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Welfare Queens

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Welfare is often derided as payment to people for doing nothing, or people getting paid not to work. The recipients are called freeloaders, lazy, etc. I would like to apply this definition to selected government programs which are not generally considered ‘welfare’, compare the spending of these activities to the spending of programs traditionally defined as welfare, and see which parties are actually the biggest freeloaders on taxpayer money.

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Unless noted, all figures being used cover the period from 2009 through 2013, with annual figures being the average of these five years.

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The total cost of the following federal programs averaged $203,554,000,000 ($204 billion) over the past five years:

  • All food and nutrition assistance (food stamps, etc.)
  • Unemployment
  • Supplemental Security Income (not Social Security)

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While not accounting for the money spent for all programs where it could be argued that individuals receive money for doing nothing, the total spent for these items makes them the three most expensive programs which make direct payments to individuals, and cover the lion’s share of what is traditionally defined as welfare. I am leaving Social Security, Medicare, and Medicaid out of this section, as these programs are paid for by workers and employers, and not generally considered welfare.

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$204 billion per year is a lot of money. But is it really, when compared with other government programs which literally pay individuals and organizations for doing nothing?

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The net interest paid by the U.S. Government over the past five years has averaged $211 billion per year. The people who collect this interest are getting paid for doing nothing. Just sitting on the couch, eating Cheetos and watching Oprah, while collecting interest payments. Some of them are probably using these proceeds to buy drugs or liquor, the lazy freeloaders. The annual cost of this one program is more than the fore-mentioned traditional welfare programs. Foreign and international organizations hold close to half of outstanding U.S. Treasuries, accounting for approximately $100 B of the 211 B annual average interest paid. At least most funds spent on traditional welfare immediately re-enter the economy in America, when they are spent on food, rent, or anything else, which in turn benefits other Americans. Conversely, interest money going to foreign countries may never make it back into the U.S. economy.

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The U.S. Federal Reserve Bank increased its assets by approximately $3 trillion from October of 2008 through the end of 2013. Most of this was due to an activity known as quantitative easing, or QE. There are several reasons that a good percentage of this $3 trillion amount will likely never be recouped by the Fed. Approximately $2 trillion of this total has been used for purchases of mortgage backed securities (MBS). Any loss realized on these assets when they are eventually sold is effectively welfare for the parties these assets were purchased from (banks, other corporations, hedge funds, pensions, governments, and individuals), as a full price paper value was paid by the Fed at the time of purchase. The people and organizations which sold the assets have passed any potential losses on these assets to the U.S. taxpayer. Due to a litany of problems with the valuation of the assets underlying these MBS, as well as a likely decline in the overall market, which is currently overpriced, a marked loss on these purchases is likely. Assuming a 40% loss on these MBS purchases when they are eventually sold by the Fed, $160 billion per year will be lost on this endeavor, in addition to the interest cost, as the Fed has been working with borrowed money. The people running the organizations receiving this free government money did not need to be smart, hard working, or well educated to collect this welfare. Generating the assets required to purchase these MBS securities may have required those traits, but selling dodgy assets to the Fed at top dollar in a bubble market is a no-brainer. In fact, purchasing said MBS securities in the first place may not have been such a bright idea, until the Fed came to the rescue, buying the questionable assets while simultaneously artificially inflating the market valuations.

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National defense and veterans affairs cost $793 billion per year, on average, over the period we are analyzing. Obviously, the taxpayers are receiving some value for the money spent here, but a great deal of this amount can certainly be considered welfare. Any profits realized by contractors providing goods and services to the Defense Department can be considered the amount the government was overcharged for said goods and services. These overcharges are then given to the shareholders of contracting corporations as profits. Overcharging is not work, so this is welfare. One could also argue that money spent by the government for which no benefit is realized by American citizens can be considered welfare, whether any actual work was done or not. Most of what the U.S. military has done in Iraq, Afghanistan, and other countries could and should have been done by native police, military, or other organizations and paid for by the people of these countries. These services are welfare benefits received by the people of these countries, at least for the ones on the ‘right’ side. Any jobs ‘created’ by this activity in Africa, Asia, and the middle east are not likely to be filled by unemployed Americans, taking them off the welfare rolls. If the U.S. Government had not pursued illegal, imperial wars of choice based on lies in Iraq, Afghanistan, Pakistan, Yemen, Libya, and several other countries over the past five years, the $793 billion annual “defense” cost could have easily been $300 billion less. With all of this taken into account, a $300 billion per year war welfare amount seems reasonable, if not too small.

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For our five year time period, total corporate profits in the U.S. were $9,589 billion, while corporate federal income tax receipts were $1,027 billion, for an overall tax rate of 10.7%. From 1967 – 1971, the actual corporate income tax rate was 34%. Applying the 23.3% difference in rates between the 1967 – 1971 period and the past five years gives an annual average of approximately $447 billion in lost tax revenue. Forty-five years ago is ancient history, you say? The period from 1996 through 2000 saw an actual corporate income tax rate of 24.8%, or 14.1% greater than the that of the past five years. These two periods are only separated by 8 years. This 14.1% difference, when applied to the past five years profits, averages $270 billion per year. This lost revenue, by itself, is much more than the cost of traditional welfare. One could argue that a tax decrease cannot be considered welfare, as the recipient does not receive money, but pays less in. Many corporations not only pay no tax, but get a refund to boot. These instances can certainly be considered welfare, and are part of the reason the overall tax rate is so low. Also, all corporations paying one-third to half of the total tax rate they have paid in the past, and a much lower rate than that which many individuals pay, can arguably be considered a form of welfare.

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From just the four areas of government activity and amounts presented here, up to $1,118 billion per year has been spent on welfare for these programs, with most of these benefits going to corporations, wealthy individuals, and foreigners. Are these welfare activities a better use of funds than helping people in the U.S. who need assistance? Are they worth five times as much? Would you prefer some of your tax dollars go toward feeding your neighbor’s kids, or give five times that amount to the government of China, warlords on the other side of the planet, corporations, and billionaires?

 

QE is a Massive Gift to the Rich – Dallas Fed President

March 21 — Federal Reserve Bank of Dallas President Richard Fisher speaks at the London School of Economics. (Source: Bloomberg)

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“I don’t think there’s any doubt that quantitative easing enabled the rich and the quick. It was a massive gift.”

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On the ‘wealth effect’ created by QE:

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“It was deliberate in that we were hoping to create a wealth effect.” … “There was a more concentrated effect. And you see it in the kind of earnings that are announced by certain private equity groups and individuals and so on.” … “the distribution of the wealth effect was heavily concentrated” … “We don’t work for the rich and the quick. We work for the American people. So that’s been one of my bigger disappointments.”

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Quoted comments start at 52:20

http://www.bloomberg.com/video/fed-s-fisher-on-monetary-policy-asset-purchases-l1Yg9oh2Ri2R5_Vyv5KGtA.html

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http://www.valuewalk.com/2014/03/dallas-fed-president-says-qe-massive-gift-wealth/

http://www.zerohedge.com/news/2014-03-21/qe-was-massive-gift-intended-boost-wealth-fed-president-admits

Tugboat: How to Be One (and Why)

Awsome article from a friend on how one person can make a difference:

five.minutes.til.midnight

Yesterday, I woke up to a frustrated post by my 26-year-old son, asking for some reinforcement on the Facebook page for Buckland Hills Mall where he works. He and a group of other mall employees had been posting for hours, looking for information about whether the mall would be opening on time, given the six inches of snow on the ground and the six more yet to come. Sleet was now falling from the sky adding a treacherous element to the already dangerous driving conditions. I added my post to the lengthening list of increasingly angry people, and chatted online with my son for a bit about how ridiculous it was that no one from the mall had responded. Finally, at 9:18am, long after the opening workers would have had to clean off their cars and head out in the snow and ice, the mall announced that they would be…

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U.S. Income Disparity

income disparity29_n

SOURCE:

2012 compensation subject to Federal income taxes as reported by employers on forms W-2.

Data compiled from Social Security Administration Office of the Chief Actuary,

“Wage Statistics for 2012”

November 5, 2013

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Individuals paid $500,000 or more             Individuals paid under $20,000

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424,508  workers                                             60,875,833  workers

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.276% of total workforce                                   39.624% of total workforce

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Total compensation:                                           Total compensation:

      $502,768,000,000                                              $502,504,000,000

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Average:  $1,184,000                                              Average:  $8,255

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Link, Yo:    http://www.socialsecurity.gov/cgi-bin/netcomp.cgi?year=2012

What is a Reasonable Level for the U.S. Minimum Wage?

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     There has been a Federal minimum wage in the U.S. continuously since 1938. The latest increase in the U.S. minimum wage was passed in the Senate on 2/1/2007, the bill passed 94-3. These facts seem to indicate that a minimum wage is fairly popular, and will be sticking around, regardless of whether some think it is a good idea or not. The state government here in Minnesota, as well as the governments of many other states and cities, is currently debating a minimum wage increase. Most of us regularly interact with and know people who make minimum wage or slightly above. As such, this article will attempt to reasonably ascertain what the U.S. minimum wage should be now and going forward, in comparison to historical data on minimum wage and average overall wage and salary income.

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    I see many historical minimum wage comparisons based on gross national product, inflation, or cherry-picking data from a particular year. I don’t feel any of these offer a reasonable historical comparison to the way things actually are. Individual pay rates or income have virtually nothing to do with gross national product, as far as I can tell, so it makes no sense to compare the two. U.S. government inflation rates are worthless for historical comparisons, as they changed many formulas used to figure inflation, starting in the 1980s. These numbers may be okay to compare the 2010s to the 1990s, or the 1950s to the 1970s, but are not accurate reflections of reality if comparing the 1960s to the 2000s. Then there are the ‘cherry-pickers’, any source which says something like “If it were like 1967 the minimum wage would be $23.45 per hour!” is just being sensationalistic and inaccurate, when one compares this information to an overall historical accounting of facts.

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     I feel a more accurate way to compare different eras would be to use actual W2 wage and salary information, and compare this to the minimum wage in effect at that time. One could use median or average income amount, I chose to use average, as it is slightly more accurate, simpler, and makes more sense to me. I ran some numbers with median data and got similar results, so averages will be used for the purposes of this article. As this data is from wages and salaries only, and not total average income, it is not skewed higher by income from rent, dividends, interest, capital gains, or other income sources. 61 years of SSA data should give an accurate representation of overall wage rates.

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     From Social Security Administration data going back to 1951, I compared national average individual income for a given year with what a worker making that year’s minimum wage made if working 2,000 hours. (40 hours x 50 weeks, 2 weeks off for vacation.) For example, in 1965, average income was $4,659, and minimum wage was $1.25. 2,000 hours at $1.25 per hour = $2,500. 4,659 divided by 2,500 = 1.86, which gives us the average wage to minimum wage ratio. This ratio ranged between 1.77 and 2.37 in every year from 1951 through 1983. The middle of this range is 2.07, so lets use that for future arithmetic.

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     2012 is the latest year this dataset includes, when the average individual income was $44,322. 44,322 divided by 2.07 = 21,412, divide by 2,000 hours and we get $10.71. Assuming increases similar to 2010 – 2012 in the average individual income for 2013 – 2015, the average income number will be around 48,400 in 2015. As any future changes in the minimum wage will most likely take effect in 2015 or later, this anticipated future figure should be contemplated as well. Applying the 2.07 ratio to the estimated 2015 income amount gives us $11.69 per hour. If future minimum wage law keeps the level the same for several years, as it often has in the past, it would seem reasonable to have the minimum wage increase to around $13 per hour, if one sees the 1951 – 1983 period as economically desirable, in general. It seems the people pushing for a $15 per hour minimum wage are right on the money, so to speak, as the first rule of any negotiation is to ask for more than you want. Applying the high and low ratios for the 1951-1983 period (1.77 and 2.37) and applying to the estimated average income for 2015, we see a range of $10.21 – $13.67. Going forward, the $10.10 level would seem to be a bit low, historically.

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     One of the arguments against raising the minimum wage says it would cause many businesses to fail due to not being able to meet payroll. Lets look back at the past to see if this holds true. From October 1, 1996 to September 1, 1997 the federal minimum wage increased twice by a total amount of 90 cents, a 21% increase from the previous $4.25 rate to $5.15. Remember how horrible this was? No one could eat out as every restaurant closed due to not being able to afford cooks and waitresses. Long lines at gas stations as they could not afford to pay cashiers. Every Walmart store closing since they could not afford to pay employees. Remember the stock market crash caused by the economic impact of the 21% increase of the minimum wage, and the huge spike in unemployed individuals? Oh wait, none of this actually happened. So how would one expect this to be different in 2014? The minimum wage has been raised over 20 times over the past 75 years. Did any of these other increases destroy the economy? If a U.S. business model cannot sustain a reasonable payroll for its workers, that business should rightfully fail, as thousands of businesses do every year. Another point to ponder: in 1997, approximately 7% of the U.S. workforce was paid minimum wage or less. That figure has dropped since then, and is a bit over 2% of the total U.S. workforce now. This indicates a similar increase would have much less impact on the overall economy now, when compared to 1997.

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     Lets conclude with a little food for thought exercise. If you currently earn minimum wage or a little above, or ever have in the past, raise your hand. (An imaginary hand-raising is fine for our purposes.) Next, if any of your family members or friends meet the above criteria, raise your hand. If you feel any of these people (including yourself) should be making less money, should have made less in said situation in the past, or actually have returned part of the wages paid, out of remorse, put your hand down. When in this situation, if any of these people refused a pay raise when offered to them, put your hand down. If you still have a hand raised, it would seem you support an increased minimum wage, if you are not a hypocrite.

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    “We stand for a living wage. Wages are subnormal if they fail to provide a living for those who devote their time and energy to industrial occupations. The monetary equivalent of a living wage varies according to local conditions, but must include enough to secure the elements of a normal standard of living–a standard high enough to make morality possible, to provide for education and recreation, to care for immature members of the family, to maintain the family during periods of sickness, and to permit of reasonable saving for old age.” –Theodore Roosevelt, 1912

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Data sources:

SSA National Average Wage Index, 1951-2012

http://www.ssa.gov/OACT/COLA/AWI.html

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Some information on why official inflation data is worthless for historical comparisons:

http://www.zerohedge.com/contributed/2012-12-04/washington%E2%80%99s-biggest-lie-and-why-it-continues-be-told

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History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938 – 2009:

http://www.dol.gov/whd/minwage/chart.htm

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Characteristics of Minimum Wage Workers: 2012

http://www.bls.gov/cps/minwage2012.htm#2

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*Pretty nifty* – Social Security Administration Wage Statistics for 1990-2012

http://www.socialsecurity.gov/cgi-bin/netcomp.cgi?year=2012

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Economic research finds little evidence in support of the hypothesis that an increase in minimum wages significantly affects employment – either positively or negatively.”:

http://www.nakedcapitalism.com/2014/01/minimum-wages-effects-employment-labour-force-turnover.html

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Misc:

http://oregonstate.edu/instruct/anth484/minwage.html

http://www.ssa.gov/history/trspeech.html(Teddy Roosevelt quote)

Locating Assets–BANKRUPTCY RECORDS

A Litigator's Blog | MKT Law, PLC

United_States_Bankruptcy_Court_Seal Information Available

Bankruptcy court filings probably contain more financial information on a debtor than any other source.  Of course, they are only available if a debtor has previously filed for bankruptcy protection with one of the U.S. District Courts. Depending on the type of bankruptcy filed, the debtor may still keep possession of the assets after her/his case is closed and is no longer subject to any legal restrictions on collection activity.

Commonly disclosed information on bankruptcy filings includes the following nonexclusive items:  last four digits of the SSN, addresses, real estate locations and values, bank account location and information, motor vehicle information, general value of assets owned, specific information about other debts (secured or unsecured), personal property and its claimed value, etc. In a Chapter 11 or 13 (sometimes Chapter 7 too), such as, the debtor may have gone through the bankruptcy process and kept the some of the…

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