Editor’s Note: Bill set out on horseback yesterday to visit his nearest neighbor. And he didn’t make it back to the ranch on time to write his regular Diary. So today, a classic from the archives…
In politics and economics, most people believe what isn’t true: that the common folk select their leaders… and that these leaders are wiser than God.
We recall an early experiment. The pilgrims washed up in the wrong place… and then proceeded to almost exterminate themselves with clumsy central planning.
Their system discouraged work and encouraged zombies. Wrote Plymouth County governor William Bradford:
[The system of] taking away of property and bringing [it] into a commonwealth [caused] confusion and discontent [and] retarded much employment that would have been to benefit and comfort [of the settlers].
Some went to work for the Indians, cutting wood and fetching water in exchange for a “capful of corn.” Others starved.
Finally, the colonists abandoned central financial planning and collective production. Families were given individual plots of land, which they were able to cultivate for themselves. The colony was saved.
“This had very good success,” Bradford wrote, “for it made all hands very industrious.”
Still today, there are no shortcuts or tricks: You get richer by working harder, saving more and improving productivity.
But the feds in all the major economies have unlearned hundreds of years of painful lessons.
Most new initiatives from government reduce the incentive to work and increase the rewards for not working. Not surprisingly, this results in fewer workers and more zombies.
You’ll remember our definition of a zombie: someone who lives on the output of others. Well, they are multiplying fast.
A November 2014 study from the Congressional Budget Office concludes that 60% of all US households now get more in transfer payments from the feds than they pay in taxes.
The zombies vote. What do they vote for?
Although one out of five US households pays about $46,000 in taxes, net of transfer payments, three out of five end up ahead by about $10,000 each.
When you take what they get from the government and deduct what they pay in taxes, you end up with about $10,000.
Between 1988 and 2011, the percentage of the public that has been zombified by government transfer payments increased 62%. That leaves about 86 million full-time private-sector workers paying taxes… and 148 million on the receiving end.
There are more than 100 million people in some kind of federal welfare program, 64 million on Social Security, 54 million on Medicare and 70 million on Medicaid.
Since 2000, the rolls for food stamps increased by 17 million – bringing the total to 46 million.
Not surprisingly, as it became easier to live by the sweat of someone else’s brow, the number of people still schlepping, busing and toting fell.
Of Americans between 16 and 54 years old, the percentage with jobs has recently fallen to levels not seen for 30 years (when fewer women were in the labor force).
Today, the ratio of non-working people of working age to working people is almost 1:2.
And the number of people on disability has soared. There were 51 working Americans to support every disabled person in 1968. Today, there are only 13.
And those few stagger under the weight of so many zombies; they earn less than they did in the disco era.
Social Security numbers show that half of American workers made less than $30,000 in 2013. Almost three-quarters made less than $50,000.
This economy – growing at about one-third the rate of previous decades – is the one that has been improved by the feds’ fiscal and monetary policies.
Imagine the unimproved version!
Further Reading: Despite Bill’s distaste for Social Security, most Americans need it. And if you want the biggest payout, former Reagan economic adviser and Harvard PhD Dr. Laurence Kotlikoff spells it out in his bestseller, Get What’s Yours: The Secrets to Maxing Our Your Social Security.
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Slowest Growth in China Since 2009
|by Chris Hunter, Editor-in-Chief, Bonner & Partners|
China is slowing down…
Yes, the Shanghai Composite Index is up 70% since Beijing starting cutting interest rates last November.
But a bunch of data released yesterday confirmed that the big rally in Chinese stocks lately has nothing to do with economic good news.
Even by the official reckoning, China just had its slowest quarter of real GDP growth since 2009.
And industrial output grew by just 5.6% in March from a year ago – the slowest rate of growth since November 2008… in the depths of the global financial crisis.
And most worrying in a country where real estate investment accounts for about 15% of GDP growth: Sales of properties developed by China’s real estate companies plunged 9.3% year-on-year during the first quarter.
That compares to the 9% of US GDP real estate construction accounted for at the height of the subprime mortgage bubble in 2006.
Fortunately for China’s stock bulls, the loss of economic momentum puts pressure on the People’s Bank of China to come up with more monetary stimulus.
And stimulus – not economic growth – appears to be what Chinese stock investors crave the most.
P.S. Stocks go down as well as up, as investors in China could be about to find out. If you’re worried about how a market downturn will affect your retirement investments, protect yourself by getting every cent the government owes you in Social Security payments.
Get What’s Yours: The Secrets to Maxing Our Your Social Security is available toDiary readers at the discounted rate of just $9.97 with this special offer.