The Government Will Collapse

04/09/11

And it isn't the degree of nasty perpetuated by movies like Al Gore's An Inconvenient Truth. There's a tidal wave coming that threatens the very solvency of all governments in the Westernized world. Believe me, once we've experienced the blunt of this incoming tsunami, we'll be wishing it was but a case of some bad weather. This incoming title wave, explained in my Hub: Death Culture, is in demographics. Simply put, we have too many old people and not enough resources to adequately take care of them all. This will leave us with some rather difficult decisions, but I suspect rather than making the hard decisions, we'll continue down the path of destruction that will ultimately lead to the insolvency of governments in Canada, the United States, Australia, and much of Europe. Governmental collapse is the 4th stage of complete and total economic collapse.

With economies collapsing and spending power on the way down, along with a lowered tax base, Washington is already going through the process of seriously looking at reducing spending. So much so, that the government could soon experience a temporary shut down. However, such a temporary shut down would only be a prelude of the mammoth to come that's in social security entitlements.

Nearly 80 million Baby Boomers phasing into retirement will set in motion a dynamic that, if not addressed by Congress, could result in the next generation getting fewer benefits or no benefits.

By 2017, Social Security is expected to start paying out more than it collects in payroll taxes, according to the 2009 Annual Report from the Social Security and Medicare Board of Trustees. There is currently a large surplus, but it will be drained by the year 2037. At that point, Social Security will only be able to pay out 75 percent of its benefits. A separate report, done by the nonpartisan Congressional Budget Office, concludes much the same thing, but gives the system another 10 years before it begins to fall apart.

The population wave began in 1946, the year after WWII, nostalgically referred to as "the baby boom." A 15-year stretch of bad times that had begun with the great Depression was finally over. People responded by having more babies than ever before, more than 78 million of them by 1964. This essentially not only ballooned the population of the United States, but the entire world, creating unique challenges in how to economically provide for a population that more than doubled in a span of no more than thirty years.

As Boomers begin to retire, the huge group of people putting money into the system will begin taking it out of the system, which then will be funded by a generation of workers, whose numbers are some 15 million fewer. The surplus of money paid into the system by Boomers will allow it to run into the late 2030s, even though it will begin paying out more than it takes in by 2017. The effects of such numbers are already becoming apparent. Generation Y, the children of the boomers, are paying up to an average of 12.4 percent of their earned income on that first job toward social security. By contrast, their boomer parents who entered the work force in say 1965 paid only 6.5 percent of their income toward social security. Boomers only started paying high social security costs during the 1990's, well into their mid-careers, making a lot of the reports coming from the Medicare Board of Trustees look suspect. This is worrisome, considering the fact their reports are not painted optimistically in the first place. In addition, adjusted for inflation, a 20 something Generation Y American male is earning approximately 30% less than his boomer father did around the same age bracket. Only women have managed to stay within the wage power of their mothers, at 2% less. Further compounding on the problem is that Generation Y was required to spend up to 400% more into tuition fees and subsequent debt than their boomer counterparts, in part because it was required to remain competitive in a workforce with so many experienced baby boomer candidates.

There are also certain ethical issues prevailing in young people havng to pay social security (and CPP here in Canada). In Canada, over 80% people ages 50+ own a home. In contrast, only 30% of people under the age of 35 own a home. CPP essentially taxes the young poor renter (whom most landlords happen to be baby boomers) to subsidize the rich old home owner. Basically, this is a tax the poor to feed the rich policy.

Projections across the United States already show that the ratio of workers paying retirees’ benefits would plunge from 16 to 1 to 2 to 1 when the last boomers retire decades in the decades to come. Italy is perhaps the worse case dealing with the incoming baby boomer tidal wave. 30 years from today, Italy will have 1.2 workers per retiree. To put this issue into perspective, every single American that's a part of the Generation Y demographic, regardless of income 25 years from today, would have to pay up to $10,000 in social security taxes alone per year. This doesn't include other income taxes the generation Y-er would have to pay. If we include other taxes, our generation Y sample would have to earn over $21,000 a year just avoid going into debt over excessive taxation. A rather robust comparison is for example a boomer, who earns $50,000 a year today, versus his son who earns (adjusted or inflation) the same $50,000 twenty five years from today. That son would have to earn approximately $110,000 per year, more than double, to have the same living standards as his father, when we plug in the new taxation numbers that would be required to maintain social security.

In the next coming decades, a lot of blame will be tossed around when the governments of the Westernized world inevitably collapse. Many will blame our imperial military policies, and as much would like to agree with this assessment, that wouldn't be the primary reason for the bankrupting of our governments and subsequent chaos that ensues. I'm as anti-colonial as they come, and I do believe we would be better off just scraping the military and selling off all the valuable excess metal. Regardless, this economic collapse caused by government fall out was inevitable even if our leaders had a head on their shoulders. Why? Because the socialist programs such as social security are a pyramid scheme. The voting demographics won't allow our politicians to simply do away with the pyramid scheme.

What is a pyramid scheme? A pyramid scheme is a non-sustainable business model that involves promising participants’ payment, services or ideals, primarily for enrolling other people into the scheme or training them to take part, rather than supplying any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud. Pyramid schemes are highly illegal in many countries (unless the government commits to the scheme), because they have the ability to destroy entire economies if left unchecked. The consequences and destruction of life and liberty caused from a pyramid scheme can at times make the most brutal of dictators seem benign by comparison.

Social security is a pyramid scheme. Understand that it's not an insurance company ran by the government as many of its promoters would have you believe. A financially solvent insurance company involves weighing in risk. I'm not a heartless individual, I do believe there can be a place for social security, CPP, etc. for people with disabilities, but old age isn't a disability. What makes an insurance company become a pyramid scheme is when everyone inevitably collects the benefits at the same promised price. Insurance is designed to protect the individual against catastrophic loss. Often the prospect of loss is so great, that most individuals hope they never have to make due on collecting the benefits. Clearly this isn't the case for social security. Because everyone gets old, it's a guarantee everyone will collect social security. Therefore it's not an insurance policy, but an entitlement. And it’s an entitlement we can no longer afford. People who arrive later paying into the social security scheme are essentially investing into nothingness, while with insurance you're investing into risk alleviation, no matter when you decide to purchase or what year you're born. The only exception to this rule is life insurance, but the payment numbers in this type of insurance are flexible (unlike social security that's static) based on how old you are and your likelihood of dying. I agree there's a place of debate for public insurance companies, as the larger the pool of buyers, the more affordable the insurance. However, social security isn't a public insurance policy.

There's no way to solve a pyramid scheme, it's a mathematical improbability. Pyramid schemes are infinite, thus they cause infinite damage. Therefore, offering solution from within social security will prove futile. With a healthy economy we may have been given the time and resources to come up with an alternative system to stop this governmental collapse and subsequent economic collapse from coming, but I feel we lost that opportunity back in the 1990's. The failures coming out of the private sector from the financial collapse, the commercial real estate bubble, and the college bubble has destroyed any possibility of a tax base that could be used to make the hard decisions and sacrifices to alter the social security tidal wave.

The entire concept of "old age welfare system" will have to be scrapped completely for our mere survival, although that won't happen, because demographics won't allow that to happen. Call it the "tyranny of democracy" if you will, but there's a reason why this upcoming Canadian Federal election will be the first I won't vote, despite being incredibly politically active and informed. My generation will never get any beneficial policies on the table because we simply don't have the numbers. As I go through brochure after brochure, I often find myself scratching my head, searching in vain for one beneficial policy for a male in his late 20's to mid 30's coming from any political candidate. I always find nothing. Face it, no matter what I do; I'm just hitching a ride to the bus that's cruising its way off a cliff. I would go on to say, that if you're educated enough to feel the democratic process has no hope of serving your interests and perhaps even has the potential to harm you, then it's your democratic duty not to vote in the name of protest. . .

In conclusion, I'll state that old age security schemes will cause the government to collapse for many nations. Once that happens, you can expect a disgruntled and underpaid military to come knocking at your doors, because martial law will be put in place.

-Donovan D. Westhaver