Friday, March 9, 2007

wealth redistribution, german style.

Germany has the "right to Rente " (publically-funded retirement) written into its constitution. (I cannot for the life of me figure out how you can make something a right that necessitates financial obligation by others, but I'm just one of those pie-in-the-sky libertarians.)

Germany, of course, has the same mathematical problems with social security as our own system. The people who thought it up failed to plan for an upside-down ratio of beneficiaries and working folk, and with the baby boomers starting to retire in both countries, both systems will be hopelessly upside down by 2020 or so. At that point, there'll be more money paid out than comes in via social security contributions, and the SS system will weigh down the general fund to the tune of a few trillion dollars.

Of course, our politcritters in both countries care little about mathematics. The retirees in Germany and the United States constitute a huge voting bloc (old folks vote), and a great number of them sides with the AARP and its German equivalent, which basically say "screw you, junior, we'll be long gone when the pot is empty." (The people in charge in Washington and Berlin also know very well that they'll be long gone when the system collapses, and somebody else will have to sort out the mess.)

Here's an instructive table from Germany. It shows the contribution-to-benefit ratio for future and current retirees based on their current age.

As you can see, people who are 65 receive about a quarter million euros more in benefits over the course of their lives than they actually pay into the system. In contrast, people who are now 25 will pay in almost 150,000 more in euros than they'll receive from the system, providing that it still exists when they retire at the age of 67. (Retirement age has just been raised in a grudging acceptance of elementary math.)

That means that my brother and his wife, who are both in the 30-35 age bracket, will be relieved of a combined quarter million dollars over the course of their lifetime to finance the current retirees' "constitutional right" to state-funded retirement. Count in their two (soon to be three) kids, and assume against all logic that the Sozialstaat won't collapse fiscally by the time the youngins reach retirement, and you're probably approaching a million bucks pilfered from just that little five-person household over the course of their lifetimes.

(That's just their contributions to their social security net, of course. I'm not even counting the money taken out of their paychecks for the almost-20%-VAT, sales taxes, ruinous gasoline taxes, and various other ways in which the state will claim a right to their paychecks.)

That is what socialists call "fair", and "socially progressive". That's their "fair share".

I have no doubt that our system is similarly unfavorable for the Gen-Xers, but that's the way the cookie crumbles. Next time you see one of those AARP ads exhorting you to call your Congressperson and tell them to "leave Social Security alone", keep in mind that the system's fine only if you're in retirement, or near it. For everyone born after the Baby Boomer generation, AARP has nothing but a shrug and a jar of Vaseline.

Nobody would need a "social net" if the government didn't confiscate half the paycheck of every working man, woman, and child at gunpoint. (In actuality, effective tax rate is closer to 90% if you count in every tax that is levied on everything you can buy or make.) Would you need to worry about your retirement years if you could deposit all of your gross pay in the bank, and in addition everything was suddenly available at a 90% discount....housing, food, cars, anything?

To speak with Harry Browne, government breaks your legs, hands you a crutch, and says, "See? Without government, you wouldn't be able to walk!"

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