The recent history of welfare
Courtesy of the Information Age we are living in, it is difficult to maintain focus on the various issues plaguing us. The deluge of information and demands on the attention of man is simply too great. People are spending time trying to observe and to form solutions to various issues of this world- though this is in many ways, a Sisyphean task.
While the amount of digestible information has increased exponentially the capability of the average man being able to digest information remains stagnant; some may even argue that it has decreased. This is, alongside the Democratization of the West and the process of the Democratization of the world, the reason why man is becoming more self-centered. The final nail in our coffin is that this is all going on while we are wasting time attacking symptoms, instead of tackling the root cause. With such obstacles in the way, we end up severely decreasing the chances of making a successful breakthrough for real change. This article will talk about one of the root issues in Western society that might cause our death should we do nothing about it.
To make this simpler for both Europeans and Americans, when I am talking about “Social Security” I will be strictly talking about the American viewpoint of Social Security and its programs since the terms and definitions differ depending on the continents. For the American and European mindset, Welfare (including Social Security) is to aid citizens in need in the form of money or necessities. Welfare is protected as a Human Right in The Universal Declaration of Human Rights Article 22, which states:
"Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality."
I would like to remind our American friends here that the UDHR refers to “Welfare” when they used the word “Social Security” in Article 22 since that’s what the Europeans had in mind when they wrote this. There’s also another article in UDHR, Article 25 that states:
“(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection."
There are many other Human Rights declarations such as the International Covenant on Economic, Social and Cultural Rights. Many Western nations base their policy decisions on these Human Rights Declarations. Therefore, one of the most common defenses coming from people supporting Welfare and Social Security is: “Welfare is a Human Right! We cannot abolish it”. It is time to explore whether this Human Right truly does we humans any good, or not.
How much do we spend?
Figure 1 US Medicare, Defense, Social Security and Welfare Spending compared. 2011
Trying to argue that Welfare spending does not contribute to a huge chunk of the budget expenditures is nonsensical. According to the proposed budget for the Fiscal Year of 2018, Social Security amounts to 987 Billion Dollars. Medicare and Medicaid in total would amount to 982 Billion Dollars. The other 624 Billion Dollars are spent on food stamps, Unemployment Compensations and some non-taxed incomes such as Supplemental Security Income. In total, they are estimated to cost 2.593 Trillion Dollars, a lot of Dollars in that equation, isn’t there? The important thing to note here is that these are mandated by law and are classified as Mandatory Spending, and in the upcoming year that number is expected to increase. The power of the Human Rights Declarations has made an appearance in the form of US budget spending; Social Security and some of the entitlements are so ingrained in the US Federal Budget that we would need to repeal or amend several laws to change the volume of spending in the US, and we all know that in a truly free democratic society such major changes are incredibly difficult due to the fact the constituency would happily vote people out if they decided to enact such changes.
Europe is arguably in a worse spot. According to Eurostat:
“At the level of the EU-28 [Author’s Note: EU-28 being European Union Member States] in 2016, around 89 % of expenditure related to 'social protection' was in the form of social (cash) benefits and the purchase of social transfers in kind. Around 5 % of expenditure in this function was in the form of compensation of employees, e.g. wages and salaries of staff administrating social protection schemes and 3 % of total expenditure on social protection was in the form of intermediate consumption.”
Figure 2 Social Protection spending’s of European Union Member States by percentage of their GDP's, 2016
One of the first things we need to realize is the fact that if we compare them by their GDP percentages, the US spends less than some European countries. The US Mandatory Expenditures’ % of GDP is around 13 percent. Whereas most of the European Union Member States are way over 13 percent, some of them even higher than 20 percent.
We have arrived at a point in this article where we can ascertain that Welfare and Social Security spending in the West is in high levels, it is now time to observe the effects it has on the West and its people.
What does this all mean?
Figure 3 UK Government Expenditure Pie Chart, 2016-2017
The total welfare spending by the British Government for the years between 2016-2017, if we combined the expenditures on Social Protection, Health, Personal Social Services, would take up 53.8% of UK Government Expenditure. Realistically, we could have included some of the spending done on employment, housing and many others. Many of the European countries have a very similar budget to this one.
So what sort of an effect does this really have on the European economies and its citizens? A very big one, high spending logically needs high revenue and the biggest source of revenue a government has is its, you guessed it, people. The question we need to ask is what is the cost of it? It is time for us to ask the OECD:
Figure 4 Percentage of average wages that goes to the government, 2013.
We can already start asking questions to ourselves right at this moment (even though I have more to say after this), is this truly the price that is worth to pay? Are you, as a citizen, more than willing to end up paying +40% of your income to the government? Some might answer that with a yes and point out that several European countries are happy with their lives and they are receiving the benefits they are paying in for. While in some cases there might be some truth in it, we need to ask ourselves is this: “Is this sustainable whilst maintaining a healthy society for the long-term?” The answer is a resounding no.
Some people would like to define a healthy society differently, for some it is just a measure of how happy its citizens are and how good are their economic wellbeing. For various others, it is much more than that. In our case, we need to look at the family structure, its cultural values, its national longevity to fully grasp if they are healthy and sustainable societies. European countries such as Germany would be more accurately described as bodybuilders on steroids. A bodybuilder on steroids might be very strong compared to the average person, but that is not going to last and they will also have to combat the side-effects that might end up destroying them completely.
I want to go back and first tackle the claims that high tax societies are inherently good and have happier citizens compared to low taxed societies. This might be a correct correlation but correlation does not equal causation in some cases.
Figure 5 German Survey on social equality, 2015
It seems that according to the citizenry of Germany’s redistributive policies does not satisfy its citizenry. This would naturally imply that the reason Germans are happy are different and not connected to the amount of taxes they are paying.
Figure 6 Fertility Rates of Europe, 2014
As we can see, the situation of European families is in a very unnatural shape. Our friends in Germany have a fertility rate of 1.5. In all European developed countries the sub-replacement fertility rate is now below 2.1. We needs to ask themselves how this situation would come to be if we did not include immigrant (particularly non-European immigrant) fertility rates in this equation, we would have much lower results. Unfortunately, it is much more difficult to make that sort of a research in the era of political correctness, as research to find out statistics that can answer us those questions in several countries -such as [France]-(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1236362) is verboten.
Before we move on to answer the questions of “Why” and “How”, we first need to address the “So what?” since there’s a good amount of people that are oblivious to what would happen to the structure of European and American societies if this keeps on going on.
Figure 7 Germany Population Pyramid, 2014
Let us analyze this Population Pyramid, first step should be to look at this from purely economic perspective, people under 20 years old would be “young dependents”, and people that are over 65 years old “old dependents”, let us finish this by calling people between the ages of 20-65 “providers”. Let us also establish the fact that the average German life expectancy is 80.57. The link provided also has information on several other country’s life expectancies, we can observe that Germany has a pretty average life expectancy compared to other European nations. Now look at the population pyramid, imagine that 15 years have passed, what would it look like? The logical conclusion would be that the number of dependents would increase and the number of providers would decrease. Resulting in a decrease in tax revenue and an increase in government expenditures. European Union Member States all share the same fate as observed in the table below:
Figure 8 European Union Population Pyramid, 2016
Let us go back to talking about the US and both its demographic past and future to see where it is headed.
Before 1965, the United States was not only majority non-Hispanic white, they also had a Eurocentric immigration policy. That changed with the 1965 Immigration and Nationality Act (aka Hart-Celler Act) signed by none other than Lyndon B. Johnson. The main point of this Act was that it abolished the national-origins quota which meant that the US would no longer pursue a Eurocentric immigration policy. What are the results of this?
Figure 9 The racial and ethnic composition of the US
Figure 10 Number of people of each age by race/ethnicity, 2015
As the number of old dependents and non-white Americans increase, so will the expenditures (Discretionary and Mandatory) end up increasing.
Figure 11 Americans on Food Stamps, 2012
Figure 12Total Fertility Rates in the US, 1980-2010
Can the US and Europe survive?
We need to go back a couple of years, to the refugee crisis. What sort of a devil whispered into the ears of the politicians that made them accept so many refugees and immigrants that are foreign and are not willing to assimilate? Is it because of incompetence or is there something more to this?
The biggest reason is necessity; when politicians in the West say “we need refugees and immigrants” they aren’t lying, the West does need immigrants, I am very certain that if you (privately) asked European politicians, they would all say that they themselves would prefer European immigrants compared to non-European immigrants. The reason might be because of racism, but it would mostly be because it would be much more convenient for EU Member States it would be much less trouble to accept European immigrants compared to non-European immigrants. But- hold on, didn’t we observe the fertility rates of EU Member States? There is not a single country in the European Union that has a fertility rate that is above the replacement rate. Not to mention that Europe as a continent has a very low population compared to other continents, such as Africa and Asia. The European economic model is a continuous model that needs a certain number of providers. But the amount will not be satisfactory if fertility rates remain low. So why are the Europeans so infertile?
Figure 13 The relation between Social Security Taxes and Fertility rates
Data makes a very strong suggestion that Social Security taxation plays a huge role in this, does common sense support the data? The answer is that it does, therefore in this case, correlation does equal causation.
Let me ask you, the reader, a question: Presume that your economic wellbeing takes precedence over all, would you have children if the nation you lived in had Social Security programs? Most people would either say no, or they would say “yes but only one kid”. Social Security removes the incentivization to have families because having a large family meant your children could financially support you once you reached a certain age, but due to high taxation and individualistic outlook on society, that is not happening anymore. Social Security programs force people to pay for everyone else instead of having people pay for themselves, resulting in growing individualism and the rejection of family.
The other side of this is that since Social Security results in a big expenditure for the governments, it is also the causation for high taxes. In a society where you are highly taxed, is it possible for you to sustain multiple people in your family, let alone yourself? The answer is no. If we go back to the survey done in Germany, it does pretty much explain why Germans cannot have children, they are too busy trying to make a living for themselves. This is inevitably same for every other European, they are too busy contributing to the system than to start a big family.
Perhaps some European politicians have realized where this is going, but what can they do about it? Social Security and Welfare are protected by Human Rights Declarations, perhaps one could suggest reducing it but that would mean you’d put yourself under massive risk because the voters would do their best to make sure that you are not in office anymore. Why do you think Donald Trump promised not to touch Social Security during the Presidential Campaigns? Do you think he would’ve won the election if he didn’t promise to protect it? I can guarantee you that states such as Florida wouldn’t vote him in if he didn’t claim that he would strongly support it.
Figure 14 US Population Pyramid, 2012
If this doesn’t sound bad enough already, it is also statistically certain that the heaviest tax burdens are on the older generations. In 15 years most of these people will end up retiring, where will the tax burden shift to? Seeing as how there’s a huge number of high skill workers on visas despite the number of people going to college to rack up debt, this burden may not shift to the younger generations.
Some optimists might say “well if we suddenly, by a magic trick, manage to increase the fertility rates in Europe we could still save it!” but we have reached a stage where the opposite will be true, because one result of increased births in a nation means that the number of young dependents will significantly increase. If Europe started to rock a good fertility rate of 3 or somewhere around that range, that would mean the number of young dependents would increase by a large amount, and it would take more than 20 years for those young dependents to become providers.
There is only one solution; cut Social Security and Welfare and aim to decrease government expenditure and taxation so that Europe can be fertile again. However, this will not happen in a democracy due to the reasons I have already mentioned, people will not vote for politicians that aim to decrease entitlements.