Thursday, November 15, 2018

I'm Feeling Frugal Today, So...

Let's look at the Federal Budget, and how we might reduce the Deficit (NOT the yearly expenses, which are, of course, important).

The Deficit is that nasty storm in the far horizon. We can set up our family picnic, have a good time, and be inside before the storm comes.


At other times, the clouds will move in fast, and, almost before we can react, the rain will drench us.

I've been hearing about the Deficit (I capitalize it, because it's an indicator of its importance) since I was a kid. It was a relatively low-level problem in my younger years.

By the late 1960's, an overheated economy had begun to make it more difficult to adjust the budget. If politicians voted down increases in military spending, Social Security, or other budget items with a lot of payments to individuals who depended on that spending for their income, he was likely to be defeated.

If he voted for status quo, or increases, it was inflationary. A few times, we had the worst of both - an inflationary economy and stagnant incomes.

It quickly became apparent to many of people that a main driver of the increase in the debt was the so-called entitlements:

  • Medicaid, Medicare
  • Welfare
  • Food Stamps
The government was slowly getting out of some of the programs that had been in effect, such as some of the big housing projects (and replacing them with Block Grants), but were adding on other, more expensive projects and departments - HUD, EPA, etc.

In the midst of all of this, COLA was introduced - the Cost of Living Adjustment.

COLA is a main driver of debt at this time. If the economy is bad, and the cost of living decreases, the COLA never goes down. It's a ratchet, that only is applied in one direction - adding on to those monthly checks.

Which checks are affected?

Government beneficiaries - servicemen, "welfare", Social Security, federal retirees. 

Because they never face smaller paychecks when the pinch of increased costs hits, these recipients have no incentive to stop the Deficit from increasing - when it goes up, the economy is pressured, and - voila - they get more money.

Win-win - for them.

In contrast, most people actually lose when the cost of living increases. The businesses they work for have to cut corners, in response to increased costs, and they are likely to face pay freezes, if not cuts.

COLA has to stop - now. It's not going to get any easier in the future. Will seniors feel the pinch? Sure.

But, it still has to be done. It just isn't fair for working people to bear the brunt of the financial hit, while seniors get to avoid the pain.

The Daily Signal's solution is multi-pronged.

If we don't do this, SOON, the younger people might just take any of the decisions out of our hands.

And, it WON'T be pretty for those affected.

AARP can keep threatening legislators who try to clamp down on the over-the-top amount that goes to the senior population. They WILL NOT be able to out-vote them forever.

The longer they wait, the harder the changes will be. The longer they insist on holding the line, the MADDER the younger voters will become. Pent-up anger, when released, it NOT pretty.

AARP, and the geriatric lobbyists, need to pick the time frame for giving in - anywhere from 3-5 years, max. If they don't, there WILL be a rebellion. And, it will likely involve some hideous outcomes for some. They've watched elders get their Senior Discounts, yearly cruises to exotic lands, cushy lifestyles, and, generally, better medical care at a lower cost than younger people can get.

There is a simmering anger. Expect a raid on savings/investment/annuities, and manage your own portfolio accordingly.


jabrwok said...

Expect a raid on savings/investment/annuities

Or we could just abolish Social Security and Medicare and all the rest. I've got nothing against the people who've been taxes all their lives to support those welfare programs (yes, welfare. see Flemming vs. Nestor) but I have no interest in being forced to subsidize other peoples' retirements anymore.


If the Left truly gets back into power, expect a raid on 401Ks.

And, as I personally experienced, being lectured and asked "What, you don't have trust in the full faith and credit of the US government? You're not patriotic."

Thanks to a mix of my own bad decisions in leaving a stable job (would have been laid off a couple of years later, but that's beside the point) and enduring a difficult job search, I have no 401K account worth mentioning. But then, I see what's coming.

* Economic collapse; it can't not
* The Left's eventual recapturing of power, and the 401K raid

I know I will never retire. I will, more likely, die fighting the Left.

Reg T said...

When you consider what inflation - much higher than admitted by .gov - does to the savings many of us old folks out away for our retirement, COLA doesn't even come close to correcting the current tripling in cost of butter and bacon, of healthcare insurance, and a host of other expenses.

The COLA, while quite small and never matching the losses due to inflation, reduce slightly the desperation felt by us seniors as we watch our money become worth less and less. When we deprived ourselves of things we would have liked to have purchased, in order to put a small part of our income into savings and a 401k, we did so imagining it would allow us some comfort in old age. Seeing the value of our money disappear, with NO COLA during some years, the little increases we _do_ get on occasion help to keep us from despair.

If .gov hadn't spent everything in the Social Security fund, if they hadn't inflated our money - unbacked, fiat paper - to a fraction of what its value once was, I'd gladly refuse any COLA. But to speak of it as something that is wrong for us to receive seems a bit specious to me.