I recently heard a story about a guy in the military who is about to retire in his early 40s. He will be paid $42,000 per year for the rest of his life, and the pension will adjust for inflation (or at least adjust according to the government’s price inflation statistics).

We don’t know for sure if he will be paid $42,000 per year for the rest of his life.  That is his assumption.  That is what the politicians have promised to him. But politicians can promise a cure for cancer, but it doesn’t mean it will happen.

If the promises come through, the guy is close to set for life, financially speaking.  If he lives really frugally, he might never have to take another job in his life.  Or, he can just find a relatively low-paying job that he likes and live a nice middle class life.

Unfortunately, much of middle class America isn’t living a nice middle class life.  They are barely affording a middle class lifestyle.  And the pension of this military guy is largely symbolic of why this is the case.

I have no idea if this guy ever saw actual combat.  For the sake of argument, let’s say that the U.S. military wasn’t starting wars and running an empire around the world.  Let’s say the U.S. military wasn’t destroying other countries and their people and wasting hundreds of billions of dollars every year with foreign interventions.  Let’s say the military was purely defensive and defending our freedoms.

Even if this were the case (which it is not), there would still be no justification in paying someone over $40,000 per year for the rest of his life to do nothing, starting at the age of 42.  Where can you find that gig in the private sector?

Some of the large companies in the private sector (i.e., non-government companies) used to have pension plans like this.  But unless you were a top executive, you typically had to work longer than 20 years to get it.  It is far less common now, as it is too expensive and too unpredictable for companies to make these promises.  But they have a bottom line to worry about and a future to worry about. Politicians don’t really care about a bottom line, and their future extends only to the next election.

Anyway, if a company wants to pay out a nice pension to attract and retain good employees, there is nothing wrong with that.  The key is that you aren’t forced to pay for it.  In the case of this person retiring from the military, we are all forced to pay for him to do nothing for the rest of his life.

There are defined-benefit plans and defined-contribution plans.  Many government employees receive both.  A defined-contribution plan for a government worker (similar to a 401k plan) would be less offensive.  The employee gets whatever is put in there during his time of working.  The government isn’t making future promises in this case.

I have no idea how many hundreds of thousands or millions of people there are who receive a defined-benefit pension like this.  When you include medical care paid to veterans, the costs are absolutely astronomical.  And it is a long-term and sustained burden.

If there are 1 million people on federal government pensions (not counting state and local, which are also a major problem), then the total cost would be $42 billion per year at $42,000.  Of course, the number is much higher than this.  It is hard to get an accurate cost for all federal pensions because the funds get so mixed up and are allocated in different buckets.

A Middle Class Revolt

I used to think there would be a war between generations.  The younger generation would get tired of struggling and paying for the retirement of the older generation.  The older generation is largely living off the younger generation because the government money spent on the older generation is coming from current tax (and deficit) dollars.  There was no money put aside in a Social Security trust fund or a Medicare trust fund.

I still think this generational war is possible.  Unfortunately, much of the younger generation, instead of advocating that the government spend less on the older generation, are advocating for more socialism for everyone.  We’ll all live at the expense of each other.

But more than this, I believe there should be (and maybe will be) a revolt by the middle class against the elites and those benefitting heavily from the government.

You can preach patriotism and supporting our troops all day long (I don’t), but there comes a breaking point for frustration.  If you are struggling to pay your bills every month and can’t afford to take your family on even a modest vacation, then your ears may perk up a little when you hear about a government ex-worker who is collecting over $40,000 per year doing nothing.  This has to be especially frustrating for someone who is making $40,000 per year, getting up early every morning and busting their butt, with no company pension, to know they are still having to fund these people’s early retirement.

I don’t really care that the guy in the military may have been deployed.  I don’t care that he may have risked his life.  I don’t care what he was promised by politicians.

Politicians lie all of the time.  So let’s make them liars here.  Any promises made by the government are invalid contracts.  If I promise to pay you money that I am going to steal from someone else, it is an invalid contract.  If I make this promise to you, you should know that it is invalid because it is based on the use of force against another party that did not agree.

I don’t know if the rest of middle class America will ever see it this way, but they should. They are working hard to pay for other people’s easy retirement.  Meanwhile, they can barely stay above water.  Maybe they’re fighting with their spouse about money.  Maybe they have to take a second job. Maybe they have to send the kids to after-hour day camp so that both parents can work full time to pay for the military guy to collect easy money every month.

You don’t have to be a radical libertarian to see this as unfair and unjust.

And while there are a lot of people collecting government pensions, the majority of voting-age Americans are not.  They can change the rules if they really want it, and if they make it known.

I am waiting for a middle class revolt of some kind.  I don’t know if I will wait forever.  Either way, the laws of economics are going to dictate some kind of change.  The massive deficits, coupled with unfulfillable promises, will force change.  It may seem sustainable right now, but it is not.