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The Mad Crapper
03-08-2011, 02:45 PM
Welfare State: Handouts Make Up One-Third of U.S. Wages

Published: Tuesday, 8 Mar 2011 | 3:59 PM ET Text Size By: John Melloy
Executive Producer, Fast Money

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,” 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.

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“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.”




http://www.cnbc.com/id/41969508

mlyonsd
03-08-2011, 02:46 PM
I fell in to a burning ring of fire........

Bewbies
03-08-2011, 02:48 PM
What were the %'s of this during Carter admin, and during the Great Depression? Wonder if Obama has em both beat....?

FD
03-08-2011, 03:11 PM
Eh, recession, automatic stabilizers.

Amnorix
03-08-2011, 03:16 PM
Mostly a function of the unemployment rate, but still -- not a good sign and it definitely needs to trend in the other direction. It's just unsustainable in the long term.

Amnorix
03-08-2011, 03:20 PM
What were the %'s of this during Carter admin, and during the Great Depression? Wonder if Obama has em both beat....?


Carter years --no idea.

Great Depression? Yeah, obviously. There weren't anywhere near the types of safety nets in place then. Pretty much zero, in fact. Both unemployment and Social Security date back to 1935, or about halfway through the Great Depression which started in 1929 and ended, effectively, with the US entrance into WWII in '41.

Jaric
03-08-2011, 03:21 PM
Mostly a function of the unemployment rate, but still -- not a good sign and it definitely needs to trend in the other direction. It's just unsustainable in the long term.

It's also the very reason there will be no reform to it.

Too many people are too dependent on the system to change it. Which means we really won't have any real "change" until the whole thing collapses.

Mr. Kotter
03-08-2011, 03:26 PM
I'd be willing to bet that 1/3 of wages figure doesn't reflect accurately 1/3 of earnings....to include bonuses, dividends, stock options, matching contributions, and employee fringe benefits not typical for the bottome 85% of Americans....

:hmmm:

chiefsnorth
03-08-2011, 03:29 PM
Well Duh, we just need to push those WI teachers over the 100k mark in total compensation and retirement, etc

Amnorix
03-08-2011, 03:34 PM
It's also the very reason there will be no reform to it.

Too many people are too dependent on the system to change it. Which means we really won't have any real "change" until the whole thing collapses.


We have deep structural problems, that is true.

But the unemployment rolls are at all-time highs, and older people who are squeezed out of the workforce are going for SS early, etc. Unemployment affects both the numerator AND the denominator in this equation, both in a negative way.

Once we have some serious hiring, this percentage will decrease dramatically.

Again, that isn't to say we don't have some structural issues with our social safety net. We do. But it's not QUITE as bad as the picture being painted.

The Mad Crapper
03-08-2011, 03:50 PM
We have deep structural problems, that is true.

But the unemployment rolls are at all-time highs, and older people who are squeezed out of the workforce are going for SS early, etc. Unemployment affects both the numerator AND the denominator in this equation, both in a negative way.

Once we have some serious hiring, this percentage will decrease dramatically.

Again, that isn't to say we don't have some structural issues with our social safety net. We do. But it's not QUITE as bad as the picture being painted.

When is this going to occur?

Amnorix
03-08-2011, 03:53 PM
When is this going to occur?


Here, you give it a shot.

http://www.netpaths.net/blog/wp-content/uploads/2007/10/magic-8-ball.jpg

Saul Good
03-08-2011, 04:10 PM
I'd be willing to bet that 1/3 of wages figure doesn't reflect accurately 1/3 of earnings....to include bonuses, dividends, stock options, matching contributions, and employee fringe benefits not typical for the bottome 85% of Americans....

:hmmm:

I would bet that it does. Either way, that type of compensation is negligible in terms of overall wages.

Amnorix
03-08-2011, 04:16 PM
I would bet that it does. Either way, that type of compensation is negligible in terms of overall wages.


While I agree that it wouldn't dramatically affect the percentage, I wouldn't use the term negligible either. He included basically all non-wage forms of compensation and "employee fringe benefits". Depending on how far you want to go in terms of fringe benefits, that's a pretty hefty number potentially.

Saul Good
03-08-2011, 04:23 PM
While I agree that it wouldn't dramatically affect the percentage, I wouldn't use the term negligible either. He included basically all non-wage forms of compensation and "employee fringe benefits". Depending on how far you want to go in terms of fringe benefits, that's a pretty hefty number potentially.

He used the modifier not available to 85% of Americans. Standard benefits available to most Americans would make up a significant percentage. Benefits only available to executive-level employees would not.

Amnorix
03-08-2011, 04:27 PM
He used the modifier not available to 85% of Americans. Standard benefits available to most Americans would make up a significant percentage. Benefits only available to executive-level employees would not.

Probably true, on an aggregate basis. Wonder if anyone has done an analysis.

Saul Good
03-08-2011, 04:29 PM
Probably true, on an aggregate basis. Wonder if anyone has done an analysis.

Couldn't tell you. Either way, there's no reason that it wouldn't be included in these figures. It's easily available through tax filings.

Sannyasi
03-08-2011, 05:04 PM
Calling Social Security a "handout" is a bit much.

mlyonsd
03-08-2011, 07:00 PM
Calling Social Security a "handout" is a bit much.

Not if you've paid in all your workng life. SS should always be considered an investment that our elected officials F'd up for their own gain.

People that don't agee part of one's 'investment' into their own retirement shouldn't be allowed to be self managed are F'sticks.

go bowe
03-08-2011, 08:12 PM
Not if you've paid in all your workng life. SS should always be considered an investment that our elected officials F'd up for their own gain.

People that don't agee part of one's 'investment' into their own retirement shouldn't be allowed to be self managed are F'sticks.i'm all for privatizing social security retirement benefits...

as long as you don't mess with MY benefits... :p :p :p

Mr. Kotter
03-08-2011, 08:32 PM
Not if you've paid in all your workng life. SS should always be considered an investment that our elected officials F'd up for their own gain.

People that don't agee part of one's 'investment' into their own retirement shouldn't be allowed to be self managed are F'sticks.

I agree with your argument on "privatization"....as long as we hold folks accountable if they are "had" by bad investments.

I'm just wonderin' how you can seemingly insist that SS/medicare benefits begin at an earlier age (relative to life expectency, of previous generations)...and drawing far above and beyond contributed monies, plus a reasonable rate of return, on average.

Without any fair/reasonable adjustment... :hmmm:

Cave Johnson
03-11-2011, 11:05 AM
CNBC's 35% number debunked.

http://www.cjr.org/the_audit/cnbc_misleads_on_welfare_state_1.php

go bowe
03-11-2011, 12:43 PM
CNBC's 35% number debunked.

http://www.cjr.org/the_audit/cnbc_misleads_on_welfare_state_1.php do you really expect us to read a link from some obscure place like columbia university?

mlyonsd
03-11-2011, 01:00 PM
I agree with your argument on "privatization"....as long as we hold folks accountable if they are "had" by bad investments.

The private part of the money can be managed like a 401k. Options for investing should be monitored. Just like your pension.


I'm just wonderin' how you can seemingly insist that SS/medicare benefits begin at an earlier age (relative to life expectency, of previous generations)...and drawing far above and beyond contributed monies, plus a reasonable rate of return, on average.

Without any fair/reasonable adjustment... :hmmm:Again, I'm only cashing in on the deal the government forced me into. It wasn't voluntary. I have no problem with forcing the government to give me what they promised for over 30 years.

I'll split the difference.....I'll work 2 weeks longer than I have to. There. My conscience is completely swiped clean.