“When you look at government policies, there’s a massive transfer of wealth from the young and relatively poor members of society toward the old and relatively members of society,” says Veronique de Rugy, a Reason magazine columnist and economist at the Mercatus Center at George Mason University.

In 1970, de Rugy notes, transfers from the young to the old took up about 20 percent of the federal budget. In a few years, that figure will break the 50 percent barrier as the population ages and Social Security and Medicare ramp up. Those programs are paid for by payroll taxes that suck up around 15 percent of every dollar most workers will ever make.

Yet the #Occupy movement spends most of its energy railing against “the 1 Percent” richest Americans, whose wealth is not gained at the expense of the “99 Percent.” Rather, it comes from providing goods and services that people want to consume.

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Last night President Obama renewed his calls for a so-called “middle class tax” cut that would all but kill Social Security:

“Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile. People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let’s agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay.”

And yet only two paragraphs later, he said this:

Alas, in calling for a renewed payroll tax holiday, President Obama continues to raid Social Security and imperil the retirement account that many Americans have paid into and continue to depend upon.

On the one hand, he raids the Social Security trust fund, while on the other he attacks Republicans for threatening Social Security.  Republicans ought not let him get away with such transparent chutzpah.

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In the year since the Tea Party arrived in Congress, the movement has managed to change the debate on Capitol Hill, but not the way Washington works.

The Tea Party has stopped President Barack Obama and the Democrats from bailing out profligate state governments, from passing new so-called “stimulus” spending, and from raising tax rates. It has even begun to win bipartisan support for major entitlement reform.

However, the Tea Party has failed thus far to stop the overall growth in the size and cost of government. It passed over a dozen bills that would accelerate economic growth and create new jobs, only to see those bills languish in Harry Reid’s Senate.

In both the debt ceiling and the payroll tax debates, the Tea Party saw its sensible bills rejected in favor of absurd compromises–then found itself being blamed for congressional gridlock.

The key to the Tea Party’s fortunes has been its relationship with the very establishment it dislikes. Where it has found common ground–for example, with House budget chair Paul Ryan–it has been able to promote its agenda of limited government. But when the Tea Party has clashed with Republican leaders–starting with key Senate races in 2010–Democrats have won by dividing conservatives from moderates, House from Senate. (more…)

From the Associated Press:

A deal on the $1 trillion-plus spending bill was reached after Republicans agreed to drop language that would have blocked President Barack Obama’s liberalized rules on people who visit and send money to relatives in Cuba. But a GOP provision will stay in the bill thwarting an Obama administration rule on energy efficiency standards that critics argued would make it hard for people to purchase inexpensive incandescent light bulbs.

A senior White House official said the administration supported the two-month plan.

Bargainers were considering the two-month extension of this year’s payroll tax cut and unemployment benefits bill because so far, they haven’t agreed how a yearlong extension would be paid for, said a Democratic aide who spoke on condition of anonymity to discuss the private talks.

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From time immemorial—from Etienne de la Boitie to David Hume to Ludwig von Mises—political analysts have noted that because the number of those in the ruling elite amounts to only a small fraction of the number in the ruled masses, every regime lives or dies in accordance with “public opinion.” Unless the mass of the people, no matter how objectively abused and plundered they may appear to be, believe that the existing rulers are legitimate, the masses will not tolerate the regime’s continuation in power. Nor need they tolerate it, because they greatly outnumber the rulers, and hence whenever they become subjectively fed up, they have the power—which is to say, the overwhelming advantage of superior numbers—to oust the regime. Even if the regime possesses a great advantage of coercive power, its employment avails the rulers nothing if they must kill or imprison 90 percent of the population, because such massive violence would reduce them to the status of parasites without hosts.

This consideration long seemed to make sense as a critical element of political analysis, and even today one often encounters it. Something akin to it seems to motivate the current Occupy Wall Street movement and its spin-offs in other venues when they represent themselves as members of the (exploited) 99 percent, in opposition to the (exploiting) 1 percent.

Certain long-established trends in the welfare state, however, have progressively weakened the force of this analysis. The main element of these trends is the tremendous growth in the number of people (and in their proportion in the population) who are directly dependent on government benefits to a substantial degree. Researchers at the Heritage Foundation have been tracking this development for several years and have pushed their analysis back for several decades. An index of dependency based on this research increases from 19 in fiscal year 1962 to 272 in fiscal year 2009.

The Heritage index uses information on almost three dozen important federal programs on which Americans depend for cash income and other support—including housing assistance, Medicaid, Medicare, Social Security, unemployment insurance benefits, educational benefits, and farm-income supports—but it is scarcely a comprehensive measure, inasmuch as the total number of federal programs with dependents is gigantic at present. Of course, each such program has government employees and contractors who run it and hence depend on it to earn much, if not all, of their income. Government civilian and military retirees add millions more to the ranks.

The Heritage researchers found that in 1962, 21.7 million persons depended on the programs they included in their index for benefits. By 2009, the corresponding number of dependents had grown to 64.3 million. Adding dependents not included in the Heritage study might easily increase the number to more than 100 million, or to more than a third of the entire population. Thus, the parasites verge ever closer to outnumbering their hosts.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the fallout from last week’s Eurozone deal, the impact of the debt crisis on Social Security and the weekend’s winter storm in the Northeast.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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Jerry Brown, California’s quirky Governor, has made a credible first step on the road to reforming the State’s insolvent public pension plans. The state is the global leader for financially irresponsible government by racking-up $350 billion in unfunded pension liabilities. But with the threat of California’s credit rating being cut to the same “junk” level that is destroying Greece; the Governor has offered a 12 step recovery program to begin the long journey back to solvency.

The new urgency to reform California’s public pensions is being driven by the Government Accounting Standards Board (GASB) new public sector accounting rules that will require the State of California and local governments to triple their annual pension contributions. There is no law that can force California to comply with GASB; but failure to do so will result in the State’s auditor issuing a “qualified opinion” regarding the reliability of the state’s financials. Eighteen months ago Greece’s auditors issued this type of opinion. The credit rating agencies downgraded Greece’s debt; causing borrowing costs rise above to 20% and destroy the nation.

California first enacted its public sector defined benefit pension plan in 1932, shortly before the enactment of Social Security. The legislation, just like Social Security, was designed to require work until age 65, when average life expectancy of Americans was only 60 years of age. Consequently, the average public employees, just like Social Security, were both required to contribute for decades for retirement payments they would never receive. But through labor union negotiations, the average age of retirement eligibility was whittled down to 53.75 years of age from 65; while the life expectancy rose from to 78.2 years. When the average California public employee retires today they should expect initially receive $35,000 a year pension payment that is expected to rise by a 3% cost-of-living increases for the next 24.5 years. The income steam necessary to pay for the combination of today’s public sector early retirement eligibility and longer expected lifetime to receive payments has driven the costs of pension payments up from $573,484 to $1,277,445.

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From USA Today:

Retirement programs for former federal workers — civilian and military — are growing so fast they now face a multitrillion-dollar shortfall nearly as big as Social Security’s, a USA TODAY analysis shows.

The federal government hasn’t set aside money or created a revenue source similar to Social Security’s payroll tax to help pay for the benefits, so the retirement costs must be paid every year through taxes and borrowing.

The government paid a record $268 billion in pension and health benefits last year to 10 million former civil servants, military personnel and their dependents, about $100 billion more than was paid a decade earlier after adjusting for inflation. And $7 billion more was deposited into tax-deferred accounts of current workers.

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Ed Koch was one of the first prominent New York Democrats to break ranks and endorse Republican Bob Turner in this week’s election to fill the vacancy left by the resignation of disgraced Congressman Anthony Weiner. Koch’s early endorsement of Turner set in motion of a chain of events, culminating in the election of a Republican to represent parts of Queens and Brooklyn. Turner is the first Republican to represent this area since the 1920s. Today, I spoke with the former mayor about the campaign.

BG: Given that Israel is a “national” issue, why did you get involved in the race in New York’s 9th district, in particular?

Koch: There were only two special congressional elections in the whole country–here and in Nevada. The election in the 9th congressional district was the only election in the City of New York. And I thought, and I expressed myself publicly, that it would be a good place, being the largest Jewish district in America–something like 300,000 Jews lived in that district, and the Jewish vote would be somewhere around 30% or more–it would be a good place to have a referendum on whether the President’s position on Israel, which I have described as hostile to Israel, was one representative of the voters of that district.

And I got a call from Bob Turner, who wanted to see me. I had never met him before. We talked, and I said, “I want to send a message to the President on Israel,” and he agreed, and I also said, “I want to send a message to the Republicans in Washington that you disagree with their effort to privatize Social Security and Medicare.” He said, “I do disagree.” I said, “Let’s put it in writing.” And we did, and I endorsed him, and I framed the issues carefully so people could understand them.

Bob Turner was a marvelous candidate. Without a good candidate, you can’t prevail, even if you’re on the right side. He’s honest, intelligence, courageous, and he’s got a good sense of humor.

So we went out there. I campaigned for him, and the Democratic Party took the district for granted up until the last, probably, ten days, and then they realized from the polls that Turner had turned it all around. He was now six points ahead, a week before the election. So they brought in Bill Clinton, Charles Schumer, and Governor Andrew Cuomo to do robo-calls. And we did robo-calls–myself, and Assemblyman Dov Hikind–and clearly, we prevailed, since Bob won with an eight percent message.

Was that a challenge, to frame that dual message? (more…)

First, a simple question: At retirement would you rather have a million dollars or social security benefits?

The answer to that one should be pretty simple. What boggles the mind, though, is that the former is not altogether impossible; in fact it may be more likely for those in Generation X or younger to save a million dollars than for social security to still be solvent when they retire.

Social Security has been a tremendous source of debate recently – an issue that becomes one of contention from time to time – particularly with the Republican candidates for the 2012 presidential election. Rick Perry has taken plenty of heat for referring to social security as a Ponzi scheme.

Since Social Security was created in the 1930s it has been a controversial issue; becoming only more contentious as the federal government borrowed against the trust to finance other government programs. The idea that it is a Ponzi scheme is certainly nothing new – Charles Ponzi having perpetrated his fraud that coined the term before the Social Security Act was ever passed.

The argument over whether Social Security is a fraud, heated though it is, is quite frankly overdone and irrelevant – not that it is near its end. No offence to Tea Partiers, but the odds of successfully seeking charges against the United States federal government for fraud seems somewhat low.

What can’t be argued about the United States Social Security System is whether it is a good investment plan for Americans. It is absolutely apparent to anyone who does the math that, fraud or not, Social Security is a loser from an investment perspective.

Supporters of social security, due to their lack of investment knowledge and ignorance of time value of money, often argue that Social Security is a profitable system for its participants. They point out that under the current system, Americans are repaid all their contributions in just 5 or 6 years, and that everything paid out after that is a gain to the contributor. This completely ignores the time value of money; and how it grows over time. So let’s do the math:

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Tonight, CNN and Tea Party Express co-host a debate of GOP candidates in Tampa, FL, site of the upcoming GOP convention. I’m not really sure how the ‘tea party’ is going to be represented in this debate, since the moderators are pulled from CNN, but there is no way it can be any worse than the MSNBC/Politico forum last week. In that fiasco, John Harris and Brian Williams drew deeply from lefty activists like ThinkProgress to launch attacks on the GOP candidates. It was as if the DNC had done a mind-meld with Harris and Williams (redundant, I know!), and got 90+ minutes to prospect for material for negative campaign ads.

Color me naive, but CNN is not MSNBC. Liberal, sure. But, it at least tries not to seem totally in the tank for the left, unlike Politico and MSNBC. So, I don’t think the DNC will own the same real estate in Wolf Blitzer’s brain as it had in Harris/Williams. Then again, according to news reports today, it won’t have to. Amazingly, two leading candidates for the GOP nomination, Mitt Romney and Michele Bachmann, look set to take a page from the DNC and ThinkProgress playbook and attack Gov. Rick Perry for daring to speak the truth about Social Security. Below is a flier the Romney campaign is distributing in Florida.

And, yesterday, Bachmann’s campaign had this to say to Byron York:

“Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser. “Clearly she feels differently about the value of Social Security than Gov. Perry does. She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

So let me get this straight; we now have TWO GOP candidates against any kind of entitlement reform? Really? We can’t begin to get out from under our overwhelming debt burden unless we tackle these auto-pilot programs. You could close every government agency and slash defense spending in half and we’re still screwed if we don’t reform Social Security, Medicare and Medicaid. How can Romney or Bachmann seek to be President if they don’t understand this basic fact? I mean, its not just a theory…its math.

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I have a great plan for “saving” Social Security.

Today’s average U.S. life expectancy is 78 years. Let’s make the retirement age to collect Social Security 79.

Presto. The “system” is saved (or until life expectancy increases, at which point we can raise the retirement age again).

Pretty dumb? Sure. But if the goal is “saving” the system, nothing would work better.

Wait a minute you say. It’s not about the “system” but about saving me, my children, my grandchildren, my neighbors. It’s about making individuals better off.

But if the point is making individuals better off, why do we only hear assurances from most politicians that they will “save the system?”

The “solution” that I have proposed here is one extreme example how Social Security, if we insist on keeping it as it is today, can be “saved.”

How about raising your taxes to get the same amount of payout at retirement?

How about leaving your taxes the same but requiring that you pay them for a longer period of time, raising the retirement age to collect?

Can you imagine getting a call from your bank that they have run out of money so in order to save your CD they have to cut the interest rate on it in half? Or that you can’t cash in your one year CD for another two years?

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Governor Rick Perry of Texas is being attacked by two rivals in the GOP presidential race. His sin, if you can believe it, is that he told the truth (as acknowledged by everyone from Paul Krugman to Milton Friedman) about Social Security being a Ponzi scheme.

Here’s an excerpt from Philip Klein’s column in the Examiner, looking at how Mitt Romney is criticizing Perry.

Mitt Romney doubled down on his attack against Texas Gov. Rick Perry this afternoon, warning in an interview with Sean Hannity that his critique of Social Security amounted to “terrible politics” that would cost Republicans the election. Romney’s decision to pile on suggests that he’s willing to play the “granny card” against Perry if it will help him get elected, a tactic more becoming of the likes of DNC chairwoman Debbie Wasserman Schultz than a potential Republican nominee.

And here’s a Byron York column from the Examiner looking at how Michele Bachmann is taking the same approach.

…another Republican rival, Michele Bachmann, is preparing to hit Perry on the same issue. “Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser.  “Clearly she feels differently about the value of Social Security than Gov. Perry does.  She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

Shame on Romney and Bachmann. With an inflation-adjusted long-run shortfall of about $28 trillion, Social Security is a Ponzi scheme on steroids.

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From The Hill:

Former Republican presidential candidate Tim Pawlenty, who dropped out of the race last month, endorsed Mitt Romney for president, in an appearance on “Fox and Friends” this morning.

“The next president is going to have to lead on the economy and jobs in a historic way and there’s one candidate in this race who is unmatched in his skills and experience and talent when it comes to turning around this economy and growing jobs. And that’s Mitt Romney,” Pawlenty said on the program. “And I’m proud and excited to endorse him for president of the United States.”

Pawlenty said he will be serving as the national co-chairman of Romney’s campaign. He also said he didn’t want to be considered as Romney’s running mate. Pawlenty will be appearing with Romney Monday at a campaign event in Charleston, South Carolina.

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When Texas Governor Rick Perry in the Republican debate at the President Reagan Library described Social Security as a “Ponzi Scheme”; Perry hoped the media would hyper-ventilate and scream that his political career was over. Back in 1982, Democratic Speaker of the House Tip O’Neill legendarily damaged the President’s and the Republican’s popularity by spinning that Reagan’s efforts to return Social Security to solvency was an effort to destroy the program. Perry understands that Social Security still remains popular; but he intends to use as a wedge issue against Democrats the fact that few Americans are willing to pay more taxes make the program solvent and that younger voters believe they will never receive the benefits they are paying for.

The Merriam-Webster Dictionary describes a Ponzi scheme as “an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.” Social Security began collecting taxes in 1937 and began in 1940 to pay their first benefit recipient, Ida May Fuller. Ms. Fuller worked for three years under the Social Security program before she retired. The Social Security taxes on her salary were $24.75; her initial monthly check was $22.54; and she lived to collect $22,888.92. Essentially, Ms. Fuller earned a spectacular 925% return on her investment.

President Franklin Delano Roosevelt was quoted by his Labor Secretary Francis Perkins as trying to make sure Social Security would not be a swindle to future generations:

“Ah, but this is the same old dole by another name. It is almost dishonest to build up an accumulated deficit for the Congress of the United States to meet in 1980. We can’t see the United States short in 1980 any more than in 1935.”

Prior to the 1970s, the Social Security program was fairly well funded; because it took a highly visible Act of Congress to change the payments. But in 1972 Republican President Richard Nixon increased benefits by 20% and created a formula to automatically adjust Social Security payments by a cost-of-living-adjustment (COLA) tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. President Jimmy Carter in 1977 more than tripled the Social Security tax on wages; but price inflation continued to drive COLA payments up faster than the taxes on wages.

When President Reagan tried to reinstate the original COLA calculation in 1982 he was pummeled by Democratic Speaker of the House, Tip O’Neill, who famously told the press that trying to change Social Security was the political equivalent of asking for the instant death of touching the “third rail” of an electric train. Republicans lost 26 Congressional seats in the following midterm elections, as the Democrats made preservation of Social Security the centerpiece of their campaign slogan: “It’s not fair … It’s Republican”.

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From Reuters:

The powerful healthcare industry hopes a congressional “super committee” tasked with slashing America’s debt will fail and is lobbying instead for automatic spending cuts that will kick in if the panel deadlocks.

Much of the health sector believes the spending cuts, which will be triggered if the committee fails to find at least $1.2 trillion in savings over 10 years, will be less draconian than any deficit-reduction deal, according to lobbyists and healthcare groups interviewed by Reuters.

Under the trigger mechanism — a process called sequestration — automatic spending cuts of $1.2 trillion will begin in 2013. But programs such as the Medicaid healthcare program for the poor and the Social Security retirement program are totally protected from cuts, while Medicare, the healthcare program for the elderly, would face only a 2 percent cut to providers.

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Reason’s Matt Welch, coauthor of the new book, The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong With America, talks with Emily Ekins, Reason’s polling director, about what the new Reason Rupe Public Opinion Survey tells us about how Americans think about federal spending, and debt.

Ekins argues that Americans primarily want to cut spending, not raise revenue, to deal with the debt crisis.

“[Americans] believe that [cutting spending] will…do more to help the economy than hurt,” Ekins says. “Fifty-seven percent believe that, where as only 20% believe that it would mostly harm the economy.”

The Reason-Rupe survey is online here and here (pdf).

This Reason Foundation project is made possible thanks to the generous support of the Arthur N. Rupe Foundation.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca and Congressman Paul Ryan to discuss the latest in the debt ceiling negotiations, the Senate’s Gang of Six plan, and the need to means test entitlement reform.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Paul Ryan: The Gang of Six Budget Effort
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Paul Ryan: Debt Negotiations and Taxes
At 15 Federal Agencies, Death More Common Than Job Loss
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Polling data, as well as anecdotal evidence suggests two things: Liberals especially and even some who are loosely conservative and/or those who are economically near-illiterate, assume A) money grows on trees; and B) anything the government does can only be done by the government.

I often think for a group of people (the Left) who pride themselves on their intelligence, their solutions are always predictably simplistic and uncreative. How difficult is it, really, to identify a problem, and then always resort to the exact same “solution”: more spending of money; or rather, more transferring of money from one place to another?

Social Security is a prime example. If the federal government did not administer Social Security, would we suddenly see American streets filled with starving, destitute elderly people? Would they simply wither away and die without this precious life-saving entitlement from the federal government? This assumes there would be a need within the economy no one would think to fill.

If the federal government stopped providing this service, would it no longer exist, or would enterprising financial institutions fill the void? It’s not far-fetched to imagine you could set up a very similar insurance system with a banking institution, taking money paid into it to use as savings, loaning it back out and investing it, much like the way annuities work. Call it a mandatory annuity.

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The Talmud says: “One should not extravagantly distribute more than one fifth of one’s income to charity.” Are the sages saying there’s a ceiling cap on giving charity? Yes they are, because if everyone were to give too much away there would be too many mouths to feed.

If you have been getting information from the mainstream media you may think tea partiers are forcing Republicans in Congress to; cut the budget so much people will be forced to push grandma’s wheelchair off a cliff or, are trying force the country into default guaranteeing Obama won’t be reelected.

Not true! It’s all about not having too many mouths to feed.

The debt ceiling’s the congressionally approved amount the federal government can borrow. The ceiling is currently set at $14.294 trillion. The country’s debt hit that figure on May 16 and we are currently approaching $14.6 trillion in debt. Thanks to some “re-arranging,” the Treasury Department says we won’t “run out of money” until August 2.

The MSM and progressive politicians report if the debt ceiling isn’t raised by August 2, a biblical-type disaster will occur, wrath of God type stuff; fire and brimstone falling from the skies! Rivers boiling! Earthquakes, volcanoes, Human sacrifice, nothing but Dennis Kuchinich speeches on your TV set … mass hysteria (that premise is false)!

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