The US Entitlement State is Not Sustainable
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The US government’s entitlement programs: Social Security and Medicare, down to food stamps and spending on the arts are closing in on 70% of our spending. Add in interest our increasing debt, and very little of what the government spends money on goes to governing our country
The problem? It is not sustainable.
And even with the pro-business policies of President Donald Trump in play, it will not change anytime soon.
Getting the country back to work is important.
Change starts at the top, and President Trump a light years ahead of Barack Hussein Obama on the issue. But, there are headwinds to meaningful change.
One of the biggest is institutional resistance to change.
Bureaucrats, and even many elected officials who do not like where the wind is blowing do not want to give up power. Of the two groups, bureaucrats are worse. They are un-elected, largely answer just to immediate supervisors, and have no incentive to care for government reform unless it gives them more power, not less.
Consider the Supplemental Nutrition Assistance Program, aka food stamps.
Food stamp usage more than 2X’d in the past 10 years, as millions were thrown out of work entirely or ended up in lower paying jobs and needed help to make ends meet.
In the Great Depression, we had bread and soup lines.
Now we have plastic cards to swipe that look like a credit or debit card. It’s a significant problem, but the government has made it a well-hidden one.
President Trump’s budget proposal cuts $200-M off the program. But that’s only a 25% reduction. And it’s not even a real cut, it is a decline in growth of future spending. That is what they call a cut in Washington, DC.
So, if President Trump gets his “cut” in, the program will still be bigger than it was 10 years ago, and will likely simply continue growing in size from the lower cut.
We are already hearing outcry from the bureaucrats. And the media is coming with stories about children starving in the streets.
The biggest issue is the concept of entitlements is the notion that the world owes you scare economic resources without having to pay for them in everything from food to housing to healthcare.
While many of the country’s entitlement programs involve some payouts now for a payback later, like Social Security and Medicare, they are not sustainable without a growing population of younger workers supporting small number of beneficiaries.
But our country has gone from 40 workers per retiree to just about 2, that thanks to aging demographics. And we are just starting with the retirement of the Baby Boomers, that will be painful.
The Big Q: Can President Trump save things?
The Big A: Maybe.
He thinks boldly, and outside the traditional political boxes. That’s a good thing for making meaningful change, whether you agree with his politics or not.
Donald Trump turns things to Gold, the US government turns things to junk like the 2 examples below:
- US Government run housing has created some of the worst ghettos in history.
- US Government involvement in healthcare has caused a big spike in costs.
President Trump can cut here and there, but The Swamp will drain his energy not the other way round.
In this country, the older an industry gets, the more it is saddled with regulations, until only a few names operate.
Consider the airlines.
The profitability of US firms is dominated by one factor alone: the government will not let foreign airlines fly domestic routes, drastically limiting choices for consumers
Fares remain cheap, but airlines have figured out how to charge extra for just about everything. As a result, the airline companies look like capitalist organizations, but they’re regulated so much they are really a utility.
In the meantime, the best way to avoid catastrophe is to invest in what few pockets of innovation are left.
It’s no surprise that investors are scrambling into high-tech companies like Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Facebook (NASDAQ:FB), and Amazon (NASDAQ:AMZN).
Whether innovative companies succeed or fail, they still have the flexibility to do something different and with fewer burdens along the way until they are really successful.
And when companies stop being successful, others will take up the leadership.
Investing in innovative companies with the fewest regulatory burdens gives one the best chance for huge returns over time. Investing in utility stocks will give you more predictable, but far lower, returns.
America leads the world in innovation for now and into the future. But, we are going down the path as Europe has gone into socialism.
America was born to be different. But the temptation of government to providing something for nothing has grown too great, and the entitlement mentality is destroying America.
If it is not reversed America will die. It is in the Book