Friday, September 28, 2007

More comments on pensions

Good comments all around. One thing I'd like to "flesh out", however, is how pension plans are inherently insolvent, no matter how well the actuaries design them.

No kidding. Let's take the Godzilla of all pensions, the unconstitutional Ponzi schemes, as an example. Why are Socialist Insecurity and Mediscare inherently unstable?

To understand, we need to understand that we (mostly) "eat this year's crop." You can save money, but unless somebody plants some corn and cuts some hay, you're going to go hungry, even if you have a room full of gold to pay for food. For this reason, the traditional retirement plan of most people around the world has been to have children--or if no children come, to cultivate friendships with others who can bear some of the burdens of being unable to work enough to support yourself.

Enter Godzilla, and what happens? Well, you've just told people that they don't have to have children to take care of retirement, because Uncle Sam is going to pick up the tab--or so they think. Unsurprisingly, the birth rate has gone down quite a bit since 1937.

The rub comes when you remember that "Godzilla" requires a rather robust birth rate to work--and thus it's no surprise that taxes to support it have been doubled twice already, with more increases on the horizon. She simply sows the seeds of her own destruction by her very nature.

So even apart from medical advances that cannot be predicted, the inherent lack of productivity of the government, and so on, Social Security and Medicare are bound to fail due to the most basic premise in these programs; "we will take care of you whether you bother to think about the future or not."

Not surprisingly, the future is rather bleak for those who don't take reasonable steps to deal with it.

2 comments:

jroosh said...

nice post...the private sectore dumped pensions long ago methinks the government will have to follow suit

Bike Bubba said...

One can only hope, but let's be real here; expecting government officials to admit that their plans are based on untenable premises is an untenable premise in itself. :^)