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Sunday, March 02, 2014

The Coming Collapse of the Welfare State

In 1935, the year that FDR signed the Social Security Act into law, the birth rate was 18.7 per 1,000. In 1940, when the first monthly check was issued, it had gone up to 19.4. By 1954, when Disability had been added, the birth rate at the heart of the Baby Boom stood at 25.3.

In a nation of 163 million people, 4 million babies were being born each year.

By 1965, when Medicare was plugged in, the birth rate had fallen back to 19.4. For the first time in ten years fewer than 4 million babies had been born in a country of 195 million. Medicare had been added in the same year that saw the single biggest drop in birth rates since the Great Depression.

There could not have been a worse time for Medicare than the end of the Baby Boom.

Today in a nation of 314 million, 4.1 million babies are being born each year for a birth rate of 13.0 per 1,000. 40.7% of those births are to unmarried mothers meaning that it will be a long time, if ever, before those single families put back into the system, and most will never put back in as much as they are taking out.Those children will cost more to educate, be more likely to be involved in crime and less likely to succeed economically. But even if they weren't, the system would still be unsustainable.

Liberals and libertarians both act as if the crisis facing us can be fixed if we take more from the "wealthy elderly" or give them less. The crisis is born of demographics. It can't be fixed by targeting the elderly because they haven't been the problem in some time. It's the same crisis being faced by countries as diverse as Russia and Japan. The difference is that Russia is autocratic and has little concern for its people while Japan shuns immigration and has a political system dominated by the elderly.

The United States however takes in a million immigrants a year who also take out more than they put in. In his 2013 State of the Union address, Barack Obama praised Desiline Victor, a 102-year-old Haitian woman who moved to the United States at the age of 79 and doesn't speak English, but did spend hours waiting in line in Florida to vote for Obama.

Between 1990 and 2010, the number of immigrants over 65 doubled from 2.7 million to 5 million. 25 percent of these senior immigrants were over 80. Desiline Victor wasn't an outlier. Elderly immigrants are also much more likely to become citizens, in part because the requirements for them are lower. Many, like Victor, don't even have to learn English to be able to stand in line and vote.

15 percent of senior immigrants come from Mexico largely as a result of family unification programs. If amnesty for illegal aliens goes through, before long the country will be on the hook not just for twelve million illegal aliens, but also for their grandparents.

The welfare state has been spending more money with an unsustainable demographic imbalance. There are fewer working families supporting more elderly, immigrants and broken families. The Russians invest money into increasing the native birth rate. Instead we fund Planned Parenthood because liberal economic eugenics dictates that we should extract "full value" from working women as a tax base to subsidize the welfare state while discarding the next generation.

The "modern" system that we have adopted with its low birth rates, late marriages, working parents, high social spending and retirement benefits is at odds with itself. We can have low birth rates, deficit spending or Social Security; but there is no possible way that we can have all three.

And yet we have all three. 

Instead of forming a comprehensive picture, our approach is to tackle each problem as if were wholly separate from everything else. Working parents are applauded because they swell out the tax base in the short term. Young immigrants are applauded because they are supposed to swell out the lower part of the demographic imbalance. Manufacturing jobs are cast aside for modern jobs. The long term consequences of each step is ignored.

In the European model that we have adopted, men and women are supposed to spend their twenties being educated and their thirties having two children. These Johns and Julias will work in some appropriately "modern" field building apps, designing environmentally sustainable cribs for the few children being born or teaching new immigrants to speak enough English to vote. Then they plan to retire on money that doesn't actually exist because they are still paying off their student loans.

The reality is that John and Julia begin their marriage with tens of thousands in debts, only one of them will work full time, while the other balances part time work, and they will do all this while being expected to support social services for new immigrants and a native working class displaced by the outsourcing of manufacturing jobs, not to mention the elderly and the entire bureaucracy that has grown around them. If John and Julia are lucky, they will find work in a technology field that is still growing, or, more likely they will pry their way into the social services bureaucracy which will keep on paying them and cover their benefits until the national bankruptcy finally arrives.

John and Julia are Obama voters. They have two children. They don't worry about the future. The future to them seems to be a bright and modern thing overseen by experts and meticulously planned out in every detail. The only dark clouds on their horizon are the Republicans and the Great Unwashed in the Red States who are resisting the future by clinging to their guns and bibles.

In this post-work and post-poverty economy, those most likely to have children are also least likely to work or to be able to afford to have those children.

Birth rates for women on welfare are three times higher than for those who are not on welfare. Within a single year, the census survey found that unmarried women had twice as high a birth rate as married women. These demographics help perpetuate poverty and feed a welfare death spiral in which more money has to be spent on social services for a less productive tax base.

Children raised on welfare are far more likely to end up on welfare than the children of working families.

Fertility rates fall sharply above the $50,000 income line and with a graduate degree; that has ominous implications in a country whose socio-economic mobility rates continue to fall. There are a number of factors responsible, but one simple factor is that work ethics and skills are no longer being passed down to a growing percentage of the population.

Liberal activists still talk as if we can afford any level of social service expenditures if we raise taxes on the rich, but workers can't be created by raising taxes. The issue isn't "investing more in education" which is the liberal solution for everything including the imminent heat death of the universe.

It's liberalism.

Everything that the left has done, from breaking up the family to driving out manufacturing industries to promoting Third World immigration has made its own spending completely unsustainable. On a social level alone, we don't have the people we need to pay the bills. And at the rate we are going, we will only run up more bills that our demographics and our culture can no longer cash.

By 2031, nearly a century after the Social Security Act, an estimated 75 million baby boomers will have retired. Aside from the demographic disparity in worker ages is a subtler disparity in worker productivity and independence as senior citizens are left chasing social spending dollars that are increasingly going to a younger population. ObamaCare with its Medicare Advantage cuts was a bellwether of the shift in health care spending from seniors to the welfare population.

14 million people are now on Disability. That means that there are more people on Disability than there were people in the country during the War of 1812. Half of those on Disability are claiming back problems or mental problems. There are over a million children on Disability and the program is packed with younger recipients who are substituting it for welfare.

Increasing welfare is only a form of Death Panel economic triage that doesn't compensate for the lack
of productive workers. It's easy to model Obamerica as Detroit, a country with a huge indigent welfare population and a small wealthy tax base. The model doesn't work in Detroit and it's flailing in New York, California and every city and state where it's been tried.

After a century of misery, the left still hasn’t learned that there is no substitute for the middle class. It’s not just running out of money, it’s running out of people.

The welfare state is bankrupt and doesn't know it yet. Reality hasn't caught up with the numbers. Instead the welfare state is floating on loans based on past productivity, old infrastructure and a diminishing productive population whose technological industries employ fewer people and don't require their physical presence in the United States.

The welfare state has no future. It is only a question of what terms it will implode on and what will happen to the social welfare political infrastructure when it does. The violence in Venezuela and the slow death of Detroit give us insights into the coming collapse of the welfare state.

43 comments:

Anonymous said...

No Libertarian who truly understands Austrian Economics would suggest forced redistribution of wealth, as you stated.

rodrigoborgia said...

I agree with the comment above ... I'm not sure you are accurately portraying libertarian principles and perspectives in the examples used in this article.

david Xavier said...

Argentina in the early 2000's ( as well as now) is a good case study. Pensions will cease and disappear, the middle class will become poor over night. If you're not part of a small specific community then get so.

PatD said...

Your article could equally apply here in the U.K. There may however be a glimmer of hope on the manufacturing front. A number of British companies are re-locating back to the U.K. as Chinese wages increase and the 'quality' of product was found to be wanting. My husband, over retirement age, works for a precision engineering firm. He has heard that all over the country similar companies are flooded out with work but cannot get any workers as our Government, like yours, dismissed manufacturing in favour of 'modern jobs'. There is a huge gap now between older workers and apprentices. The British Government is now trying to close this gap with new schools and colleges to train the young. It was a massive mistake but we live in hopes.

Anonymous said...

Liberals (er, "progressives") are quick to scold the rest of us about "sustainability", yet every one of their schemes to achieve the Progressive Socialist Utopia is never economically sustainable. Every one of their schemes is built upon finding some source of funding that must be coerced into making up the difference between cost and benefit. This is true with wind power and it is true with Social Security.

Moreover, liberals are happy on the one hand to furiously protect a woman's right to abort her children and thus to diminish the size of the next generation, and on the other hand to conduct fiscal policy that puts as much burden to pay for present "benefits" on to our children to pay. Liberals, while claiming to be concerned for the welfare of everyone, are in fact turning every member of the next generation into debt serfs.

Stein's law is: what cannot go on forever, won't. Socialism works until its economic and moral reality becomes so real that it stops working. Only the free market and respect of the property of each citizen is sustainable. We must return to fiscal and financial prudence where each person pays their own way, and where not working does not pay more than working.

Judged by its fruits, socialism is evil and so are those who advance and defend it.

--- theBuckWheat

Anonymous said...

Yup, I quit reading after it said libertarians think the problem can be fixed, they don't know libertarians. We want taxes eliminated all together.

Dennis Latham said...

As Liberals tell everyone who disagrees with them that they are too stupid to understand the big picture. That's how they get out of responsibility for anything they can't explain. The last time I saw something about Detroit, 47% of the city was without electricity and you could buy a three bedroom house in some places for 700 dollars. Detroit is simply hell on earth, especially after dark, created and destroyed by Liberal social programs that never work, ever.

Anonymous said...

Other than your comment about Libertarians, I agree

Johnny said...

An issue that can not be brought up in detail because it would be racist and otherwise offensive even if the race element were left out, is that each succeeding generation is a little less competent than the previous one. A consensus democracy can not be run with an incompetent population. The system will break down for that reason alone, and that is even without the financial constraints brought up here.

A second consideration also not brought up is race as a political issue. Most of the old people who are going to want the handouts are white, and in the not too distant future a majority of the working age class will be non white or will self identify with being non white. Is the rainbow coalition really going to want to anti up money for a bunch of aging white people?

josephpmartino said...

You've described the problem accurately. Now what? I don't have an answer either.

Daniel Greenfield @ the Sultan Knish blog said...

They already don't... hence Obama's cuts to seniors for ObamaCare

Burke said...

The only solution is a completely free economy, and what do you think the chances are that we will be seeing that anytime soon?

Man's next great civilization will be in outer space. The Earth will be a giant slum.

Daniel Greenfield @ the Sultan Knish blog said...

you're assuming we'll get to a point where steady travel to outer space is possible before the whole thing collapses

Anonymous said...

This problem is not completely free of common sense solutions that could make a real difference. Writing as one who had a mid life crisis and then spent 20 years in public health, I feel on very sold ground stating that the abandonment of the 'anchor baby' policy would make a huge difference in the future. Remember, it is a 'policy' not a law. While this would not affect those already born here, it would have a huge impact on future social welfare programs.
I could sell a nice bridge in Brooklyn easier than I could give away free birth control to many of our patients. Once we break the knot between having children to increase income and access to social benefits, things will change.'
I know of no other country where citizenship is granted to the child of non citizen parents.
As for our own citizens who use much the same tactics to increase income, welfare should be capped at two children.
I wasn't always so uncharitable, but experience is truly the great teacher.
When sick veterans showed up hoping for treatment, some of us opened our own wallets to pay for a bus or a cab to the VA, as we weren't allowed to treat them. Try chewing on that bone for a few minutes.
sophie

Daniel Greenfield @ the Sultan Knish blog said...

Sophie, all very true. And there's the larger question of responsibility hanging over all of this.

Anonymous said...

Certainly the problem of the welfare state can be fixed. Collapse, after all, is one possible fix. The consequences of the various fixes, however, are simply not acceptable to some people. The welfare state is also well aware of its' own bankruptcy. It has simply entered the stage of looting before the fix is imposed.

Anonymous said...

Trenchant piece. We need a strong middle class. Paying decent wages would help. That money would go right back into the economy. Too many fast-food companies rely on their employees getting welfare/food stamps.
Jerome

Daniel Greenfield @ the Sultan Knish blog said...

that's why a lot of corps like the welfare state as long as their taxes don't go up

Daniel Greenfield @ the Sultan Knish blog said...

"Liberals and libertarians both act as if the crisis facing us can be fixed if we take more from the "wealthy elderly" or give them less."

It's the give them less part that involves libertarians.

theunrecordedman said...

Terrific article. The one bit I didn't understand was this:

"14 million people are now on Disability or 1 in 4 adults."

Clearly that's not 1 in 4 adult Americans. Is it 1 in 4 Americans on some kind of welfare?

Daniel Greenfield @ the Sultan Knish blog said...

you're right, that was a transposition, sorry about that

Shouting Thomas said...

I foresee a huge black market economy in our future.

Suri Lantemen said...

What is a transposition? Where?

Anonymous said...

Amen BuckWheat.

Anonymous said...

Libertarians are generally in favor of suicidal Camp of the Saints-style immigration. Generally they refuse to acknowledge HBD as a significant factor in public policy making. For both those reasons, libertarians are essentially fellow travellers of the Progs.

Daniel, workman-like piece as usual but won't you consider shifting your focus to "Day After" scenarios? "Now what?"-- is not this the burning issue of the day?

Anonymous said...

Greenfield: I'm a quasi-libertarian and am confused by your stmt that libertarians think the problem can be fixed by taking bfts away from 'wealthy' elderly people. I think ALL govt spending and programs should be reduced by about 2%/year and taxes reduced by 1%/year, until we reach a better balance and better economy. But targeting the so-called 'wealthy' is a dangerous tactic; libertarians don't want class-warfare, screw the 'rich' tactics, do they?

Daniel Greenfield @ the Sultan Knish blog said...

libertarians are not all one thing and I am talking about the kind of rhetoric I have heard

Anonymous said...

"The larger question of responsibility" is a thorny one. Do you mean responsibility as in "I am my brother's keeper", or the responsibility of the people involved to care for, and support their children, starting with limiting the size of their families ?

I started my career with the 'brothers keeper' ideal, and retired with the smaller families conclusion.

sophie

Daniel Greenfield @ the Sultan Knish blog said...

individual responsibility by those most likely to become social problems and therefore wards of the state

Iapetus said...

Shorter Knish: Demography is destiny.

Daniel Greenfield @ the Sultan Knish blog said...

pretty much

roger in florida said...

Mr. Greenfield,
The situation you describe is horrendous. Perhaps the worst aspect of it is the moral collapse that has occurred. There is, amongst a large portion of our population, a complete disregard for personal responsibility, a profound cynicism that persuades people that they have a right to be kept, this may actually now be a majority. In the context of this moral rot no solution to our financial problems is possible. What then will happen? Of our approximately $17 trillion debt the part held by the Federal reserve will never be repaid, the part held by internal US interests will be serviced but probably not retired. The debt held externally, approximately $5 trillion, has to be repaid, if it is not then the US will have defaulted. Exactly how this can be retired is a good question, consider that if no new debt was accumulated (the US Fed. Govt. lived within it's tax revenue) and a small but significant amount, say $500 million/year, was set aside to retire the external debt, we would be debt free in about 10,000 years.
Another aspect of the moral decay in our society is that the likely result of severe cuts in welfare payments, there would be serious civil disorder across the country with a real possibility of civil war, but certainly at least martial law. Any serious student of this situation knows that cuts have to be made, either by reducing the payout amounts and thereby protecting the value of the currency or by simply distributing more money and thereby destroying the currency through inflation.
A poster on another blog summed it up very well: We expect to consume without producing, spend without saving and enjoy leisure without work.
The consumers of the last 40 years or so have gone on a binge, accumulating inter-generational debt on a criminal scale, and there is no leadership in sight to address this.
This cannot end well.

Paulie Boy said...

Detroit was not destroyed by liberals or liberal policies it was destroyed by black

Anonymous said...

Breed people, breed! Fill the Earth and subdue it! Hear oh Israel: The LORD our God is One LORD: And thou shalt love the LORD with all thine heart, and with all thy soul, and with all thy might. And these words, which I command thee this day, shall be in thy heart: And thou shalt teach them diligently to thy children, and shall talk of them when thou sittest down in thine house, and when thou walkest by the way, and when thou liest down, and when thou risest up. Have children, and train them to Love the LORD and Trust in Him. Don't allow them to be subverted by a system of socialist indoctrination: that isn't doing it for the children. Don't permit the fruit of your body, the greatest blessing of the Mighty One, whose name is Jealous, to have their minds be stolen. That is our great responsibility. If and when the economy tanks, your investments will be like Schindlers' Ring. Develop in your children and grandchildren a trust in the LORD that will remain in spite of the fact. Begin today.

abprosper said...

Great article as always. You forgot one thing though, automation.

As automation continues to get better it will continue to erode jobs. Under those circumstances its going to be harder and harder to rebuild to a work based economy. Fact our modern way of life depends on the moderately skilled 90-110 IQ crowd being able to make a good living and many more of them can't on account of machines

This is spreading to a lot of other trades as well, accounting, tax preparation hundreds of other things that were ways to make a living are going to be gone in a few decades. I won't post links but you can read the articles yourself just Google it.

This situation is no more sustainable than a welfare state and that inability for people to fill demand is the express train to the 3rd world or if somehow a welfare state is managed, population free fall.

Its part and parcel of why Europe has such low birth rates. The elite don't want many kids and the sound minded middle and working classes often can't afford them. This leaves only the feral poor really and of course immigrants from places where our welfare system is a state paved with gold, till the riots anyway.

Its really not complex, High (22% percent average in Europe save Germany) youth unemployment and who knows how much underemployment plus urban living means low birth rates.

Heavy automation, free trade and outsourcing means more of the same.

Its sad that a lot of my fellow conservatives are far too attached to tradition and assume that people will just go on having kids because the church tells them too or because the neighbors are. This is clearly not the case, Europe is not Christian and even in Brazil (which now has Europe style birth rates) people realize the best way out of poverty is less babies.This is 100% effective within a few generations

The highly religious and the feral people of course do not follow this trend but none of them are attached to modernity or capable of sustaining the good bits

So if we want a functional society we need to pay for it, either the State does it wisely (and apparently that not working) or the private sector does and if we can't and we won't, we can assume that a lack of ability to spur demand will wreck the economy.

And no, trade won't cut it either. Even if China was kettled, the world cannot support more net exporters. The demand isn't there and no amount of social engineering can create demand if there is no income. The rest of the poor world would love to buy stuff but, well they are poor for a reason.

My suspicion is the best bet is to control borders, control the feral people with have no child incentives and just let them population fall slowly.

Eventually it will reach equilibrium either as a more theocratic and natalist state or shrink to some kind of smaller population base which is self supporting.

mindRider said...

A few examples of welfare state collapse in the Netherlands: Under new regulations GP's are strongly dissuaded from referring their patients to specialists for in depth examination. (Such could already be considered a death-panel) Patients with mental problems can only be referred to low-level psychological aid for at the most four "help"sessions. The elderly homes are in such dyer financial state that many shall envisage imminent closure.(just dumping the inhabitants). The other side of the coin however is that had no welfare state ever existed the poor and unemployable would have been begging on the streets and without the, mainly thanks to excessive misuse and too leniently given welfare and medical aid the life expectancy and wellbeing would have never reached the level it did in this country. In short, like most actions things take the shape of a sinusoidal wave with inevitable ups and downs.

Anonymous said...

Neil Young wrote a song back in the day, "welfare mothers make better lovers".

abprosper said...

Whatever happens business owners and politic elite are not going to like the results.

In fairly stable nations without welfare states the saving rate is very high often approaching 25% or more . This plays havoc with consumption, investment and fertility as we have seen everywhere, Its not much fun if your business model depends at all on discretionary spending or more babies.

We already have too much money in circulation and it is screwing up the economy. Doing as they do in Japan, lending it to the State for basic pensions makes little sense. Even spending it in the private sector won't help. It will dry up the capital but virtually insure that many more people will end up poorer anyway, Its eating seed corn really.

A more likely scenario is a rise in parties like the Golden Dawn, feed the hungry and they'll flock to your banner. This bodes poorly for the multi-cult of course and for stability as the Left cracks down full bore but so be it. On hopes that the upcoming nationalists are good leaders

Anonymous said...

abprosper sounds like another veteran of the trenches. Although I never thought of my patients as 'feral', I came to believe that it will take three or four generations before even a semblance of assimilation is noticeable, and even that will usually mimic junky pop culture..Speaking of feral, no one here wants to know how many pregnant eleven and twelve year olds I saw in 20 years...
The whole scenario is so disturbing, and most Americans have no clue, and even less understanding of how much it costs.
sophie
--

George of the Jungle said...

The left's greatest, most successful, and most effective tactic ever devised to promulgate this mess, is to use their ideological enemies' objective standards against them. First they propgandize a lofty position that is ostensibly "fair" to everyone, thus getting their opposition to buy into it simply as a matter of objective logic, equanimity and even-handedness. Then when the associated law or meme or standard has been foisted off onto everyone, the left then sets out to use its appointed henchmen in the legal establishment and lackeys in related organizations to undercut the law by introducing (subtly at first) new shifting subjective "definitions" of supporting terms that immediately undercut the intent of what they sold to the gullible objectivists, thereby imposing their true program instead. Meanwhile, their enemies are left confused, spluttering, and powerless to do anything about it... after all, they bought into it in the first place, didn't they?

Thus we see endlessly repeated the situation in which an objective law intended to be applied in equal manner to individuals, is morphed by the left into an "equal" outcome for their designated victimized group of the moment.

Anonymous said...

My liberal friends tell me that the out of wedlock birthrate problem will be solved by free birth control. I doubt that the people who contribute to this problem will be the ones who take advantage of the free birth control, though.

Daniel Greenfield @ the Sultan Knish blog said...

they're taking advantage of abortions more than birth control. We're not dealing with very responsible folk here

natskvi said...

The conclusion depends on what is the definition of a "welfare state." Whether or not it is viable as a general proposition is debatable. But what is certain is that a welfare state and out-of-control immigration are mutually exclusive. In the end, demography and nationalism always prevail, as we see today with Russia's annexation of Crimea and its previous invasion into Ossetia. Political correctness, which results in uncontrolled immigration from the Third World, among other problems, is a passing fad. But there is and will be even higher price to pay.

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