Demographics and the End of the Savior State (May 17, 2010)
Germany is well down the path to national insolvency--a path shared by all developed nations attempting to fund unsustainable Savior States.
That the Savior State appeared sustainable was an accidental coincidence of cheap oil and favorable demographics. The notion that a central government could provide cradle-to-grave care for all its citizenry was only possible when the worker-to-retiree/recipient was on the order of 10-to-1 or 5-to-1. Now that it is effectively 2-to-1 in most of the developed world, the demographics have turned decidedly unfavorable.
Correspondent Michael M. submitted this report on taxes and demographics in Germany, the Eurozone's largest economy and the world's biggest exporter.
Regarding your article Why the Eurozone Is Doomed, I want to add some insights from myself growing up in Germany, and being still in close contact to friends during the time 1996 to 2007, when I lived in Switzerland.
Thank you, Michael, for a thought-provoking commentary on this critical topic.
We can conclude that whatever real growth (i.e. adjusted for inflation) Germany has experienced in the past 15 years, most of it has simply gone into the bottomless black hole of Social Security spending for an increasingly aging populace.
Germany is not alone in its demographics. One of the saddest images I retain from my first trip to Japan in 1992 was a rural school, abandoned for lack of students. While this might be attributed to the movement of young people from the countryside to the cities, it also reflects Japan's low birth rate.
Here in the U.S. the trends are just as irreversible. Though the U.S. maintains a "replacement" birthrate of around 2.0 live births per female, as unemployment continues rising then it's difficult to see how immigration can continue adding new taxpaying citizens: if there are no jobs, the incentive to come to America dissipates.
Medical costs continue climbing far faster than the population or GDP. Sickcare already absorbs some 17% of the U.S. economy, a staggering sum which rises 7-10% annually regardless of recession, "cost savings," new technology" and any other factor which is supposed to "save" the system.
This chart is a few years old and "official," so it reflects all sorts of hopeful extrapolations (GDP rises at 3% forever, etc.). From the present, we can already say the "crisis" foreseen in 2030 is already here: Social Security payroll taxes no longer cover Social Security costs.
Federal borrowing and debt are almost tracking this exponential curve:
As interest rates and crushing structural deficits rise, interest on the Federal debt will absorb half the Federal budget:
Medicare and Medicaid will soon take half the Federal budget:
Why the "Nascent Recovery" Won't Last (April 27, 2010)
So if interest takes half the budget, and Medicare/Medicaid take the other half, then what's left for Defense/global Empire? Zero. Social Security? Zero. Highways? Zero. Education? Zero. And so on: zero for any other spending.
There is simply no way to reconcile these numbers: there may well be fewer than 120 million people with paying jobs in a few years, even as retirees drawing Social Security and Medicare total 67 million people. Add in millions drawing Medicaid (for low-income residents without healthcare insurance), 40-50 million people drawing food stamps, millions of veterans and their spouses receiving Veterans Administration benefits, etc. and you realize the demographic pyramid has inverted: each worker will be carrying one recipient of Federal (Savior State) benefits.
That is unsustainable.
I have often addressed the decline of paying work:
End of Work, End of Affluence I: Cascading Job Losses (December 8, 2008)
End of Work, End of Affluence III: The Rise of Informal Businesses (December 10, 2008)
Endgame 3: The End of (Paying) Work (January 21, 2009)
For more on the perverse partnership of the financial Power Elites and the Savior State,
and the End of Work, please take a look at
Survival+: Structuring Prosperity for Yourself and the Nation and/or
Survival+ The Primer.
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