Farewell Welfare in Retirement — Part One

Is ‘welfare’ a Latin interplay for ‘fare well’? Many on social security age pension, unemployment benefits, disability payments, etc. would argue very strongly that they do not fare all that well on the taxpayer funded payments they receive.

The term ‘taxpayer funded’ has been used deliberately. Most people define and describe social security as a government payment. But Government does not generate revenue; it’s a tax collector and redistributor. The following is an extract from the 2014-15 budget papers showing just how much tax the government collects.

By the year 2017, over 50% of the tax collected is earmarked for health and welfare spending. An ageing population comes with a tax cost. With wave after wave of baby boomers waiting to receive their gold watches, the largesse of future (and as yet unborn) tax payers is going to be…taxed (pardon the pun).

Boomers who are expecting the social security and health care status quo to be maintained should have a real cold shower — the numbers do not add up.

Boomers are a spoilt lot. I should know; I am one.

We’ve had a relatively charmed life — free tertiary education, affordable housing in our younger years, access to a variety of employment opportunities, rising asset values (shares and property), travel opportunities, access to a first class health system, inheritances courtesy of frugal parents.

Compared to our parents, we boomers have had a dream run — no Great Depression or World War to live through.

The absence of genuinely hard times (in economic terms) has led to complacency. Hyman Minsky’s Financial Instability Hypothesis determined that ‘stability leads to instability’. This is the academic way of saying familiarity breeds contempt.

If asset values rise each year, the stability in price action leads people to believe this constancy will continue forever. In effect, every year another deck is added to the house of cards. The longer the house of cards remains upright, the more decks will be added (and at a more frenzied pace).

The irony is that the more stable the original foundation (due to fear severely discounting values), the greater the number of upper decks likely to be added in the later years of greed.

Read the rest of this article at The Daily Reckoning