TCS Daily


Are We Really Entitled to This?

By Jagadeesh Gokhale - November 14, 2006 12:00 AM

The new Congress faces an urgent need to reposition the big entitlement programs, Social Security and Medicare, on a sounder financial footing. With each passing year, these programs' massive fiscal imbalances grow larger, making it harder to solve the problem, but all the more necessary to do so.

As reported by its trustees, Social Security's total imbalance has increased from $10.4 trillion in 2004 to $13.4 trillion in 2006 - a jump of $3.0 trillion in just two years. And Medicare's imbalance has grown from $61.6 trillion in 2004 to $70.5 trillion today - an increase of $8.9 trillion in the same period.

That's $11.9 trillion in new debt in the past two years alone. Put another way, it's 85 percent of the $14 trillion of GDP that the United States will likely produce this year.

Some of this increase reflects changes in underlying economic assumptions, but a significant portion of it arises from accruing interest costs on the existing fiscal imbalance. At the current interest rate of 2.9 percent, for example, the combined imbalance of Social Security and Medicare - $83.9 trillion - will accrue added costs of $2.4 trillion this year. Next year's interest cost accrual will be even larger, as additional interest accrues on this year's interest costs as well. This situation is clearly not sustainable, because US economic growth cannot keep pace with such massive accruals in future government obligations.

There is considerable debate about whether and how to "recognize" on the government's books future Social Security and Medicare payment obligations. Members of the Federal Accounting Standards Advisory Board recently released preliminary views indicating a split between its members on the issue. FASAB was established by the Treasury, Office of Management and Budget, and The Comptroller General. Three of its members currently oppose recognizing any more than benefits currently "due and payable" as government "liabilities."

However, six other FASAB members favor earlier recognition of entitlement liabilities—as soon as workers meet every benefit-eligibility requirement except that of attaining retirement age. That means the present value of future benefits as earned to date by all benefit-eligible workers - even those far from retirement - would be recognized and reported as explicit government liabilities, not unlike outstanding government bonds.

Why is this debate important? There are two main concerns about broadening the definition of entitlement liabilities beyond the current "due and payable" standard. First, it might make future entitlement obligations more difficult to change. But those obligations are extremely difficult to alter even now - as we witnessed last year when the American Association of Retired Persons led voters opposed to entitlement changes to thwart the Social Security reform debate that President Bush was attempting to initiate. Broadening entitlement liability recognition would only render this reality more transparent.

Second, earlier recognition of entitlement liabilities would make the government's finances appear a lot shakier, and may make it more difficult for it to raise funds in capital markets. Whether and to what extent this would occur is difficult to foretell.

However, consider the flip side: Hiding the reality that the government must raise trillions more in future taxes to meet its benefit obligations - or forcibly cut those obligations when the costs of tax increases become unacceptably large - creates a seemingly benign economic outlook today. It provides a false sense of security to consumers and policymakers. As a result, consumers continue to save less, making them more vulnerable to future adjustments in taxes, entitlement benefits, or other public expenditures. And the lack of visibility and market discipline encourages relatively shortsighted politicians to postpone difficult reform decisions.

Lawmakers and Administration officials recently highlighted the Congressional Budget Office report of a $248 billion "deficit" for the just-completed 2006 fiscal year, and everyone applauded how much smaller the deficit had turned out to be than projections suggested two years ago. But this year's actual cost accrual in Social Security and Medicare alone amounts to $2.4 trillion - ten times as much - a reality that remains hidden under current budget accounting standards.

Historically - and irrespective of which political party is in power - government officials have opposed earlier recognition of entitlement obligations as explicit government liabilities. They usually justify their position by observing that such obligations would only relate to current entitlement laws, which are subject to future changes. Of course, future changes are inevitable given the programs' insolvency. But, ironically, that perspective appears to be the biggest hurdle preventing pro-active changes in entitlement policies.

Lawmakers should resume entitlement reform discussions soon. The policy debate would take on greater urgency, however, if the size of entitlement obligations were explicitly recognized on the government's books. And clear recognition that the government faces payment commitments much larger than its outstanding Treasury securities would impose greater discipline on lawmakers who might otherwise be inclined to spend public funds like there's no tomorrow.


Jagadeesh Gokhale is a senior fellow at the Cato Institute and a former senior economic advisor to the Federal Reserve Bank of Cleveland.


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56 Comments

The government does not have an Income Statement...
The government cannot be fairly represented by a Balance Sheet such as we generate for an industrial company. How would we value the Asset side? We might be able to put an auditable number on some of the lines but others would be meaningless. The government does not have income producing capital goods. The government taxes its GDP. There is no top line and no bottom line. There is no Income Statement at all. Changes in the Balance Sheet period to period must be reflected dollar for dollar on the Income Statement.

This exercise to create a liabilities number is pure political fantasy. Lawyers do not understand accounting.

It may be a fact that projected entitlements will require tax increases to achieve a balanced budget in the coming decades if we do not grow our way out of the Baby Boom spike and if we do not cut back the entitlement numbers.

Will the government actually tax the GDP into the Stone Ages, default on Treasuries, or put the old people out on the snow? Nope. But Armegeddon is always a fun read.

Look at these numbers...
You are reporting a projected imbalance as if we have a bookable liability. A long term debt line item suitable for a balance sheet. Your interest rate for that debt yields a $2.4 trillion debt service number. But there is no such debt service payment to be made. This is simply not real. Our entire tax base in this country is approximately $4 trillion across State and Federal Income Tax, Social Security Tax, Property Tax and Sales Taxes!

Go through these numbers for us more carefully, please. Maybe I am not understanding this. Does the Social Security plus Medicare payable actually come to $83.9 trillion that we are accumulating interest on and such interest is being added back into the principle?

The National Debt is $8 trillion. Social Security and Medicare are running immense surpluses that are being swept into the general fund even as we speak. Your $83.9 trillion number is not a debt. It is a projection. There is no interest accruing. Did you make that part up? Or do I still not understand.

Invest in the government, would they steer you wrong?
My what an imaginative denial of a disaster that has finally grown to the point where even the most deluded among us can recognize the coming results of the Great Ponzi scheme. Trillions is new debt created and we can just grow our way or tax our way out of it. That's the normal Leftist mantra. So let us resume the unsustainable, reckless programs and provide no alternatives other than doubling your social security taxes and upping retirement age, which by the way stands at 67 now, to say 75, and when that doesn't solve things lets change the goal posts again to say 80 all to sustain the policies of the irredemible and graceless.

Why increasing taxes won't impact on our society nor will changing the conditions under which the govrnment suckered the peons into social security. The Ponzi Scheme must go on.

By the way did you know the Supreme Court has declared twice that the US citizen has absolutely no right to nor guarantee of social security payments? Thats right ace the government can just say boo whether it wishes.

And finally can we imagine the governments ever going back on its word? My great great grandfather Chief Bull Feathers once said, "When the government steals our land, kills us, straves us and then tells you it is here to help you, hide your wallet."

The Supreme Court has twice said the citizen has no right to social security
Or in other words you've been suckered along time and have zero waiting for you. Believe the government will honor its words, just ask the Indians what they think of the government's word regarding its commitments.

Don't you get it Forest?
Scoail security is a Ponzi scheme. Its illegal. If a corporation attempted this with their pension plans the same government that foists this off on the people would send the corporate executives to jail.


The revenues you pay into social security are transferred to pay current retirees. They is no accumulation for the future just an empty box with a great number of government IOUs growing ever larger. To buy votes and curry favor politicians increase the payout for retirees beyond what they paid in. Now this has to be paid for and since the government doesn't invest it has to come out of general revenues at some point in time. When this occurs the government must issue debt to pay off the balance. This requires major expense, an expense growing every year. Growing so fast and so swiftly that the entire house of cards will collapse unless the government does what all governments do inflate the currency till past debt is meaningless. Third world countries do this all the time just add a zero or two to your currency and the debt problem is solved, of course the 2,000 dollar social security payment will now have the buying power of only 200 old dollars but it can't happen here.

Except it has occurred here. An Hersey bar used to cost 3 cents its what 80 cents today. A slice of pizza was 15 cents and is 1.50 today. A movie ticket was a dollar and you saw two movies. Or you can go the route of the Weimar Republic and pay your workers in wheel barrow load of cash that would lose half their value in about six hours.

The interest closk is just ticking away and our obligations are over 70 trillion dollars and there is no way it can be paid unless of course you just keep increasing those tac=xes, which in itself will just lead to more inflation.

entitled to be stupid
Let's see if I've got this straight. The politicians promise 'bread and circuses' to the people in return for votes. Then the politicians don't even have to make good on the promises, only some of them, or partially, but they are really not held to account. But they can be voted out, but only by an opposition that promises even more entitlements, which the people must know will not be delivered. So it seems like stupid people get both stupid and lying politicians in a system whereby everyone tries to live at the expense of everyne else.

Social Security and Private Pensions
"If a corporation attempted this with their pension plans the same government that foists this off on the people would send the corporate executives to jail."


Specifically, but not exclusively, Social Insecurity would violate, in design, operation or both:

Internal Revenue Code Sec. 412 (full funding requirements)

Internal Revenue Code Sec. 401(a)(13) anti-alienation provisions

Internal Revenue Codes 501(a) & 401(a) trust requirements

Internal Revenue Code 401(a)(2) exclusive benefit rule.

http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000401----000-.html

Of course pensions are dually regulated, so the Department of Labor, who makes the IRS look like the pinnacle of fairness and restraint, enforce similar provisions in ERISA.

Those evil Republicans...
just wanted to steal old people's money. There is nothing wrong with the current system at all. Bush will just throw their money in the evil stock market and lose it in a crap game. People can't be trusted to manage their own futures. The government is far better at it.

Hmmmmm... did I miss any Democratic talking points?

Perhaps the part about ...
how the rich aren't paying their fair share of taxes thus moving this burden onto America's po'fok.

Hmmm...
I was just addressing the Democratic myths about SS. If I cataloged the whole range of Democratic mythology it would bring the TCS webserver down.

Well said.
At least we could have told the Indians to just bend of and get ready.

Where's Roy_bean?
Come on, tell us how David Walker thinks everything is ok again.

Perhaps he's enrollling in a local college to take "two or three accounting courses", which would do him good, but probably would never happen, since it would be like an exorcism of his Marxist demons.

This situation isn't new
Many other countries have faced exactly this problem of rising entitlements and a growing gap between the payout and the revenues to provide it. There are only two remedies, increase taxes or cut entitlements. Typically, those countries which have solved this problem have cut entitlements, usually through a clawback in benefits.

I agree with you that it's something of a Ponzi scheme. However, it's not entirely the fault of government (just mostly). The part which isn't is that often these schemes for retirement benefit were designed many decades ago when average life expectancy was little beyond the age of retirement. Today, that's far from the case, as we are, generally speaking, all living much longer that was true in the past, meaning that social security programs were underfunded.

Of course there's another vicious practise in the U.S. of shovelling receipts into general revenues and filling the account with IOUs. That's certainly happened with the nuclear waste decommissioning fund.

So government has a problem. And the longer they put off doing anything about it, the worse it gets.

The govt has no business being in the pension business
The question remains how much your govt will alter the rules of the game. Most South American nations have looted their pension schemes before giving up on them entirely or being forced to at gunpoint literally.

Western Europe is going bankrupt. The bottom line is the government has no business being in the pension business. It can set the ground rules but administer the benefits and collect the funds no.

Besides social security provides a two cent annual return. This is robbery. Why not just require people to purchase govt bonds?

You are right that the problem only grows worse. But there are many who refuse to do anything because this will stop their access to pension money and this funds their pet schemes to insure their re election.

Nice evidence superheater
Just hope you're not an IRS lawyer.

Nope
CPA & MBA, several insurance and financial planning designations. Several years in pension compliance.

About governments and pensions
maybe governments should not be in the pension business, and I suspect you are right about this, but unfortunately that's not an option right now. It is in the pension business and somehow it has to be fixed.

Many nations in Western Europe are indeed having severe budget problems, and entitlements, of which pensions are only one part albeit a large part, are much of the problem. The only nation which I can think of which fixed the problem was Canada. It cut entitlements by clawing back benefits through income tax. Ugly, but at least the books balanced. It could do this because it was not facing any coherent opposition in its parliament on the issue.

That leads us to the real problem. Governments are in the pension business because of voter demand. Cut the benefits and government risks being tossed out by others who promise to restore entitlements.

It's a vicious circle, but I don't see how to bring an end to it. I suppose where I'm coming from is that I tend to believe that governments tend to do what the voters want them to do, even if those things the voters want are stupid. Put another way, voters get the government they deserve. Agree or disagree?

Its a shame the education system doesn't teach investing or about capitalism
The market allows a small amount to grow incredibily over the decades yet most people haven't the fainest idea of how the market works or capitalism. Its a shame people couldn't invest 8% of their total income annually in tax free pension accounts. Everyone would be so much better off as long as they were required to buuy disability and insurance as well.

brain surgery, without anesthetic - - -
All this flailing and gnashing and damning government is true and purgative, but begs a solution. There is only one way out, short of legislatively renouncing the debt, and letting us all just go scratch with the chickens, (which is probably really the best way, in the end).

Let's assemble some facts: something over 12% is now forcibly confiscated from our workers' paychecks to make their retirement easier. Only, it's spent immediately by our representatives to buy more votes to keep them in office. These representatives ought to be rounded up and publicly executed as a cautionary example to others.

When we do the math, we find that if the confiscated money were merely placed in an ordinary, conservative, investment account at compound interest for that person, we'd be retiring working-class millionaires who could live comfortably on just the interest. When they die, their kids could fight over the account, and the problem would go away.

Except for the "donut hole" folks close to retirement, with no, or only small, savings accounts. The only answer here is to borrow, which is one thing the government is good at, to bridge over to the new system. Cheers, all

Look at these numbers...reply
forest said: "You are reporting a projected imbalance as if we have a bookable liability."


I'm reporting those numbers, but I'm not the one who produced them. All of the numbers, including the interest rate assumption, are available in the Social Security and Medicare Trustees' reports.


forest said: "But there is no such debt service payment to be made."


Sure, there's a debt service payment being made. If we are short by $1 on a payment commitment which comes due next year, we can raise 95 cents today (approximately, if the interest rate is 5 percent per year). Or we can raise $1 next year. The amount we must raise increases with interest the longer we wait to raise it. Sure, we're not "paying" debt service as a visible transaction if we don't raise 95 cents today. But the cost is there, and it's just as real as that for servicing oustanding government bonds. If the economy and the wage tax base grows at just 2 percent per year, then raising $1 next year would involve imposing a higher tax rate than raising 95 cents today. That is, the cost goes up even when compared to the size of the economy the longer that policy adjustments are postponed -- again, if the economic growth rate is less than the interest rate -- as is true in normal economy.


Explicit debt (outstanding government bonds) reflect the government's financial shortfalls accumulated from the past. Why make policies based on the size of that debt -- that is, based on what happened in the past? That's like driving a car by looking only in the rear-view mirror. The projected "fiscal imbalance" ($83.9 trillion) based on continuing current policies into the future (an assumption) shows the stance of current fiscal policies. If the projected FI is positive, it indicates that today's policies are not sustainable and must be changed. FI estimates by how much they would have to be changed. The interest cost accrual tells us how much worse the problem is getting each year that we don't adjust fiscal policies.


I hope this is helpful and thanks for your interest.



Its income re-distribution, nothing more
Someone said once the mob realizes it can vote itself benefits from the treasury democracy becomes mob rule. This is what we are seeing today in most democracies. The foolish believe they can succeed only with the aid of the government. This belief is fanned by those who benefit from a system that takes in huge amounts and has for decades returning a pitanence. But the Ponzi scheme is coming due.

The US all ready taxes benefts. If the cretins here realized how badly they are ripped off by a system that:

1. Taxes your total income including the social security taxes witheld (in effect paying a tax on a tax).

2. They then tax you again when the monies you contributed arew returned (again compound taxation).

I believe the Western democracies will continue to increase the age limits for retirement; cut benefits and finally means test them. In the end the whole scheme will collapse due to demagraphics and a coming generation war over taxes.

Standard Practice
You are reporting a projected imbalance as if we have a bookable liability.

In booking a liability the criteria for recognition - is that it is probable and estimable. Thats how it is in the real world, although perhaps the Federal Accounting Standards Advisory Board (FASAB) has a different idea. If it does, I'd argue that they are wrong.

Of course it's compound taxation
The root of the problem is that the U.S. will not live within its means. As Don correctly points out down below, it's the siphoning of funds for a dedicated purpose into general revenues with government as a whole running a huge budget deficit. The intergenerational war over taxes has already started, and it's showing up in health care.

Where you can really see the effect of the political power of entitlement is Sweden. Something close to 40 per cent of the population is receiving significant government entitlement for income. As such, they constitute a sufficiently powerful voting block as to outweigh business and labor combined in that country (yes, organized labor and big business both support Sweden's equivalent of the conservative party). The result? One massive budget deficit after another, and until the last election, a permanent Red-Green coalition government in power.

When the recipients of state largesse outnumber and outvote those who pay the taxes, a country is in deep, serious trouble.

I think you're a bit optimistic in your last paragraph. Before cutting benefits, the national deficit and debt will have to increase to levels that threaten the national economy. Canada didn't make drastic changes until the Wall Street bankers put the country on a credit watch, and the U.S. won't either. There's a lot more fiscal pain and suffering to come before this is resolved.

You're right of course, why do you think Congress exempted itself
No fools they.

Fixing the Mess- Too Late, Too Many Predatory Politicians
It's a vicious circle, but I don't see how to bring an end to it. I suppose where I'm coming from is that I tend to believe that governments tend to do what the voters want them to do, even if those things the voters want are stupid. Put another way, voters get the government they deserve. Agree or disagree?

Agree!

As originally proposed (and adopted, In Germany, if I recall correctly) in Europe in the 19th century, social security systems were designed to remove a primary reason for procreation, that is assuring one of an income when the indignities and infirmities of "old age" robbed one of the ability to earn an income. It has worked remarkably well.

In this country, it was pushed hard by Huey P. Long, attempting to outflank FDR on the left. FDR seized upon Social Security and the kingfisher met mis maker. FDR no doubt saw that the "benefits" were conspicuous and the costs hidden, but that it would render people to be beholden to the government for their livelihood. As a result, income that should have been spent on the young was transferred to the old, until convention and technology made "nofamily planning", easy and acceptable. Now people expect that their elder years will be provided by somebody else's kids and the fallacy of composition kicks in.

To make matters worse, the lack of actuarial soundness, combined with the contributions made by all but the original recipients have created a sense of investment that is impossible to dislodge and disproportionate. Ask an elderly relative, especially one that is at least 80, and they'll be glad to tell you how they earned every penny they got-and their the ones that most likely didn't because their wages were lower and they've collected longer.

I fear this problem is intractable. This is why they'll be an inexorable push for mass (illegal) immigration. Of course, poorly educated, illiterate and non-English speaking immigrants won't solve the problem of not enough physicians, engineers, etc. Of course, they easily work in factories, hotels and agriculture.

There simply are too many disincentives, if not outright obstacles to normal fecundity. Those that can think, go to school, limit family size and seek respectability-but are guaranteeing they will be a shrinking part of the gene pool. Meanwhile, those who are unresponsive to social cues are bearing young at earlier ages and in greater numbers-often at the expense of public treasury.


Any politician can exploit the fears of the elderly by beating the drum of social security, because in many cases, it represents a huge part of people's income. We lost our chance at making the system actuarially sound, providing for real ownership, etc. That simply would make too many elderly voters unreliant on the government. The dems like off being massas on the plantation. With a little help from their friends, they have removed any chance of a "fix".

Short of some event transorming the political landscape deus ex machina, we will follow Europe and suffer wrenching demographic and fiscal problems.



















Colin that was brillant
Not only in examining the problem but the probable outcome and a comparison of how others have fared.

The immigration problem in the US is more than a sop to social security which it cannot hope to solve. I mean how much can the lowest fifth in income contribute when they lack the numbers (perhaps 25 million) and their costs far exceed any contributions. Many of these people serve the interests of people like Pelosi very well (non-union) as well as resorts and restuarants (also non-union). I wouldn't even pretend to speculate about the wages paid since these are illegals. I have no doubt many GOP types are just as guilty it is the great public that suffers.

Its sad that the ideologues cut off intelligent discussion and block any alternatives that might stave off a debacle that will split the nation eventually. I pity the poor fools that place their faith in the government.

No, no , no ...still wrong...
Jagadeesh,

You have been described as one of the nation's leading economists. Your colleague Kent Smetters teaches at my grad school so I am certain you know your business. Nevertheless, your 2003 calculations stated that "If steps are not taken immediately to correct the imbalance, it will rise to $53.96 trillion by 2008" Now you say that "combined imbalance of Social Security and Medicare [are] $83.9 trillion". I have not seen your math but it seems like your 2003 numbers were off by $30 trillion! And this larger number is two years ahead of schedule. How is this possible? Which assumptions changed in the three year interval? What could possibly have changed that much? Or have you abandoned your own numbers to embrace those of someone else?

These projected fiscal imbalances you speak about are the net present value of currently unfunded future obligations? Of course, we should reasonably be able to project all such obligations some distance out into perpetuity to include not only all the workers and retirees we have in the system today but also those who have not yet entered the workforce. Indeed, we might include people who have not yet been born. All this difficulty started when the Social Security system was launched in 1935. Everyone in the workforce at that time is no longer working. Most of us who are grappling with Social Security today were not born in 1935. So if we are going to act responsibly fixing this system let's look out at least a similar period of 70 years. Would 100 years be more prudent? Those are going to be some very large numbers.

Similarly, we are able to project our currently unfunded future spending requirements for the United States to remain the sole Superpower. I feel certain that someone at the Crystal City has those budget projections on his desk. (Maybe no one at Wharton has them.) These are certainly going to be large numbers too. I do not hear anyone crying wolf that we should have those funds in hand today.

What makes our obligation to the American people regarding their Social Security entitlements any different from (or any more urgent than) our obligation to keep them free from foreign imperialist hegemony?

If the government fails to come up with the money required to fund our Defense Budget when it is needed, then we might not need to worry too much about Medicare.

The point is that we are not talking about money that should be currently held in escrow to be paid out as an annuity. And we are not talking about a set of entitlements that will be allowed to destroy our economy. We are talking about a government that we expect to do the very best it can. And we are talking about elected officials who should not be going back for another term if they fail to do the best they can.

At the moment, contributions to Social Security and Medicare far outpace the system's period obligations. Recent predictions are that the cashflow will go negative in 2018? And the problem that year might be about $200 billion? If we do nothing to fix it between now and then.

But, these projections keep moving around and some of the finest minds on Earth are working on the problem.

Nevertheless, (and I respect your hard work) the presentation of such numbers as an $84 trillion fiscal imbalance as a current liability and one that is actually accruing interest (to be added back into the principle) vastly overstates the magnitude of the problem today. That kind of talk is misleading to the civilians, who should be able to trust in your honesty. But this really seems to be deception with an agenda. I don't know what your politics are but I am willing to give you the benefit of the doubt that you mean well.

SS works like this. Politicians take money from working people under 65 and give...
...it to people over 65, to buy their votes. Now a larger percentage of people over 65 vote than people under 65 (perhaps SS is why). Further the number of people over 65 is growing faster than the number of people under 65. Additionally there is deficit spending.

Such a system cannot go broke (it also cannot be ever not be broke). The problem with SS is not that it is headed for bankruptcy it is that it takes money from the young and gives it to the old at a rate demanded by the old and gives politicians the credit.

A person on this board once said that young people would not be able to afford to care for their parents if it where not for SS. That is a laugh who does he think is providing the SS not the politicians.





BTW I would like to opt out but they will not let me out of the paying the tax part...
eom

no, no, no, ... still wrong...reply.
forest said: "You have been described as one of the nation's leading economists. Your colleague Kent Smetters teaches at my grad school so I am certain you know your business."

Thanks!

forest said: "Now you say that "combined imbalance of Social Security and Medicare [are] $83.9 trillion"

I already mentioned those were the Social Security and Medicare Trustees' numbers and not mine in my previous message. If you've read my book (co-authored with Kent Smetters), it clearly states that my numbers are based on OMB assumptions -- which are different. But they're in the right ballpark (see the update published by the NBER recently in Tax Policy and the Economy, vol 20.)

forest said: "Which assumptions changed in the three year interval?"

It'll help to recall that the country adopted a massive Medicare prescription drug benefit that explains most of the escalation in the fiscal imbalance since 2002.

forest said: "I do not hear anyone crying wolf that we should have those funds in hand today."

It's not my recommendation either. But we need to change policies so that we are prepared for when those funds will be needed. Those policy changes should be implemented as early as possible so that people don't expect to receive tax and transfer benefits that cannot be delivered. Such expectations would induce them to work and save less and be ill-prepared for fiscal changes as they unfold over time -- that is, unless policy changes to reduce fiscal imbalances are enacted sufficiently early.

forest said: "What makes our obligation to the American people regarding their Social Security entitlements any different from (or any more urgent than) our obligation to keep them free from foreign imperialist hegemony?"

That's my point, not yours!

forest said: "If the government fails to come up with the money required to fund our Defense Budget when it is needed, then we might not need to worry too much about Medicare."

Wha...? Come again!?

forest said: "We are talking about a government that we expect to do THE VERY BEST IT CAN (my emphasis)."

I couldn't agree more! Congrats! You ARE a libertarian after all!

forest said: "Recent predictions are that the cashflow will go negative in 2018?"

Why the question mark? Don't you know the latest estimates?

forest said: "Nevertheless, (and I respect your hard work) the presentation of such numbers as an $84 trillion fiscal imbalance as a current liability and one that is actually accruing interest (to be added back into the principle) vastly overstates the magnitude of the problem today."

Again, please say all of this not to me but to the Social Security and Medicare Trustees. They're the ones putting out the numbers including the interest accruals. I'm just reporting them and drawing my own conclusions.

Again, thanks for YOUR hard work!







What your post suggests
is that many of these problems, the deficit in social security and illegal immigration, are rather closely connected. I agree. This in turn implies that progress in one area, over the long term, is dependent to some degree on progress in others. I suggest this because in the case of these two issues, at some point illegal immigrants will through age or health related problems be unable to work and thus dependent upon benefits for which neither they nor their employers have contributed.

I thank you for your comments regarding my thoughts. I have tried to set aside whatever my personal convictions were on this issue and look at it empirically. I agree with you that this is not a situation for ideology. It is a situation that calls for pragmatic solutions. I agree with you about the relative lack of income vs. the cost of them as you noted in your post.

Would you agree that the solution must be much more than a clampdown on illegal immigration? I suggest this because all a clampdown will do is increase the difficulty but probably not diminish the overall inrush of illegal immigration. Supply meeting Demand. To be effective, as Marjon has suggested, it must be combined with increased access of legal immigration. Increased legal immigration produces several benefits: it reduces the pressure on illegal immigration and it brings them into the U.S. as full legal, taxpaying, benefit paying residents. Among other things, it should help close the funding gap in social security. It also reduces all kinds of things like public health problems (you know the list). Marjon has also suggested a real guest worker program, not the useless, excessively inefficient one now in place. This would further deflate the pressure on illegal immigration.

I don't much like the following conclusion, but here it is. Increasing the minimum wage is likely to increase the demand (on the part of employers) for yet more illegal immigrants who will receive less than minimum wage. I tend to support an increased minimum wage, but I am not blind to its potential consequences.

The problem with these measures as you can well imagine is that lots of industries dependent upon illegal immigrant labor will howl. Big unions will howl because any increased flow of legal immigrants will tend to increase the labor supply. These aren't the only groups who will object to immigration reform, but they're the only ones I can think of right now.

Finally there's the question of an illegal amnesty. I am in two minds over this one. If it is not accompanied by any measures to deal with overall U.S. immigration policy and otherwise reduce the number of illegals coming in, I suggest it will do very little good and the problem will remain in place. It may do a great deal of harm by sending a loud message that any illegal immigrant can be granted legal status, further discrediting the legal immigration system. If serious steps are taken like I suggested above, then it may be tactically useful. I mean by this that any amnesty must be assessed thoroughly on its merits and consequences, not just because it's a feel-good idea, and certainly not because it conveniences the rich and smug who want to protect their maids and housekeepers.

I note here at the end that part of the problem with immigration is that the U.S. has a number of labor exchange agreements with other countries, for example the free flow of professionals under NAFTA among the U.S., Canada and Mexico. This arrangement has proved to be highly beneficial to all three countries. So I suggest that there must be a clampdown on illegal immigration, but it must be done so as not to damage those parts of U.S. immigration or trade policy which do function well.

Unstated assumption completey changes the nature of the program
This article has premised itself on an unstated assumption - that the SS program has assets.

If one makes this assumption, then adding interest to the asset makes sense. It in effect converts the non-asset system into one with hard assets and assumes that those assets are invested at some rate of return.

This assumption completely changes the nature of the program. With one swift, unstated assumption a program that is a cash flow system (one generation generating the cash inflow and the retiring generation consuming the cash outflow) changes into a hard asset system (a real retirement system).

In midstream, one cannot make this change. Some (arbitrarily selected) generation will bear the unfair brunt of it.

A program that was designed as a pay as you go system, though unfair from the start, cannot be instantly morphed into a real asset system.

If one wants a real asset system, then privatize the whole affair. During the transition to privatize the system, the cost of conversion should be borne by all of the taxpayers - not just those supporting retirees.




Superheater MBA & CPA...you know this stuff...
Heater,

You may disagree with the other members of your accounting profession if you like, but rules is rules.

The projected liabilities you are talking about are called "Reserves" against future claims. Yes these might be estimated and assigned a probability. But what they are best at doing is to adjust downward an unusually profitable period, to carry forward some of that extra income into future periods, to smooth earnings, and to postpone tax liabilities. Fundamentally, such reserves are great for managing our financials. And the IRS takes a dim view of these mechanisms.

Of course, it is also prudent to put some money aside as a contingency fund if we are being sued really good or if we suffer from some history of product failure and an exposure to recalls, repairs and refunds. Nevertheless, these liability line items tend to be rolled over as the risks they guard against do not materialize and similar new liabilities are accommodated. Rather than for such lines to continue growing they should stay about the same as a proportion of our annual sales. And then if we have a slow Quarter, some of those reserves will be reversed to make the bottom line number the old man and his bankers told us they need.

But this is not what we are talking about with Social Security. You know there is no legitimate Balance Sheet of the Federal Government on which to book such liability line items. Therefore, this exercise within the accounting discipline is meaningless.

No operation could project its future spending obligations and be allowed to book them as liabilities against current income. If we might do this then we would never need to pay taxes! Such liabilities are only bookable as reserves against current income. And carried forward against historical income unless they are later reversed and the income is "flushed through" as we say. Future spending lines (such as these Social Security payments would be) are laid into the annual plan as deductions against future income.

The government does indeed have projected revenues and projected spending. The government does have an Annual Plan and a Federal Budget. But the government has no Income Statement and no Balance Sheet (the Soviets did, but then that did not work out so well for them). So let's not pretend.

You cannot change the rules of accounting to serve your political agenda! Is nothing sacred?

Legal immigration is far more complex than most people realize
The US currently absorbs more legal immigrants than the rest of the world combined. The USA admits over 500,000 professionals each year in addition to the normal legal aliens under our immigration laws. In the late 50s a special program was attempted that failed as the guest workers just didn't return.

I wonder how the US survived before Mexicans? Who worked in Perdue's poultry operations? Who worked the fields? Who were the gardeners etc. Today the US ius being asked to absorb more immigrants than in any time in its history at a time when unskilled, uneducated workers from one linguistic group present unique problems the US has never dealt with before.

When one asks should we absorb more illegal immigrants I guess you might ask the black community how they feel about the increased competition for jobs and housing or other hispanic immigrants who have been here for twenty years or so.

When the government starts admitting the true costs of immigration and starts enforcing our laws we might have a better concept of what the impact is. But when you have major hispanic populations in North Carolina, Alabama, Georgia and Arkansas where non existed ten years ago the situation has gotten out of hand.

I do not feel illegal immigration will reduce the problem of social security so much as postphone it and make it greater.

Are you aware that one third of the social security budget gos to SSI. Or a welfare program for people not eligible for social security? About half of the people on this program are dependents of non citizens. Now tell me how you would feel if you watched your father who worked for forty years get a medical benfit less than someone who never worked or contributed in the US. Is this fair or just?

Professionals can enter the US from any country through the investor clause of our immigration laws. I would suggest we have the immigration law backwards and should adopt a law that most countries utilize.


Simply any individual with assets of over a million dollars may enter upon paying a fee of one hundred thousand dollars and demonstrating he has set up or will set uup an enterprise employing at least ten US citizens who are not related to the applicant. In this fashion most problems are eliminated and everyone benfits. As we run immigration today we are creating deep divisions and resentments. I would not care to see the creation of another Yguoslavia.

this is covered - - - - -
Anthony, check my post above. Cheers, Don V.

nothing is going to change
Nothing is going to change until the system blows up because the AARP and the NEA can swing any vote that is important to them.

The old people always vote and the young people seldom vote. When the voting age was lowered to 18 I thought the young people would campaign to reduce the drinking age. They have never influenced any election.

Confusion
I'm not disagreeing with members of my profession, but with a minor technical detail of your post.

This post however exposes the fact that you are very confused in the details of accounting. Consider this: "Nevertheless, these liability line items tend to be rolled over as the risks they guard against do not materialize and similar new liabilities are accommodated. Rather than for such lines to continue growing they should stay about the same as a proportion of our annual sales".

To be blunt, this prose is worthy of the logorrhea afflicted character portrayed by Keenan Ivory Wayans in "In Living Color". Social security functions in many ways, though not completely, like a defined benefit pension plan. Defined benefit plans regularly adjust their projected liability against actual experience.

Forest, I've made no attempt to change the rules to suit an "agenda". My "agenda" would be to go back to the beginning and hang the SOB's that designed this feudal ponzi scheme. If you agree with that, stop there.

On the other hand I'm not even sure that I can disagree with you, because your understanding of accounting concepts is so confused. You're confusing basic conceptual ideas, confusing income statement and balance sheet accounts "No operation could project its future spending obligations and be allowed to book them as liabilities against current income." and making a misnomer-laden assertion about the IRS into a discussion where the IRS has no jurisdiction or bearing. In any case, Congress has created a tax accounting system is far more arbitrary and bizarre than GAAP. Not a good place to go for anything other than to determine what you owe the IRS.

You seem to be considering contingency funds as liabilities-their not. Your missive is as vacant as it is lengthy. "Flushed" may mean something to you, but its no where to be found in any accounting literature of merit.

In short, don't try to be something your not. Government accounting and budgetary analysis isn't your thing. You don't have to be a farmer to know that a pile of manure stinks and just about anybody with a brain can smell the "aroma" of fiscal scatol in Soc. Sec. Leave the tecnical details to the pros. When you teeth hurt, go to see a dentist, but don't lecture him or her on your denticia in an attempt to be authoritative, It only makes you look pretentious.

Alright you ignorant poser...now you've tried to bully the wrong boy...
Superheater,

I just went back and reviewed my post from this morning and it is fine. I thought perhaps that I had stated something unclearly or that a reasonable professional might not understand the discussion. I was treating you like you had common sense and would not venture out of your depth. You want to play with the adults, Mr. (or is it MS.) Superheater? Alright then...let's play.

You know very well that it is precisely you who are posing here as someone you clearly are not. You said in an earlier post that you have an MBA and a CPA etc? But you are totally confused when I talk about routine accounting matters.

My MBA is from the Wharton School (1975) and I changed majors out of Accounting after the first semester because it was simply too easy for me. During my 30 year management career I was a line accountant attached to the Treasurer's office at a Fortune 50 corporation and I specialized in consoliating our international books. And my closings were perfect to the penny! After that I was a Senior Consultant at Deloitte. For the past 20 years I have been the Chief Operating Officer for a series of Silicon Valley startups and turnarounds. Mostly owned by foreign nationals (Koreans) with heavy manufacturing plants offshore (Seoul). In all such cases the CFO reported directly to me and I was intimately familiar with all of our numbers. I can spend ten minutes with your Balance Sheets for the past five years and I will know your business cold. You do not want me to audit your books because I will know exactly where you are fudging your numbers. On Monday morning. Before lunch. (You do know what the word "fudge" means?) According to your comments you do not yet understand how an Income Statement and a Balance Sheet are related to each other. This is pathetic.

If you could use the word bizarre to describe Generally Accepted Accounting Principles (GAAP) you are a moron as well as a poser. But one thing you definitely are not is an Accountant. I am astounded that you would have the nerve to make these statements even as a civilian. You don't know how the IRS is relevant to a discussion of mechanisms to postpone part of the tax liability for current period earnings? Are you kidding? Really? Are you serious?

You are calling the Social Security system a feudal Ponzi scheme? Social Security contributions are simply taxes without deductions and they are legally unavoidable. (Income taxes, on the other hand, are easy to protect yourself from.) The government has been living off the Social Security cash flow all these years because the system always throws a surplus. But this is not a Ponzi. Do you even know how a Ponzi works?

You never heard of "flushing through" reserves to prop up period earnings? You may have never done it...but you never heard of it? And you want me to believe that you are a professional accountant? You incredible loud-mouthed moron. Pity your family because I am certain you act like this at home. Superheater, you really put me off.

Double hogwash
Anyone who would call the social security simply a tax couldn't be a CPA much less an accountant esopecially after questioning whether social security could be termed a Ponzi scheme. It is simply the largest Ponzi scheme ever foisted on the public.

So you attended Wharton, what is smoky joe's?

Hey Jarod : "Pretender" was cancelled a couple years ago.
First off, any decent student of accounting knows self review isn't review at all.

If you can't distinguish between an income statement and a balance sheet item, you left accounting too early. More importantly you don't read well.

I didn't describe GAAP as bizarre-I described IRS tax accounting as bizarre. My words verbatim:

“In any case, Congress has created a tax accounting system is far more arbitrary and bizarre than GAAP. Not a good place to go for anything other than to determine what you owe the IRS.”

But go on, tell me how the IRS figures in a a discussion of the federal government, does it pay a tax to itself? Or does the IRS figure in FASAB?

Hyperbole aside, there's no way your international closings were "perfect to the penny". Tell me how this happened under FASB 52, I'm dying to hear it.

While your at it, do tell oh Oracle of philadelphia, since a ponzi scheme relies on current income contributions to pay returns to prior "contributees" how SS is not a ponzi scheme. Is there some legal reserve, or is that the magic “trust fund” we hear about?

Oh yes, I know about "fudging" and its precisely what you are doing here. I also know what "flushing is" and thats why I said its not in any accounting literature OF MERIT.

Do you really expect me to buy your puffery? You are a fraud, a liar and you've been exposed as such. Blowhard all you want, its obvious to anybody reading your post, your reaching, tossing around words you clearly don’t understand. You can dream up all the credentials you want, if you ever had them, they're fading.

That precisely the catch
Illegal immigration does not reduce the problem of social security. It only delays and magnifies it, as you say. But, given that policies are rarely enacted for more than the current term of office, it's often very difficult to get the political process to focus on the long term problem. Even worse, the rich and affluent, (those who employ them as various forms of underpaid household labor) don't particularly care about social security, because they are far too well off for it to be of any consequence.

The worst aspect of illegal immigration is that we are creating a servile underclass without rights or franchise. Over time, particularly into the next generation, they will grow to resent their underclass status and seek to change it. The United States fought a hideous and bloody civil war in which one of the principal dividing issues was slavery. It would be a travesty if, through illegal immigration, the U.S. allows any form of economic indentureship or slavery to arise again, as you are rightly suggesting may be possible, vis. your reference to Yugoslavia. It is a threat, and while perhaps not large at this time may be clearly storing up trouble for the future.

I understand and agree with your caveats about guest worker programs, TJ, but surely in this modern age, there's a way to make this work. If it can be made to work, it would lighten enormously the pressure of illegal immigration.

OK...and you want to play too...
Thomas Jackson,

Social Security has been represented to us as something of a "retirement investment plan" that the government mandates. It turns out that the funds are swept into the general fund. And that the benefit payments each period are far below the contributions. This results in a huge surplus that is projected to continue until 2018, last time I looked. Maybe longer by now. Therefore, the Social Security Tax is actually and "simply" just another tax. We've been lied to again.

Individual Social Security benefits do not reasonably reflect the value that should have accumulated if our contributions (and those of our employers) had being held in escrow all these years and invested prudently. This misunderstanding is our disappointment and precisely why we (as tax-paying Americans) might feel cheated.

In a Ponzi (a chain letter or a pyramid scheme would be better examples) the investors are typically onto the scam and everyone should be trying to get in on the game early enough to benefit before the program hits the wall. Direct marketing schemes (Amway) are only derivative of this technique because they do keep going year after year. But with Amway the "suckers" simply drop out after they have put their money in and before they are able to dupe any suckers themselves.

Of course, I can understand how Social Security could be confused with a Ponzi because the system needs to continue growing if we expect to receive our benefits when it comes our time to retire. Our own money is already gone. But consider this mechanism regarding real estate investments where most of your mortgage payments go to the bank as interest. Not to pay down your principle. Your own money is also already gone. You are depending on appreciation of the real estate and in some measure continued inflation. If the market does not go up because more people are buying (increased demand as the economy grows and the population expands) you will not make anything. You might lose money. You are hoping that new players will get into the game before you cash out. And yet, this is also not a Ponzi.

Our national survival as a sovereign state and as the sole Superpower absolutely requires a robust, growing GDP. If more people do not enter our workforce and if more corporate entities are not launched continually and into perpetuity then Amnerica will hit the wall and we will all lose everything. Does this make America a Ponzi? No, of course not. The same sort of thing could be said about global financial economics. Advanced capitalism must keep expanding until all of humanity is included and it must keep expanding after that. Does this make financial capitalism a Ponzi? Again, no.

Thomas. I am, indeed, the real deal. Let's talk about Penn regarding something you cannot look up on the Web, shall we? What did Hasan Ozbekhan smoke while he lectured and (important detail) how did he smoke (it/them)? Thomas, if you went to Wharton in the 1970's then you know this answer. If you even know anyone who took the MBA or the PhD at Wharton during those years then he can tell you and you will look smart!

I don't know if Smokey Joe's is still there. Someone told me Penn was going to (in a sense) annex the property since it was virtually on campus. (Suppose I could look it up on Google. That's where most of the knowledge on these blogs actually comes from, doesn't it?)

Haven't been to West Phili in over 20 years. My parents are still living in the suburbs so I do fly into town. Then right up the Schuylkill Expressway (we used to say Sure Kill Expressway) and I'm eating turkey and cranberries! I don't know much about the watering holes around Villanova either, although that's where I did my Masters in Biology.

Is Thomas Jackson your real name? Forest is, indeed, mine.

And your supposed to be a CPA?
Anyone who went toUPenn knows Smokey. Disappointed you couldn't answer a simple question. Philly was a dump in the 70s and I doubt its much better now. As to what a prof. smoked I guess we must have moved in different circles.

Social Security is a Ponzi scheme because onlyt those who get in early make anything and later people get burned as we now see. The collapse of social security isn't a question of if but only when. Unlike Amway the government forces you at gunpoint to take part in this joke. Yes you are absolutley correct the returns are a joke but it is also a joke that the returns different according to your contribution.


People contributing less get a better return, those paying the most get a reduced return in comparison. Some people get the shaft such as people who draw a federal pension. The social security system is all ready on the verge of bankruptcy due to medicare and its doubtful things will be settled anytime soon.

Too Bad You didn't write the first two paragraphs first
That would've sufficed.

Accurate, succint, clear and persuasive.

Would've been a pleasure reading.

Please stick to similar style and content in the future.

As for your exacting specifictions for what constitutes a ponzi scheme-who cares? The fact is social security depends on new entrants to pay. There is a technical name for this type of arrangement I can't think of right now and you won't hear it much because your state insurance regulator will not grant a certificate of authority to an insurer uses legal reserve. Lets not forget social security is technically called "OASDI" (Old Age, Survivors and Disability INSURANCE".

Worse, unlike a private voluntary insurance, SS causes (by design) demographic changes that make the system more burdensome to "later entrants". This will have conomic effects as well, since as employment taxes rise, there'll be reductions in personal investments in human capital and work effort. There'll be greater efforts to reclassify owner-operator returns (small businesses) as investment income rather than wages. It creates incentives as we now have for the government to turn a blind eye to invasion.

How is a mortgage a relevant comparison here? With a mortgage, I take posession of a valuable asset which I can use personally or rent out to acquire income NOW. I don't care what the mortgager does with the payments because I have something now, not just a future promise. As soon as I can enough money together,I'm done with the mortgager and I own property I can keep or sell.

I have NOTHING for the money I've had taken from me by Social Security. I do not feel cheated, I was cheated.

This is too easy...but I enjoy it... because you are such a tool...
Superheater said: "First off, any decent student of accounting knows self review isn't review at all."

RESPONSE: I should not have been too hard on you. This blogging might be all you have.

Superheater said: "If you can't distinguish between an income statement and a balance sheet item, you left accounting too early. More importantly you don't read well."

Response: I am amazed that I still need to explain this to someone who has clearly looked up the terms on Google enough to think he understands accounting now. The Period Income Statement feeds the Period Balance Sheet. All of the changes from one year to the next on the Balance Sheet are precisely reflected as actuals on the Income Statement. (Moron)

Superheater said: "I didn't describe GAAP as bizarre-I described IRS tax accounting as bizarre. My words verbatim:

“In any case, Congress has created a tax accounting system is far more arbitrary and bizarre than GAAP. Not a good place to go for anything other than to determine what you owe the IRS.”

RESPONSE: Yes you did. By your own words. You said they are both arbitrary and bizarre. Only the "tax accounting system" created by Congress is "more arbitrary and bizarre than GAAP".

In the first place GAAP is logical and tight, unless it confuses you. Secondly, there is no "tax accounting system" that was created by Congress. Only a civilian would say something like that and only someone who knows nothing about the accounting discipline itself would imagine that members of the Congress, who write laws and who are for the most part lawyers, would create any sort of accounting system.

Superheater said: "But go on, tell me how the IRS figures in a a discussion of the federal government, does it pay a tax to itself? Or does the IRS figure in FASAB?"

RESPONSE: "FASAB was established by the Treasury, Office of Management and Budget, and The Comptroller General." IRS is also Treasury. FASAB is the government's equivalent of FASB. Treasury, the OMB and the GAO all have veto power over anything the FASAB has to say. FASAB is described as quasi-government. In any case, and refering to your comment above, Treasury is part of the Executive branch and the FASAB is far removed from the Congress.

I am not sure how to answer your question about 'how the IRS figures into a discussion of the federal government'. Seems to me the IRS is part of the Federal Government and collects revenues for the Federal Government...So what was your question about how these entities are related?

Superheater said: "Hyperbole aside, there's no way your international closings were "perfect to the penny". Tell me how this happened under FASB 52, I'm dying to hear it."

RESPONSE: The accountant who had that particular desk for a couple years before I took over thought that same thing, Pal. There was no way she could make her numbers reconcile to the penny. So each month she had the line "ESP" that made everything foot. (You do know what "foot" means, don't you?) ESP meant "Error Some Place". I went back through all those months and I did reconcile her ESP lines (to the penny). Her ESP was always composed of several much larger errors both positive and negative that balanced to a line item plug that was seemingly benign. In fact, many of the individual errors themselves were very significant and would have caused confusion had that bad number been incorporated into certain reports.

Actually, FASB 52 clarified currency conversions. But that Statement was adopted in late 1981 and I had already been promoted back into operations line management in another division, by then. In any case, our compliance policies were set somewhere above my pay grade. And the mechanics of currency translation are, in a word, mechanical. So my number and the numbers used by my counterparts at our offshore entities would be the same numbers, wouldn't they? When I applied a conversion factor it was the same factor all of us used that month. How do you imagine that this could cause my consolidations not to foot? You really don't know what you are talking about.

Superheater said: "While your at it, do tell oh Oracle of philadelphia, since a ponzi scheme relies on current income contributions to pay returns to prior "contributees" how SS is not a ponzi scheme. Is there some legal reserve, or is that the magic “trust fund” we hear about?"

RESPONSE: Magic Trust Fund. Magic? Interesting concept.

Superheater said: "Oh yes, I know about "fudging" and its precisely what you are doing here. I also know what "flushing is" and thats why I said its not in any accounting literature OF MERIT."

RESPONSE: We are talking about actually doing the work of a line accountant, Superheater. You keep talking about accounting literature. It is very clear that you have not ever worked as an accountant although you may have read a book.

Superheater said: "Do you really expect me to buy your puffery? You are a fraud, a liar and you've been exposed as such. Blowhard all you want, its obvious to anybody reading your post, your reaching, tossing around words you clearly don’t understand. You can dream up all the credentials you want, if you ever had them, they're fading."

RESPONSE: I think we have established who the poser is here. And another thing, young man, at 58 years of age none of my credentials are either out of date or fading. In fact my "beer gut" is bigger than ever! But thanks for your interest and for your sincere expression of concern.

Another poser tips his hand...
Thomas,

Everyone knows where the watering hole on the Penn campus is. That's not a good trick question. Any nine year old in Mongolia could figure it out. Just like you did.

But my question to you about Professor Ozbekhan had nothing to do with information on the Web or anyone's circle of friends. You don't know because you were not there. Hasan Ozbekhan had everything to do with the Wharton educational experience which you clearly have not enjoyed. I would think you could have called someone to get the answer, though. If you knew anyone.

Actually, West Philly on the Penn campus with the Drexel campus right there was very nice. Almost no trouble from the surrounding neighborhoods. North Philly was a war zone, however. And if you went looking for trouble in the neighborhoods of South Philly, near the Italian Market, you could get hurt. But to call Philidelphia a dump? Compared with where? You know what, boys and girls? Thomas Jackson was never a student at Penn. He's just making this story up.

I am not a CPA. Never in my life said that I was. I was not on a partner-path at Deloitte precisely because I was not a CPA. I was recruited into the MAS practice at our Chicago office because of my experience working with Eli Goldratt on a consulting product called OPT back in Milford Connecticut during the mid-1980's. Dr. Goldratt's theories have now evolved into his TOC concepts. Nevertheless, after a couple of years at Deloitte I let one of the clients lure me away with "an offer I could not refuse" as we liked to say back then.

By the way, Putz. No one called Smokey Joe's "Smokey". We never even said "Smokey Joe's".

We might say "Where you going? "Smokey's?" or "Last night I met this girl at "Smokey Joe".

But we never called that place "Smokey". And I am pretty sure that there wasn't anyone there named Smokey. I never met him.

We also never called the school UPenn. We said Penn or we said Wharton. You are way out of your depth, Thomas.

Really
Yeah I never attended Wharton but you couldn't tell me what every freshman would know. Now in the mid seventies anyone describing the areas surrounding the U of Penn campus as nice must have extremely lowered expectations. It is the same as describing Morningside Heights as nice. It is in fact a suburb of Harlem. I never called Smokey Joe's Smokey but do dream on, and no one ever referred to it by another name. Its amusing to see you contradict yourself in your own comment but what the heck, anyone who describe the areaq surrounding the campus in the way you have has a distinctly different scale of evaluating and one that is alien to the experiences of most.

Yeah I love Philly. There was something about cops with large mean dogs. These were not riot police, this was the normal cop. I did enjoy the roving gangs and rampant muggers that made walking in by city hall at 9 pm an adventure even for big man. i USED TO LOVE WALKING THROUGH THIS AREA TO CATCH THE train back to the mainline.

Sorry the educational experience I had required me to maintain a certain grade point or lose my scholarshoip. The experience was one of back braking and mind bending work to get through cost accounting and finance. It meant I couldn't enjoy the antics of the Psi U guys or stay in their mansion by Wharton which I understand the UPenn authorities have decided was too good for a bunch of preppies and has taken over in the name of the people. But I did have the pleasure of meeting a friend of mine who became a full professor there, Phil Pritchard, although he had the sense to stay away from business.

I doubt it can for political reasons
By this I mean the greed and persuit of power by both parties at the expense of people only seeking to provide a better life for their families. First you'd have to alter our citizenship and immigration laws as follows:

-citizenship is conferred by birth to legal residents or citizens only.
-Any individuals allowed amnesty would be placed at the end of the line. They would be required to pay all taxes; prove they obeyed all laws; owed no fines or were guilty of any felony; nor had received public assistance. Failure to meet these requirements would win you a bus ticket back home or the chance to repay all assistance with a fine and at a ten per cent interest.
-Voting would now be based on a census of citizens and not population alone.
-Immigration would be based on worker need not family reunification. No special rights to brothers, sisters, etc. Nothing for parents.

I agree that there is a need to avoid an underclass one that our political elites and the professional malcontents have taken great care in creating. I'd therefore recommend a thorough investigation of firms employing illegals and fining each one 100,000 per alien. This fine to be used towards the constructiuon of a border wall (not detection devices, not chain link, something as close to the great wall as possible with nasty East German guards and lots and lots of landmines.)

I would also make it federal law to allow any municipality to arrest and detain illegal aliens and charge the Federal government double what their cost incurred. Individual citizens would also be paid a bounty amounting of 5,000 credit on their income tax.

I believe this would settle things but unfortunately people neither realize the dimensions of the problem nor its costs.

When you say
"I'd therefore recommend a thorough investigation of firms employing illegals and fining each one 100,000 per alien" I think you're on to something. Part of the problem here is that there appears to be very limited consequence for employing illegals. Perhaps a large part of the solution is vigorously penalizing employers who do so willfully.

You are mostly correct here
It was indeed introduced in Germany by the Bismarck government. The purpose was not so much to reduce procreation (high birth rates were valued in the 19th C because it ensured a large supply of potential conscripts in wartime) as it was to outflank the rising tide of socialism as a political force, very much in tune with what you wrote about the Kingfisher.

I also agree that the problem appears intractable, except as I noted in a post elsewhere at least one country has placed its social security on a fiscally sound basis, and that was Canada.

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