Saturday, June 15, 2013

Government "Help" Facilitates Middle Class "Learned Helplessness"

Throughout my life of nearly seventy years, government at all levels has grown in its influence and invasiveness. America has increasingly become a cradle to grave government dominated society.

As a result, that's made our country weaker and our people less self reliant and free to choose.

We're familiar with the negatives of the hand out versus the positives associated with the hand up approach to helping people.

And we all know too that 'conservatives' are heard to complain about government freebies which often work to encourage non-work among the recipients of those goodies. There's truth to all that.

So why do we choose more government? Well, the fact is that most of us tend to choose working only when it's more attractive for us to do so compared to the relative attractiveness of not working. That's just human nature --- at work. So if we make it "easier" to choose not to work, that's what we'll do. Not take "bad" jobs, work less, save less, retire early and so forth.

But my problem is that government is unintentionally fostering "learned helplessness" among the majority of Americans with programs such as underfunded public sector pensions, Social Security and Medicare promises throughout "middle class" America.

So let's discuss briefly our growing dependence and underfunding of K-12 schools, college loans, Social Security, Medicare and now ObamaCare. What role should government play in our lives? And how much personal responsibility should future Americans assume for their financial health and "general welfare?" Don't we need to have a national debate about the long term nature of these programs and their effect on the long term well being of We the People as a whole?

I think we do. Otherwise we'll never come to recognize the simple fact that for each dollar of government deficits incurred by the taxpayers of today, there's an inevitable tax increase to be paid down the road by future taxpayers, including our kids and grandkids. In other words, deficits today equal tax increases tomorrow, assuming those deficits aren't related to investments creating future economic growth.

And the deficit and unfunded debt creating Social Security, Medicare and ObamaCare payments of today won't lead to future economic growth of tomorrow. They'll have just the opposite effect, in fact.

What brings this government dependency issue front and center for me at this time is the realization that Social Security is now a must and not a supplemental benefit for most Americans. And the realization that if we reduce the benefits anytime soon, we'd do great financial harm to the vast majority of our fellow Americans, since far too many of us have become virtually totally dependent on Social Security for our retirement income. It wasn't suppoed to be that way, but that's the way it's worked out.

But what about the future? Do we want to encourage and perpetuate this cycle of government dependence indefinitely and as a way of life for future generations? Or stated another way, do we want government to have vast power and control over our individual lives and those of our kids and grandkids?

In other words, won't we choose to trust ourselves to pick the schools our children attend (with vouchers, for example), decide how to invest our money for our retirement years (with individuals and not government deciding how to invest our and our employer's current payroll deductions and Social Security 'contributions") and empower individuals to select the amount and kind of medical care that we determine is best for ourselves and our families?

Or have we arrived at such a state of "learned helplessness" that we're willing to cede to the government the control of those matters? And even if we do, are we willing to have our kids and grandkids paying to fund the benefits to us that we didn't fully fund ourselves?

The truth is that the taxes we've been willing to pay have long been insufficient to pay for the American K-12 schools and colleges (including the public sector pension promises that are underfunded). And the underfunded amount is overwhelming for Social Security and Medicare promised benefits we've promised to ourselves, even if we set aside ObamaCare for now. And you can be sure that the poorly named "Affordable Care Act," aka ObamaCare, will be a much more costly proposition than we're being led to believe, too. Yes, we've run up quite a bill for future generations to pay. Why don't we stop?

You see, the simple fact is that in the end, somebody has to pay to fund the promises we make to ourselves but don't fund fully during our working years. That means we're sticking our kids and grandkids with the bills coming due down the road. And we're giving the current government knows best gang control over that future instead of preserving those decisions for future generations. That's what debt does, recognized or not.

But for the Grace of Social Security serves as an unintended advocate for this aforementioned learned helplessness approach for We the People and granting unlimited power to the government elitists to take care of "the helpless" as only government 'do-gooders' can do. Read on and see if you agree with me:

Protesters on December 10, 2012 in Doral, Florida.
Protesters on December 10, 2012 in Doral, Florida.

"Back in the 1980s and 1990s, when it was still possible to believe that steady investments in 401(k) plans would lead to a comfortable retirement, the notion took hold that the best way to pay for old age was to leave your tax-deferred plan untouched for as long as possible, allowing it to grow into a formidable nest egg.

It still makes sense to save as much as you can during your work life. But the idea that you should hold off breaking into your account even after you’re retired no longer makes sense for most people, if it ever did. 401(k)s have largely failed to generate sums anywhere near sufficient for secure retirements. Long stretches of wage stagnation, high unemployment and widespread underemployment have made it impossible for many people to save for tomorrow while surviving today, and serial stock market busts, repeated financial crises, high fees and prolonged low interest rates have devastated what savings many people had.

Today, less than half of households aged 55 to 64 have retirement savings, and of them, half have less than $120,000.

The reality of dismally low savings has turned conventional retirement advice on its head – and, in the process, highlighted the vital importance of Social Security.

A recent research paper from the Center for Retirement Research at Boston College shows that, today, the best deal for many people with modest 401(k)s is to live off those low balances in the early years of retirement and to delay claiming Social Security. That’s because monthly Social Security benefits are higher the later benefits are claimed.

You get bigger benefits at your full retirement age — 66 for people born from 1943 to 1954, rising to 67 for people born in 1960 or later — than you do if you claim them early.

In addition, for each year you delay taking benefits beyond your full retirement age, up to age 70, you earn a bonus.

Monthly benefits are 8 percent higher if claimed at age 67, rather than age 66, and 32 percent higher if claimed at 70. For example, if your monthly benefit would be $2,000 a month if claimed at 66, it would be $2,160 at 67 and $2,640 at 70.

That’s an attractive return in any case, and especially now, when interest rates are at rock bottom.

What is truly stunning, however, is that retirement experts are saying that the best use of modest retirement sums is to spend them in the near term, in effect buying time for one’s Social Security benefit to grow.

There is a larger lesson in that: If Social Security is strategically important for those with 401(k)s, it is obviously indispensable for the majority who have little or no retirement savings. Benefits need to be preserved and enhanced, not cut."

Summing Up

The long term solution must be a choice between dramatically higher taxes during our working years or the assumption of greater personal responsibility for our financial retirement needs.

If we choose the dramatically increased taxes route, we're admitting that we want more government in our lives and that government bureaucrats will do a better job investing our MOM than we will.

Either that or we're willing to burden future generations with paying for the promises we've made to ourselves in order to fund our retirement years.

I strongly believe this prevailing attitude and approach must change and that we must choose the road leading to greater personal responsibility and control of our own lives and well being.

We have too much government "help" already.

What do you say?

Thanks. Bob.

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