by Fergus Hodgson
Director of Fiscal Policy Studies
Shameless government retirement benefits highlight the difference
While advocates for economic liberty do not condemn the acquisition of wealth, they also do not claim that all wealth is in the right hands. The distinction flows from the manner in which one acquires wealth.
Individuals can earn their wealth in a free market by generating value and enabling voluntary trade with others. The woman who challenged the state of Utah and won her freedom to braid hair without a government license wanted to do just that. Also on a voluntary basis, individuals may acquire wealth through gifting or inheritance.
On the other hand, individuals can acquire wealth through coercion, particularly with the assistance of government — sometimes referred to as cronyism. Coercion is a problem because it testifies that the other party is worsened and does not wish to engage in the trade. Lacking a mutually beneficial outcome, such activity is grounds for condemnation rather than praise.
In the context of the United States, a representative republic, one pervasive form of a coercive policy is wealth redistribution across generations. This generational welfare, perhaps better described as theft, takes from those not here to defend themselves, those not yet able to vote.
The use of current taxpayer money to pay for government services rendered in the past is one form of generational welfare. The retiree health care benefits of North Carolina state employees, for example, come out of general tax revenues since the associated trust fund is bare (p. 5). This redistribution, when a dollar in taxes does not bring back a dollar in government services, is worsening as the baby-boom retires.
When other people are paying the bills, there is also less incentive for fiscal prudence. A recent story from WECT noted how many former state employees are receiving six-figure pensions. Although presently funded from the state employee trust fund, these too will either have to be picked up by current taxpayers or reneged because of faulty accounting practices and unsustainable payments. Here are the top five recipients:
Although it may be painful to think about, this image captures more than a grain of truth about the redistribution that is expanding in the United States. The Reason Foundation did an excellent job explaining the problem of transferring wealth from the young to the elderly who are far wealthier on average.
In 1984, reports the Pew Research Center, households headed by people 65 or older had 10 times the wealth of households headed by people under 35. By 2005 — before the Great Recession hit — the gap had increased to 22 times, and by 2009 it was 47
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