The Great Moral Hazard

The average American household has a net worth of $77,300, including home equity.  And the average American worker has an annual income of $45,800.

Each month I take about $4,000 from the trust account of my 91-year-old Mother to pay the costs associated with her care in a semi-private room in the dementia nursing center of a large nonprofit retirement facility.  That comes to approximately $48,000 per annum, or about 62 percent of the average American’s net worth.

In other words, average Americans would be broke in less than two years if they were to end up in a situation like my Mom’s.  Actually, they would have been broke on the first day that they entered a retirement facility similar to the one where my Mom resides.  That’s because the entrance fee was $90,000 in 2005, when my Mom moved to the facility and began living in an independent living apartment.  The fee is much higher today, due to the increased demand for such arrangements from retiring boomers.  

The fee guaranteed that my Mom’s monthly rent would always stay at the rate for an independent living apartment, even if she would later need to progress, as she did, to an assisted living apartment and then to the nursing center. 

I hope that my Mom outlives her money, but given the size of her assets, that probably won’t happen.

So why does my Mom have a lot more money than the average American?

Is it because she and my Dad were upper-class?  No, my Mom worked as a clerk, and my Dad worked as a tile setter and then a warehouse worker.  Contrary to the conventional bull crap about low wages of today, the wages in their days were a lot lower than now (in constant dollars). 

Is it because she and my Dad came from wealthy families?  No, my Mom was orphaned in infancy, adopted by her immigrant aunt and uncle, lived with them in a walk-up rental flat in St. Louis, and went to Catholic grade and high school on her uncle’s pay as a waiter.  My Dad’s parents were also immigrants, and my Dad’s Dad worked as a coal miner in southern Illinois and then as a barkeep in St. Louis.  Somehow, my Dad’s parents were able to afford to buy a two-flat for cash and to send my Dad and his two siblings to Catholic schools.  (Hint:  Back then, taxes were a third of today’s confiscatory levels.)

Is it because, as Elizabeth Warren and Barack Obama and other Ivy League nincompoops believe, the government provided my Mom with certain public goods and public utilities?  No, that belief is intellectual excrement that is served in university classrooms and faculty lounges. It doesn’t take an Ivy League genius to see the fatuousness of the thinking.  If my Mom has money and others from the same socioeconomic background don’t have money, does that mean that the others didn’t have access to public goods and public utilities?  Of course not.

The right answer is simple:  My Mom and Dad lived below their modest means, saved money, and invested wisely.  The others didn’t.

The others didn’t because of The Great Moral Hazard.

Like all moral hazards, The Great Moral Hazard has encouraged people to do morally questionable things and engage in risky behavior that they wouldn’t have otherwise done in the absence of the Hazard.  The difference between run-of-the-mill moral hazards and The Great Moral Hazard is that the latter is so widespread that it has bankrupted the country fiscally and morally.

The Hazard was created by the unholy alliance between academia, media and government.  The alliance brainwashed Americans into believing that they didn’t have to save money because when they ran out of money, they could take other people’s money under the guise of social justice and fairness.  (Actually, no political or moral philosophy justifies this, including the philosophies of Marx, Rawls, Rousseau and Hegel.)  

If someone can’t afford nursing care in old age because of spending money frivolously on smartphones, big TV’s, big ATV’s, $4 frappuchinos, $7 margaritas, lottery tickets, cigarettes, tattoos, expensive cars, big houses, granite countertops, stainless steel appliances, trips to Vegas and Disneyworld, loose women, loose men, and thousands of other ways that money can be wasted--then the person can get free care in a Medicaid nursing home and be subsidized by those who saved money, including people like my Mom and Dad, who didn’t buy a new car until the floorboards rusted through on the old one, and who invested 60 years of sweat equity in fixing up the dilapidated 1,000 sq. ft. house they bought in their youth.

In a similar vein, the same alliance led Americans into believing that the government would bail them out with Social Security, SSI, Medicare, Medicaid, food stamps, earned income tax credits, tuition loans, housing subsidies, and one hundred other social-welfare programs and entitlements.  They are going to be surprised and angry when the U.S. declares bankruptcy and throws them out of the government nest.

In the meantime, justice will be served when those who succumbed to The Great Moral Hazard end up in a depressing, dirty Medicaid nursing home in soiled underwear with tubes up their nose instead of in a nice, caring place like the one where my Mom resides.

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Mencken’s Ghost is the nom de plume of an Arizona writer who can be reached at ccan2@aol.com.