Stop and Pay Attention

 

They say that “a rising tide lifts all boats.”

The general premise is that a broad, positive force can improve everyone’s lot, no matter their circumstances. If the economy is growing, then even people in small, leaky boats will benefit.

Naturally, the opposite of this is that a falling tide will leave many boats aground.

So it’s not surprising that the rising economies of the Western world gave a lot of people a Superman complex.

If you had a pulse, you could find a job. If you had even a weak pulse, you could borrow money.

The limitations on life were minimal at best. Those who were cautious — saving money, living within their means, etc. — seemed like relics of a bygone era.

Then the financial crisis struck…

Today, the financial tide remains low… and now it appears not only that a lot of boats are hitting the rocks, but also that many boats appear to have very bad skippers.

So who’s responsible for such people?

The New York Times profiled a young woman, Jack Monroe, who has become the face of Britain’s poor. Her plight was detailed in The Daily Mail (a daily in Britain) after she gained fame as a blogger for The Guardian, where she discusses recipes that people can make on the cheap.

The overview is that Ms. Monroe, a single mom in her mid-20s, lost a job that paid over $40,000 per year and she couldn’t find another one. She lived on state assistance, but found herself unable to buy enough food for herself and her young son.

She sold their belongings, let her hair grow to avoid the cost of haircuts, and did many other things to save money. After months of going hungry, she began writing a blog about her plight and about how to eat for pennies a day.

This led to much British soul searching, but the story left me searching for something else: good choices.

Ms. Monroe is apparently from a middle-class family. Her parents have steady careers and have remained married, so there’s no historical drama for her to carry into her own adult life.

She is unfettered in making bad decisions.

She left high school at 16. She worked in shops and restaurants before finding a job as an emergency dispatcher.

She obviously became pregnant and gave birth to her son. She’s a single mother (although in further posts she’s said she and the boy’s father intend to marry).

Upon returning to her job from maternity leave, she asked for a shift change so she could care for her son or find reasonable alternative care. Her employer refused, so she quit.

She applied for, and received, state benefits, but they didn’t provide enough to cover all of her bills. That’s why she ran into trouble buying food.

She kept her situation a secret from friends and relatives, until she revealed all in a blog about being poor.

Mind you, she apparently wasn’t doing this in a “poor me,” kind of way. She was just stating the way things are.

Hmm. I see a pattern.

This young girl quit school but eventually found a good job. So far, so good.

Then she became a single parent. We aren’t told in the story to what level the father is involved, so I assume zero, at least financially.

She quit her job when it wouldn’t bend to the new demands on her schedule.

She tried to make ends meet with state benefits.

She applied for many jobs, but landed none of them.

She told no one that she’s going to bed hungry, then revealed all in a blog.

It’s never spelled out in the Times story, but the tone implies that Britain has failed citizens like Ms. Monroe.

Really?!

Is it the place of Britain, or any nation, to guarantee good outcomes?

Isn’t the place of the state to provide a level playing field on which all of us make our choices, after which we must deal with the consequences of those choices?

The British government didn’t tell Ms. Monroe to quit school, have a child out of wedlock, or quit her job. She made those decisions all by herself.

Britain didn’t tell Ms. Monroe to hide her plight from the people who could assist the quickest — friends and family.

And yet the state is the one being called to account.

This seems backward.

My point here isn’t to paint Ms. Monroe as the bad gal. We all make bad decisions or simply find ourselves in difficult straits. Many of us have needed help before… and may need help again one day.

My point, instead, is to bring us back to the main question. That is: “What is the role of the state?”

Is the state required to guarantee a minimum standard of living? Is some level of comfort guaranteed in the U.S. Constitution or Britain’s charter documents?

Western nations have developed social safety nets intended to keep citizens from reaching the depths of poverty. The programs were never intended to provide anything near a level that would make most people comfortable… because they can’t.

Without dramatically raising taxes on all levels of income, it would be impossible to keep Ms. Monroe and her son, as well as the millions like her, living in poor working-class or near middle-class conditions on society’s dime.

Financial responsibility, for any given individual household, has been the role of the family and the local community since man first developed into clans. So far, no larger society has been able to replace this function at a satisfactory level.

And while the discussion about Ms. Monroe and others like her (young, working-age people with children) is important, it’s the next iteration of this conversation that should make people stop and pay attention.

What happens when people retire with only modest, if any, means?

As our nations age, the plights of our senior citizens will be front and center. Hundreds of millions of people around the globe will spend decades out of the work force, looking to their states for the means to live comfortable lives.

Numerically, it’s not possible to provide for them without massive increases in taxes on those still working.

It would be better for everyone — those reaching retirement age as well as those expected to pay for them — to address the question of where responsibilities lie before we reach the next crisis.

As with most such conversations, I expect it to end in a place where no one is happy:

Those receiving benefits believe those funds are too meager, while those paying taxes think they’re too high.

Rodney

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Categories: Social Security

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.