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When, if ever, is it appropriate to refer to someone as a 'parasite?' I don't mean in a literal sense, only in the political/economic sense. My instinct says 'never', its a very dehumanizing term... but I had that resolution sorely tested this week.
Two separate examples bubbled up through the twittersphere:
First, consider an 'early retired' couple. They have been held up as a sympathetic example of citizens who will be deeply impacted by losing their health insurance subsidy. But a bit of reading shows something... surprising:
Okay, first and foremost, its sheer statistical fact that your average 60-year-old will OBVIOUSLY consume more medical services now and in the immediate future than your average 30-year-old. Hence the risk premium for the 30 year old would ideally be much, much lower. But if they're in the same risk pool, the 30 year old is having to cover a LOT of conditions, medications, and services they are vanishingly unlikely to use. AND, if the 30 year old is paying taxes... they're contributing to the subsidies that those 60 year olds are using to cover things like:
That. Issues that arrive in older age or due to a rough lifestyle. This seems sort of sympathetic. And yet:
$127,000 per year? On pensions? This legitimately sounds like a princely sum to me. And... early retirement? That they achieved through working for governments? Bill the Civil Engineer, and Shelley who worked in banks and other state institutions? This is NOT your stereotypical blue collar family who busted their ass for decades to set aside a nest egg.
For God's sake. An extra $15k-20k a year is NOT going to bankrupt anyone worth a low seven figures. I cannot square that circle at all. And if they're not worth low 7 figures then how the hell did they decide to retire in their 50's? Oh, wait:
They just wanted to consume more. That's... fine on its own, but I don't think you get to complain if you drop out of the workforce early that those remaining in the workforce don't want to fund your trips or medical care.
Being slightly uncharitable, I read this as a couple that very intentionally gamed certain financial systems in a way that let them extract a lot of personal benefits from comparatively little effort and input, and are continuing to do so after they retired by sloughing their largest non-optional expenses on the next generation.
And finally. No dependents. Its not like they've got mouths to feed and kids to raise. Every dollar they spend here on is solely on themselves, and contributes 'nothing' to the future productivity of the country.
There's a counter argument that they've quite possibly contributed more to the system in their working years than they've extracted. Maybe. But I cannot be convinced that they are justified in receiving $15-20k a year paid by young, healthy people who are still trying to build capital... when they clearly possess the means to pay their own way. Of course, government pensions are ALSO being paid for by younger generations' tax dollars. So this does start to seem quite... parasitic.
They've worked about 30 years, and they'll be retired for 25-30 more, it seems likely that they'll have extracted more wealth from the system, especially if they divert said wealth from productive uses, than they put in when all is said and done.
Second, a pair of illegal immigrants residing in the U.S.
Twitter thread with commentary Here. Original video here.
They're DREAMers, so not the most blatantly offensive example of illegal immigration. But after learning about their situation I still don't want to share a country with them:
They have three kids. They're not married. First two aren't his. She's a SAHM.
Caleb calculates they'll owe about $3,300 in federal taxes this year (the commentary thread wrongfully implies he pays zero).
Own a house.
$133k in 'bad debt.' (that is admitted/disclosed)
Total debt (including the house) is $420k.
Early 30s.
So, at the very least the house can be seized to cover most or all of that debt if they ever just stopped paying. But hearing the rest of their financial situation and how aggressively they (well, mostly her) spend money and I'm really forced to assume they're getting financial support from some other programs to eke out more than a basic level of existence.
I am at a loss as to how these people could be considered a net benefit to the country. Unless one of those kids goes on to cure prostate cancer or something, booting them out would have no noticeable negative effect. To be faaaaair she seems to be the main problem. If it were just him cranking out work it'd be hard to be offended.
But we have two non-citizens and their kids enjoying, from the sound of it, a living standard higher than the median American in their age bracket (just counting the home ownership, for sure) and overall paying little into the system at present, and racking up enough debt that its questionable if it'll ever get paid down.
Presumably they have a net positive effect on GDP when measured on the spending side, and if we ASSUME they don't declare bankruptcy, or renege and duck out on the debt, or just die early (not something I wish on them), they're helping the engine of Capitalism in this country sputter along.
And yes, YES there are plenty of U.S. Citizens who are doing WORSE than this. Caleb has had many of them on his show.
But ask me how I'm damn near certain that these two aren't saving enough for retirement and will not save enough for retirement (around the 41 minute mark she talks about pulling money out of her retirement) so if they're around in their late 60's they're either still working with no end in sight OR have figured out a way to sponge benefits out of the government to maintain their livelihood and yet still die with a mountain of debt someday.
I doubt they'll be in any position to retire early like Bill and Shelley up there. It certainly seems like they're choosing to live parasitically, but unlike the early retirees they still have a lot of good working years in front of them to make up the difference.
Two separate cases that are only similar in the abstract: couples who have gamed parts of the U.S. economic system so as to have their lifestyles paid for without contributing as much to it as the support they have extracted (yet). Bill and Shelley managing to pull off a plan that would be virtually impossible to repeat for anyone much younger than they: get the state government pensions + the Fedgov subsidies and then stop working well before most people could afford to do so.
This raises a question: are 'we' really supporting this entire apparatus on the efforts of some small and possibly shrinking minority of our actual population? Without getting too Randian, what's the ratio of productive/unproductive left now?
It leads me, specifically, to ask: HOW MANY PEOPLE DO WE HAVE IN THIS COUNTRY PULLING THESE KINDS OF SHENANIGANS. There have to be known strategies that are shared amongst groups on how to follow these paths, exploit edge cases, take advantage of lax enforcement, or otherwise slip into niches that allow you to live 'above your means' for some period of time if not indefinitely. On the individual level its rational. On the population level, the equilibrium can get dangerously unsustainable. Have we crossed that tipping point? I don't know. Feels like it to me.
I personally recall visiting a friend in college and learning that both of his parents (in their 50s) were 100% disabled, getting checks from SSI. Both were mobile but certainly had some impairments... but what stuck with me is more the fact that they had a massive collection of Disney movie memorabilia (especially Tinkerbell) all throughout the house, displayed on shelves floor to ceiling, and even then I wondered "who paid for all this and how does buying these kinds of trinkets square with the claim that you're unable to support yourselves and need government help? Clearly you've got money to spare if you can spend it on things that has no investment value."
We've got some indeterminate number of guys like Oscar paying $3500/year in taxes into the system. We've got some indeterminate number of guys like Bill pulling $15,000/yr OUT of the system in insurance subsidies. WHO THEN IS MAKING UP THE DIFFERENCE. Someone who is good at the economy please help me budget this. my country is dying.
Today was payday for me. I had a really good month last month. And yet I look at my actual pay stub and see that ~24% of that will never even touch my account due to Federal Taxes. Florida has no income tax, so I can be certain that money is going to pay for all kinds of lovely U.S. Government programs. And now, I have to wonder, what portion of that is going to help Oscar and Natasha raise their kids and pay their mortgage. What portion is paying down Bill and Shelley's insurance premiums so they can take a cruise, or fly to Australia or whatever.
I've KNOWN how bad the Government money faucet was for the past 15 years. Trump and DOGE showed just how blatantly fake/fraudulent much of it is, earlier this year. But this here has me putting a face on the issue and that makes it feel personal, even though I have no direct grievance against these folks.
Here's my personal history:
Never used welfare, food stamps, or even unemployment insurance. Have literally never pulled money from a government program to pay my bills... other than the Covid stimulus.
I've held two government jobs in my life. One was Census Enumerator, the other was Public Defender for the State of Florida. Its not inconceivable that I could work for the Gov't in the future, but right now I have no intention to return. No pensions for me.
I've made some boneheaded financial decisions in my life. Its not even a joke to say that I've only been able to reach my current financial position because I was trading Crypto in 2014-2020, and it happened to work out for me. I have never rugpulled a memecoin or otherwise indulged in the scammier parts of that ecosystem.
Yet. YET I've managed to maintain my life on what I earn, and follow most of Dave Ramsey's advice to have adequate savings, minimal (unsecured) debt, and I fully intend to sock away enough to retire on my own even if I never get to draw a social security check.
I'm unmarried and have no dependents so I'm pretty much boned on my tax bill, although I do use some strategies to mitigate the damage.
I have debt comparable to Oscar and Natasha, but on a good day, when everything shakes out, I'm probably at around $250k net worth, and diligently reducing the debt load as I go.
I have not taken an extended vacation in almost exactly 5 years. I could afford to, but it feels irresponsible for various reasons and I've chosen to prioritize financial stability for so long its hard to break that habit. For the right woman, perhaps.
And some days I feel like an utter buffoon when I can see people living a lifestyle that matches or maybe even exceeds my own by making choices that, while individually rational, are deleterious to the overall fabric of the civilization they exist within. Its bad enough if they're burning up our surplus wealth that could have been put to productive use, all the worse if the capitalist machine itself starts to break down under the strain.
One of my favorite little storybooks as a child was The Little Red Hen. The hen goes around seeking assistance from the other animals to make some bread from scratch. Finding no help, she completes the whole process herself. and at the end of the day when the bread is done all the animals follow the wonderful smell and show up hoping to get a piece. And she politely tells them to fuck off. (I also read The Rainbow Fish as a child, that message didn't stick.)
I start to feel like that's going to be my life trajectory. Building as much as I can through my own efforts while trying to cooperate with others, who have found alternate ways to subsist, and then when I finally sit down to enjoy it all, in this version the farmer shows up with a shotgun and says "these other animals are hungry, you're gonna share half that loaf with them." Bluntly and uncharitably, this seems like the logical outcome of the many policies that the Boomers implemented over decades to keep themselves financially secured into old age, which has left a lot of cracks and crevices in the mess of various entitlement programs that various amoral latecomers can latch onto and coast along even after the Boomers are gone.
All paid for by whatever percentage of the population is suckered into actually producing wealth and paying their taxes every year.
I don't want to dehumanize them. Bill and Shelley seem like good people. Oscar seems like a decent guy. I want my fellow Americans to thrive, along with most humans on earth. I do NOT want to tolerate a system that has such a mix of malincentives and avenues for cheating that it is actually easier for the low-conscientiousness hordes to simply shove handfuls of seed corn into their mouths and demand payouts from the most productive members of society than it is for them to maintain a job, not acquire too much debt, and live within their means with enough saved to sustain them into old age.
But human beings are exceptionally good at finding ways to drive excess calories into their own bellies at the expense of others. You might even say this is the actual basis for the entirety of the culture wars: which tribe will do most of the work, and which will consume most of the rewards. Bastiat had it right a long time ago. I don't blackpill over this stuff, but I do wonder how one is supposed to feel when the entirety of your civilization depends on your demographic continuing to accept a status quo that confers benefits on everyone BUT your demographic.
Oh, did you hear that California is going to put a Wealth-Tax Proposal on the ballot next year?
I'm sure its nothing to worry about.
To be fair, most government-paid civil engineers take a much lower salary than they could in the private sector. So it's not quite that this guy figured out a hack here, only that he sacrificed early to reap a larger return later. Similarly the State took the inverse deal: pay him less now in exchange for more later, in order to make their budgets temporarily look better.
I think the solution for both is actuarial integrity -- defined benefit plans need to be run in such a way that the State pays in year X the expected future costs of all (incremental) future liabilities accrued during year X. The only real exploitation is that voters in X accrue liability for year >X without paying for it, another intertemporal transfer of wealth.
A non-solution (afaict) is for governments not to hire competent civil servants and instead farm that stuff out to McKinsey consultants and others. Not because the McKinsey consultants aren't smart, but because it's a diffusion of accountability that ultimately costs Idaho more than paying competitive salaries for in-house expertise.
[ One astute commenter noted that one good that McKinsey does produce is laundering the low status of working for bumfuck Idaho into PMC-respectability. An excellent observation, if something of a tangent here. ]
Eh, bankruptcy is (in expectation) priced into the transactions. Lenders make out fine charging these two 7% interest on their HELOC and car note. It's not like dumping it on the fisc.
Their retirement on the public dime, OTOH, will certainly be dumped on us.
A big issue for public pensions is that many were originally paid for with corruption. Public unions promised politicians support in exchange for pensions. Taxpayers at the time happy because they didn't get stuck with a big bill at the time, but now the bills are coming due. So I don't really have much problem giving these pensioners a haircut; their pensions are dirty money.
No different than any other public obligation or liability. Might as well shaft municipal bondholders too on this theory,
Yes. Difference is there's at least some chance the bondholders will be shafted.
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"The Lord gave, and the Lord hath taken away"
But I doubt it, they built the propaganda into the name "public servant".
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In an efficient market, that's true. Is that even legal right now? I know that college admissions have changed over time (and between jurisdictions) between unmeritocratic discrimination being illegal and required.
I would not be the slightest bit surprised if charging previously-illegal immigrants the real cost of a loan (or just denying them) was blocked by anti-discrimination laws.
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Nervous laughter.
Sorry, I came of age during the 2007-2008 subprime mortgage crisis, I am overtly sensitive to the whole "Just give money to financially irresponsible people and hope that in the aggregate we make adequate returns to justify the risk" approach.
I'm sure SOME lessons were learned since then. Maybe not the right ones.
I'm sure it'll be fine.
The problem with the '07-08 crisis wasn't with the returns, it's that the loans were packaged into MBS and sold to investors under a false bill of health. The lessons weren't that you can't have high-risk/high-return assets, only that you must not try to pawn them off as low risk with fanciful assumptions. And that buyers of those collateralized debt must do more diligence.
The bill of health wasn't false. It's trivially easy to take a cdo prospectus and simulate what happens in the event of a catastrophic drop in house prices.
It's just that everyone - buyers, sellers, rates, regulators, all assumed that this was a very low probability event. Reality turned out to be worse than nightmare/worst case scenarios in various stress tests cooked up by regulators.
The sellers (who are often accused of fraud) kept the risky tranches on their books while selling the safe ones - the opposite of what one would do if they knew the risk.
No, they assumed it was uncorrelated and that you could lower risk by bundling large tranches of mortgages.
That works until there is a large correlated event that impacts all of them at once.
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The issue was that they never really understood the level of systemic risk involved. The whole securitization scheme was based on the idea that, while high-risk mortgages might be too risky on an individual basis, in aggregate only a small percentage of them would default, and the riskiness led to higher interest rates. If you're assuming that a certain percentage of the mortgages are going to default over a given time period, you can price that in. They didn't forsee that there would be a foreclosure crisis that would lead to default rates grossly in excess of what was anticipated, and that this would cause a domino effect whereby the problem would keep getting worse.
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Yes and no. It was obvious from day 1 that those CDOs weren’t good as good. They were labeled AAA but had yields materially higher compared to other AAA. This was attractive for insurance companies who legally were required to have a percentage of assets in AAA. But the only reason why one AAA trades at a yield much higher than other AAA is that the first isn’t really AAA.
Bingo. Pennies are free in front of a steamroller stuff.
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