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Bad Choices
If two people are dying from liver disease, one 25, the other 65, and there’s only one liver available for transplant, the old one dies.
There’s one economic variable that’s highly predictable; demographics. In all of the industrial countries the aging population is now weighing on the economic outcome. Japan was the first country to go down the tubes from this phenomenon. Europe is behind Japan, but rapidly catching up.
The US has a huge headache with an aging population. The number of oldsters is big, and rapidly rising. Add to the size of the aging US population the fact that the promises made to these people are enormous. Other countries, like Canada, Russia and even China are struggling with the problem.
The USA is in now in year three of what will prove to be a twenty-year mega-trend of an aging population. These facts have been know for a long time, I’m amazed that the US has been so slow to come to grips with the implications of what is clearly in our future. Thanks to the Fiscal Cliff debate, the financial implications of the graying of America are now being discussed, and Washington is talking about “solutions”.
So what are the solutions that the deciders are zeroing in on? Simple. The proposals (and what we will get) are extensions of the ages that benefits become available. Both sides have suggested that pushing out the age for Medicare and Social Security benefits for an additional two years is appropriate. The Administration has said it would be willing to do this; John Boehner (and other big Republicans) has flat-out insisted that it happen.
At some point in the next year (I don’t think this will be part of the fiscal cliff resolution) the eligibility changes will take place. The changes will be phased in over 10-15 years. When the ink is dry on the new laws, the bean counters in Washington will declare success. The end result will be a 3-4 year extension of the lives of both the Social Security and Medicare Trust Funds.
Where does this “fix” take the country? That’s easy to forecast. Older people will be forced to stay in the workforce for years longer. The retirement age will be pushed out, the benefit checks will also be smaller on a relative basis. (There will be cuts to inflation adjustments) Once again, the deep thinkers in D.C. are “okay” with making old folks wait for a few years for benefits; the thinking is that people live longer, so make them work longer.
My fear is that the solution to one problem is going to spill over and aggravate another problem. The fix on retirement benefits will cause a long-term erosion of youth unemployment. That outcome could prove more devastating than the aging problem.
Its not hard to find evidence that these big trends are already moving the needle. Last Friday’s NFP is a case in point. Zero Hedge has the details (Link) and (Link). This chart shows what happened in November. A disaster for those 22-54, the 55-69 group were the winners.
It wasn’t just November. Consider the changes since 2009.
What does a government do when it is faced with high youth unemployment? It sends them to school with borrowed money. This won’t work much longer:
This is the worst kind of whack-a-mole problem solving. Washington will take steps to address the fiscal consequences of the aging population, but those steps will create a multi-decade drag on what is already a serious problem.
We are far from the point where rules on transplants should apply to choices on economic policy, but we’re getting closer. The policy choices that are being made today are running counter to the rules on transplants. They favor old over young. We are a long way from being balanced on this issue; longer still toward policies that actually tip the scales to the next few generations.
If you asked the question, “How do we create opportunities for younger workers?” The answer would be to lower the retirement age. Create the opportunity for upward mobility. We are on a path 180 degrees in the opposite direction.
I don’t see a way around this. Demographic changes are powerful forces. The problem is we are on the third rung of a twenty-foot steep ladder, and we’re already making bad choices.
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We're all buttwipes then, eh?
only complaint I have is that I want out of the system. They can have every penny I paid in and I am 46. I want to be free of the grand Ponzi. Aside from that I don't care. I can accept that I have been lied to and robbed. I don't even give a fuck if anyone goes to jail, I just want OUT of their system.
Dear JWoop,
Request denied. Sorry.
Love, your elected representatives
It is quite obvious that you are not really an elected representative since you said "sorry". REAL elected representatives don't give a fuck about you and wouldn't even respond.
REAL elected representative often say "sorry." They don't actually mean it, of course, but they say it because that's what normal people do when THEY get caught having sex with an underage goat.
They would also automatically put you on the "No-fly" list, and you could probably expect an anal-probing IRS audit within the following year.
Divide and conquer, buttwipes
Riding around Tokyo, it is obvious that Japan is a giant geriatric ward. These people thought they were saving up for retirement, investing in Japanese treasuries. It's beginning to look like instead of saving they were really just paying a "tax". If you ask the Chinese or Koreans they will say that it couldn't have happened to nicer group of people.
Here in the US we always thought we were contributing to a retirement (Ponzi) scheme called Social Security. Before it's over it will have been nothing more than a tax for a lot of us.
This is a problem caused by the women ("the pill"). We have not produced enough replacements. It's the old story about the three pigs. Can you guess witch pig we are? So it's time to pay the tab on all this fun we have been having.
It's as if you don't realize that all Ponzi schemes eventually fail for one reason or another.
PS: Spell check wants me to change Ponzi to Fonzie. Talk about jumping the shark.
Hope & Change. The baby boomers and seniors getting the retirement they dreamed off.
Hope & Pocket Change...lol.
The younger folks voted overwhemingly for Obozo, to levy taxes on themselves, to save various "entitlements" (apparently) to pay for me.
Somewhere, on some astral plane, PT Barnum has got to be laughing his ass off ;-)
It is and always was just a tax. It's just like any other tax... you get taxed and, if you're lucky, you get to extract some of that stolen money back every once and awhile, through benefits paid (either direct cash or governmental services).
While SS is technically a tax, that wasn't what it was designed for. SS was and is a massive vote-buying scheme. The awful elegant crystalline beauty of it is they use *our* money to buy the votes. I can only pray that FDR is sucking cocks in Hell.
Things tend to end up how they were designed... and those designing the program have no crediblity to say the least. Not sure why you put faith in them or shortchange their ulterior motives or foresight.
Conclusion: an aging population is not to blame. Socialist governments are to blame. An aging population should mean lower inflation, more resources for everyone, less labor required to build infrastructure for growing populations, and a tremendous benefit for the environment.
The aged population around me seem to be driving recent vintage Cadillacs to and from the local stores and medical providers.
Most don't seem to want to sit home and preserve fossil fuels or foodstuffs. In fact, they seem to want to enjoy it up while they still can.
The generation that is creating wars should also be fighting them. This should fix both the demographic problem and the pension problem.
Same as it ever was.
But without wars, the US economy would grind to a halt. Many of us benefit from war money every day without even knowing it. There are little subcontractors throughout the country that make screws, seat covers, tires, fluids, windows, knobs and thousands of other little things that go directly into the Military Industrial Complex.
Don't knock unending wars of aggression. They're what keep dad and granny getting paid by a government war machine sponsored job instead of them collecting a government sponsored welfare check.
There's almost certainly a place on the secondary level of War Department handouts in or near your community if you live in any congressional district in the U.S.
That screw Uncle Louie is making right now will someday fall out of a critical joint in a Stryker.
Money appropriated by government for any reason represents a lost opportunity for that money to be spent by those who earned it on useful products which they desire. This opportunity cost reduces the likelihood than an economy can develop in a sustainable way. The military-industrial complex is a horribly inefficient way to sustain the economy. Spending as much on the military as every other nation combined makes Americans poorer not richer. It's the broken window fallacy writ large.
I don't like it. But I think about it anyway.
The aging population should be retiring and leaving the (shrinking) job market to the (smaller numbers) of youg people coming up.
Thanks to automation, robotics, CAD?CAM etc if 1 person can now turn out as much product as 20 did in the fifties, it should be possible to pay the pensions and give the workers higher wages too.
The people turning out the mythical 20x product don't own the means of production. Therefore, although it should be 'possible', they haven't been and won't be seeing 20x wage increases. Or a stinkin' pension for that matter.
That additional cream has already been set aside for somebody else's corn flakes.
Capital: You can't make us.