JOIN ( IT’S FREE )
≡ Menu
Resilient Communities
≡ Browse Categories
Facebook Twitter RSS
data-ad-format=”horizontal”>

A 40% cut in Social Security…

As most of us already know, the Greek government is bankrupt.

So far, it has been forced to cut expenses by 34%.

That means they have already made deep cuts in pension payments, government employee incomes, and government employee headcount.  And they are just getting started.

The Greek economy is in free-fall and likely to set the record for the most severe depression in a modern country so far this Century.

Our collective problem is that the Greek experience will soon seem commonplace.  Almost all of the nations in the West are headed towards a Greek style bankruptcy given current trends.  The US deficit alone is running at over a trillion a year with NO end in sight.  So, eventual bankruptcy of the US and most of the EU isn’t a question of what is right or just or what could happen in a perfect world.  It’s what is likely to happen.

Given this, the question you should be asking yourself is:  What would happen if the US and the EU cut their budgets as deeply as Greece?  What if there was an across the board budget cut of 40%?

This is an important question since it is almost certain to happen and it will be ugly.  Why?  The number of people that…

  1. currently work for the government,
  2. get a government pension (or military pension),
  3. or get social security/medicare/income support payments
is very large.
So, for planning purposes, what if the monthly check you got from the government was cut by 40%, but the costs of living remained the same?  Even if you don’t get a check from the government, you can still ask yourself that question.

Or, what if you live in a community where more than half of the people also depend on government income?

I could go on, but you should get the point.

All of these questions wouldn’t be worrisome if you were a) resilient or b) lived in a resilient community.

Stay tuned.

A man that’s very confident that we can figure out solutions together,

John Robb

PS:  For extra credit, here’s a map that shows which counties in the US are the most dependent on government income support (by type of government support).  It might be useful when you are trying to decide where to live.

PPS:  If you know someone that is reliant on the government for their income and they are oblivious.  Forward them this article.

data-ad-format=”horizontal”>

How To Get Resilient And Thrive No Matter What Happens

These are uncertain times, and our goal is simple: To help you make the preparations and build the self-reliance to thrive no matter what happens. Click below to join our free community and get updates to your inbox.

SIGN ME UP FOR FREE

Comments on this entry are closed.

  • It seems a bit disingenuous to compare Greece’s deficits to the US’s when the US is monetarily sovereign.

    I mean, obviously you’re correct to say that austerity will continue to be pushed ruthlessly across the West, but it’s not because there isn’t “money” for things. It’s because the financial/political elite have instituted a deliberate program of austerity (following Jon Schwartz’s Iron Law of Institutions).

    (And granted, Greece could pull out of the Euro and re-institute monetary sovereignty, or at least they had the chance to previously.)

    But perhaps it’s just quibbling to dispute the reasons since it is going to happen regardless.

    • johnrobb

      Circadian,

      Sorry, I just skipped the steps and jumped to the conclusion. You got there too I see.

      JR

  • rjh

    I suggest the summary paper “Reforming Pensions” at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1315444 or their books for a better, if deeply wonkish analysis of pension issues. The US is in much better shape than much of the world, thanks to having much better demographics and somewhat better policies. Greece has about the worst of both.

    Greece, quite stupidly, has not keep the ratio of workers to retirees in a tolerable range. They had mandatory retirement at 58, with a very generous pension for the rest of your life. In contrast, the US has target (not mandatory) retirement at 67. Scandinavian countries have a target retirement age of 70. This makes a huge difference. Instead of having two working people supporting each retiree (like Greece) the US and Scandinavia still have four+ working people per retiree. Keeping this ratio healthy is crucial to having an affordable pension system.

    I do expect the US, after immense fuss, to gradually shift the target age to 70, like the Scandinavian countries. If this is done to both public and private pensions, it accomplishes the bulk of the reduction needed for unfunded pension costs. It means that pension money flows balance with 3 more years of work and 3 less years of retirement.

    The paper and books go into other important details.

    The major danger is that emotional uninformed “thinking” will lead to stupid decisions in US policy. Stupidity is in overwhelming supply among US decision makers, so this danger is real.

    • johnrobb

      RJH,

      Social security is just the tip of the iceberg. You have much more faith in the bureaucratic system to solve current problems than most of the readers on this site do.

      JR

      • rjh

        The pension reform issues are more relevant to resilient communities than you think. Unless you plan to toss the elderly out of the boat, a resilient community will need a sustainable approach to pensions. The important piece of the underlying pension theory is that regardless of how you implement a pension, it will crash and burn if you allow the productive worker to retired worker ratio to drop below 4. To be resilient, you want a good margin for demographic shifts, so aim for a ratio of 6 or more.

        What steps will you take to make the elderly productive and happy to work so that you maintain that 6+:1 ratio? Note, the ratio is what matters. All the fuss and bother about finances, savings, etc. is noise. If you fail the ratio the system fails. Once you’ve met the ratio, then you worry about details of how you fund and manage the pension system.

        I have higher expectations than you on the US pension system for a few reasons.
        First, the US ratio has not fallen close to 4 yet. The social pain of adjusting the retirement age upwards is not going to be severe for several more years. This is unlike Greece and other southern European nations.
        Second, increasing the retirement age is part of the proposals from most of the pension advocacy groups. They are not willing to reach an agreement yet, but they do mostly accept the need for this fix.
        Third, the next set of pensions to fail (municipal pensions) will come crashing down peicemeal, and this should terrify the policy makers into acting before the really big pension systems like Social Security collapse. I expect we disagree significantly on how bad it will get before they act and how they act.
        Fourth, 80-90% of the unfunded pension debts vanish when you adjust the retirement age to 70. The current numbers are indeed terrible, but adjusting the age is much more effective than reducing the payout level. This provides a political bias towards the more appropriate policy change.

        • johnrobb

          RJH,

          Good luck with that.

          JR

  • Burgundy

    It also affects private business that do work for the Government and has a knock on effect to their employees.

    In the area of France where I live 26% of the population earn less than €9000 ($11,880), which probably equates to the unemployment rate. Many of those employed are employed either directly or indirectly by the Government via annual grants, employment schemes, educational institutions or subcontracted responsibilities like healthcare. Then there are the local city councils which are heavily subsidised by government, not to mention the subsidies to farmers that keep them solvent.

    If all government money stopped flowing into this area then money would become as rare as chicken teeth. All the retail outlets and supermarket chains that service this area would close, as would the logistic companies that transport in the goods. The shock would likely induce an exodus to the cities. But I expect all this to happen in slow motion.

    • johnrobb

      Burgundy,

      Concur. Each of those well paid gov’t jobs supports 2-3 in the private sector and convoluted mesh of subsidies/protections that have been erected to keep certain businesses solvent are impossible to understand. When that flow starts to dry up and those protections unravel…

      One way around that? Local currencies and more local autonomy.

      JR

  • rufus13

    If a person can afford to move and sustain themselves for a while during integration/formation of a new community, they should go ASAP. Big cities are not getting better for at least decades, except for the highly-secured elite. “junk land” in western States may be a good place to end up, in an RV parked on a big garden plot.

    Cheers.

    • johnrobb

      Thanks KG.

      JR

    • The Western part of the US is going to have severe water shortages. The infrastructure in western states was built to capture a slow snow-melt. As the earth gets warmer, projections show the west, and especially the south west, will get drier and drier, as Texas has been, and what snow they do get will melt too quickly for the infrastructure to capture enough to get people through the long, dry summers.

      Add to this the fact that unsustainable agriculture in the west has been sucking the water out of the aquifers, like the Ogallala Aquifer, for years now, and you have a real recipe for disaster, again, as we are seeing in Texas.

      • johnrobb

        Scott,

        It’s definitely going to be interesting in the SW. Southern CA, on the other hand, is supposed to get much more rain.

        JR

        • I’m not so sure about that.

          http://www.onearth.org/blog/climate-forecast-thirsty-americans-in-dry-counties

          Do you have a source that shows more rain for So Cal?

          • johnrobb

            Scott, it was an offhand remark based on articles I’ve read about potential changes in climate over the next decades. That’s all gambling though, since nobody really knows how the heat will be transferred. JR

          • The post I linked to seems to be more than just gambling. Water is already a big problem in the west, including in So Cal, and these scientists are saying it’s going to get much worse there. I don’t think they’re just guessing; they’re basing it on patterns that have already been emerging.

            Of course, there are things they could do to the infrastructure and legally (allowing more rainwater collection, for instance) that would mitigate this disaster, but that would take politicians who actually want to invest in our future instead of just redistributing more wealth to the rich.

          • johnrobb

            Scott,

            Probably right Scott, I’ve not done much research on So. Cal. weather patterns. The good news is that if you become resilient, it won’t really matter if it gets drier or wetter.

            JR

  • I hadn’t considered that before. So Greece has been forced to cut spending by 34% but how did they come up with that number? What will the US government have to cut when it gets into the same situation? I like the idea of drastic spending cuts (30%+) but I don’t think it will happen until it’s too late. Does anyone foresee any situation where the US government would be willing to make those kinds of spending cuts?

    • johnrobb

      So far, five different negotiations with creditors.

      JR

  • different clue

    A lot of those counties with highest percentage of people on taxfunded benefits are also in those regions most thoroughly exploited of non-renewable natural resources.
    ” Welcome to Appalachia, America’s Tibet”.

  • Mike Tyner

    Once I learned that the various rating agencies fraudulently approved AAA ratings for mortgage-backed security investments it became obvious that they probably cannot be trusted to rate anything else, including anything that most people have vested in their pension funds.

    Maybe a more resilient investment would be to set up a program where people can invest locally making businesses in their community more resilient.

    • johnrobb

      Mike,

      Agree. Lots of ways to do this.

      JR

  • Bailey

    John I actually thought this level 4 assessment was way off, more media driven drama than truth, but after speaking with a acquaintance there Id have to say it may be spot on. Hes a working class guy not prone to drama or doom n gloom but it sounds absolutely horrid there. No confidence in the govt leadership to make things anything but worse and truly its sounds like its turning ugly, you can trust family and perhaps your tight knit crew but beyond that, trust is gone. Iceland showed the way but I doubt any other nation has the leaders to take a similar path.

    • johnrobb

      Bailey,

      Thanks for the feedback. Tough situation. This shows that you don’t need an apocalypse to get to the point where resilience becomes critical.

      One of the things Iceland had in its favor: it’s tiny. 300k people. Greece is 11m. There’s a rule of thumb in there someplace.

      Sincerely,

      John Robb

Read more:
This Giant 3D Printer Built 10 Houses In Just 1 Day – Seeing It In Action Is Mesmerizing
Close