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Monday, August 01, 2016

US Government Entitlements - The Sixth Biggest Economy On Earth

Because the main street economy is failing, the nation’s entitlement rolls have exploded. About 110 million citizens now receive some form of means tested benefits. When social security is included, more than 160 million citizens get checks from Washington.

The total cost is now $3 trillion per year and rising rapidly. America’s entitlements sector, in fact, is the sixth biggest economy in the world.

Yet in a society that is rapidly aging to the tune of 10,000 baby boom retirees per day, this 50% dependency ratio is not even remotely sustainable. As we show in a later chapter, social security itself will be bankrupt within 10 years.

Still, there is another even more important aspect of the mainstream narrative’s absolute radio silence about the monumental entitlements problem. Like in the case of the nation’s 30-year LBO, the transfer payments crisis is obfuscated by the economic blind spots of our Keynesian central banking regime.

Greenspan, Bernanke, Yellen and their posse of paint-by-the-numbers economic plumbers have deified the great aggregates of consumer, business and government spending as the motor force of economic life. As more fully deconstructed below, however, this boils down to a primitive notion of bathtub economics.

In this bogus economic model, it is assumed that the supply-side of the economy is always fully endowed or even over-provided. By contrast, the perennial problem is purportedly a shortfall of an ether called “aggregate demand”.

So the job of the central bank is to pump reserves and credit into the macroeconomy until the resulting incremental spending by households, business and government has caused “full employment GDP” to be filled to the brim. In effect, spending derived from current production and income is supplemented with proceeds extracted from increasingly indebted balance sheets.

Needless to say, this amounts to borrowing from future production and income, but it does boost the current period GDP so long as there is still runway available on household and business balance sheets. Yet what we call the Keynesian parlor trick—-goosing current economic output by leveraging-up balance sheets—–self-evidently doesn’t work in an economy that is at Peak Debt, as we document in the next section.

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6 comments:

Anonymous said...

If they ditched 75% of welfare and food stamp recipients, along with section 8 housing, these people would take the jobs nobody wants...or starve!

In the words of Jim Kirk, "Let them die!".

Anonymous said...

This must be stopped. It's killing us.

Anonymous said...

1:07 - and then there won't be enough jobs to entice the illegals here!

Anonymous said...

Let's get something straight very quickly....Social Security is not an entitlement. Workers and employers pay in, gov't robs it. Soc. Security is something I worked for...not an entitlement like food stamps, EBT, Section 8.

Anonymous said...

3:17
I think you got it backwards?

Social Security is an entitlement. We are "entitled" to it because we paid into it.

Welfare is a "hand out" or "free money" from the government who steals it from somewhere (some one) else and gives it to those in need.

Anonymous said...

5:08 PM OK, I stand corrected on that. However definition of 'entitlement' doesn't include the word 'earned'. Agree with the 'hand out' and 'free money' concepts though.