Two days ago, I was driving my six-year-old to the store, and the subject of her grandparents’ retirement came up.
During the conversation, she discovered the concept of Social Security.
"You mean you get paid to retire?" she asked, suddenly excited about the possibility.
"Well," I said, "your grandparents get paid. And I might get paid fifty cents on the dollar… but I doubt you will see anything."
"Aww, man… "
The poor girl just discovered the concept of paid retirement and had it taken away, all in an afternoon. This is when it really hit me that we are indeed stealing from our children.
We Don’t Need No Water Let the #$@#!@ Burn!
As I write this, the Obama Administration is pushing a health care entitlement nobody wants and that we cannot afford. And yet, beneath the fold of most front pages is the disturbing fact that this year — for the first time — Social Security will pay out more than it takes in.
In fact according to Investor’s Business Daily, the government will pay out $29 billion more than it takes in through the payroll tax.
The good news is that the Social Security trust fund (remember Al Gore’s lockbox?) has been funded to the tune of $2.5 trillion in anticipation of this event. The bad news is that according to the AP, those are only paper assets. It turns out Congress spent the money on other programs.
The IBD says, "Social Security’s unfunded liability for future decades now stands at $17.5 trillion, an inconceivable amount of money."
That is quite a hole. Perhaps the leaders of this country should do what they always do and simply issue more government debt?
U.S. Credit is Maxed Out
Moody’s, the world famous rating agency best known for closing the barn door with self-assured tardiness while in the pay of the horse, said that the United States, Great Britain, Germany, and France had a one-way ticket to debtors’ prison.
The Ca-rated Moody’s went on:
… debt levels in the four large credit-worthy economies had reached the point at which they are at risk of being downgraded — a step that would drive up interest rates, increase borrowing costs and mark a turn in perceptions about the world economy… growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.
Social cohesion? I think that’s economist speak for riots — the same kind that took place 1967 in Detroit, Michigan; in 1894 in Pullman, Illinois; and in Athens, Greece, just last week…
I can imagine torch-carrying, pitchfork-wielding peasants burning lower Manhattan and K Street. One can only dream.
The sad truth is that rioters rarely get those who are to blame. Generally speaking, they just destroy their neighbors’ property.
As American as Apple Pie
But don’t worry, dear reader, your humble editor has a plan.
I believe we’re looking at all this debt and unfunded liabilities in the wrong way.
The problem is that back in 1950, there were 100 workers for every six retirees. But come 2050, there will be about one retiree for ever two workers. My daughter will be 46 at this time and she doesn’t really want to give 65% of her income to a retiree, having her own kids to raise and a hover-car to pay for.
The way I see it, we have two options: We can go the old school route and let those who can’t contribute to the tribe, nobly wander out into the woods to meet the Great Spirit on their own terms like proud warriors…
It’s the Denominator, Stupid
Or because that’s not politically attainable, we can simply increase the denominator.
In this case, the denominator is the number of workers. This is brilliant.
You see, it might be true that the elites in this country such as Wall Street fat cats, ambulance-chasing lawyers, and Washington lobbyists don’t actually add value to the economy.
It also might be true that the U.S. manufacturing base has been packed up and shipped to China… and that our education system produces slack-jawed slackers…
But there is one thing this country still has going for it. And that, my friends, is that people really want to live here.
Heck, folks will climb into a wheel well of a 747, even brave the shark-infested waters off the coast of Cuba in a converted panel truck, just for the chance at the American dream.
Let’s face it, being a U.S. citizen has tremendous perceived value.
Here’s the Deal
What we do is we put the American Dream on eBay and auction it off. I’m thinking half a million dollars as a reserve bid — 100,000 blocks at a time. I’d be willing to bet that over the years, we could not only get around 300 million people paying for the right to live in the United States… but that these same people would also be paying into Social Security.
Drastic times call for drastic action, and citizenship is about the last thing we have to sell.
As Bernie Madoff would tell you, the first rule of any successful Ponzi scheme is expansion, expansion, expansion…
Who’s with me?
Editor, Wealth Daily
Editor and Founder, Crisis & Opportunity
Investor’s Note: Christian is a fourteen-year veteran of Wall Street. His last three recommendations banked 57% in three days on eBay calls, up to 312% on Unilife, and 106% on a Mongolian Oil company that is still going up… Click here to read more about how you can enjoy the same kinds of profits.