The Dangers of Government Handouts

by Gerri Willis

The trouble with government handouts is that once you get hooked on the free money - it's really hard to give it up.

And it doesn't matter what kind of entitlement you're getting -- just this week, for example, we learned that the executives at Solyndra applied for a second government grant after wasting half a billion dollars in federal loans.

The stereotype of somebody on the government dole is a welfare mother living in urban poverty but the reality today is that it could just as easily be a graduate of Stanford University who holds an MBA -- that's a fair description of Brian Harrison, the CEO of Solyndra.

Government dependency, it seems, is a disease that is spreading. Census data shows nearly half of U.S. households have at least one member receiving some type of government aid or benefit.

That percentage has skyrocketed over the last few decades - only about a third of American households received that kind of support back in the 1980s.

And that 48.5% is four percentage points higher than during the height of the recession in 2008! So we are more hooked on Uncle Sam now than ever.

While it's true that the population is aging and more people are receiving Social Security -- we know they are receiving benefits they've spent a lifetime paying for. But there are other ways that people get public dollars - like ObamaCare. There are also the government's stimulus programs and other benefits. So who gets what?

The average American got more than $7,400 in benefits last year. That's up from under $4,800 in 2000. And under $3,700 in 1990.

The Wall Street Journal points out: Lower income households were the largest share of recipients. More than a third of Americans lived in a home that utilized food stamps, welfare, Medicaid - and other means-tested programs.

Also, more than 14% have someone on Medicare... And nearly 16% are receiving Social Security benefits. Couple all this with record high unemployment - and you get nearly half of American households paying no federal income taxes this year!

And interestingly, the fastest growing proportion of people paying no taxes is in the middle class -- people making $75,000 to $100,000 a year - because of the burgeoning number of tax loopholes and deductions.

Look, this Administration prides itself on "looking out for the little guy" not having the government turn its back on any American in need. But when the President says he needs $447 billion for a jobs bill - somebody has to pay the price - that's us the taxpayer!

The overabundance of handouts and ridiculous spending is putting this country in need - and that could have disastrous consequences for us all.

America: Focus on the Number 2016

by Gerri Willis

Every night on the show I bring you a segment called Back of the Envelope, where I show you a lot of numbers, figures, data points -- but not tonight. Because, I really want you to focus on one number -- an important one.

That number is 2016.

That's the year that surpluses in the Social Security fund disappear once and for all and payments exceed payroll tax revenue. The government will be in the position that no private sector business operator would want to be in -- facing a huge and rising fixed cost each year at a time revenues are flat or down.

This isn't good. We've got a lot of viewers who care deeply about Social Security. I've read your e-mails. Many of you know the basic facts about the program -- for example, when the program was enacted back in 1935 that there were 42 working Americans for each retiree and that now there are fewer than three working Americans supporting each retiree.

You know the fundamentals with the Baby Boomers retiring -- well, it just doesn't work.

Which brings me to Texas Governor Rick Perry who says that Social Security is a Ponzi scheme. He's been taking a lot of heat for that. But I have to tell you, he is dead right.

As a financial reporter for years, I know that a Ponzi scheme is simply is a fradulent operation that pays returns to its investors from their own money or the money of investors who join the scheme later. The only difference between Bernie Madoff and the Social Security Administration is that Madoff set out to defraud investors while the SSA is simply trying to make ends meet. All this as Congress skims money from the top for all kinds of pet programs.

The answer isn't to end Social Security or to cut benefits. The answer is to reform Social Security. And, I have to tell you it's not that hard to do -- it's already being done by at least three counties in Texas. Those counties have figured out the problem with the plan -- it doesn't make enough money to cover its costs. Returns for the current program are punk -- between 1 and 2 percent, according to Congressman Paul Ryan. Would you put up with results like those from your financial advisor? Heck, no!

What some counties in Texas have done is to pool retirement contributions from public workers and invest them -- like a real money manager would. The workers get a match -- just like private sector workers and they contribute 6.2 percent of their pay just as they would have given to Social Security.

Let me show you some results:

  • A lower middle income worker making $26,000 at retirement would get $1,007 from Social Security a month, but $1,826 under the alternate Texas plan.
  • A middle income worker does evem better. Somebody earning $51,200 a year would get $1,540 monthly from social security, but $3,600 from the Texas model. (Source: Institute for Policy Innovation)

Which leads to the question, what would you prefer arriving in your mailbox each month in retirement -- $1,500 bucks or twice that amount. It's a no brainer right?

Even President Roosevelt knew that eventually the plan would have financial problems one day. And, we've changed Social Security in the past for the better. Exemptions in the original program meant that women and minorities wouldn't get Social Security benefits. We changed that.

Two-thousand sixteen -- when Social Security goes cash flow negative -- is just five years away. It's time for real reform.

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