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Paying the Price of Poor Planning:

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Good Morning Middle America, your “after the 4th” King of Simple News is on the air.

I have often spoken about the “social safety net” that we have in America. I have also remarked that the only difference between us and those in 3rd world countries is that we have a job and for those who don’t, there is social safety net.

The question then becomes, “How many people need to be unemployed before the safety net collapses?” After all, it’s the taxes of the working that support the benefits of the unemployed.

I heard that. Someone said, “Nooooo it’s not. I paid into my unemployment insurance and so did my employer.” This is true, but we don’t pay enough to provide for 100% of our benefits. The program is set up in such a manner that it will only support a small percentage of those paying in, should they become unemployed. Like any insurance, should the group all make claims on the same day, there goes the neighborhood.

To punctuate what I’m saying, thirty three states currently have unemployment funds below recommended levels. When they run out, they will have to borrow the money. Where do you suppose that money will come from? Higher taxes and higher premiums for those who remain employed is the obvious answer.

This is the same mathematical phenomenon that has caused Medicare to go into the red this year of 2008. It will be this same mathematical truth that will cause Social Security to go broke a little further down the road. And, it’s the same math that has caused fuel to reach the $4.00 mark.

How the heck did we ever get in this mess? Well, we spent countless years, days and hours, planning for it. At least we sent the brightest and the best to Washington to do that planning for us. Uh-oh. So there’s the cause; we sent others to do our planning and they planned for themselves, not us. Well who’d ah’ thunk it?

But we were so busy enjoying the temporary trappings of the all of this flawed planning, that it was just as easy to ignore the consequences of a plan that would surely become someone else’s problem after we were dead. But if you’re reading this, you lived too long, because we have arrived at the end of the temporary era. Well, darn the luck anyway.

Remember the question, “If a tree falls in the forest and there is no one there to hear it, did it really make a sound?” Well of course it made a sound, it fell down didn’t it? Physics doesn’t just apply when you are watching it for goodness sakes.

And so goes math. “If a flawed system fails after I am dead, did it really fail.” You can bet your boots on it, (that’s an old cowboy phrase).

Jamie Dimon is the CEO of J.P. Morgan Chase. Speaking in Aspen, Colorado recently, and to make his point, he asked the participants whether they were “pissed off” about the high price of gasoline at the pump. Most hands shot up.

“YOU HAVE NO RIGHT!” Dimon declared. “We almost deserve it,” he said, because as a country we had dithered for decades rather than transforming our energy economy. “We knew about this in 1974!” he said. The crisis we face now is the result of a “lack of political will.” (I think he meant sending crooks to Congress, but “lack of political will” sounds better).

Jamie Dimon was of course speaking about Marion King Hubbert’s testimony in front of Morris K. Udall’s committee in congress in 1974 that we were fast running out of oil. What Dimon should have said was that we have known about the energy problem since 1949 when the good Dr. Hubbert said, “The fossil fuel era will be of short duration.”

But then, being humans and all, it was easier to consider joining the grasshopper (Congress) and taking the ants food. In case you wonder, those of us in Middle America are the ants.

 

www.kingofsimple.com

Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 

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but the situation is so painfully obvious. &n... by kgongre on Monday, Jul 7, 2008 at 4:05:55 PM
Thanks for the response. Dimon should have said a ... by Mike Folkerth on Monday, Jul 7, 2008 at 9:43:36 PM
Wages inflate only when their is competition for l... by pft on Monday, Jul 7, 2008 at 11:38:05 PM
In my honest and educated opinion, you are wrong a... by Mike Folkerth on Tuesday, Jul 8, 2008 at 8:06:40 AM
 In a recent hearing held by the Oversight an... by pft on Tuesday, Jul 8, 2008 at 11:44:56 PM
If you can't understand what's happening i... by PeterJ on Tuesday, Jul 8, 2008 at 8:55:19 AM
I once wrote a column comparing unchecked capitali... by Mike Folkerth on Tuesday, Jul 8, 2008 at 9:49:14 AM
Good point Mike, but maybe we should change the ga... by PeterJ on Tuesday, Jul 8, 2008 at 10:41:18 AM
I like that line, "The best 3rd world nation on ea... by Mike Folkerth on Tuesday, Jul 8, 2008 at 11:04:02 AM
It only stands to reason it will change. I'm n... by PeterJ on Tuesday, Jul 8, 2008 at 1:40:56 PM