[TerAlelmlor]

I cannot believe that Handouts Make Up One-Third of U.S. Wages - WOW holy cow...

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” (THE DEMOCRAT WAY SORTA LIKE A DRUG DEALER GET THEM HOOKED THEN HIT EM HARD)said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

“You’ve got to cut back government spending and the Republicans will run on this platform leading up to next year’s election,” said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a “Fast Money” trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world's reserve currency.”

News Headlines

[q9h9pPne]

I cannot believe that Handouts Make Up One-Third of U.S. Wages - WOW holy cow...

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” (THE DEMOCRAT WAY SORTA LIKE A DRUG DEALER GET THEM HOOKED THEN HIT EM HARD)said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

“You’ve got to cut back government spending and the Republicans will run on this platform leading up to next year’s election,” said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a “Fast Money” trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world's reserve currency.”

News Headlines

Hell 35%, no way, the Dem's want to move it to 50% and beyond. Their goal is to take everybody's money and redistribute it in a way they choose. It'll make no difference what you make, it will all go to the government for redistribution. You have to understand it is not your wealth it's the people's wealth.

[infelconi]

As jobs disappear, expect that percentage to increase. Don't like it? Discourage outsourcing, encourage unions, push wages up, push for more at-home employment. More jobs and better paying jobs = less welfare.

Keep setting policy according to whatever maximizes the corporate bottom line and this situation will only get worse.

[Quonuttott]

I'm confused. The vast majority of conservatives claim they have the right to collect SS and Medicare benefits because they paid into the system (just ask the Tea Partiers who carry signs to "Keep your government hands off my Medicare"). The vast majority of conservatives also seemingly claim that SS and Medicare is a big handout (a.k.a. entitlement).

Which is it? Is it something that they paid for and therefore can collect on? Or is it a handout? It can't be both at the same time can it?

[Adimos]

This isn't exactly a surprise to anyone who's been paying attention. The question really becomes, at what % does it all collapse?

At the rate it's accelerating, we might find out in 10-20 years.

[q9h9pPne]

I'm confused. The vast majority of conservatives claim they have the right to collect SS and Medicare benefits because they paid into the system (just ask the Tea Partiers who carry signs to "Keep your government hands off my Medicare"). The vast majority of conservatives also seemingly claim that SS and Medicare is a big handout (a.k.a. entitlement).

Which is it? Is it something that they paid for and therefore can collect on? Or is it a handout? It can't be both at the same time can it?

It's a handout when more is paid out than what was received plus simple interest. You know SS was promoted by government because you are to stupid to save for your own retirement. But look at how the government manges it's money. They do such a good job, their only 14+ trillion in debt and they can't stop spending raising the national debt by 1.5 trillion a yr. Isn't Government wonderful.

[TerAlelmlor]

I'm confused. The vast majority of conservatives claim they have the right to collect SS and Medicare benefits because they paid into the system (just ask the Tea Partiers who carry signs to "Keep your government hands off my Medicare"). The vast majority of conservatives also seemingly claim that SS and Medicare is a big handout (a.k.a. entitlement).

Which is it? Is it something that they paid for and therefore can collect on? Or is it a handout? It can't be both at the same time can it?

SS is a handout.. the way the government makes believe you are getting what you put in though makes people think its not.

I knoe someone who at 18 "hurt" his back.. he has been on SS since.. he rides a motorcycle, just had his thrid baby and runs a pt business that is his "Wifes" so he can work, but like the handout.

[JimmyHas]

I'm confused. The vast majority of conservatives claim they have the right to collect SS and Medicare benefits because they paid into the system (just ask the Tea Partiers who carry signs to "Keep your government hands off my Medicare"). The vast majority of conservatives also seemingly claim that SS and Medicare is a big handout (a.k.a. entitlement).

Which is it? Is it something that they paid for and therefore can collect on? Or is it a handout? It can't be both at the same time can it?

SS, as it was established, wasn't a "handout". It was essentially an old school pension plan with a defined benefit at plan maturity. As with other such plans the critical flaw was that invested contributions didn't produce a sufficient return to fund the promised benefit. That flaw was compounded with COLA adjustments implemented in the 70's and then when Congress raided the Trust Fund beginning in '83 the whole system went to hell in a handbasket. Today, instead of being anything resembling a contributory plan, SS is a straight up entitlement and the "contributions" through FICA are little more than another funding source for the General Fund.

SS is very, very broken and needs a complete overhaul if not outright elimination. Government has proved to be unable or unwilling to properly administer the program and they have failed miserably in their fiduciary responsibilities. If they were a private company handling this program there would be people who had traded their pinstripes for prison stripes a thousand times over but that simply isn't going to happen.

There are ways to offer comparable benefits to the general public without direct government control but making such a switch would require either a huge temporary tax increase or elimination of a huge chunk of other government spending. Such a tax increase would be difficult in the extreme since most people are under the impression (justifiably so) that if we agree to a temporary tax increase it will quickly become permanent. The same goes for chopping the government budget by 50% because so many people are now reliant...or at least believe that they are reliant...on the government to provide so many services.

[Quonuttott]

It's a handout when more is paid out than what was received plus simple interest.

That definition makes sense, although why shouldn't it be compound interest?

SS, as it was established, wasn't a "handout". It was essentially an old school pension plan with a defined benefit at plan maturity. As with other such plans the critical flaw was that invested contributions didn't produce a sufficient return to fund the promised benefit. That flaw was compounded with COLA adjustments implemented in the 70's and then when Congress raided the Trust Fund beginning in '83 the whole system went to hell in a handbasket. Today, instead of being anything resembling a contributory plan, SS is a straight up entitlement and the "contributions" through FICA are little more than another funding source for the General Fund.

SS is very, very broken and needs a complete overhaul if not outright elimination. Government has proved to be unable or unwilling to properly administer the program and they have failed miserably in their fiduciary responsibilities. If they were a private company handling this program there would be people who had traded their pinstripes for prison stripes a thousand times over but that simply isn't going to happen.

There are ways to offer comparable benefits to the general public without direct government control but making such a switch would require either a huge temporary tax increase or elimination of a huge chunk of other government spending. Such a tax increase would be difficult in the extreme since most people are under the impression (justifiably so) that if we agree to a temporary tax increase it will quickly become permanent. The same goes for chopping the government budget by 50% because so many people are now reliant...or at least believe that they are reliant...on the government to provide so many services.

SS will be completely solvent through 2037, which is more than 100 years since it was started, and will be able to pay out funds until 2084. Not many private endeavors do that well do they? Yes, there are problems with SS, but they are surmountable.

7 Ways to Make Social Security Solvent - TheStreet
SEEING A DECLINE: Fears of insolvency have been stoked, rightly or wrongly, by the annual report of the Social Security Board of Trustees. The combined assets in the trust funds of the Social Security Old-Age and Survivors Insurance and Disability Insurance, known as OASDI, will be exhausted in 2037, it estimates. Program costs will exceed tax revenues this year and next. From 2012 to 2014, costs drop back behind revenues, but will permanently exceed tax revenues starting in 2015.

The annual cost of Social Security benefits represented 4.8% of GDP last year and is projected to increase gradually to 6.1% in 2035, then decline to about 5.9% by 2050 and remain at about that level, the report says. Projected OASDI tax income will be sufficient to pay about 75% of scheduled annual benefits in 2037 through 2084 after the combined trust funds are projected to be exhausted. My biggest gripe is that people whine about government entitlements, but then the very same people are the first in line demanding their entitlements. Conservatives whine about the system being a failure, yet they want to do nothing to save it, and they still want their handout that they feel they have coming. They can't have their cake and eat it too. Either they have to be willing to sacrifice some of their entitled benefits, or pay more taxes, or abolish the system and declare all benefits null-and-void, even the ones they think are rightfully 'theirs'.

Right NOW is the time to make minor adjustments. SS insolvency is like a meteorite that's going to hit the earth. Nudge it early and you stave off disaster. Wait until it enters the atmosphere and the world's combined nukes can't stop it.

[JimmyHas]

SS will be completely solvent through 2037, which is more than 100 years since it was started, and will be able to pay out funds until 2084. Not many private endeavors do that well do they? Yes, there are problems with SS, but they are surmountable.

7 Ways to Make Social Security Solvent - TheStreet


My biggest gripe is that people whine about government entitlements, but then the very same people are the first in line demanding their entitlements. Conservatives whine about the system being a failure, yet they want to do nothing to save it, and they still want their handout that they feel they have coming. They can't have their cake and eat it too. Either they have to be willing to sacrifice some of their entitled benefits, or pay more taxes, or abolish the system and declare all benefits null-and-void, even the ones they think are rightfully 'theirs'.

Right NOW is the time to make minor adjustments. SS insolvency is like a meteorite that's going to hit the earth. Nudge it early and you stave off disaster. Wait until it enters the atmosphere and the world's combined nukes can't stop it.

That 2037 figure you cite is from a CRS report from last October but the CBO also had the following to say on the issue:

CBO projects surplus from 2010–2020

Starting this fiscal year, however, Social Security will operate with a cash flow deficit (i.e., income excluding interest will be less than outlays), according to projections by the CBO released in March 2010. The CBO projects that Social Security will operate with cash flow deficits in FY2010 through FY2013 and again in FY2016 through FY2020. When Social Security operates with a cash flow deficit, the program cashes in more federal government securities than the amount of current Social Security tax revenues. General revenues are used to redeem the federal government securities held by the trust fund. This increased spending for Social Security from the general fund can only be paid for by the federal government by reducing other spending, increasing taxes or other income, or borrowing from the public (i.e., replacing bonds held by the trust funds with bonds held by the public). When total trust fund income (income excluding interest) is taken into account, the CBO projects that Social Security will have a surplus in each fiscal year from 2010 to 2020. CRS looks at solvency status of Social Security trust funds
OASDI Trustees Report for 2010

Pushing tough decisions that HAVE to be made back until the shitstorm becomes a shittornado really isn't in our best interest....unless your only primary goal is nothing more than political popularity.

[Dogxzysl]

I cannot believe that Handouts Make Up One-Third of U.S. Wages - WOW holy cow...

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” (THE DEMOCRAT WAY SORTA LIKE A DRUG DEALER GET THEM HOOKED THEN HIT EM HARD)said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

Last month, the Republican-led House of Representatives passed a $61 billion federal spending cut, but Senate Democratic leaders and the White House made it clear that had no chance of becoming law. Short-term resolutions passed have averted a government shutdown that could have occurred this month, as Vice President Biden leads negotiations with Republican leaders on some sort of long-term compromise.

“You’ve got to cut back government spending and the Republicans will run on this platform leading up to next year’s election,” said Joe Terranova, Chief Market Strategist for Virtus Investment Partners and a “Fast Money” trader.

Terranova noted some sort of opt out for social security or even raising the retirement age.

But the country may not be ready for these tough choices, even though economists like Schnapp say something will have to be done to avoid a significant economic crisis.

A Wall Street Journal/NBC News poll released last week showed that less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world's reserve currency.”

News Headlines

C'mon CSA, handouts aren't wages, they're handouts. You have to earn wages.

[Quonuttott]

That 2037 figure you cite is from a CRS report from last October but the CBO also had the following to say on the issue:

Yes, ultimately the fact that SS funds have been used to pay for roads, military, wars, corporate bailouts, etc is going to hit and hit hard - that is why there are two debt numbers: The public debt and the gross debt. The difference between the two is exactly what you're talking about - that's the amount that is 'owed' to the SS fund. However, that the government owes money to itself isn't fundamentally the fault of the SS program, its the fault of the government's other programs which were paid for through funds that were meant for SS.

The fundamental problem is the government spending social security revenues as though they were ordinary tax dollars for the past 70 years. That's not the fault of the SS program. That's the fault of the way the government (OUR government by the way, not some OTHER guy's government) has chosen to irresponsibly administer the system.

What that means is everyone who feels 'entitled' to SS funds should stop feeling entitled. What they were paying for all those years was NOT social security money. What they were paying was for roads, wars, bank bailouts, military, etc. If enough people eventually realize this then our problems with SS can be addressed rationally. Until then its just an accounting game like it has been for the past 70 years.

[TerAlelmlor]

C'mon CSA, handouts aren't wages, they're handouts. You have to earn wages.

well they are not taxable wages ... These are wages given for voting democrat!

[brraverishhh]

Wow, the private enterprise system is failing miserably, what's wrong with the capitalist system?
Do we need another FDR to save it again?
Or do we simply let it fail, and move on to a more logical system?

[JimmyHas]

Yes, ultimately the fact that SS funds have been used to pay for roads, military, wars, corporate bailouts, etc is going to hit and hit hard - that is why there are two debt numbers: The public debt and the gross debt. The difference between the two is exactly what you're talking about - that's the amount that is 'owed' to the SS fund. However, that the government owes money to itself isn't fundamentally the fault of the SS program, its the fault of the government's other programs which were paid for through funds that were meant for SS.

The fundamental problem is the government spending social security revenues as though they were ordinary tax dollars for the past 70 years. That's not the fault of the SS program. That's the fault of the way the government (OUR government by the way, not some OTHER guy's government) has chosen to irresponsibly administer the system.

What that means is everyone who feels 'entitled' to SS funds should stop feeling entitled. What they were paying for all those years was NOT social security money. What they were paying was for roads, wars, bank bailouts, military, etc. If enough people eventually realize this then our problems with SS can be addressed rationally. Until then its just an accounting game like it has been for the past 70 years.

Soooo....what I said earlier then? -
SS is very, very broken and needs a complete overhaul if not outright elimination. Government has proved to be unable or unwilling to properly administer the program and they have failed miserably in their fiduciary responsibilities. If they were a private company handling this program there would be people who had traded their pinstripes for prison stripes a thousand times over but that simply isn't going to happen.

There are ways to offer comparable benefits to the general public without direct government control but making such a switch would require either a huge temporary tax increase or elimination of a huge chunk of other government spending. Such a tax increase would be difficult in the extreme since most people are under the impression (justifiably so) that if we agree to a temporary tax increase it will quickly become permanent. The same goes for chopping the government budget by 50% because so many people are now reliant...or at least believe that they are reliant...on the government to provide so many services. I don't care what you call the program but but making fundamental changes to the program one way or another IS the bottom line.

[Quonuttott]

Oh yeah, I agree with your bolded assessment completely, I saw that earlier but didn't mention it.

I also agree with:
I don't care what you call the program but but making fundamental changes to the program one way or another IS the bottom line. Of course, where we'll probably disagree is exactly which fundamental changes are the correct thing to do.

[Adimos]

Wow, the private enterprise system is failing miserably, what's wrong with the capitalist system?
Do we need another FDR to save it again?
Or do we simply let it fail, and move on to a more logical system?

It would probably help if we had a free enterprise system, instead of the government shackled one we've got.

[brraverishhh]

Yes, ultimately the fact that SS funds have been used to pay for roads, military, wars, corporate bailouts, etc is going to hit and hit hard - that is why there are two debt numbers: The public debt and the gross debt. The difference between the two is exactly what you're talking about - that's the amount that is 'owed' to the SS fund. However, that the government owes money to itself isn't fundamentally the fault of the SS program, its the fault of the government's other programs which were paid for through funds that were meant for SS.

The fundamental problem is the government spending social security revenues as though they were ordinary tax dollars for the past 70 years. That's not the fault of the SS program. That's the fault of the way the government (OUR government by the way, not some OTHER guy's government) has chosen to irresponsibly administer the system.

What that means is everyone who feels 'entitled' to SS funds should stop feeling entitled. What they were paying for all those years was NOT social security money. What they were paying was for roads, wars, bank bailouts, military, etc. If enough people eventually realize this then our problems with SS can be addressed rationally. Until then its just an accounting game like it has been for the past 70 years.

Of course the funds invested in Treasury obligations were used for roads, wars and other government spending, that's what the proceeds of treasury issues are used for. You act shocked.

[JimmyHas]

Of course, where we'll probably disagree is exactly which fundamental changes are the correct thing to do.

If it were up to me, Dis, we'd offer an option to current beneficiaries of continuing with the program as is or opting out and taking a tax credit for the remainder of any contributions plus, say, 10%. For those who have not started receiving benefits but have 25 or more years in contributions they'd get the same option with a reduced benefit but also be allowed to contribute up to 10% of their wages to a retirement plan tax free (like an IRA but without the contribution cap). For those with less than 25 years paid in they wouldn't get an option on receiving benefits but they would get the tax credit and be allowed to contribute up to 15% of their wages tax free.

For nothing more than the peace of mind of some folks I could also see establishing certain funds in which only "secure" investments (Treasuries) are allowed to be purchased or which are insured by the government up to a certain level. This would resolve the unease that a lot of people have with investing for retirement on the open market while still keeping the thieves in Congress from getting their hands on the funds.

[brraverishhh]

It would probably help if we had a free enterprise system, instead of the government shackled one we've got.

We did at one point, it failed miserably, left the nation in a Great Depression, then we went to a regulated market economy, which worked well for a period, then regulations were removed until we find the system failing miserably again.

And your brilliant solution would be to remove all regulation, just like before the Great Depression.