, the problem will soon resolve itself. I think it is called suicide.; 1/2/13, 9:48 AM
Jersey McJones said...: FT, your complete lack of ability to judge character will never cease to amaze me.

I worked for many years in accounting in international trade, genius. I was a history major and am married to a history teacher. I am quite aware of the world around me.

And I'm astounded that you are unaware of the plain and obvious facts I presented.

http://en.wikipedia.org/wiki/Wealth_in_the_United_States#Wealth_distribution

And here's the point you missed (again, astounding! How do you breathe???) about AVERAGE life expectancy.

http://www.nytimes.com/2008/03/23/us/23health.html?_r=0

I just am astounded that you wouldn't know this basic stuff about your own country.

As for the effect of real estate price declines in the North as the Boomers retire, yes, there will be a period of problems, but as the prices decline the market will open up for newer, younger buyers, and the market and related sectors will rise up. Of course, redevelopment of these regions will be requisite if they are to bounce back. And this will take a national effort.

The problem with your argument, FT, is that you are ignoring a whole pile of other factors here, be they positive, negative, or more foggy. It's a far more complex picture than you paint.

JMJ; 1/2/13, 10:53 AM
Jersey McJones said...: There are hundreds of books addressing the subjects I raised. You guys just don't read them.

JMJ; 1/2/13, 11:23 AM
FreeThinke said...: I take this as great GOOD news. It means The Evil Socialist System will self-destruct for lack of "fuel." YIPPEE!!!

Ponzi Schemes collapse when there aren't any more suckers to share the ever-increasing burden of supporting them.

We need FEWER people not MORE to share the dwindling, not-so-abundant-anymore resources the planet has to offer.

This is not a tragedy for Civilization. It may in fact prove to be its SALVATION.

Besides, bringing new life into THIS stinking mess should be regarded as MORTAL SIN.

~ FreeThinke; 1/2/13, 12:22 PM
FreeThinke said...: Listen, Jersey. HE is Finntann.

I am the one and only FT.

Please don't confuse our readers. Call him FINN or TANN or FINT or just plain F, if you are too lazy to spell out his name, but please don't call him FT.

Thank you, and Happy New Year.

~ FreeThinke aka FT ;-); 1/2/13, 12:28 PM
FreeThinke said...: Needless to say that was not intended as an insult to all you responsible, loving parents out there who can afford to raise your children without Public Assistance.

However, those perennially on the Dole should be subjected to MANDATORY STERILIZATION

~ FT; 1/2/13, 12:31 PM
FreeThinke said...: Who writes them -- Michael Moore? Katrina Vanden Heuvel? William Rivers Pitt? Greg Pallast? Joe Cinasin? Howard Zinn? Barbra Streisand?

GEDOUDDAHERE!; 1/2/13, 2:06 PM
FreeThinke said...: BEAUTIFUL PICTURE! If I ever want to take a Swan Dive to Doom, I'll be sure to travel to Acapulco to do it.

What away to go!; 1/2/13, 2:09 PM
Jersey McJones said...: FT(?),

Do you really find what I wrote to be somehow partisan or radical? Some kind of liberal agenda in code speak? Really?

These are plain facts about your own country, and you don't know them?

When I said "hundreds of books" I proably could have said THOUSANDS, you loony.

JMJ; 1/2/13, 2:18 PM
Jersey McJones said...: I'm sorry, I always confuse you two.

So then, when I write "FT," should it be in bold letters? ;)

JMJ; 1/2/13, 2:18 PM
Mark Adams said...: "If you want real growth for most workers, we have to invest in
infrastructure and education,... If you want to see growing
American families, they will need schools, roads, hospitals, etc. With
those investments will come the natural development of private sector
jobs."

Most of what you have pointed out do not come from private sector. Those are government jobs. Entrepreneurship, innovation, private investment and free markets develop private sector jobs. The more private sector job growth, the stronger the economy. Boomers 55 and 64 have lost 38% of their net worth in the meltdown, and Boomers between 45 and 54 have lost 45% of their median net worth. All based on the 2009 Center for Economic and Policy Research study. And according to The Center for Retirement Research at Boston College, 41% of early baby boomers now entering retirement are at risk of a significant drop in living standards in retirement. So as they retire they will be FAR less to divest that wealth from.; 1/2/13, 3:26 PM
Les Carpenter said...: Of the "thousands" of books on the subject which would be your top 3 recommendations. I would be interested in perusing them. Always god to put more arrows in ones quiver. : -); 1/2/13, 5:55 PM
Finntann said...: Yeah, cite a four year old NYT article. The graph I linked is current.,

By your own statement "Baby Boomers control a historically disproportionate share of the nation's wealth" and the article you cite "Life expectancy for the nation as a whole has increased, the researchers
said, but affluent people have experienced greater gains, and this, in
turn, has caused a widening gap." You contradict your own statement "The mean life expectancy has been flat for a generation"

If the Boomers control the wealth, as you stated, and the wealthier are living longer, as your cited article states... then the Boomers are going to consume more and more entitlement money, as the article posted here states.

You can say "So, if we simply means-tested entitlements to some fair extent, the
rising life expectancy will have little effect on the sustainability of
entitlements." to which I reply, good luck with that and the AARP.

You may as well simply state that all we need to do is colonize Mars, for all the likelihood of either happening.

No one here is disputing either income disparity other than the one between what the government takes in and what it is currently legally obligated to pay out.

So, you spent years in international trade... what happens when companies start defaulting on their obligations? And what will be the result of the US government defaulting on its legal obligations?

You progressives are as bad as Bernie Madoff... and your entitlement pyramid scheme is beginning to crumble... it will soon collapse, and the only viable alternative you can offer is to turn employee contributions to social programs that promised them a return into a retroactive tax.

Keep digging!; 1/2/13, 11:48 PM
Jersey McJones said...: NO! I'm not talking about "government jobs," though yes there would be some. I'm talking about return on investment. I'm saying "If you build it, they will come." Why don't you cons ever get that? For Christ's sake, you sound like 19th century Germanic monarchists!

JMJ; 1/3/13, 12:00 AM
Jersey McJones said...: Les, do you really need me to do that? I'm only gu8essing there are at least thousands of books and articles and papers on the subject. I don't know them all. I don't just read one author and hang on their every word. I take in many dozens of informational sources every week - sometimes every day.

I'm not Sarah Palin, hard-pressed to name anything ever. But on this particular subject, it seems the complexity is far beyond "what magazines do you read," or whatever the hell that question was. If you asked me that, I'd name them instantly. If you asked me to remember where I heard and read on this particular subject, all I can say is, "What? Haven't you been paying attention?" And to ask me to cite something for you??? You??? Who adhere's to friggin' Ayn Rand???

Look.

A demographic that controls a huge proportion of the wealth is retiring, getting old, dying, getting out of the way, kaput, done, the money's gotta go somewhere, face reality.

I'm tired of you guys pretending I'm stupid while you just blithely skip down the road of ignorance. You are not stupid and neither am I.

At the very least consider the FACT that the wealth of the Baby Boomers is about to be widely divested and there is opportunity there to improve the country the Baby Sometimes Stupid Sleazy Spoiled Selfish Boomers so neglected. (Five "S's"!!!)

JMJ; 1/3/13, 12:16 AM
Jersey McJones said...: Man, I can't believe you argue on such a petty level.

"By your own statement "Baby Boomers control a historically disproportionate share of the nation's wealth" and the article you cite "Life expectancy for the nation as a whole has increased, the
researchers said, but affluent people have experienced greater gains, and this, in
turn, has caused a widening gap." You contradict your own statement "The mean life expectancy has been flat for a generation"

Yes, sorry to have confused you. I meant median, not mean. Good for you, Grammar Cop.

(By the way... You really didn't get the point, or even know it?)

Your point about the AARP and means-testing Medicare, in any way whatsoever... Great point. This is yet another example of certain sectors intentionally destroying themselves. The ant-or-protagonist forces pulling against the compact all have one thing in common, very wealthy and by happenstance selfish interests (poor people can be like that too, but their scumbag political influence is nothing compared to that of those wealthy scumbags).

Back to the AARP and it's concerns, a conservative must think someone could come up with a private health insurance policy for the elderly that would be affordable, right? Well, guess what. Can't be done. Not for profit. And as any decent man knows, sometimes there are things we must do to ensure the state of our countrymen.

And so we have Medicare.

When you guys go after that, and not address it's problems as outside of itself, you are throwing grandma out with the bathwater.

Just the same, we younger folks will be caring for these retirees in the very near future. Their careers, their wealth, their heritage will be ours. We should take care of them.

There's a lot of wealth they are now bequeathing us. Let's use it for good.

JMJ; 1/3/13, 12:40 AM
Les Carpenter said...: Okay then jmj, thanks for answering my very simple question for three sources of your information. Good to know you either can't or think we're too stupid to notice you can't.

For someone, and that someone is you , who has regularly called those who on good ground disagree with you stupid, idiots, uneducated etc just what in the hell do expect?

No jmj you're not stupid, not at all. However, IMNHO your are bat shit crazy. Others of course will determine for themselves what they think.; 1/3/13, 2:30 AM
Finntann said...: Interesting progressive perspective "There's a lot of wealth they are now bequeathing us. Let's use it for good",

And that sums it all up in a nutshell!

Who said they were bequeathing it to you?

You may have worked in accounting, but you are arguing a point contrary to everyone with access to the numbers including the CBO. We owe more than we take in or can take in without destroying the economy,.

Forget Grandma... we're all getting tossed out on our ass with the bathwater.

Fight the good fight Vive La Francais!; 1/3/13, 6:27 AM
Z said...: test; 1/4/13, 5:39 PM
FreeThinke said...: Back to The Stone Age, if you ask me.; 1/4/13, 7:28 PM