Record Low Birth Rate, A Crisis For Older Americans

Last August, amid all the coverage of the presidential election, a significant news item was overlooked.  That was the fact that, last year, America's birth rate reached a record low of 59.8 births per 1000 women.  By comparison, at the peak of the baby-boom years, the average was 122.9.

In a country that is getting older with a projected percentage of the over-65 population rising from 15% today to 24% by 2060, this is a problem.  The problem lies in the fact that social programs rely heavily on younger Americans paying into programs like Medicare and Social Security to keep them buoyed into the future.  If there are fewer young people and more older people, the young are going to have to carry a bigger burden to support the seniors of the future. Plus, who will take care of an aging population?  Is senior-care the big job sector of the future?

Facing the same outlook, Japan is desperately trying to "develop" robots to take care of its sick and older population.  But, what about the cost of caring for an aging population in the U.S.?  Has anyone heard of a single politician that seems concerned about this?  Democrats seem to think that Medicare and Social Security are solvent programs as far as the eye can see!

References:

US fertility rate falls to lowest on record: http://www.cnn.com/2016/08/11/health/us-lowest-fertility-rate/

Fact Sheet: Aging in the United States: http://www.prb.org/Publications/Media-Guides/2016/aging-unitedstates-fact-sheet.aspx

Development of care robots growing in aging Japan: http://www.japantimes.co.jp/news/2016/01/27/national/social-issues/development-care-robots-growing-aging-japan/#.WM7adWclTb1

New York & California Just Killed Entrepreneurship

In just 16 years, the minimum wage in the State of California will see a rise of 222% from $6.75 in 2006 to $15 in 2022.  That is an average annual increase of nearly 14%.  In New York, the increase to $15 from, again, $6.75 in 2006 is more complicated as follows:

• For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage would rise to $11 at the end of 2016, then another $2 each year, reaching $15 on 12/31/2018.
• For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50 each year, reaching $15 on 12/31/2019.
• For workers in Nassau, Suffolk and Westchester Counties, the minimum wage would increase to $10 at the end of 2016, then $1 each year, reaching $15 on 12/31/2021.
• For workers in the rest of the state, the minimum wage would increase to $9.70 at the end of 2016, then another .70 each year, until reaching $12.50 on 12/31/2020 – then  continue to increase to $15 on an indexed schedule to be set by the Director of the Division of Budget in consultation with the Department of Labor.

The reality is that no other class of workers has seen that kind of increase.  In fact, assuming a 2% raise a year, it would take the middle class worker an average of 111 years to have a 222% rise in their salaries.

The point is that many people will find themselves less able to afford products and services that are heavily dependent on low wage workers; such as fast food businesses, retail, hospitality, and leisure.  The same goes for this nation's 55 million seniors, who, at best have seen increases of just 1% a year in their Social Security checks.  Additionally, millions more, such as waiters and waitresses, won't be eligible for minimum wage because they earn tips.  And, so too, for the three quarters of 47 million Americans in poverty who aren't even working.

More importantly, the $15 wage will accelerate the death of entrepreneurship and its ability to create jobs.  It will be much more expensive to start new businesses that generally depend heavily on entry level employees.  Entrepreneurship has already been in decline for decades, but now it will become a much higher risk proposition.  Even before instituting this excessive wage, 1-in-4 startup businesses failed in the first year.  50% will be kicked to the curb in just 4 years, and operational costs are one of the 4 main reasons for failure.

I hope I'm wrong, but I think the $15 minimum wage will be a real job creation killer.  And, in fact, a job killer for businesses who must raise prices, and in turn, lose customers who can't afford those price hikes. Also, the $15 minimum wage will bring in automation to replace the humans making that wage.  Already, you can rent a robo-security guard that can hear, smell, and has 360 degree night vision for just $6.25 an hour.  So, if you can already automate a security guard, it only seems logical that other lesser tasks, such as flipping burgers, will follow suit.

References:

Governor Cuomo Signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Policy into Law: https://www.governor.ny.gov/news/governor-cuomo-signs-15-minimum-wage-plan-and-12-week-paid-family-leave-policy-law

California, New York enact $15 minimum wages: http://www.foxnews.com/politics/2016/04/05/california-new-york-enact-15-minimum-wages.html

California Minimum Wage 2006: https://www.google.com/search?q=california+minimum+wage+in+2007&ie=utf-8&oe=utf-8

New York Minimum Wage 2006: https://www.google.com/search?q=minimum+wage+in+new+york+in+2006&ie=utf-8&oe=utf-8

Minimum Wage - United States Department of Labor: Questions and Answers About the Minimum Wage: http://www.dol.gov/whd/minwage/q-a.htm

The Mysterious Death of Entrepreneurship in America: http://www.theatlantic.com/business/archive/2014/05/entrepreneurship-in-america-is-dying-wait-what-does-that-actually-mean/362097/

The Slow Death of American Entrepreneurship: http://fivethirtyeight.com/features/the-slow-death-of-american-entrepreneurship/

Startup Business Failure Rate By Industry: http://www.statisticbrain.com/startup-failure-by-industry/

The Four Major Reasons for New Business Failure: http://smallbusiness.chron.com/four-major-reasons-new-business-failure-51924.html

Rent A Robot Security Guard for $6.25 an Hour: http://www.psfk.com/2014/12/rent-a-silicon-valley-security-bot-for-6-25-per-hour.html

The Average Senior Lives on Less than the Minimum Wage

For months now, we have been told by the "raise-the-minimum-wage activists" and by both Hillary Clinton and Bernie Sanders that the federal minimum wage of $7.25 is not adequate for the 1.3 million Americans earning that amount.  Many arguing that an increase to $15 an hour is much needed.

But tell that to more than half of our nation's 55 million seniors living on Social Security and existing on less than $7 an hour.

Right now, the average monthly Social Security check is $1180 with nearly half getting less than that. Mathematically, that is the equivalent of only $6.86 an hour; and, for 23% of married and 46% of single social security recipients, that  check constitutes almost all of their income.

Maybe we should be talking about $15 an hour for the nation's seniors so, that 12% of  women and 7% of men aren't living in poverty anymore?  You know, a living wage.  Of course then, Social Security would go bankrupt.  Though, I suppose its alright to bankrupt struggling businesses with a $12 or $15 wage. 

References:

The Tightwire Act of Living Only on Social Security: http://www.nytimes.com/2012/09/12/business/retirementspecial/living-only-on-social-security-is-a-tightwire-act.html

Poverty Among Seniors: http://kff.org/medicare/issue-brief/poverty-among-seniors-an-updated-analysis-of-national-and-state-level-poverty-rates-under-the-official-and-supplemental-poverty-measures/

Characteristics of Minimum Wage Workers: Among those paid by the hour, 1.3 million earned exactly the prevailing federal minimum wage of $7.25 per hour: http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf

The Financial Consequences of Amnesty For 4.5 Million Illegals

Just recently, the White House admitted that President Obama's executive action giving illegal immigrants permanent residency, would also give them Social Security and Medicare benefits. In defense of this, they are claiming that this will actually benefit programs like Social Security because these people will now be paying payroll taxes in support of those programs. This in turn, will help balance out our aging population

Well, on the surface that all sounds great.  However, a majority of those who would benefit from Obama's executive order can't speak English; have few, if any, high level skills and little education. Many are functionally illiterate in their own language, and as a result, are incapable of learning English. Over their entire lifetimes they will only be able to work in low level jobs. Taking all this into consideration, you have to understand that the President will be  creating a large and permanent underclass.  In this country, those kinds of people will always take more from the government than they put in.

Take, for example, paying taxes. Only 53% of all Americans pay any federal income tax.  However, most of those who make up the remaining 47% -- especially those who have low incomes --  actually get money back from the government for having children and by qualifying for Earned Income Tax credit.  So, if most of these people are low income workers, what benefit are they going to be to our tax system when they don't pay income taxes?

Then, there's Medicare and Social Security.  The White House claims that these programs will only be strengthened by having them pay into the Federal Insurance Compensation Act (FICA) fund (the payroll tax that collects the funds needed to support Medicare and Social Security).  Of course that would be true only if they weren't so far skewed to the low income side of the equation.

You see, the FICA tax is a fixed percentage tax on your gross wages.  The amount paid diminishes with low income individuals; meaning that he middle class and the upper middle class will foot the bill for most of the future payouts.  Thus, when a low income worker goes on Medicare, he/she receives the same benefit as everyone else; while having paid relatively little into the system. The same is also true with Social Security.  Therefore instead of strengthening these two benefit programs, these newly minted beneficiaries are only going to help speed them toward insolvency.  If you don't think this isn't already a problem, just look at this chart on Social Security:

Of course, this projected insolvency was calculated before Obama's action on immigration. There might be a short term increase in funding from these younger workers paying into the system, and thus, delaying insolvency.  But, when they do start retiring, the impact on will be significant and rapid because too few dollars were added to the fund to pay for their benefits.

In my opinion, the long-term survivability of the benefits to our nation's seniors is being put at risk so this President can garner future Hispanic votes for Democrats.  Similarly, this nation's debt will only increase as we payout an increasing number of tax dollars in Earned Income Tax Credit refunds.  This is why there should have been a fully explored and debated reform of immigration through Congressional means.  Instead, we have another go-it-alone action that will have far reaching consequences; long after Obama is out of office. Then some other President or Congress will be saddled with the cleanup.


References:

Under Executive Action, Immigrants Are Entitled To Social Security Benefits: http://www.npr.org/blogs/thetwo-way/2014/12/03/368216062/under-executive-action-immigrants-are-entitled-to-social-security-benefits

Illegal immigrants could receive Social Security, Medicare: http://www.washingtonpost.com/politics/illegal-immigrants-could-receive-social-security-medicare-under-obama-action/2014/11/25/571caefe-74d4-11e4-bd1b-03009bd3e984_story.html

Commonsense Immigration Reform Will Strengthen Social Security: http://www.whitehouse.gov/blog/2013/07/01/commonsense-immigration-reform-will-strengthen-social-security

TPC Tax Topics | Who Doesn't Pay Federal Taxes?: http://www.taxpolicycenter.org/taxtopics/federal-taxes-households.cfm

Policy Basics: The Earned Income Tax Credit: http://www.cbpp.org/cms/?fa=view&id=2505

What is FICA? - CNN Money: http://money.cnn.com/magazines/moneymag/money101/lesson18/index4.htm

 Social Security to Become Insolvent Far Earlier Than Expected: http://www.mrctv.org/blog/chart-social-security-s-end-date-fast-approaching-far-earlier-expected

Chart: Medicare insolvency projection: https://kaiserfamilyfoundation.files.wordpress.com/2014/07/7305-08-exhibit-6.png

Obama Drops Chained CPI From Budget...Another Election Year Maneuver

Last year, in Obama's rejected budget submission, was something called "chained CPI". It was the  proposed method by which annual cost of living adjustments (COLA) would be calculated for Social Security beneficiaries.  Without getting into a lot of technical economics related to how cost of living increases were previously calculated using CPI-W versus how they would be calculated under Obama's proposed chained CPI, the bottom line is that chained CPI would greatly slow the amount of any benefit increases; thus saving the Federal government billions of dollars over time and, similarly, costing seniors billions in buying power.

For years our elderly have been losing ground against rising inflation and chained CPI would only further worsen that condition.  This as evidenced by the following chart:

Click to zoom

The bar labelled "Elderly" reflects the fact that seniors saw their expenses go up by more than 39% from 1999 to 2013.  Yet, the Social Security Administration only adjusted benefits by a little more than 37%, which was the same as the cost of living calculation for all "Urban Workers" (also known as CPI-W). But, if chained CPI had been applied during that same period, those cost of living adjustments would have only been a little better than a 33% increase; leaving seniors with a 6 percentage point shortfall against expenses. Or, in other words, a 15% loss in buying power.

With as many as 22% of seniors living solely on their Social Security checks and many of them already in poverty and having to make serious choices between food and heat or medications, chained CPI would only have made a bad situation worse.  Add to this the expected inflation associated with raising the minimum wage by another $40 and, this could have been a humanitarian disaster in the making. 

For months,  Democrats were fearing that this could be a losing issue for them in the fall elections.  So,  for now, they're breathing a sigh of relief because Obama has yanked that idea from his current budget submission.  Whether it is just another one of his politically motivated delays prior to the 2014 elections or a complete dropping of this horrible idea is anyone's guess. But, I do know this, it's a little hard to argue that America needs to address income inequality and poverty when Obama, himself, was busily trying to create both with his chained CPI proposal.

If the President wants to save Medicare and lower costs, he should start by addressing the estimated $17 to $57 billion in fraud each year; and, not shove all too many seniors deeper into poverty.

Note: The 2nd column on the chart, Urban Consumers, is what is referred to as the CPI-U.  That's the overall number that the government publishes when it releases CPI data.

References:

Why 'Chained CPI' Rattles the Elderly (and Soon to Be): http://www.businessweek.com/articles/2013-04-10/why-chained-cpi-rattles-the-elderly-and-soon-to-be

CNN: February 20, 2014: Obama drops controversial Social Security proposal: http://money.cnn.com/2014/02/20/news/economy/obama-social-security-chained-cpi/

Medicare FAQs: Fraud: http://www.medicarenewsgroup.com/news/medicare-faqs/individual-faq?faqId=6a130489-e387-476d-a358-c77cfba68367

Obama and the Democrat's Priorities Are Out Of Step With America's

Every year, Pew Research conducts a poll to determine what America thinks the nation's priorities should be. The result of this year's poll are as follows:

At the very top, the economy, jobs, terrorism, education, and social security are what American's are most concerned about.  Yet, we have a President who seems to think he's done a good job on the economy, jobs, and terrorism; and, at the same time, completely ignores any meaningful programs to fix our broken education system.  It is interesting to see that there really hasn't been any significant drops in either the economy or jobs as priorities since the President took office in 2009.  I guess that's why, in other polls, many Americans still think we are in a recession.

But, what's more disturbing, is that many of Obama's  priorities -- global warming, infrastructure,  immigration, and income inequality (dealing with the poor) -- are either at the bottom or, in the case of income inequality, are in the bottom half of this year's list.

All too often Obama and the Democrats claim they are more in sync with what Americans need or want.  If that was really true, the Pew poll would be just the inverse of what it really is.

Socialism Spawns Socialism

We know from past experience, that the welfare system in America has actually locked generations into a losing system for the rest of their lives. Originally intended as a so-called "safety net" to help people get back on their feet during hard times, it, instead, became a way of life with children of welfare recipients becoming future captives of the same system they grew up in.

Socialism is often referred to as "creeping socialism" because it, like some kind of cancer, spreads until, someday, the state government literally runs everything. Socialism is like a narcotic that pulls more and more citizens into its grasp; and, eventually the nanny-state fully evolves.

I often hear people say that the United States is not Europe when it comes to socialism. But, it wasn't very long ago when Europe wasn't what it is today, with all its socialist burdens.

I'm of the belief that socialism spawns socialism by weakening a capitalistic society. With every social program created, workers and money makers have to ante up more and more of their own money in order to subsidize an increasingly larger group of state-dependent citizens. As the state keeps taking more from the successful segment of society, those money makers find themselves being driven out of business and, thus, forced to join the increasingly larger group of state-dependents. Eventually -- too many have jumped into the wagon, with no one left to pull it.

Usually, unemployment insurance is the first step in the creation of a socialist state. It follows the logic that you can't have the unemployed starving and dying in the streets while they're looking for a new job. Then, the socialist will push for a government-run retirement program like our "Social" Security system. Next there's the institution of a welfare system for those who are determined, by the state, to be unemployable. Often, this includes food stamps, housing, and some kind of state-provided salary. Then, there has to be a government-run health care system so that, again, you don't have people dying for lack of care. Oh, and let's not forget that, eventually, higher education should be the right of every citizen as well.

With each of these programs, more and more citizens are being cared for by the government and more and more government funds and people (working for the government) are needed to support the programs. As this occurs, the burden of taxes rises and shaky businesses are forced to go under with the owners and the employees of those fallen businesses being forced to join the increasingly larger group of government-shepherded citizens. Then, ultimately, you have a society like Greece where the state can no longer support itself. Make no mistake, Obama and the Democrats have put us ever closer to the day when that fate will be our own.