The Half-Life of the Welfare State

Originally Published in Flourishing August/September 2011

Social Security is projected to exhaust its trust fund in 2036. Medicare will be out of cash in 2024. Technically speaking.

In reality, both systems are already in the red, because there are no actual assets in those trust funds; only government IOU’s. As Social Security and Medicare begin to pay out more than they take in from payroll taxes, they’ll scarf up virtually the entire federal budget and guarantee a steady increase in our already dangerous national debt. Add to that the current low interest rate environment (0-2%), and ask yourself what happens when we’re paying a more normalized 5% rate on upwards of $17 trillion.  Why else do you think the Federal Reserve is determined to keep rates so low?

Everyone already senses this, of course, but most people don’t yet understand that the current budget crisis heralds the beginning of the end of the Era of Entitlements.  Though Social Security has been around since 1935, the growth of cradle-to-grave entitlements accelerated in the 1960’s and ’70’s, when we decided that we  could subsidize everything for everybody. From education, to housing, to medical care, to food stamps, to the arts and entertainment, to retirement; a consensus of Americans decided that a policy of “from each according to his ability, to each according to his need” would be a fine thing. The wealthiest among us would somehow pay for it all.  Or most of it, anyway.  But it was an illusion. The 2009 Patient Protection and Affordable Care Act  (PPACA) was the last gasp grasp of that philosophy, and because the American people—having finally realized who would really pay—overwhelmingly opposed PPACA, it had to bullied through Congress in the dark of night.  That Act, following hard upon the government-led bums’ rush into housing (1995-2006), and the subsequent $trillions wasted on bailouts and stimulus packages have pulled back the curtain.

So, we’re now intimately acquainted with the life cycle of the entitlement hoax. Benefits, bailouts, and tax breaks are passed by the Congress and millions rush to claim them.  Marginal taxes rates can never be raised fast enough to keep up with an unending stream of entitlement promises without triggering a recession, so Congress makes up the difference with massive deficit spending and an ever-increasing debt burden—and we get a recession, anyway.  The Federal Reserve sops up the government’s debt with an increasing supply of inflationary electronic dollars—until we reach the point where we are now.  Over a (pork) barrel.

The task of our generation, and perhaps the next, is to preside over the dismantling of the voracious entitlement monster we’ve created.  We can now see that it was the unprecedented wealth created by the entrepreneurs, savers, and investors of our parents’ generation that made the welfare state seem plausible. In particular, the post-World War II boom in Americaand Europesupported the fantasy that we were rich enough to afford such an immoderate system of cradle-to-grave entitlements.  But, despite the incredible wealth creation of the past sixty years, the Age of Entitlement is now kaput.  We are living in the Age of Recompense.  Without explanation—since none should be needed—let me just assert that that’s a good thing.  It means that working, saving, and personal responsibility will soon be in vogue, and not just for those formerly willing, but for everyone.  Well, I guess that is the explanation, isn’t it?

The science of Physics tells us that a radioactive isotope decays perfectly according to first order kinetics.  For example, the half life of the Carbon 14 isotope is 57.3 centuries, which means that in 5,730 years, one half of any given quantity of Carbon 14 will have decayed into its surroundings.  By its nature, Carbon 14 is physically unsustainable.

As an extreme, and, therefore, educationally valuable case, consider the PIIGS (Portugal, Italy, Ireland, Greeceand Spain).  Over the last forty years, they were all built on the self-same ideal of cradle-to-grave entitlement; and here they are, begging the world for bailouts.  The entitlement philosophy is economically unsustainable, because compound interest, being mathematically akin to radioactive decay, guarantees that sooner or later entitlements will consume all of a country’s capital, and then destroy its credit, too.  With the demonstration and dissemination of that knowledge provided by the sad spectacle of the PIIGS, the remaining half-life of our own welfare state will not be measured in centuries, perhaps not even in decades.  mh

Advertisements

Adolph and Me

Originally Published in Flourishing August/September 2011

About a year ago, I wrote an article for this newsletter about the 45th reunion of my high school graduating class.  In that article I mentioned that, during my high school days, I’d worked for A. A. (Adolph) Reisig,  “…but that’s a story for another day.”  Well, that day has finally arrived.

I don’t know what made me think of Adolph again just now, any more than I can excuse the fact that I haven’t seen him since 1996, when we were both in Russell to witness Bob Dole’s announcement of his vice-presidential running mate.  We had spotted each other onMain Street, and the first thing he wanted to know, “What business are you in now?”  That was sooooo Adolph!

I told him, and he replied, “You know I have some investments, too.” 

“Yes,” I said, “I do know that.  You were the first person who ever talked to me about the market.” 

“Well, how are you doing?” he asked, but before I could answer, the national media had spotted him, and I slipped back into the crowd.  I never saw him again.

I was fourteen years old, when Adolph first knocked on our door.  He and his family lived just a few houses down the street, and he’d come to ask my dad, if I might like to earn some money that drizzly spring day; and my dad assured him that I would.  So, I climbed into Adolph’s pick-up, an aging but well-maintained Dodge, proudly emblazoned with the name A. A. Reisig Oil Co.  Among his many small-business enterprises, Adolph owned the local Texaco Bulk Plant.  He distributed gasoline, diesel fuel, motor oil, kerosene, anti-freeze, and dozens of other products to the farms, ranches, and Texaco service stations in and around Hays,Kansas.  He also provided and maintained both underground and above ground storage tanks.

So, that first Saturday on the job, my assigned task was to climb down a ladder into a mud pit—I’d guess that it was about twelve feet deep—to wrap a chain around a ten thousand gallon gasoline storage tank.  For $1.25 an hour (and my dad’s approval), I would have done almost anything, and compared to some things I’d done, this was a walk in the park.  The reason I had the job, incidentally, was simply that I was the skinniest kid—if you can believe it—that Adolph could think of that day.  Despite the wet weather and the dirty job, I had some fun and made some money.  I wasn’t too proud to ask Adolph if he had anything else I could do.

That was the first day.  Over the next three years, always for $1.25 an hour, I wrapped a lot of chains around a lot of tanks for Adolph.  I unloaded boxcars filled with 55 gallon drums of bulk oil products and anti-freeze, and thousands of cases of motor oil.  I delivered them to Adolph’s warehouse on a flat bed winch truck and unloaded them, using a small hydraulic lifting platform.  You might think that a skinny teenager can’t or shouldn’t do that kind of work alone, but I could and I did. I developed a strong sense of pride in my work, too.

I scraped and brushed old paint and rust from pipelines and tanks, and repainted them.  I painted warehouse floors and mended fences. I filled delivery trucks with gasoline from overhead storage tanks. 

Adolph was a sportsman, so, on the land that’s now home to the Ramada Inn of Hays, I launched clay targets, so he and his daughter could practice their shooting skills.  When you’re being paid, you don’t get to shoot.  But, I just thought I was a lucky kid to have a dad who knew Adolph, and to have a job that paid so well; and, of course, I was.

Did I mention that Adolph was virtually deaf?  Well, he was, and that made him hard to talk to; not that I had much to say.  What the heck did I know?—about anything?  So, I listened a lot.  Adolph was my dad’s friend, and I learned that he was also a good customer of the lumber yard my dad managed.  I learned that he had a collection of mid-range rental properties, and I painted most of them before my time was up.  He owned a couple of aging motels. With Hays being equidistant fromKansas CityandDenveron Highway 40 (and later on I-70), they each provided him an agreeable income.  Adolph had started his business career with a one-man auto body shop, but it had been closed long before.  I never asked why.

I’m sure that Adolph thought of himself as my mentor.  He told a lot of stories—the kind a kid’s expected to take a lesson from—but there were two things in his life of which he seemed especially proud.

First, he was a lifelong friend of Bob Dole, who had by then become a U.S. Congressman.  They had grown up together in Russell, and Adolph had been instrumental in helping his friend recover from war injuries.  He had also helped raise money to pay for Dole’s reconstructive surgeries.  In fact, that’s how Adolph and my dad had become friends:  In the late 1940’s, cigar boxes stood ceremoniously on the counters of businesses throughout Russell.  In effect, they were collection plates to help Dole and, doubtless, many other young men, who had come home from the war with serious injuries.  

Adolph was about thirty-eight years old when I went to work for him,  and I remember how very proud he was, when he earned his business degree from Fort Hays State University in 1961. That degree meant a lot to him, but I had no idea why.  I wonder, now, at how little I knew about Adolph.

Fifty years later, when I finally was curious enough to google “Adolph Reisig”,  here’s what I learned:  Adolph was born in Russell, Kansasin 1923, and graduated from RussellHigh Schoolin May of 1941.  Two days after the bombing of Pearl Harbor, he enlisted in the United States Marine Corps.  As a nineteen year old member of the First Marine Division, he went ashore on Guadalcanalon August 7, 1942, where he served under Lt. Ray Davis. (Lt. Davis was later awarded the Congressional Medal of Honor for his service inKorea during the Battle of Chosin Reservoir, and he eventually achieved the rank of General.) 

While defending Henderson Field onGuadalcanal, Adolph was wounded numerous times, and suffered the permanent loss of his hearing.  He was evacuated to hospitals inAustralia, until he could be safely transferred to theOaklandNavalHospital, where he spent eleven months, recovering from his injuries.

Back home on the packed-sand prairie of westernKansas, Adolph soon became a successful businessman; which I already knew, of course, and that would have been more than enough for him to have an impact on his community.  But, he also co-founded the Ft. Hays Historical Society, and served for many years as Executive Director of the Ft. Hays State University Endowment Association.  He co-founded the Butterfield Trail Antique Auto Club, and he was active in theMethodistChurch, Lions Club, VFW, Toastmasters, American Legion, the First Marine Division and the Marine Corps League.  With a group called the Rooftop Riders, he made an annual horseback crossing of the Great Divide.

Adolph Alexander Reisig died three years ago, on Saturday, September 27, 2008.  Typically, I didn’t know.  And now, when I finally do know that I’ll never again listen to his queries and admonitions, I miss him.  mh