The Weight of the Pyramid: An Aging America

My interest in the stock market began at a young age with my Polish grandparents talking frequently about the Great Depression and the inevitability of a repeat performance. Many of my ideas of survival are shaped from those impressionable young years about subjects that were considerably larger than my young age to fully comprehend. I predicted the first housing bubble bursting in the 1980’s as I had become sufficiently educated to understand the consequence of speculation, actual value and supply and demand markets.

I made my co-workers crazy in 2007 as I was advising them to move their money to the side lines as I understood the impact of deregulation of Wall St was ready to fall upon us. In 2008 I became manic and agitated as I predicted and correctly identified the timing of the crash and I met my predicted targets each month and how far the market would fall. My ex-Merrill Lynch financial boyfriend initially resisted my persistence, but finally moved his money when the DOW fell to 12,000. Anyone paying attention could see the signals of a collapse, but I cannot to this day explain how I predicted with accuracy what the DOW would be from month to month. Perhaps it was my grandmother’s spirit whispering in my ear. Your guess is as good as mine.

The laws of deduction make my assessments for the future reasonable conclusions. Most people understand the population pyramid and that the baby boomers, of which I am one of the last, are going to make our nation top heavy with retirees. We are a significant group of market investors. It used to be that there were 6 supporters for every one retiree. When I retire it will be a 2:1 ratio. It is no wonder the 2030’s will bring to bear a stress on Social Security and Medicare. It’s more a pyramid problem than it is a spending problem, although we seriously have to address our futile care system and rampant fraud from providers and unscrupulous law practices. As a RN for thirty years, I am acutely aware of the issue of futile care.

This idea of long term care insurance boggles my mind. I see it as an unattainable pyramid scheme. Why you may ask? Perhaps you have not dealt with an aging loved one yet. There are already a lack of services in homecare and extended care facilities. This deficit will only worsen in the next two decades. You may have the money, but good luck finding the care. The whole reverse mortgage is yet another bad idea. You lose value in your greatest asset, a roof over your head.

If nothing, absolutely nothing is done with Social Security, we will see a drop in payout to 80% until the boomers die off. It will not go bankrupt as fear mongers would like you to believe, and a few small measures would keep it at 100% such as just raising the current $113,000 ceiling on Social Security taxation. Means testing has bipartisan support. Why do they want to privatize Social Security? To save it? Absolutely not! Wall St will witness a retiring divesting tsunami as we tap into our investments to use as liquid cash. Think of basic supply and demand….all sellers and few buyers will drive the markets down. Wall ST wants the steady flow of guaranteed cash from Social Security to shore up the markets. I have a Tax Sheltered Annuity, but who can tell me that my taxes won’t be higher when I withdraw than when I earned it??

Social Security has USA backing, but what about private retirements that will experience the same stressor at the same time? Many companies have limited or eliminated their liability by transitioning their retirement programs to expensive 401K programs. Of course those in positions of power and in the driver’s seat of the distribution of wealth have secured significant guaranteed retirement packages. I expect any company with a significant retirement obligation will be put under financial pressure. Many of these plans have lacked necessary government oversight and are desperately underfunded. Much of the money has been shifted into bonus payouts and extravagant salaries. It is easy to predict that many will take the easy way out of their retirement obligations by filing bankruptcy. This will leave us, the taxpayer, on the hook following the “privatize the profits and socialize the losses” business model.

Deficits are not as impressive to me as the pyramid. It will leave a vacuum of unfilled positions as many of our current population cannot afford an education. We are dumbing down in the USA because of our failures in policy and priorities. I am a conservative when it comes to “an ounce of prevention is worth a pound of cure.” Obstruction of investments into our infrastructure will leave us seriously weak as a nation. Privatization of government will leave us in the hands of those proven to not give a rat’s ass about the greater population that extends beyond their own narrow circle. So many moving parts as the pyramid flips and puts its weight to bear on our nation. I hope we are strong enough to make the changes necessary to keep us moving forward with strength and resolve for the best interest of the nation, not just a few.

Privatization of Government: Democracy for Sale

Privatization is appropriate in many settings and can be the fiscal answer to meet budgetary objectives. It should be limited in its use and accountability and oversight must be maintained to have successful outcomes. Historically our government has always contracted out work to private companies. However, the current trend of the last 30 years has been to demonize government as inefficient, costly and too big. Selling this idea has paved the way to privatize every feasible portion of government.  Technology and policy demand we be innovative and remain flexible with the changing landscape. The big fallacy is that privatization translates into smaller government. What we do not understand is the taxpayer pays the bill whether government runs it or the private industry does.

We have seen a steady increase in privatization since the late 70's and early 80's, but since 2006, privatization has doubled. Many studies and reports are now weighing in on the outcomes of privatization of government and the data has not been favorable to the private industries who cannot meet deadlines, projected budgets or delivery of services. Convictions of fraud are commonplace as many of our government services and implementation of policy are now controlled by the private industry.  Republicans are pushing to privatize everything from Medicare and Social Security to education. Even the Connecticut DMV is now partially privatized. It is easy to blame government about lack of service, but you may not even know you are dealing with a private company with a government label. What if you send your registration renewal in to the “DMV” and it was headed for Bank of America? Has anyone tried to work with BofA lately?

                                Pros and Cons of Privatization

Arguments for privatization:

·         private companies are more efficient in cost containment
·         reduction of government wastes
·         improve quality of services
·         improve innovation
·         private companies better equipped to provide services
·         improves choice
·         decreases bureaucracy

Criticisms of privatization:

·         lack of accountability to taxpayers who pay the bill
·         high levels of corruption to win contracts from government officials
·         higher costs from cost over runs, price gauging, waste and fraud
·         primary obligation is to shareholders, not American taxpayers
·         undermines government power and democracy
·         lack of sustained senior leadership in government positions insures dependence              on private subcontractor
·         the for profit  model incentivizes misappropriation of funds
·         decrease in quality of services
·         lack of public interests in outcomes
·         net loss in worker pay and benefits
·         decreased job opportunities for women and minorities
·         waste and fraud
·         high costs and delay of services when subcontractor is fired

                     Medicare and Big Pharm: The Intimate Connection

The Medicare Prescription Part D is a government program subcontracted to Big Pharm. It is well documented that Big Pharm was heavily lobbying Congress to affect policy. The Washington Post reported they spent over 900 million in lobbying between 1998 and 2005 and 90 million in campaign donations favoring republican over democrats 3:1.

The end result is a trillion dollar program that charged Medicare recipients up to 200% more than other bargaining groups primarily because the policy (under influence of Big Pharm lobbyists) prohibited Medicare from the ability to negotiate lower prices. According to the Center for Public Integrity the result of such influence on policy is 61% of Medicare spending on prescription drugs is pure profit for Big Pharm".

In Dec. 2011 Merck and 12 other Big Pharm companies were found guilty of Medicaid fraud to the tune of 240 million in the state of Massachusetts alone. Subcontracting gives access not only to policy, but taxpayer pocketbooks as well. It is not about pharmaceutical companies getting a return on their investment for developing drugs, it is about them using their political influence to make policy and gain contracts that are tailored to unfairly enhance their bottom line.

         Homeland Security and the Defense Machine: Fear buys opportunity

One of the greatest government expansions and subcontracting to private companies is Homeland Security that started in 2003 under GW Bush after 9/11. It has become so secretive and large it is a challenge to estimate its cost. Nearly 2000 private companies are engaged in counter terrorism activities. Many of the activities are duplicated throughout the system creating some 50,000 reports per year. The consequence is there is so much noise and complexity that filtering out viable intelligence is the greatest challenge. Liberty Crossing is one of the largest most secretive collections of government and private companies that are largely disconnected. The financial incentives are to provide intelligence whether it is good or bad intelligence. Fear for your safety is one of the strongest sells for any program successful or not.

The Defense Machine is another example of privatization. Lockheed- Martin has been convicted 11 separate times for fraud against the government and holds top fraud agent against the USA as well as top money contractor. Halliburton and Blackwater have also been convicted of fraud against the USA. The consequence of large scale fraud by such companies is the enormous costs to the government, but our hands are tied by our dependence on them.

Bernie Sanders (I) Vermont sites a report by the Office of Accountability that hundreds of defense contractors who have committed fraud against the USA have received over 1 trillion in contracts.

First we ended the draft. When I express sympathy for a soldier’s death, I get a response like "they volunteered". We now hire mercenaries whose deaths and casualties go unchecked. Perhaps this is one more step away from public awareness of the human cost of war. This detachment allows the freedom to influence national defense priorities by defense contractors or even Big Oil when they need security for their oil fields in a foreign country. No one will notice. Ted Koppel did an in depth investigative piece on the inevitability of private companies to use both American soldiers and government hired private mercenaries to protect their private interests abroad.

     Fannie Mae and Freddie Mac: A comparison to government run Ginnie Mae

Everyone loves the story of Fannie Mae and Freddie Mac. In 1968 Mae and Mac were 'privatized' and in the crash of 2008 were given disproportionate demonization for the mortgage balloon rupture. Fannie Mae and Freddie Mac were only responsible for some 25 percent of mortgage failures due to subprime lending scams. This is because they had been sanctioned and banned from participation early in the subprime build up due to CEO Franklin Raines' bad behavior. The 75 percent of mortgage failures were from the private lending industry.

Ginnie Mae remained a government run and owned Mortgage Company. Ginnie May has been both profitable and self sustaining because of its government oversight. Mae and Mac executives got caught up in creating and distorting balance sheets to generate more ‘profits’ to give bigger payouts to its executives. The profit motive can corrupt these privatized companies with the taxpayer holding the bag of financial consequence.

                                  Be careful of what you wish for

Privatization has its benefits when used conservatively with necessary oversight, but the idea that privatization will guarantee net benefits to the fiscal bottom line is not supported by our ballooning deficits. The consequence is public policy being generated by private companies who seek to unfairly enhance their bottom lines and whose first loyalty is to their next bonus and their shareholders. The only guarantee is that the taxpayer is the one who pays the bill either way. How does it feel when you begin to understand that it is the taxpayer subsidizing the out of control executive pay and bonuses in our hurry to ‘downsize’ government? Makes me feel damn uncomfortable.

Franklin D Roosevelt "The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group, or by any other controlling private power" (the growth of private power could lead to fascism)

Dwight Eisenhower's farwell address: "the need to maintain balance in and among national programs -- balance between the private and the public economy, balance between cost and hoped for advantage."
"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together. "

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Washingtonpost Investigation: by Dana Priest and William M. Arkin “A hidden world, growing beyond control”

Privatization Myths Debunked http://www.inthepublicinterest.org/node/457

United States Government Accountability Office, "Department of Labor, Better Cost Assessments and Departmentwide Performance Tracking Are Needed to Effectively Manage Competitive Sourcing Program." November 2008. GAO-09-14.

Economic Policy Institute, "Outsourcing Poverty: Federal contracting pushes down wages and benefits." EPI Issue Brief #250. February 11, 2009