Dependence Pt. 2

If you read Gladwell's article you'll see his basic thesis is that dependency schemes breakdown as the ratio of producer to dependent goes up. Why is GM in a hole? Mostly because too much money that could have been reinvested in the company has gone to provide current benefits for a retiree pool growing faster than its employee base. Why do poor nations stay poor? Corruption and bureaucracy for sure, but Gladwell argues it's too small a producer base relative to dependents.

Extrapolate from there: Social Security...the State of New York...U.S. income taxes. The State of New York has been feeding on the huge tax base of Wall St. for years and now that Wall St.'s dead, or at least in a coma, there isn't funding to support the demand for services. Nearly all federal personal income taxes are paid by the top half of taxpayers. Amazingly, Obama campaigned on a pledge (taxpayers who make less than $250k, i.e. 95% of all taxpayers will receive a tax break) that'll exacerbate the problem (BTW, so did John McCain).

The breaking point is, of course, very difficult to anticipate. The problem manifests in demographic waves (birth rates), which are impossible to control. By the time policy makers see a population imbalanced by age (too many dependent young or old people), it's much too late to adjust. Birth rates and the absorption of those births into the job market can't happen fast enough to solve the State of New York's budget problem, or GM's pension problem, or Social Security's benefit problem. My wife and I have chosen to replace ourselves as taxpayers/worker bees and no more, so we're of no help.

What can we do as a society, other than procreate in a demographically smooth way, to solve this problem? More on that later...

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