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Generous Unemployment Benefits and
Long-Term Economic Dislocations

Generous Unemployment Benefits and
Long-Term Economic Dislocations

The Problem with Entitlement Programs

Just before year-end we participated in a Q&A with Jeff Gundlach of DoubleLine Funds.  In support of his investment thesis a myriad of information was provided.  We carved out and reordered a few slides of interest as although they were not directly related to Mr. Gundlach’s thesis they speak to something we at Apollo have been saying for quite a while – the welfare state destroys personal responsibility.  Here’s the rundown…

Slide #1 shows civilians not in the labor force.  The labor force is defined as those who are employed and those who are unemployed but actively seeking employment.

Chart: Civilians Not in Labor Force

Slide #2 shows the number of Americans (in millions) participating in the food stamp program.  Notice the eerie symmetry between this chart and that in slide #1.  Is it because being out of work means needing government assistance or is it because receiving government assistance means not needing to work?

Chart: US Food Stamp Participation

Slide #3 presents the results of a recent public opinion poll.  Note that 81% view cuts to entitlement programs as unpalatable.  Yes, that’s “entitlement” programs.

Chart: Recent Public Opinion Poll

Slide #4 shows the crux of the problem.  Our entitlement programs are funded on a “pay as you go” basis which is all fine and dandy except that the number of people paying into the system is declining precisely at the time when the number of people drawing from the system is increasing.

Chart: Workers Per Retiree

(How’s that for a cheery start to the weekend?!)

As always our goal is not to be political or espouse any particular point of view.  Rather we seek to inform and educate so that the advice we provide and strategies we implement fit soundly within a framework and perspective.

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