Living on a Borrowed Dime

Adam Smith said, ‘there is a great deal of ruin in a nation.’ America’s pension managers are trying to find the exact dollar amount.

Living on a Borrowed Dime

by Tom Shackleford


In the future, American Whites will be a hated minority struggling to survive within a destitute, failed state. That’s the fate we’re fighting to avert on the Alt Right. However, we hold no institutional power whatsoever. The Establishment has decreed that America must commit suicide, and so it will. We’re already too far down that path to make a U-turn. In a national sense, suicide isn’t a single trigger-pulling event. Rather, it’s a long process. One of our major strengths lies in the escalating set of extremely negative consequences that this journey will inflict on pretty much everybody. It appears that the initial mass casualties to be suffered in this implosion will be in the Baby Boomer generation. Although polls have shown that many have little inkling of the impoverishment that awaits them, a 1st world level of retirement income is not a reasonable expectation in a 3rd world country.

Boomers

The term “Baby Boomer” applies to those born during the huge White population expansion that occurred from the end of WW2 to 1964. Apropos, the Hart-Celler Immigration act, which has been browning out this country ever since, was signed the following year in 1965. Roughly 76 million Boomers were born. Of that original population, around 65 million remain alive. When immigrants are added to this total, it comes out to 80 million. At this point, an average of 10,000 Boomers retire each day. This trend is driven partially by the fact that federal law encourages many to leave the workforce by age 70.5. People over this age are compelled by the IRS to annually withdraw at least 5% of the value of their retirement plans such as IRAs or 401(k)s. Last year, Pew research calculated that 1.5 million Americans reached this age. It also noted that this trend will continue for the next 15 years until almost all Boomers have exited the labor market.

Demographic Imbalance

Traditionally, societies take on a pyramid shape in terms of age. Older people comprise the top of the pyramid, and are supported by a substantially larger base of younger, productive people. The “Greatest Generation,” which preceded the Boomers, is the last group of White Americans for whom this is the case. The Boomers are faced with a retirement situation in which the sizes of the generations behind them are getting smaller. The shrinking pool of contributors relative to retirees alone creates unprecedented challenges without easy solutions.

Consumption

The average American reaches their highest levels of consumption in their forties. During this time, a person would generally be advanced in their careers, at least a decade away from retirement, and still supporting a family that would probably include ravenous teenagers. After that, as dependents reach adulthood and retirement looms, spending habits generally become much more conservative.

Upon retirement, incomes are generally much smaller, so consumption drops sharply for seniors. This is a particularly salient consumer habit among those with a private, individual retirement plan. A person relying on such a plan doesn’t have the security that was generally afforded to a retiree who could expect fixed payments from a traditional pension plan.

This new wave of retirees has demonstrated an even more pronounced contraction in consumption because they have no idea how long they will live. As a 70 year old in reasonable health, will you die at age 80 or 90? The latter estimate would mean that you must survive twice as long on your assets than the former. Will you spend these years self-reliant in your home, or require expensive assisted-living? Thus, it’s impossible to project how long they need their wealth to last.

Therefore, the only prudent course of action for someone in that position is to be as conservative as possible with his discretionary spending. On a scale as massive as the Boomers, the deleterious economic impact will be massive. Already, this is probably a significant factor in America’s ongoing “retail apocalypse”. The record amount of store closings in 2017 (with 2018 projected to be even worse) can be attributed to a range of trends, but Boomers steadily buying far less should definitely be taken into consideration.

Private Plans

From a generational perspective, the Boomers hold the vast majority of assets. This becomes a problem because they need to continually sell a portion of these assets each year to the younger generations in order to fund their retirements. Due to the demographic imbalance, there will be larger pool of sellers than buyers.

Greatly compounding this problem is the fact that the younger generations are characterized by steep student and consumer debts. From abysmal family formation and personal savings rates, it’s easy to see that many people in this generation lack the wealth to start building a portfolio of equities. Simply starting a family and sending their kids to a safe, functional White school is a huge challenge for typical “middle class” Americans in many areas of the country. Making substantial investments for retirement has become a luxury.

So, a toxic cycle will come into play. At a minimum, Boomers will need to sell 5% of the value their plans annually. There will be a huge pool of retirees annually dumping equities onto the market without a comparable pool of buyers to purchase them. This unfortunate dynamic will lower the prices of equities, thus lowering the value of the plans that Boomers need to survive on. This may lead many to sell their homes and seek more affordable accommodations. Home prices will experience a stiff decline, thus reducing the value they can get out of their homes.

Public Pensions

Many Boomers will be reliant on traditional pensions provided by state and municipal governments. These are already faltering in at least seven different states: TX, CA, IL, CT, OH, and KY. There’s exponentially more of this to come as our profound demographic transition continues and pension plans burn through their assets. American politicians are inherently high time-preference creatures. Many of them also happen to be borderline or outright imbeciles. To these people, a crisis later isn’t even a price to pay for winning an election right now. This has led government entities across the country to dramatically underfund their pension obligations in order to present the illusion of balanced budgets. Decades of this selfish, reckless behavior by our political class will exact a heavy toll on retirees.

Back in 2016, a study commissioned by the Actuarial Standards Board concluded that state and municipal pensions are facing a nationwide total of 5 trillion in unfunded liabilities. It argued that unlike private or most foreign public plans, US pensions in this category are able to discount liabilities against assumptions about future returns on investment. This is the precisely the sort chicanery that has come to define the math done at all levels of US government.

To illustrate, let’s take a look at CalPERS, the largest public pension fund in the state of California. With assets in excess of 300 billion, it is the largest pension fund in the country. It made projections based on an estimated annual return of 7.5%, compounding each year. That’s quite unreasonable since in fiscal year 2016, its rate of return was a meager .6%. That’s far below what CalPERS needs to achieve in order to meet the needs of 2 million retirees. At this early stage, Californian households have amassed over 100,000 dollars apiece in liabilities to cover a pension shortfall that surpasses a trillion dollars.

The Toxic Debt-Pension Relationship

Pension fund managers favor purchasing public debt. Bonds issued by American governments are considered safe havens. For someone managing a long-term, low-risk fund, they offer predictable yields over a defined period of years. This makes them ideal investments for pension plans.

Thus, along with Social Security, public pension plans own around 50% of the National Debt. The problem is that government debts are now so high that only minuscule interest rates are possible. This is the toxic relationship: Pension plans need healthy returns on their government bonds, generally somewhere between 5-8%. However, if governments had to borrow at such traditional rates, a debt crisis would arrive sooner rather than later. So, most pension plans can’t get the returns that they need to stay solvent without making their own deeply indebted governments insolvent. Likewise, governments can’t borrow enough money to bail out the insolvent pensions without pushing themselves towards insolvency.

Social Security

As state and municipal pensions come under duress, many will look to the Federal Government in the hope that Social Security payments would provide them with a subsistence-level safety net. This colossal entitlement constitutes nearly a quarter of the Federal budget. It is already a Ponzi scheme. Many contributors travail under the intentionally-cultivated misconception that they are paying into a program that will take care of them once they are retired. In reality, worker contributions were already exceeded by payments to retirees back in 2010. The program now costs around 950 billion annually, a figure which includes disability payments. This annual deficit is now around 75 billion dollars, which like everything else, will mount steadily as the Boomers retire.

In 2016, the program already consumed 24% of the federal budget. Its staggering cost is kept artificially low by the deliberate manipulation of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The current formula was set by the “Boskin Commission” in 1996. It decided that inflation estimates had been too high. So, the best way to bring them down would be a combination of new approaches to measurement. First, if an item in its measurement basket rises by an unacceptable amount, this item is substituted by a cheaper one. Second, it assumes that if something gets too expensive, then people will use it less. Thus, it gets weighted lower. This includes healthcare. Third, it applies “hedonics”. According to this concept, an improvement in something (often based on spurious reasoning) makes it cheaper. This theoretical lower price is then applied, regardless if the actual retail price changed or not.

This CPI figure is used to determine cost-of-living adjustments (COLAs). In 2015, this led to 0 percent increase and a paltry .3% increase in 2016. If the CPI were calculated according to earlier methods, then SS payments would be at least 50% higher. That would add hundreds of billions onto our massive annual Federal Budget deficits. This is simply not something the Federal government can afford to do. Don’t expect any honesty out of them.

Medicare

In addition to Social Security, most retirees will be looking to the Federal Government’s Medicare program for coverage. This program is already eating up 15% of the federal budget. In 2016, it made benefits payments totaling 675 billion dollars. That’s a steep increase over the 375 billion paid out in 2006. As the Boomers continue to retire, it will get much higher. The Congressional Budget office projects that Medicare spending will grow to 1.4 trillion dollars by 2027. Laurence Kotlikoff, a notable economist at Boston University, estimates that in conjunction with the national debt, Social Security and Medicare liabilities have created a fiscal gap that currently stands at 206 trillion dollars.

The Short-Term Outlook

A large scale failure of pension and medical plans has been temporarily averted through a tripartite approach. The first method is to incur unsustainable debts in order to make good on current payouts. The second is to divert money away from infrastructure investment. This has led to a national backlog that some estimate to be as high as 4 trillion dollars. The third plan is to raise taxes. All of these tactics create their own sets of problems, as we’ll discuss later when we take a closer look Illinois and California.

The Long-Term Prognosis

The contraction of our productive White population, coupled with exploding vibrancy, makes the catastrophic, wide-spread failure of retirement plans a mathematical certainty. The resources simply do not exist to produce the majority of the retirement income that the Boomer generation is depending on.

There will not be a taxable path out of the crisis at any level of government. The simple reality is that solutions cannot be squeezed out of taxpayers. Take California for instance. As we’ve seen, it has amassed over 100,000 dollars per household in pension liabilities. The US Census Bureau estimates that the median per household income in that state was just 63,783 dollars in 2016. There’s simply not enough wealth to requisition from Californians to fix the problem. At some point, states will have no recourse but to beg for trillions in bailouts from the Federal Government.

Economic Turmoil Would Hasten The Reckoning

An economic slowdown that leads to a dramatic decline in financial markets would be disastrous. For example, in 2008, markets lost over 30% of their value. During the Great Depression, the Dow Jones Industrial Average dropped by roughly 90%. Any similar events in the future would gut both private pension plans and public retirement systems. We’ve never seen what that looks like before, because in 2008, most of the Boomers were still in the workforce. While their retirement wealth was severely affected, they weren’t trying to survive on it yet.

Safeguards have been put in place to avoid steep declines in the markets, including interventions by a secretive “Presidential Working Group on Financial Markets”, and circuit breakers that shut markets down if a sharp drop occurs from the previous day’s closing value. Since 2008, central banks have pumped out over 12 trillion dollars’ worth of global quantitative easing. One effect has been to greatly bolster the value of retirement funds. Hopefully, nothing goes wrong with this extremely precarious monetary policy. Now, let’s shift from future shocks and more closely examine two populous states where pension problems have already manifested themselves.

Illinois

Recently downgraded to the nation’s 6th most populous state, Illinois serves as a striking example of the nasty dynamics a pension crisis creates. As with many other deeply-indebted states, it spends significantly more than it makes, yet interest rates are currently miniscule. So, servicing the state’s bonds only requires about 10% of its general fund revenues. In contrast, pensions are now consuming well over 30%. To give a picture of how fast insolvency is looming: In 2006, the state’s unfunded pension liabilities stood at 40.7 billion. In just a decade, that had tripled to 129.8 billion. In the past fiscal year, the state only generated around 33 billion in GF revenue. The gap is still climbing fast.

In July of 2017, the State of Illinois avoided having its debt offerings reduced to more expensive “junk” status by enacting a 32% hike on its already steep income tax. High income and property taxes have promoted an ongoing mass exodus of taxpayers. In aggregate, the state lost 125,000 people last year. The state’s productive demographics are contracting sharply. In the near future, Illinois will have to declare that it is, in fact, insolvent. This could come as soon as this year, since the rating agency Moody’s is considering changes in its criteria that would leave the state with a junk rating. What would insolvency look like? No one really knows, because legally the state is not allowed to formally make such a pronouncement. What is certain is that we are going to find out.

While the state isn’t formally broke, in reality this is already the case. It’s got a backlog of unpaid bills in excess of 7 billion dollars. This generally carries high interest penalties of around 9-12%. What we can see from the example of Illinois is that a pension crisis translates directly into a state’s ability to provide a range of basic services. For example, a great deal of road maintenance is no longer being performed since contractors can’t even collect on work they’ve already completed. Medical facilities are struggling to function without prompt reimbursable for Medicaid expenditures. In November of 2017, the state had to issue roughly 9 billion in new bonds just to cover a backlog that threatened to cripple the state’s hospitals. They’re still being stiffed to the tune of over 1 billion dollars.

The tension between providing pensions and providing the services that sustain vibrancy is demonstrated in a particularly gruesome fashion by our nation’s 3rd largest city, Chicago. During the summer of 2017, the school system alone racked up 887 million in debt, which included 387 million just to keep paying out pensions. Seeing as Chicago schools primarily perform a warehousing function for Vibrants, its fiscal woes are the least of their worries.

Since a handful of neighborhoods suffered around 3,600 shootings in 2017, the most immediate concern of Chicago’s Ascendant should be physical safety. There’s not much hope that the situation will improve. Assuming the markets remain stable, by 2021 less than 150 million in assets will remain in the police pension fund to cover 928 million in annual payouts. Many Chicago cops must be wondering about why they should remain in a profession that’s as thankless as it dangerous, while paying into a pension system from which they’ll receive nothing.

For now, Chicago will keep functioning by borrowing via a separate corporate entity set up by Goldman Sachs. In theory, it wouldn’t be involved in a city bankruptcy scenario and is backed by state funding for the municipality. So, it’s able to sell 3 billion dollars’ worth of AAA-rated bonds that are 9 ranks higher than the junk bonds the city can offer. Yet, as they’re doing across the state, taxpayers are still fleeing. In 2016, there was an exodus of 19,000. They won’t be digging out of this hole. Illinois and Chicago are heading swiftly towards an inexorable calamity that could easily be a catalyst for a much broader crisis in public debt.

California

Now, let’s look once again at our nation’s most populous state. It’s a true beacon of our bright future. In its leading city, Los Angeles, pensions already eat roughly 20% of the city budget. That’s hardly a plateau. This percentage has essentially quadrupled in well under 20 years, and it’s only getting higher from here.

Across the state, municipalities have issued “pension bonds” in order to keep their systems running. Yep, they’re borrowing money just to make pension payments. This new practice is a foreboding departure from the traditional “self-liquidating” debt that once funded projects like highways and hydroelectric power. It’s also a huge gamble. If pension plans can’t generate enough return to service the bonds, then taxpayers get hit twice: once by the pension deficit, and again by the interest payments on the bonds.

Earlier in article, CalPERS’ absurdly high estimated annual return of 7.5% in 2016 was contrasted with its actual return of a mere .6%. Why is honesty such a problem for them? Well, because it would devastate municipal finances. Realistic projections would force significantly higher municipal contributions into retirement systems. Just lowering it down to 6% could force some into bankruptcy.

This has led CalPERs to raise their equity exposure to 60%. It’s a risky bet that the stock market will keep rising. In the short term, this enables them to make more affordable rate of return projections. If the market took a downturn (which even the senile Governor, Jerry Brown, repeatedly reminds is a strong possibility) the fund would take a massive hit.

Ascendants Are Also Driving California’s Descent

There’s been a lot of outrage across the nation about the acquittal of an illegal alien in the wanton murder of Kate Steinle. In California, the reaction seemed to be mostly triumphant gloating amongst the liberal elites. Beyond their own lack of self-awareness, what they’ve failed to consider is how they’ll live in a functional state when the population resembles the un-convicted murderer far more than his victim. That’s fast approaching. Only about a quarter of California’s kids are white. In 2016, over 100,000 people fled. Who were these people? White taxpayers. With the coming SALT deduction eliminations, this phenomenon should become far more dramatic.

Whites who opt to stay will be forced to grapple with the fact that Ascendants are already eating over 17% of the state budget. The value of their labor doesn’t cover education, dialysis, and a range of other subsidies made available to them in this thriving “sanctuary”. If you’ve got the mental wherewithal to look past the Establishment’s enforced narratives, it’s easy to see that America is fast becoming a failed entity. The most dangerous myth peddled to the Boomers is that their children are being displaced so that more contributors will be available to pay their pensions. Nothing illustrates the sheer mendacity of this notion better than the escalating debacle that is California.

Current Impacts of Pension Shortfalls

California and Illinois are simply the two largest out of numerous examples from across the country. There are some key lessons to draw from the leading edges of an existential dilemma. Let’s sum up some of the readily apparent consequences:

-Unsustainable retirement obligations translate into unsustainable debts.
-Income and property taxes soar, prompting white taxpayers to flee.
-“White Flight” will be sharply exacerbated by the SALT deduction eliminations in the 2017 tax reform
-Eventually, these dynamics impact the provision of basic government services.
-This leads to an inescapable tension between the needs of Vibrants and Retirees.
-A state of insolvency will eventually be reached.

Where Can We Get the Money?

The money’s not currently out there. This is because there’s a staggering incongruence between our growing national needs and limited means of real-world productivity. To briefly illustrate this disparity with a single statistic: the Federal Reserve estimated that the net worth of US households and nonprofits stood at 96.9 trillion in the 3rd quarter of 2017. Bear in mind, confiscatable cash constitutes only a small portion of this figure. Contrast that with 206 trillion in unfunded Federal liabilities alone.

Unfortunately, much has already been wasted. This article already referenced a 5 trillion dollar estimate for state and local unfunded liabilities. Weigh this against the roughly 6 trillion that has been squandered thus far in the “War on Terror”. What we’re beginning to witness is the tragic product of decades’ worth of decisions that were not made in our national interest.

Modern Monetary Theory

We’re entering perilous, uncharted waters. Eventually, it doesn’t seem that Federal decision makers will have any politically-palatable choice but to fully embrace Modern Monetary Theory. They’ll gradually have to attempt over a hundred trillion in bailouts on a systemic scale. In extremely simple terms, according to MMT, sovereign governments that issue their own currency face no constraints on their budgets from a purely financial standpoint. For the economy to function, the government must spend money into existence and so sovereign debts within this context actually constitute national savings.

For the purposes of this article, it’s not really worth debating the merits of MMT or how it applies to the US (in command of the world’s premier reserve currency) in unique ways. Reality will make a ruling eventually since it’s the path we’ve irrevocably taken for well over a decade. The 2017 tax legislation made that abundantly clear. Although none would likely ever do so, proponents of MMT should at least concede that it’s an experiment that’s only been conducted for a very short amount of time. If it turns out that they’re wrong, the ultimate results could easily be the financial and economic equivalent of a nuclear apocalypse.

Red States vs Blue States?

While the largest states to be initially impacted are Blue, Red states will not avoid a reckoning. That’s already happening now on a far more limited scale. For example, Kentucky is already grappling with enormous pension shortfalls that it can never hope to cure through taxation. Just to keep their fund for state workers and school teachers operating over the next two years, it would require a bit over 3,000 dollars extra from each household. In 2016, median household income was just 46,659 dollars.

Intergenerational Conflict?

Although the MSM will undoubtedly attempt to market this crisis in such deracinated terms, it is not. Our movement is comprised heavily of Gen-Xers and Millennials with Boomer parents. So, just like everyone else our age, many of us will probably face some pretty significant financial challenges that we hadn’t anticipated. It seems reasonable that few in our generations will be happy for our parents to get screwed out of what they were counting on to get by in their old age. In that sense, many families will be forced to rely on intergenerational economic cooperation that has become a distant concept in the modern age.

Opportunity For Realists

It’s important to temper any potential despondency one might feel by considering the implications for the trajectory of the Alt-Right movement. We’re the only political group in this country for which this fiasco offers a silver lining. Why?

Well, we’re fighting an uphill battle. It’s going to take a lot to wake the average person up. In an ideal scenario, we would simply convince White America to return to its senses by pointing out reality. We all know this isn’t going to happen on a sufficient scale to right the ship. Systemic financial devastation offers a tremendous opportunity to achieve a comprehensive paradigm shift. Take heart at the fact that we don’t need to destroy the system. It’s doing that to itself because it was never sustainable in the first place. This is simply one facet of that process.

If America were a White country, and its productive citizens only had to concern themselves with paying for the elderly, this would not have the makings of an existential crisis. The elderly would receive less, the young would have to pay more, and life would go on. Unfortunately, we live in Clownworld. America’s beleaguered White population is forced to shoulder the burden of disastrous foreign aggression on behalf of Israel, all while generously subsidizing the Ascendants intended to displace them. Obviously, none of this is affordable. This is why debts and unfunded liabilities are already at astronomical levels. We’re the only people willing to point that out.

Scarcity as Catalyst for Strife

Scarcity often propels sectarian conflicts. It would be the most likely catalyst in the US because mere predation from “others” generally is not enough when one half of the equation is White. As we’ve often lamented, simply suffering a diminished quality of life and violence from non-Whites does little to move the needle. It’s sad, but true. However, White Americans have never been forced into a profound confrontation with the following questions: Who gets what? Us or them? But, they will have to be asked in the near future. There’s simply no way around it. The disparity between needs and means is far too high for everybody to get what they’ve come to expect.

How will the Ascendants react? They’re both accustomed to and already dissatisfied at getting what they currently receive, even if they understand virtually nothing about the mechanisms through which it is provided. That’s one of the more immediate and dangerous aspects of this trend, particularly at the state and local level. They have a proven track record of rioting at the slightest provocation, and generally do so under absurd pretexts. If massive Federal bailouts do not come through, major cities like Chicago and LA could find themselves dealing with the modern equivalent of bread riots within a few years, or right away if the markets took a surprise downturn. In the American experience, there are no suitable precedents for scarcity-driven civil strife. However, there are plenty of bad harbingers for what’s to come.

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