by Tyler Durden
ZeroHedge

In the
recent past we noted the somewhat startling reality that “the
single mom is better off earning gross income of $29,000
with $57,327 in net income benefits than to earn gross
income of $69,000 with net income and benefits of $57,045.”
While mathematics is our tool – as opposed to the mathemagics
of some of the more politically biased media who did not like our
message – the painful reality in America is that: for increasingly
more Americans it is now more lucrative – in the form of actual
disposable income – to sit, do nothing, and collect various
welfare entitlements, than to work. This is such an important
topic that we felt it necessary to warrant a second look. The graphic
below quite clearly, and very painfully, confirms that there
is an earnings vacuum of around $40k in which US workers are perfectly
ambivalent toward inputting more effort since it does not result
in any additional incremental disposable income. With the
ongoing ‘fiscal cliff’ battles over taxes and entitlements, this
is a problematic finding, since – as a result – it is
the US government that will have to keep funding indirectly this
lost productivity and worker output (via wealth redistribution).

As we noted
before (details below):

We realize
that this is a painful topic in a country in which the issue of
welfare benefits, and cutting (or not) the spending side of the
fiscal cliff, have become the two most sensitive social topics.
Alas, none of that changes the matrix of incentives for most Americans
who find themselves in a comparable situation: either being on the
left side of minimum US wage, and relying on benefits, or move to
the right side at far greater personal investment of work, and energy,
and… have the same disposable income at the end of the day.

Naturally,
the topic of wealth redistribution is paramount one now that America
is entering the terminal phase of its out of control spending, and
whose response to hike taxes in a globalized, easily fungible world,
will merely force more of the uber-wealthy to find offshore tax
jurisdictions, avoid US taxation altogether, and thus result in
even lower budget revenues for the US. It explains why the cluelessly
incompetent but supposedly impartial Congressional Budget Office
just released a key paper titled “Share
of Returns Filed by Low- and Moderate-Income Workers, by Marginal
Tax Rate, Under 2012 Law” which carries a chart of disposable
income by net income comparable to the one above.

But perhaps
the scariest chart in the entire presentation is the following summarizing
the unsustainable welfare burden on current taxpayers:

• For
  every 1.65 employed persons in the private sector, 1 person receives
  welfare assistance
• For
  every 1.25 employed persons in the private sector, 1 person receives
  welfare assistance or works for the government.

The punchline:
110 million privately employed workers; 88 million welfare
recipients and government workers and rising rapidly.

And since nothing
has changed in the past two years, and in fact the situation has
gotten progressively (pardon the pun) worse, here is our conclusion
on this topic from
two years ago:

We have been
writing for over a year, how the very top of America’s social
order steals from the middle class each and every day. Now we
finally know that the very bottom of the entitlement food chain
also makes out like a bandit compared to that idiot American who
actually works and pays their taxes. One can only also hope that
in addition to seeing their disposable income be eaten away by
a kleptocratic entitlement state, that the disappearing middle
class is also selling off its weaponry. Because if it isn’t, and
if it finally decides it has had enough, the outcome will not
be surprising at all: it will be the same old that has occurred
in virtually every revolution in the history of the world to date.

But
for now, just stick head in sand, and pretend all is good. Self-deception
is now the only thing left for the entire insolvent entitlement-addicted
world.

Full must
read presentation: “Welfare’s Failure and the Solution”

Some other
thoughts on this topic: DOES
IT PAY, AT THE MARGIN, TO WORK AND SAVE?

Reprinted
with permission from ZeroHedge.

December
3, 2012

JS
Kim is the Founder and Managing Director of SmartKnowledgeU, a fiercely
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© 2012 ZeroHedge