Saturday, February 05, 2011

Things Change Over Time

In the 1930’s, Social Security was for those over the age of 65. Very few people lived to be 65. Smoking wasn’t going to kill you, old age was. Penicillin and new medical treatments later on in the century extended our lifetimes tremendously.

Back in Abe Lincoln’s time, health care wasn’t a big expense; you either died or got better. Today you can exist in a coma for years; premature babies can cost 100k apiece. The personal concept of paying for it all doesn’t exist. Just who pays for all that is another story. Now we have government health care for those who can’t afford it. The private insurance companies can see the handwriting on the wall; you can’t compete and undercut the price of government programs, the government doesn’t have to make a profit to survive. Look for private health care to fade out of existence.

Home ownership after WWII was considered a God given right. Private financing with acronyms like GSE kept the game going for 50 years. This financing plan has pretty much collapsed. The Federal Reserve and Congress stepped in to provide the funding to keep the ball rolling. When the game started, you needed a 20 percent down payment. Just before the collapse, the banks were writing loans to anyone that could fog a mirror. Now the government has extended the “fog a mirror” program; of course you have to “buy” one of the zillion homes they now own.

40 years ago, government jobs were very low paying. Most people went to work for private industry. Of course many people started working in government to get some experience and then jumped into the private sector. In today’s world, the government does surveys to figure out what to pay employees so “they won’t lose them to the private sector.” They weren’t really losing anyone at that pay rate; they were inconvenienced with the fact that they had to train a new employee. Yesterday’s low hire government employee is today’s retiree with the Rolls Royce health and pension plan.

When I went to school, it wasn’t hard to flunk a grade and get set back a year. I remember a guy graduating in my senior class, was 21, real nice guy, he was more into cars, girls, cigarettes and beer. He had a great time in High School. There were probably 4 straight A students in my high school with 800 students. My son who graduated from high school last year was a straight A student, as were many of his class mates. There are so many straight A students in today’s world, that it is meaningless. No kid left behind has pretty much trashed the educational system. The kid selling drugs on the sidewalk is getting more of a math lesson than the stoned kid in class who bought the weed. Success today, is guaranteed to our children; then they hit the reality of the real world, after graduation.

When the Constitution was written, there was the right to bear arms. If you ever want a fun time, try to load and fire a flint lock pistol from that era. When you pull the trigger, the intended victim has about 1 ½ seconds to dodge the bullet--- the flint hits the steel which lights the gunpowder in the flash pan, which ignites the powder in the barrel, which launches the bullet. It could probably misfire one out of three times. It’s not much like the weapons they sell in the gun stores today.

The invisible issue here is that things change over time very slowly. But our perspective doesn’t. We still see the program in its original design. The change has escaped us, but the penalties haven’t. The bill is coming due and everyone has all these entitlements they have been promised. It’s kind of like enjoying a full meal in a very expensive restaurant and informing the waiter that the next person to sit in your chair will pay your bill. The waiter will have none of that no matter how indignant you get. Reality is right around the corner, let’s see if we can kick the can that far.


Anonymous said...

Who do you think you are writng an article like this???? People have been forced to pay Social Security taxes all throughout their working lives to be able to get their SS entitlements!!! It's too damm bad for the Government if they mismanaged the funds!!! Everyone should make sure they get every single penny they are entitled too when it comes time to collect..........and don't let the Government cheat you out of it by changing the rules to suit themselves!!!!! Cut Government spending first!!!!!!!!

Jim in San Marcos said...

Hi Anon 12:49

Sorry to touch a nerve, I'm just the messenger.

Our government has already spent the Social Security trust fund. There is a filing cabinet full of IOU's to prove it--2.5 trillion dollars worth.

The Supreme Court ruled that Social Security was not an entitlement, but rather a tax and could be spent any way Congress wanted to. They have been doing just that.

Think about it, for every dime you gave them for retirement, they promised you a dollar back. What sort of magic act is that?

Then there is the 14 trillion dollar national debt, where do you think they borrowed that money from?

You have a right to be mad, but cutting government spending now, won't work, it's too late in the game. They can't even cut down on the amount of borrowing they do.

Anonymous said...

Things do change. When I was a kid, you could still find drinking fountains in Florida labeled"
"White only" and "Colored".
Long distance calls had to be placed through an operator, and were expensive.
A woman could not get a credit card.
And there were NO safety features in cars- not even seatbelts.

Tyrone said...

It's quite amazing to watch and see the things unfolding in the world. But I am extremely impressed at how tame things seem in the USA. I don't understand how or why.

Here were some things I was mulling over...

Bank failures
State debt
Falling tax revenue
Food price inflation
Massive US debt
Continued Gov borrowing
World turmoil
High unemployment
Continued foreclosures
Housing shadow inventory
$5.8B/mo food stamps (grows each month)
People struggling to get by
Social security
Student loan debt
Credit card debt
US$ World currency status
Perhaps it's like a heating pot of water. It doesn't boil over until you get to the right temperature.

Jim in San Marcos said...

Hi Tyrone

Times must be tough, there was no frog in your illusionary pot of water ;>)

You raise an interesting point that not much has happened after the fact. You would expect more fallout.

The people that bought the big homes out here with nothing down, didn't lose a dime when they walked away. Most get to live in the home for two years without even making a payment. Walk away from a 5K monthly mortgage after two years, thats 120K in your wallet that you didn't have to shell out in rent.

I think that the coming year about May will be the straw to break the camel's back in California. The tax collections due in April that are for the next fiscal year starting in July, have already been spent.

We are seeing firemen and police being layed off. Prisoners being released early and a lot of state workers getting furloughs.

The student loan program is a travesty but that won't hit the fan any time soon. But Social Security and Medicare certainly will.

The money isn't there to pay all of the bills. Normal rational is to cut spending, but that isn't really possible because we already spend far more than we take in.

Ben and Tim have been printing money to save the banks, but you can't print items for consumption like food, cars, and energy. So hyperinflation looks like the next stop.

I think you are right, the pot isn't boiling yet. We are close, it shouldn't be much longer.

Jim in San Marcos said...

Note to Viewers:

Bear with me, I am trying to update this blog to the new Google modes so things might not seem quite right. Give me a day or two to get things straight.

I can's stand in the way of progress forever. It will run you over, I am learning that lesson now

rob in ns said...

What is happening in Middle East is consequence of monetary policies here. We have luxury of monitoring core inflation along with inflation. Over in Eygpt 90% of people can barely afford food so when prices for essentials goes up people pay attention. Also they don't have welfare and food stamps. Hungry people are angry people. Sooner or later it will happen here.

frakrak said...

Jim one of the big differences I have noted in the way I grew up and thought, to the way people live and think would be:
There was a tomorrow!!!

Now people feel that "it's the end of the world as we know it," people are told and sold theories on the new world order, global warming, the Mayan calender, the list is long and sometimes quite spurious!!

I think this mindset has as much as anything else created short term and reckless behavior in people.

Now I am not a climate change deny (er), and it is a debate that is a little beyond my ability to sustain in one direction or the other, but,

My point:

People should rise up to the challenge, start acting as if there is a tomorrow, clear the system out (democratically), that would mean holding your leaders to account for leadership, mark the whole pile of crap to market, and start again.....

We have just experienced the worst flooding here in living memory, our leaders told us that it would take Brisbane 5 years to get back on its feet again, so what did the people do here? We mobilised ourselves (tens of thousands of people) and had the whole sh#t pile cleaned up in a weekend.

I have an American Pastor, who is an ex Marine Sargent, if we can do this here, knowing him, America could do it in half the time, and with three times the outcome!!

America get off your arse and fix it now! There is a tomorrow, don't let this mess become a self fulfilling prophesy.

Jim in San Marcos said...

Hi Rob

Another thing about third world protests, you have to be unemployed or a student to protest. Most people are too busy working just to survive.

People don't seem to be overweight in those countries either. Here in the US a food shortage might be a good thing. You wouldn't have to pay $150 a week for diet food.

Jim in San Marcos said...

Hi Frakrak

I don't think that we can hold our leaders accountable, shooting them or even threatening them with that, is against the law;>) There is no accountability.

Right now half of the nation is just realizing that their path to retirement riches has hit the dumpster. They are in shock. Now they have to work for a living, and that concept has not sunk in yet.

A physical disaster like you just went through will pull people together in a group effort. It's a great thing when it happens. I'm glad it turned out OK for Australia.

I think that the problem in our country, is that the people expect the elected officials to fix it, and we know that isn't going to happen. That's where you succeeded, you bypassed the bureaucracy.

Anonymous said...

Its no wonder the democracy doesn't work very well in third world. Idle hungry people don't make an appreciative electorate. I watched a show on TLC last night called "Heavy". I couldn't help but think how far from reality we as a society have veered from the real world.


Jim in San Marcos said...

Hi Rob

The thing that worries me, is that in a Democracy you have to have a viable middle class. If the dudes in Washington trash the currency, the middle class disappears.

From there it is uncharted territory. Can poor people afford Democracy?

Anonymous said...

I don't think the poor can afford Democracy as a good percentage of poor don't vote now because they don't feel they are stakeholders. It does seem like a paradox as they are more dependent on government largess to get by but folks in charge know that they just need to keep funding the entitlements and the whole ball of wax will keep rolling. I attended a discussion at local university last night, three professors gave their take on current situation in Cairo. I thought the whole exercise, although interesting, just fed our smugness and self importance. The people in square are for the most part poor and/or unemployed. Hopefully things will work out over there but it has high probability of getting messy. The one thing they going for them is the protestors have little expectation of government to provide anything to help them get from day to day. We don't have that luxury here in North America. People have grown up expecting that government will provide everything to live a comfortable life. When there is no money left for pensions and medicare I wonder if the populace here will have as much patience with government as protestors in Tahrir square. I doubt it.

A viable middle class moderates the reactionary forces which exist in all societies.

rob in Antigonish