How much can the American worker shoulder?

As this entry is being typed, Congress is overriding King Bush II’s veto of the $300 billion farm subsidy bill. All of the money is going to be collected from working Americans and (a little bit) handed out to the poor via food stamps and (a lot) handed out to millionaire farmers. This made me wonder how hard the average American is going to have to work for the next five years. Let’s look at some major items that primarily benefit those who don’t work…

  • $300 billion farm handouts
  • $1.4 trillion($250 billion per year and growing) for Medicare (health care for those over 65)
  • $1.6 trillion ($300 billion per year and growing) for Medicaid (health care for poor Americans)
  • $500 billion, estimated remaining cost of our effort to make Iraq safe for Iraqis (some estimates and comparisons to previous wars)
  • 13 percent of wages for Social Security, includes employer-paid portion (Social Security is billed as a savings program, but it is really pay as we go and depends substantially on taxes from current workers)
  • about 1 percent of wages to pay for all the people in prison (roughly 2 percent of the working age population)

We have approximately 150 million workers in this country. Running the numbers, over the next five years, each of those workers will have to generate more than $25,000 plus 13 percent of wages. An employer of American workers would therefore have to pay at least $5,000 per year per person just to enable that person to pay enough taxes to cover farm subsidies, health care for the old and the poor, and our misadventures in Iraq. Then the employer would have to pay another 14 percent on top of whatever else was being paid to cover Social Security and prisons.

Given that a fairly well educated worker in China can be employed for $5,000 per year, it is tough to understand how the American economy is sustainable unless we believe that our workers are vastly better educated than Chinese workers.

Let’s not forget that the working slobs are soon to be taxed another $1 trillion to bail out real estate and mortgage speculators (higher end of Standard and Poor’s estimate of the ultimate cost to the taxpayer).

The prevailing wisdom at the New York Times (editorial) seems to be that our economic future will be assured if we start selling houses to each other at ever-higher prices.  All we need to do to grow our economy is build more and larger houses and sit inside them watching big-screen TVs that we import from Asia, occasionally getting up to drive our imported car to the supermarket to buy more chips and beer, stopping on the way home to fill up with imported oil.

Given all of the burdens that the American worker has to shoulder compared to his counterparts in younger countries, could the truth be a lot more frightening?  Might we have to work harder?  Study at night instead of watching TV?

18 Comments

  1. Omar

    May 22, 2008 @ 7:47 am

    1

    The crazy part about your farm subsidies (I’m Canadian and directly tied to the farming industry) is that the money passes through to the land owners. Farmers compete for land rentals/purchases, and subsidies just drive up the rental/purchase cost. Of course some farmers are also land owners, so they benefit once they sell.

    That said, even farmers who are adamantly opposed to the subsidies will claim them. If a program is available, they need to use it to remain competitive.

    In the big picture, I’m really hoping your economy is in better shape than it appears from the outside. With the deficits and unfunded liabilities, your future taxpayers are being hit with huge bills before they are even born. Talk about taxation without representation!

  2. K

    May 22, 2008 @ 11:59 am

    2

    Also, (I don’t have the link now), there was a report that the average California family pays $1000/year to subsidize illegal immigrants.

    Another key statistic is that the median household (not personal) income in the US is $48k.

  3. Russil Wvong

    May 22, 2008 @ 1:45 pm

    3

    Gareth Morley, writing on INROADS-L (a Canadian mailing list):

    “… By 2020, most of the Baby Boomers will be out of the active workforce and will be heavy users of medicare and other defined benefits of the welfare state.

    “The point is not to panic and make changes to our system that make it less cost effective. The point is that we have fixated on the fiscal surplus/deficit when we should be focusing on the actuarial deficit implicit in our current system of benefits and taxes. As Paul Krugman put it, we (in all the Western countries) are like a professional couple in their fifties: we are not planning adequately if our incomes barely exceed our expenditures, let alone if we are actually borrowing money.”

    The US has two big challenges ahead of it: (1) close the fiscal deficit, which will require both cutting expenditures (currently 37.4% of GDP, according to the OECD) and raising taxes (currently 34.6%); (2) plan for the rising cost of Medicare (Social Security isn’t so much of a problem). Obviously, the reflexive Republican clamor for tax cuts, and the Bush administration’s pandering to them, will make dealing with these challenges much more difficult. (The public debt will be more than $5.5 trillion when Bush leaves office.)

    That said, annual US GDP is more than $13 trillion, so I don’t think these problems are unsolvable.

  4. PaulS

    May 22, 2008 @ 2:30 pm

    4

    A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.
    Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.

    Author (s) unknown,

    Certainly seems the direction we are headed……………

  5. J. Peterson

    May 22, 2008 @ 4:07 pm

    5

    You might as well include interest on the national debt in your calculations. Isn’t that where something like 20% of your tax bill goes?

  6. Daniel Lee Taylor

    May 22, 2008 @ 4:13 pm

    6

    Government spending and regulation has long been out of control in the U.S. I don’t know how we can rein it in. We effectively have a two party system, and both parties spend beyond our means while regulating us to death. Because we have only two choices, voters are stuck with choosing higher taxes and spending (Democrats) or higher debt and spending (Republicans). We can punish a politician for higher taxes by firing them in favor of one who goes for higher debt. Or we can punish a politician for greater debt by firing them in favor of one who goes for higher taxes. But we can’t actually punish anyone for higher spending because they all do it. We can’t fire a big spender for a candidate who is not because no such candidates exist. So there’s no real way to send a signal to Congress to stop spending.

    The presidential race illustrates this. All three are big spenders. Whoever wins the dust up between Obama and Clinton, we will end up with two choices: big tax and spend or big debt and spend.

    We can write letters and make phone calls, but at the end of the day politicians will do whatever it takes to get elected. And big spending is a sure bet, or at least it appears that way since voters never even have the chance to vote for limited spending.

    Between this and our self imposed energy crisis, I firmly believe that we’re in trouble. And I don’t know how to change it without firing everyone in Congress. With our two party system, that’s not going to happen any time soon.

  7. Darwin

    May 22, 2008 @ 5:51 pm

    7

    And to top it all off there is not one of the remaining three presidential candidates with a clue on how the problem can or could be fixed. The country is heading full bore to internal implosion from the vacuum created by the greenies and other environmentalists. They want the entire economy to screech to a halt.How, by lobbying to prevent exploration and development of energy resources which this country has in plentiful supply! We have an abundant supply of intelligent people also, but because they are intelligent would not touch our political system with gloves on. Don’t blame them either.

  8. K

    May 22, 2008 @ 7:33 pm

    8

    To further Daniel Lee Taylor’s comments, while no government spending is free, it is clear that some spending is worse than others.

    Within the last 2 years or so, someone published that in the us “we spend 7 times more on our past than our future,” where “our past” is old non-working Social Security and Medicare recipients, and “our future” would be children. The cost-effectiveness of public schools is not the greatest, but one can at least make a theoretical argument that “investing in education” is a good idea. In contrast, King Bush II’s “Medicare prescription drug benefit” was a new and spectacularly expensive giveaway to old people at the expense of those of us who have to pay their debt.

    Similarly foolish “strategies” seem to apply to other government spending and strategic priorities, i.e., enhancing the incentives in the FIRE (finance, insurance, and real estate) sector while abandoning the manufacturing base. As if a nation has ever grown wealthy or stayed competitive by abandoning technology and tradable goods manufacturing in favor of putting sticks in the ground and selling said piles of sticks at increasingly multiplied prices.

  9. Stu

    May 22, 2008 @ 8:12 pm

    9

    The tragic part of this is that the majority of this money is going towards lining the pockets of global corporations. Every rule, every law, every litigation favors them. They are allowed to profit at the expense of human suffering. The stronger corporations are allowed to destroy the weaker ones. For example, the king of them all, the oil industry, is allowed to rake in obscene profits while airlines, car makers and just about every citizen on the face of the earth pays dearly.

    You can thank the oil companies, the pharmaceutical companies, the insurance companies & the politicians that pander to them. Instead of making these corporations pay their way, the government passes that expense along to the middle class…which is slowly disappearing.

    Government and Big Business are one in the same. The farmers and the mortgagors are simply next in line for their hand out.

  10. Mark

    May 22, 2008 @ 10:34 pm

    10

    Phil,
    As a lifelong farmer (part-time) I can tell you that the vast majority of subsidies paid to farmers in southern states are not going to multi-millionaires who own tens of thousands of acres. Quite the opposite, actually.
    I’d suggest actually looking at the state by state breakdowns. They are easily found online. Sure, there are the small percentage of landowners who collect subsidies from their huge land holdings. So what? Do they not deserve the same proportions based on acreage that the small farmers receive?
    We watched tobacco lose it’s price supports a few years ago and the industry is doing just fine. So if you’d like to know what I think, I say end them all. But again, the farm subsidies are very widely dispersed.
    PS
    From what i read, the “bailouts” do not take care of real estate speculators.
    The NYT has know to be a bit, shall we say, “liberal” in it’s assessments of all things Bush. :)
    Regards,
    Mark

  11. Daniel Lee Taylor

    May 23, 2008 @ 1:30 am

    11

    I have to disagree with Stu regarding the oil companies. They didn’t create $135 a barrel oil. The U.S. Congress did. The amount of U.S. oil which is off limits to production is greater than the currently booked reserves of the middle east. That’s including non-conventional sources (shale), but even if we just look at conventional oil the U.S. has placed the equivalent of half of Saudi Arabia’s reserves off limits to production. We’re the world’s #3 producer of crude. If we place massive fields off limits to production, it drives the price up for everyone.

    It’s basic supply and demand. If you make a commodity rare, the price will go up, and the people who produce and sell that commodity will make more money. We just witnessed the same event in the global food market. The U.S. government subsidized ethanol production, this pulled land away from food production, and global food prices went up. Should we blame farmers for their “obscene” profits? Or blame our ignorant leaders for all the harm they are causing not just at home, but across the globe?

    I’m serious when I say we need to fire Congress, but I don’t know how.

  12. dominik

    May 23, 2008 @ 10:58 pm

    12

    Out of curiosity, have you read Ron Paul’s book, The Revolution: A Manifesto? From reading the last few months of blog posts, it seems like it might be a book you’d greatly enjoy.

  13. philg

    May 24, 2008 @ 2:19 am

    13

    Dominik: As a Massachusetts voter I don’t feel that I need to invest a lot of time in looking at political candidates. Incumbents always win and Democrats always win. So I had not even been to Ron Paul’s Web site until just now. If he wants people to read his book, he should put it on his site! I think that only Barack Obama’s stories are inspiring enough to inspire mass purchases (though as noted in an earlier posting, Obama’s stories are not of prevailing in the face of white prejudice, but rather of more or or less sailing effortlessly up through all the ranks of American society).

    This Paul guys looks like he should be a good candidate. He served in the military. On the other hand, instead of marrying a rich babe (Kerry/McCain) or inheriting wealth and connections (King Bush II), he seems to have worked for a living as a medical doctor. For some reasons Americans don’t seem to like that.

    I guess he has been tainted with the brush of unrealism. Ronald Reagan tried to eliminate the U.S. Department of Education, pointing out that they educated no children and actually had no goals to accomplish in exchange for the billions of dollars of taxpayer money. He failed. Now mainstream Americans believe that somehow they can’t live without the U.S. Department of Education (which still basically has no function; their Web page says that they spend $69 billion per year to collect data and “focus national attention” (you could probably focus a lot more attention at much less cost by hiring Britney Spears or Paris Hilton to talk about whatever it is that needed saying).

    If we can’t get rid of the Department of Education there probably is no federal function or spending program that we have the political will to eliminate. Our only hope is to try to grow the number of taxpayers faster than the salaries and pensions of bureaucrats and that seems to be what we’re attempting, mostly through immigration.

  14. dominik

    May 24, 2008 @ 12:51 pm

    14

    Regarding our political will (or lack thereof), you’re probably right, though I hope you’re not.

    Sadly, the book is not available online (I wish it were!), apart from the preface, which I quote here:
    “Every election cycle we are treated to candidates who promise us “change,” and 2008 has been no different. But in the American political lexicon, “change” always means more of the same: more government, more looting of Americans, more inflation, more police-state measures, more unnecessary war, and more centralization of power.

    Real change would mean something like the opposite of those things. It might even involve following our Constitution. And that’s the one option Americans are never permitted to hear….

    With national bankruptcy looming, politicians from both parties continue to make multi-trillion dollar promises of “free” goods from the government, and hardly a soul wonders if we can still afford to have troops in – this is not a misprint – 130 countries around the world. All of this is going to come to an end sooner or later, because financial reality is going to make itself felt in very uncomfortable ways. But instead of thinking about what this means for how we conduct our foreign and domestic affairs, our chattering classes seem incapable of speaking in anything but the emptiest platitudes, when they can be bothered to address serious issues at all. Fundamental questions like this, and countless others besides, are off the table in our mainstream media, which focuses our attention on trivialities and phony debates as we march toward oblivion.

    This is the deadening consensus that crosses party lines, that dominates our major media, and that is strangling the liberty and prosperity that were once the birthright of Americans. Dissenters who tell their fellow citizens what is really going on are subject to smear campaigns that, like clockwork, are aimed at the political heretic. Truth is treason in the empire of lies.

    There is an alternative to national bankruptcy, a bigger police state, trillion-dollar wars, and a government that draws ever more parasitically on the productive energies of the American people. It’s called freedom. But as we’ve learned through hard experience, we are not going to hear a word in its favor if our political and media establishments have anything to say about it.

    If we want to live in a free society, we need to break free from these artificial limitations on free debate and start asking serious questions once again. I am happy that my campaign for the presidency has finally raised some of them. But this is a long-term project that will persist far into the future. These ideas cannot be allowed to die, buried beneath the mind-numbing chorus of empty slogans and inanities that constitute official political discourse in America.

    That is why I wrote this book.”

  15. philg

    May 24, 2008 @ 3:59 pm

    15

    Okay, I like this Paul guy less than Richard Nixon circa 1960. Nixon calmly pointed out that low taxes generate economic growth and that citizens could spend money in ways that were more efficient than the way government was likely to spend it.

    Paul claims that we aren’t free. By biblical standards, he is right (“slavery” in the old days was having to pay a 20 percent income tax). But the New York Times and other mainstream media continuing to advocate for higher taxes and more government spending does not equal “police state”.

    If the picture were as bad as Paul paints it, Americans might indeed vote for some new rascals. I think the problem is that we can muddle through on the strengths of our infrastructure and the great piece of land that we stole from the Indians. Despite Iraq, our entitlement programs, and the spectacular inefficiency of government at all levels, we aren’t going to go bankrupt. We will only have to find people from poor countries who want to come here and pay taxes because they think that their kids will be better off.

    The end of the U.S. Empire doesn’t look like the collapse of Rome. It looks like modern day China, with a huge number of people packed into a small and degraded physical environment. It is a young person moving to a city to find a job and sharing a 2BR apartment with 7 others. It is congestion on roads, public transit, sidewalks. The “high growth” prediction by the U.S. Census Bureau shows a U.S. population of 500 million by 2050. That would be an unrecognizably crowded nation for an American who grew up in the 1950s.

    Paul complains of “artificial limitations on free debate”, for which his main evidence is that people don’t listen to him. I think the sadder truth is that debate is not artificially constrained. It is simply that most Americans care less about what their country is going to look like in 2050 than whether they can afford to trade in their SUV for a slightly larger one. So a major expense today, whether for a foreign war, handouts to millionaire farmers, or public employee pensions, is not upsetting as long as we can borrow the money and stick an immigrant circa 2020 with the payments.

    Ron Paul is asking people who couldn’t think beyond three years when they signed their adjustable rate mortgage on a real estate speculation to think out to the year 2050.

  16. philg

    May 24, 2008 @ 4:00 pm

    16

    On the “change” front, Jay Leno said that Barack Obama was speaking at a campaign rally promising “change” and exhorting the assembly to “take back the country.” Leno said that he found it a bit worrisome that he was saying this on an Indian reservation in Montana…

  17. patrick giagnocavo

    May 26, 2008 @ 10:27 am

    17

    The one thing that you haven’t mentioned are our natural resources. I predict that offshore drilling and ANWR development is going to look a lot more attractive to old enviro-weenie hippies once the link between getting a new hip replacement for free from the government, and getting royalty payments from Shell and Exxon, is made more explicit.

  18. Ryan

    May 26, 2008 @ 7:13 pm

    18

    K, If illegal immigrants cost me just $1k per year that’s a bargain (as a CA resident). Without them, the cost of fruits and veg would go up, wine would cost more (who picks the grapes?), many restaurants I eat at would be more expensive due to rising food and labor costs (dishwashers!), my local tourism industry would want badly for cleaners, govt shortfalls would worsen due to lack of incoming soc sec, income and sales tax…

    And you don’t have to believe me, thanks to the govt.’s immigration clampdown much of this has already started to happen, just read the local paper.

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