Freedom vs. Anarchy

Freedom vs. Anarchy
posted 10 hours ago by Angelica Wolf   [ updated 10 hours ago ]
In the last couple of months, we have all witnessed the spectacular protests being held under the "Occupy" movement. The movement is made up of disparate groups that have come together to protest what they feel is an unfair government that favors rich over poor, big business over labor and a host of other grievances. In fact, it is at times difficult to know what their real goals are, as interviews conducted with various protestors seem unable to clarify an overriding cause or objective. While they have had trouble putting into words what their goals are, we have been able to witness the actions of this crowd and from that we can glean what is at the core of the movement - anarchy.

Anarchy is defined* as:

1. Absence of any form of political authority.
2. Political disorder and confusion.
3. Absence of any cohesive principle, such as a common standard or purpose.

Over the past several decades, there has been a persistent effort in our country and throughout much of western culture to reject all authority. It started in earnest in the 1950's with the anti-establishment movement, accelerated through the Vietnam era and really took root in colleges and universities during the late 60's and early 70's. In 1966, Ronald Reagan, as then governor of California, gave a speech warning about how radicals were using colleges and universities to recruit young people to their cause. He quoted a California university professor as saying, "I think we agree that the revolution is necessary and that you don't conduct a revolution by attacking the strongest enemy first. You take care of your business at home first, then you move abroad. Thus we must make the university the home of the revolution." Since that time, there has been a consistent message of radicalization being poured into the minds of impressionable youth. 

When I attended school in the 1980's, these efforts were still somewhat marginal. Today, they are right out in the open and in your face. A prime example of this is the recent comments of a Suffolk University Law professor who said US soldiers were those who go to other lands to kill people. Never mind that our country's soldiers have freed more oppressed people than any other nation in history. Never mind that we saved Europe from Nazi domination. Forget about the fact that our military stopped the Soviets from spreading Communism throughout the free world and eventually, freed even those living under the hammer and sickle themselves. Never mind that western-style democracy has lifted more people out of poverty, ignorance and bitter infighting and increased the standard of living more than any other political ideology. It is a concerted effort to distort and rewrite history so as to take advantage of the ignorant and misinformed. But to what end?. Are we to believe that those who promote anarchy and a complete "throwing off" of government have no greater ambition than social justice? And how will they achieve that social justice they speak of? 

History has given us many clear examples of how these movements achieve their goals - at the end of a gun. The first thing they do is terminate all dissenting opinion with prejudice. All those who might be able to sway public opinion are marginalized, jailed and even murdered. The free press is dismantled and state-run media is installed in its place. This allows the new government to ensure a consistent message to the people - one which promotes the new government and leadership, of course. The armed forces must also be controlled, or else a military dictatorship may rise up and overthrow the new government. Individual freedoms are taken away one by one. The freedom of speech, the right to assemble, the right to own firearms, freedom of religious expression, the ability to move about freely - all gone in a short period of time. Soon, the government tells you what kind of work you must do, where and if you can go to school, where you must live, how much you can make, etc. Every aspect of your life becomes controlled by the state in order to ensure "Social Justice". Freedom becomes a thing of the past.

Today, our youth are taught that Freedom and Anarchy are the same thing. They are taught that freedom is being able to do whatever you want, whenever you want. But is this true freedom? What if I want to shoot my neighbor's dog because it sometimes barks at night? What if I want something you have and I am strong enough to take it? What if I don't want to participate in taking care of the nation's infrastructure and I simply refuse to pay taxes? What if I don't feel like hauling my trash to a proper place of disposal and instead just choose to dump it on the side of the road? What if I don't feel like obeying traffic laws? Is my ability to do whatever I want the true test of freedom?

I would submit that real freedom is liberty with responsibility. It involves understanding that every choice I make impacts others around me. It means I must temper my decisions with the knowledge that others will be affected and I must strive for a positive personal outcome that will not harm others. Anything less is short-sighted. If I harm you by my choices, you or someone else will do the same to me. Social order devolves into chaos. Only the strong can survive. The weak are preyed upon by the strong and moral leadership is replaced with schoolyard bullies. Individual liberties are lost and remain so until enough people rise up to throw off the brutal regime. Our founders understood this completely. In 1798, John Adams, in a speech to the military, warned "Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." Benjamin Rush, one of the signers of the Declaration of Independence, said "...without virtue there can be no liberty, and liberty is the object and life of all republican governments." These men and many others understood that freedom can only flourish in a moral environment. We must be willing to rule our own passions and exercise self-control if we want a society that is just and truly free.

Liberty without responsibility is not freedom. It's called narcissism.

© 2011, Angelica Wolf

Website: www.TheAngelicaW.com

Follow me on Twitter @TheAngelicaw

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EnoughisEnoughDC@hotmail.com


Definition of Anarchy courtesy of "The Free Dictionary" by Farlex. http://www.thefreedictionary.com 

The Virtue of Intolerance

Over the past few decades, brave men and women have fought difficult and dangerous battles for freedom and equality in America. These include the civil rights movement, women’s liberation, gay rights, and more. Across our nation, average people have picked up the mantle of freedom and through non-violent expression challenged the status quo to advance the cause of human freedom. It is one of the characteristics of our great country that the majority will fight for an oppressed minority both here and abroad.

Unfortunately, as we have striven to become more accepting and tolerant of those with different cultures, religions, lifestyles, points of view, etc. we have established a culture of political correctness which blinds us to many changes in our society that threaten to undermine the foundations upon which our country has flourished.

We have allowed a pernicious culture of drugs and alcohol to completely overwhelm our youth. As early as grade school, boys and girls are being exposed to marijuana on a regular basis and many take up the habit as early as 9-10 years old. We are told that whether someone uses drugs is simply a choice but what choice does a child have when the use of drugs is glorified in popular music, television shows and movies? When the pushers send their gang into a school and they put massive pressure on kids to try the drugs or be labeled as an outcast, what choice do they have?

When society idolizes someone like Paris Hilton, whose major contributions to our culture are a sex tape, being photographed leaving parties wasted and multiple arrests for drug possession, is it any wonder that our youth would try to emulate her behavior? Not only does she objectify herself so she can make money and attain popularity, she creates an image in the mind of impressionable young boys of what an ideal woman should be. She might claim she is just living her life and having fun but she is selling herself and her image for a profit.

When the most popular shows for teens include drivel like The Jersey Shore, what does that tell us about character quality of our young adult population? The characters basically go from one boozed-up, sexed-up, drugged-up encounter to another while displaying a level of narcissism rarely seen outside of television. All this so teens and young adults can learn how to become better predators.

When college-age youth “occupy” parks, sidewalks and bridges in major cities to rail against the very form of government and free-market based capitalism that has provided them with the highest standard of living in the world, what does this say about the priorities of the next generation? When they dare to equate the worthiness of their “cause” to the struggle of previous generations (such as those who fought against Hitler and his goal of global fascism) it reveals how infantile and selfish their cause truly is. How can they possibly lead this country to a brighter future?

When millions cross our borders illegally each year, use our hospitals, schools, public services, infrastructure and more at our expense and face no penalty as a result of doing so, how can we not go bankrupt? When our government refuses to enforce the immigration laws currently in place or for that matter, any law they happen to disagree with, how can we stop from sliding into eventual chaos?

When the CEO’s of public corporations raid the company for ridiculous compensation and bonus packages and then kick tens of thousands of employees to the curb during the next economic downturn, what does that say about the morality of business leaders in our country. When they place themselves above the shareholder, the employee and the customer and are rewarded for doing so, how can capitalism survive?

When the high-frequency traders and hedge fund managers treat our stock market as a casino and profit from volatility that they themselves often create, how can the average investor continue to have faith in our markets? When investors have finally had enough and eventually take their money off the table, how will businesses get access to the capital they need to grow? How will workers prepare for retirement if they only invest in fixed-income assets? Why haven’t the SEC and FINRA lived up to their mandate to protect “fair and orderly markets”?

When our politicians exempt themselves from the same laws that indicted Martha Stewart for insider trading and led to her spending some serious time in jail, what kind of message does it send to society? Many members of the House and Senate go to Washington as struggling lawyers and even semi-successful business owners but they rarely leave without becoming millionaires. They have made it legal (although it could never be moral) to profit from insider knowledge they have as a result of their position. This includes profiting from non-public information that would result in you or I being tossed in the slammer. They pass health-care laws that the rest of the country must accept, but give themselves a Cadillac plan that they get to keep for life at our expense. In 2011, members of Congress get paid $174,000/year plus benefits. While this is a healthy salary, it doesn’t allow one to keep a house back home and a nice apartment in Georgetown and still become a multimillionaire. Is it any wonder that the people have lost faith in our system of government and Congress’ approval rating is at historic lows?

When the President travels around the world apologizing for the United States and its “imperialistic” nature, what kind of message does it send to those who have seen America as the best hope for the continued freedom of mankind. If our own President does not believe in our country’s past and the exceptional nature of our Republic, what kind of message does that send to the enemies of freedom? How many have been emboldened by his lack of character and commitment?

Through the decades, America has made great advances in the name of tolerance. Yet today, we find that “tolerance” has been co-opted by those who advocate an “anything goes” society. All cultures and beliefs are not equal. Living in a post-modern world where the liberal elite promote the value (or lack thereof) of moral relativism has shown what happens to a society when it loses its sense of right and wrong. One has only to look at the riots in France, England and yes, even Oakland, CA to see where it all ends – in chaos. Young people running wild in the streets, tossing Molotov cocktails, burning buildings, destroying private property and assaulting the innocent. If we continue to let liberal progressives undermine our history, our sense of civic duty and our moral values, we will wake up one day and not even recognize the country we live in. We need to fight those who have used our schools as a breeding ground for amoral ignorance and disrespect for our great nation. We need to remove those in public office who have shown the ultimate disrespect for our country and are guilty of gross dereliction of their duty. We have to demand the removal of immoral business leaders who put quick profits over long-term profitability and a concern for employees, customers and shareholders.

What we really need today is a healthy dose of “intolerance.”

© 2011, Angelica Wolf

Website: www.TheAngelicaW.com

Follow me on Twitter @TheAngelicaw

Subscribe to my YouTube Channel: TheAngelicaw

EnoughisEnoughDC@hotmail.com

A "Virtuous" Cycle?

In business, there is a phenomenon known as “The Virtuous Cycle”. As an investor, I put my capital at risk to open a new company. I may manufacture a product or provide a service to my customers. I may hire additional workers and trade my money for their time and production to produce even more of a profit. I make a return on my investment that I use to buy goods and services that create profit for someone else. My employees use their paychecks to do the same. My customers purchase my goods or services. This frees them up from the labor required to produce these things and allows them to use their time more profitably. The cycle goes on and on. It is a virtuous cycle because everyone benefits – the investor, the employees and the customers.

When government begins to intrude into markets, the “Virtuous Cycle” is destroyed. A good example of this is the mandated production of ethanol and other biofuels here in the US. The Energy Policy Act of 2005 laid out a series of government mandates for the increased production and consumption of biofuels through 2012. The Energy Independence and Security Act of 2007 expanded these regulations and extended them for another decade through 2022. Both of these rules were passed by Congress and signed into law by President George W. Bush. We were told that the real reasons for passing these laws was to help reduce greenhouse gas emissions and create a more prosperous, energy-secure future for our country, help us make the transition from unsustainable fossil fuels to sustainable alternatives and create a cleaner world for our children. But is this actually the case?

Ethanol is produced from sugar crops. In Brazil, the world’s largest producer of ethanol, production is derived mainly from sugar cane or sugar beets. In the US, these crops do not grow effectively throughout much of the nation due to climate conditions. Instead, ethanol is largely produced from one of our staple food crops – corn. Corn is used in a wide variety of food products, sweeteners, preservatives, etc.  and is also one of our chief sources of livestock feed. Annual price variations in corn due to weather-related production losses, demand, disease and more can create a tremendous ripple effect that spreads across our economy. In addition, mandating large amounts of our crop produce to be used in alternative fuel production has had a similar effect. According to the Congressional Budget Office (CBO) the increased demand for corn to be used in Ethanol production between April 2007 and April 2008 caused prices to rise between .50 to .80 per bushel. This accounts for somewhere between 28-47% of the total increase in corn prices during that time. Other factors that impacted crop prices were increased global demand for meat (corn is a staple in livestock feeds), the devaluation of the US Dollar and weather-related crop concerns. During this year alone, corn prices increased from $3.39 to $5.14 per bushel. Demand for corn just to produce ethanol during this same time period was up by 43%. Unfortunately, the costs don’t stop there.

When corn prices rise, demand for cropland also increases. When the cost of land increases, all crop prices must increase. Other food crops are competing for the same arable land and higher land prices are reflected in the prices of these crops. As food prices rise, the Consumer Price Index (CPI) goes up. As the CPI rises, government benefits like Social Security, civilian and military pay are adjusted accordingly which creates higher government spending. Even federal assistance programs like SNAP (formerly Food Stamp Program), child assistance and WIC have to increase as well.

What about the promise of saving our atmosphere and reducing greenhouse gas emissions? According to 2007 research by Argonne National Labs, the amount of greenhouse gas emission from the use of ethanol is directly related to how the ethanol is produced. In the US, ethanol facilities are largely powered by natural gas and coal. Natural gas plants burn cleaner and according to the study actually produce a positive reduction in greenhouse gas emissions of ethanol vs. gasoline. Coal-fired plants actually produce more greenhouse gas emissions than the production and consumption of gasoline. Fortunately, most ethanol production plants are powered by natural gas. So how much did we reduce our carbon footprint in the transportation sector by substituting ethanol for gasoline in the 2007-2008 time period? By the most optimistic estimates, it was probably reduced by around 0.7%.

Another issue is the economic viability of using ethanol as a substitute for gasoline. Since 1978, companies that blend ethanol with gasoline have received a tax subsidy from the federal government. Today, that equates to about .45 for every gallon of ethanol blended into gasoline. According to the CBO study, the price of a gallon of gas must be roughly equivalent to 90% of the price of a bushel of corn for ethanol production to be financially sensible with no government subsidies. As of this writing, the cost of a bushel of corn is roughly $6.98. Gasoline (regular) currently averages $3.65 nationwide. In other words, gas costs 52% as much as a bushel of corn. It makes no economic sense to turn corn into ethanol unless it is subsidized by taxpayer dollars. This means the government must forcibly take your money and give it to the owners of a refinery in order to make ethanol economically viable. There is no win-win in this type of artificial cycle.

What about the looming threat of running out of fossil fuels? In the last few years, technology has advanced to allow the removal of vast oil reserves that was formerly trapped in tar/oil sands and shale. On the North Dakota/Montana border, the Bakken formation is currently being exploited profitably by using methods such as fracturing, lateral drilling, moveable platforms and more. A 2011 report indicates that up to 24 Billion Barrels may be harvested using current technology and the total size of the oil reserve may be as large as 300 BBbls. Much of that oil is not extractable using these new technologies but may be harvested in the future. A recent interview on CNBC stated that as long as oil stays above $40 barrel, current drilling technologies are leading to profitable oil extraction. In one interview, a geologist estimated that with the current pace of drilling technology advancement, as much as 150BBbls of oil may one day be extracted from the Bakken formation.

Government certainly has a role in funding the research and development of new technologies and energy sources that may one day have a positive impact on our environment and economy. Advancements in wind, wave, nuclear and solar energy are important as we look for ways to produce cleaner, cheaper energy to meet our national interests. However, government should not be involved in subsidizing the production of these technologies. For a new commodity or technology to be produced, it should be viable in the marketplace and able to stand on its own. Anything else is counter-intuitive and diminishes viable and profitable markets.

Isn’t it immoral to use food to make fuel when so many go hungry every day? Doesn’t artificially increasing the cost of food for consumers reduce a family’s ability to provide for itself? Who is hurt the most by government intrusion in the markets? It is ultimately the poor and lower income households that feel the greatest economic pain from this type of intervention because food and fuel prices represent a much larger portion of their take-home pay than the middle and upper class. There is nothing virtuous in this “Cycle of Destruction.”

© 2011, Angelica Wolf

Corporate Responsibility

Recently, it seems like every time you turn on the news, you hear about another corporation that is laying off thousands of employees, shutting down factories, sending manufacturing overseas or outsourcing jobs to India.  Often we are told it is because of the economy, the high cost of US labor and corporate taxes. While it is true that the economy has been in recession and is now in a period of very slow growth, labor in many third world countries is cheaper than the US and corporate taxes here in the United States are the second highest amongst developed nations, I think that one of the biggest factors is a lack of corporate leadership or business ethics.

I am sure that you are all aware of some of the high profile cases of corporate fraud, greed and mismanagement from the past few years. All of us have heard of companies like Enron, Tyco, WorldComm and others where dishonest executives destroyed the companies under their management with illegal and unethical business practices. More recently, we have only to look at Lehman Brothers, Merrill Lynch, Countrywide, Fannie Mae and Freddie Mac to know that corporate malfeasance and risk-taking has been on the upswing. These stories are legend and often used as case studies in business schools across the country. Today I would like to focus on some of the more insidious business practices that I feel are doing tremendous damage to our country and our economy.

Many years ago, people went to work for a corporation and often spent the rest of their working career with that same company. Employees and employers had a responsibility to one another. If I worked for you, I had a responsibility to show up on time, perform the requirements of my job to the best of my ability and deliver value for the wage I was paid. The company had a responsibility to provide me with a safe environment, pay me fair market value for the work I produced and run the company in a manner that would provide profitable growth for the shareholders, stable employment to its workers and a good product and service to its customers.

Over the past few decades, things have changed dramatically. In 1965, the CEO’s of major US corporations earned approximately 25 times what the average worker made. By 1978, the ratio grew to 35 times. By 1989, CEO’s earned approximately 71 times as much. In the late 1980’s to early 1990’s, Congress grew concerned that while CEO pay was growing at astronomical rates, oftentimes the companies they represented were posting huge losses and hundreds of thousands of employees were being laid off and shoved onto the public dole. In 1993, Congress moved to limit the deductibility of executive income to one million dollars. A company could pay more cash compensation but they could not deduct it as a business expense.  This should have brought CEO pay more in line with what the average worker was earning.  Yet by 2005, CEO pay was on average 262 times higher than the rank and file worker.

Unfortunately, the Law of Unintended Consequences reared its ugly head and corporate compensation committees came up with an alternative way to incent their executives using stock options and restricted stock grants. This seemed like a logical approach as the CEO’s pay would be tied to the performance of the company and its stock. While that sounds both good and fair, we all learned very quickly that no one is in a better position to manipulate the value of a company’s stock than its executives. Since the early 90’s fraud, manipulation and misrepresentation of company earnings have been steadily on the rise.  In November of 2008, the Wall Street Journal published an article outlining how CEO’s and top executives of major corporations liquidated their stock between 2003 and 2007 before the stock market collapse.

Richard Fuld of the now bankrupt Lehman Brothers, cashed in $184.6 million. Countrywide’s CEO, Angelo Mozillo sold over $400 million of his stock during his tenure with the company and cashed out $129 million in the 12 months leading up to August 2007 alone. Ken Lewis of Bank of America reportedly sold off $81 million during this time and the CEO’s of Fannie Mae and Freddie Mac pocketed $23 million and $33 million respectively for their last two years of service, even though they were chiefly responsible for the downfall and subsequent government takeover of the two companies. As these CEO’s were liquidating their stock and exercising their options, who purchased the stock they were selling? You and me. The mutual funds in our 401k plans and IRAs were buying up this stock at exorbitant prices right before the bust.

How could the very people who destroyed the businesses they were hired to serve have profited so much from their failure? What about the shareholders who lost trillions in value from bankruptcies, declining share prices, bond defaults and more? What about the employees of these companies who were just doing their jobs and suddenly found their lives turned upside down because they were out of a job during one of the worst recessions in history? What about the customers of these companies who were left out in the cold?

During boom years, the ridiculous compensation of many executives serves to drain corporate profits and hurt shareholder performance. During lean times, these same executives simply engage in massive layoffs to bring “costs” under control and help profitability. Tens of thousands of workers suffer because they experience a drastic reduction in income and the taxpayer is left holding the bill for unemployment and government assistance.

 Isn’t it logical to assume that companies will experience both good and bad times? Shouldn’t they feel some responsibility to their employees? Shouldn’t they make plans to retain these employees by building a cushion during the good years? Sadly, these same CEO’s and executives receive huge bonuses for helping boost company performance by cutting costs and laying off so many employees. Is this really the best we can do?

© 2011, Angelica Wolf

The Amazing United States of America

Lately it seems like all we hear is bad news about our country. We constantly hear that we are slowly becoming a second-rate superpower and that our best days are behind us. Well, let's take a few moments to review some of the great strengths of our country and our economy…

Did you know that the household net worth of the United States is projected at $55 trillion dollars? When you add in all of our public and military assets, the value of the country is projected at $200 trillion! We have nearly $11 trillion in cash and money assets and our cost to borrow money is at historically low rates with ten year borrowing costs at just over 2%. Our total debt is just over $14 trillion, which represents only 7% of our total net worth.

Even though the United States represents only 4% of the world’s total population, we will produce 21% of the planet’s total wealth output for 2011. All the countries of the world combine to produce $70 Trillion dollars of wealth and the US alone produces over $14 Trillion! Our next closest competitor, China produces roughly 40% of that amount. Japan, Germany and France combined produce 25% less than the US. The United Kingdom, Brazil and Italy combine to produce roughly half of the wealth created by the US. We have an incredibly strong economy!

We are the number one country in industrial output in the world and produce 50% more than China. We are currently tied with China as the largest Manufacturing producers in the world. We are number one in Maritime trading, as big as China and Japan combined! We are the number three exporter in the world behind the 13 member European community and only barely behind China. We are number 3 in Agricultural Output behind China and India, even though their populations combined are 8 times larger than the US. The free market system out-produces every other form of economy and has made the US the number one generator of wealth on a per capita basis.

What are some of the things we make? We are #1 in Natural Gas, #2 in Coal, #3 in Oil. This makes us #2 in the world in combined energy production! We are the #2 largest producer of Gold and Copper. We are #3 in Lead and Platinum and #4 in Aluminum and Zinc. We are the world’s #1 producer of coarse grains.

We lead the world in Foreign Direct Investment. The nations of the world pour their money into the United States because they recognize the value of investing in a democratic country with free and open markets. We rank #1 in the world on the innovation index and # 2 in worldwide patents. Even with one of the highest corporate tax rates in the world, we are still ranked #4 in overall competitiveness! More than 50% of the world’s top Universities are here in the US and we are number one in the entire world in Tourism.

Those who believe that our best days are behind us and that we are facing a slow, inevitable decline do not understand the greatness of our nation. Throughout our history, we have faced many hardships, dangers and challenges but because we are free nation, we have overcome them all. The United States of America is great because of its people. Our ability to adapt, to overcome and meet any challenge has made us the greatest producer of wealth in the history of the world. We have helped more people overcome oppression and taste real freedom than all the countries of the world combined.

Don’t let those who want to be re-elected fill you with fear. As former President Ronald Reagan once said, “America is a shining city upon a hill whose beacon light guides freedom-loving people everywhere.” Be proud to be a part of these Amazing United States of America!

Source for Economic Data: “The Economist, Pocket World in Figures 2011 Edition.”

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© 2011, Angelica Wolf

The "Fourth Branch"

USA Today Reports that occasional on-air golf analyst, Paul Azinger was publicly reprimanded by ESPN for supposedly violating its social media policy. On Thursday, Azinger tweeted, "Facts: Potus has played more golf this month than I have: I have created more jobs this month than he has: #Marthasvineyard". ESPN spokesman Andy Hall stated, "Paul's tweet was not consistent with our social media policy, and he has been reminded that political commentary is best left to those in that field."

While every company has the right to establish and enforce guidelines as to how their employees utilize social media, I find it extremely interesting that Kenny Mayne, another on-air personality for ESPN featured on SportsCenter and The Mayne Event, tweeted on June 11 "almost rammed car with palin bumper sticker. with intent.. held up..coulda been kids in car." Where was the public dressing-down of Kenny Mayne over this egregious case of political commentary?

The hypocrisy behind the selective enforcement of the social media policy at ESPN is not lost on the vast majority of America. This "fourth branch" needs to be pruned...


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© 2011, Angelica Wolf

Social Security?

Social Security is often called an “Entitlement Program.” I find this phrase very interesting since all of the money that comes from Social Security is paid in by each of us and our employers during our working lifetime. Currently, we each pay 5.65% of our salary into Social Security and our employer pays 7.65% of our salary. Normally we each pay 7.65% but in 2011 the amount has been temporarily reduced by 2%. So, if one earns $30,000 this year, the total contribution to Social Security between them and their employer is 13.3% or $3,990!

Let’s assume I am a 25 year old and make $30,000/year. If I work for 40 years and my salary only increases by 3% each year, the total contributions will be approximately $345,000. My actual Social Security benefit at age 66 would be approximately $1200 a month or $14,400 a year for the rest of my life with increases for inflation. If inflation averages 3% that means my income goes up each year! Sounds great, right? Well, let’s do a little more math! Since I have to wait until age 66 to collect, I can expect on average to receive income for 15 more years based on the IRS life expectancy tables.  That means I would collect a total of $268,000! Wait a minute… I paid in $345,000 but I only collect $268,000? What the heck?

As you know, money that is being collected doesn’t have to just set idle but can actually earn interest. If I use the money each year to buy 30 year US treasury bonds at today’s interest rates, I would make about 4% interest. If I invested all of my contributions this way, I would have grown my $345,000 in contributions to almost $732,000 over 40 years. If I used this money to buy bonds paying 5% interest, I could have an income of $36,500 a year without ever spending any of my principal! This is 2 ½ times more than the benefit I will receive from Social Security and they don’t let me have my principal!

You would think that the government’s miserly paybacks on my investment through the years would make it very easy for Social Security to pay my benefits. Well, we keep hearing that Social Security is broke! How can that be? Well, there’s a simple explanation for it. All the money that was put in over the past has been spent by one congress after another and basically the cash was replaced with a government I.O.U. called a “special issue” security. In 2010, Social Security paid out $929 Billion and took in $1,020 Billion. Current benefits are largely being paid on the money that you and I pay in every week.

How come they need so much of the money coming in just to cover the money going out. There are primarily three reasons…

One, benefits for Seniors have gone up through the years much faster than inflation. As interest rates have been going steadily down and they earn less interest on these “special issue” securities, they keep paying higher benefits to existing retirees. Politicians find it an easy way to buy votes from senior citizens by raising their benefits and then scaring them that their political opponents will try to cut those benefits.

Two, life expectancies continue to increase because modern medical technology and advances in medicine have allowed people to live much longer. It used to be that when a man reached age 65, he retired from his company, got his gold watch and died in the next few years. Now people commonly live well into their 80’s. So, they receive benefits for a longer period of time. Keep in mind that this should not create a problem because of the massive overfunding of the program but unfortunately, our Congress has managed to massively over-promise and over-spend the available funds.

Three, the largest segment of our population is now beginning to enter their retirement years and for the next 20 years or so, the number of retirees will outnumber those still in the labor force that pay into Social Security. This means we will have more people taking out and fewer people paying in. Even the Social Security Administration website acknowledges that without significant changes, Social Security will be broke with 25 years.

When someone takes in money from new investors and uses that money to pay off earlier investors because they already spent their money, we call it a Ponzi Scheme. The United States Government has a much better sounding name for it. They call it “Social Security”. Doesn’t that sound nice? Let’s tell this free-spending Congress enough is enough!

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© 2011, Angelica Wolf