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2019-04-12 07:00 by Karl Denninger
in Musings , 2773 references Ignore this thread
Cut The Crap
[Comments enabled]

Let me point out a few things.

1. I have in front of me my Social Security "benefits and wage record" statement.  It says I have qualified for disability, because I have worked enough credits through my life.  Were I to be able to claim to be disabled right here and now I would get $2,342.00 a month for life -- that is, $28,104 a year tax free.

2. Two years after the date they deem me "disabled" I qualify for Medicare (irrespective of my age) and since I have no other outside income I would pay next to zero for Medicare.  Now I have "free" public health care.

3. Being "low income" and "disabled" I would also qualify for Section 8 housing.  Provided I was willing to move to somewhere there were open slots (typically you have to move to a county outside of the major metro areas to not have to contend with a long waiting list) the government would also give me northward of $500 a month -- or another $6,000 a year -- of housing assistance.

In other words all I have to do is be able to claim I cannot work due to some "disability" and I magically get $34,000 a year, or somewhere north of $20/hour (since there are no taxes withheld from that, but there are from wage income.)  Forever.

If I am an entrepreneur and gross $25,000 a year or less (note -- far less than this disability income) I can have "health insurance" for almost nothing.  In fact I currently pay about $15/month.  Note, however, that this is gross income -- on which I must pay taxes, most-particularly FICA and Medicare tax from the first dollar onward.

That Obamacare subsidy completely evaporates by the time I make less than double that, about $42,000 -- and the monthly charge for that "insurance" is nearly $900 a month, or $9,600 a year -- which I must pay, on top of FICA, Medicare (combined 15.3% of gross) and whatever federal income tax liability (~10% bracket, roughly) is.  In other words out of that $17,000 in additional income from $25,000 to $42,000 I must pay $9,600 + $2,601 + $1,700 = $13,901 plus any state income tax owed.

That is a tax rate of 82% on that $17,000 in earnings before state income taxes. I get to keep nearly nothing of that money but I have to work for all of it.

So I actually have $28,099 (not including the FICA and Medicare tax on the original $25,000) by working hard at trying to build a new business while if I claim to be disabled I have roughly 30% more and I get to sit on my ass and drink beer or (if I live in the right state) smoke weed all day for the rest of my life.

Further, if and when I destroy my health doing that all the medical care I need as a result I don't have to pay for either.  But if I wreck my health by burning the candle at all ends at once (and getting about 4 hours of sleep -- maybe -- a night), as I did for over a decade being an entrepreneur I am entitled to..... nothing.

500,000 fewer small businesses exist now than did a year ago.

Do you now understand one of the major reasons why?

In the mid 1980s I took a salaried job that made $18,000 a year.  It was challenging on a technical and "skill" basis, but miserable in terms of working conditions.  It was several years before I cracked the $40,000 a year barrier in gross earnings.  During all of those years, none of which provided me a nickel in overtime pay I was expected routinely as a professional (coder) to work in many cases as much as 80 hours a week, whether for someone else or self-employed.  With that quite-modest salary and no overtime I managed to provide myself with a modest (1 bedroom) but clean, comfortable and livable apartment, a vehicle, sufficient food (I never went hungry), electric, water, garbage service, phone and similar.  I managed to save enough money to pay for (with cash) a decent TV and stereo.  I did not have much extra money at the end of the month but I received zero government benefits or subsidies, nor did I receive any benefit, subsidy or gift from anyone else either.  I had plenty to eat, enough money to enjoy a night out at the local bar once in a while and enough money to take women out on dates on occasion -- and I was able to afford a place to live by myself, not needing to have a roommate or live with my parents who in fact lived in a different state.

Car insurance was a fraction of what it costs now.

Food was a fraction of what it costs now.

Health insurance was a fraction of what it costs now.

Utilities were much cheaper.

Rent was less than half what it costs now in the same building.

You could actually obtain $500 cars from ads in the paper and they ran perfectly well.  They looked like crap and were old, but were functional to get you to and from work.  When they broke down and required something expensive to fix them another one was available on a trivial basis and the title and tag fees were much smaller than they are today too, so transferring from one to the other was cheap.

All of this happened inside and just outside of Chicago -- a major city -- in the immediate metro area, not somewhere in the sticks.

A few years prior to that it was routinely possible to spin (or deliver) pizzas and make enough to go to college -- room, board, tuition and books.  Again, you wouldn't have a lot of money at the end of the month but you could make it.  You can't today; it's impossible.

The problem isn't income.

It's expenses.

The alleged "no inflation" world we have lived in is a lie.

The solution to the problem cannot be to lift wages because if you do not address the cost problem prices will rise faster than wages since nobody works for free and every increase in wages means more than one person touches the money before the employee gets it.  Such an attempt therefore will always screw the people at the bottom the most and those in the middle of the transactions will skim off a piece for themselves, making the people at the top richer!  The paradox is that if you lift the minimum wage from $10 -> $15 some number of people will get zero instead of $10 (they'll be unemployed as they're replaced by a robot, an order kiosk or similar) but even those who get $15 will see their cost of living and taxes, both direct and indirect, go up by enough that they will actually lose standard of living even though in dollars they make more.

This has happened every single time through American history.

It will happen again.

It is regressive enough, and punishing enough, that there is no way I will stand up a company in this environment.  In addition to that the lack of Rule of Law means that if some rich billionaire *******, whether it be Beelzebezos, Zucker****er or other lies, cheats, or even outright steals what I produce I will not able to stop him, sue him and he won't go to prison.  If I try to use the very same tactics these bastards use I will either be sued into bankruptcy or prosecuted and imprisoned, so even if I'm willing to be an unprincipled prick the odds of my getting away with it and succeeding are nearly zero.

We either fix this, starting with the medical scam as I've outlined before, or this nation and its financial future are finished.  Further, unless we fix this intelligent people will not choose to have children since they cannot get ahead of the tax leech that claims disability and sucks off all their money while slugging down beer and drugs by the truckload.

Time's up folks.

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