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Posts Tagged ‘baby-boomers’

Now  that the U.S. and the world have experienced a financial catastrophe comparable only to the Great Depression, the thing we might want to ask is this: are we safe now? The answer is no. Even while Ireland is facing financial devastation, because they followed a path that mirrors George Bush’s economic “thinking” for the past several years, the U.S. is seemingly on the road to recovery. That’s because the newly elected Democrats instituted a major stimulus program (admittedly a weak and barely sufficient stimulus – but far better than what the misers of the Party of Herbert Hoover would ever offer).

The problem is that we are a myopic country. Our Congress is incapable of looking down the road beyond the next election cycle. And that is exactly where the problem lies.

The crazy, mind-boggling, economic policies of Ronald Reagan and his Republican successors will soon bear their bitter fruit. I am talking about a little time bomb created by the Reagan administration called section 401k of the U.S. income tax code. It is what governs the 401k plans that most Americans have instead of the old employer-guaranteed pension plans. Reagan’s lunatic idea was that throughout your working life you would contribute tax-deferred money into your 401k account, which would sometimes be matched by employer contributions. You take charge of this money while you are working and cleverly invest it in the stock market. Then, when you retire, you live in grand style off your earnings from the stock market! For as long as you live!

Complete economic rubbish. Complete deception of the American people. However, the good news is that your former employer is completely off the hook, and you are on your own! Isn’t that just grand? It’s a Republican Tea Party dream come true.

If you care to look at the history of the U.S. stock market, you will see that, for the thirty years or so before Ronald Reagan’s administration created the 401k  idea, the Dow had very anemic growth. It was only  when America’s workers started pumping large chunks of their salaries, via the 401k plan, into the stock market that stocks really took off. This soon led to two stock market bubbles (one NASDAQ and one NYSE). Remember the “irrational exuberance” of ten years ago?

A couple of years ago, we had the  housing bubble that led to the world economic collapse. This was enabled by Congress changing the income tax laws so that you could buy and flip houses every two years and not pay income tax on the profit. This gave the false hope to many people that they could still build up a nest egg even though their 401k accounts that had been destroyed in the previous stock market bubbles.

So what has Republican Reaganomics achieved for  our economy (and, while we are on the subject, where is Ireland’s heading)? The answer: A gigantic smouldering ruin.  High unemployment, low wages, a devastated real estate market, and little to hope for. Could things get any worse? As Tea Party Palin would say, “You betcha!”

A large part of our population is about to enter crisis mode, and we are totally unprepared.  The World War II baby boomers are now reaching retirement age and most do not have employer guaranteed pensions. However, most do have those good ol’ 401k plans.  Of course these 401k accounts have been savaged by the Voodoo economics policies of Republican Presidents Ronald Reagan and George Bush. But wait – won’t  Social Security save them? Hardly. Well, yes, maybe from starvation, I suppose. Maybe. Unless, that is, the Republican Tea Party succeeds in cutting or privatizing Social Security, which they would love to do.

We are on the verge of having an entire generation enter a situation so desperate that they cannot meet their own living expenses because the 401k thing was just a gigantic Ponzi scheme and their not-fully-paid-for homes are only worth half of what they used to be worth. It will be a financial catastrophe.  Many have virtually nothing left in their 401k accounts. They will be lucky to survive a year if they have to depend only on their 401k plans – but many have life expectancies that would take them into their 80’s or beyond. What can they do?

Expect another wave of house selling as the boomers divest themselves of this last piece of wealth they partially own. It’s a young Tea Party Republican’s dream of course – think of how cheaply these houses can then be bought and then flipped! What a chance to make a killing! It’s the chance to make a small fortune! The question, of course, is who is going to buy them and at what price? And what will this mass selling will do to an already bleeding real estate market?

The baby boomers are a huge bulge in the population of this country, and as they have gone through life their generation has always had major effects on the U.S. economy simply because they represent such a large part of the population. When they were young, schools had to be built for them. When they earned money they spent it and the economy boomed. When they objected to war, they caused chaos in the streets.They changed the culture. They changed the environment. They changed the way we worked, shopped, ate, vacationed. They changed America because there were just so many of them. Now they will change America again.

Soon, a  significant number of the boomers will start leaving the work force. They have to. They are getting too old to work. They will soon stop putting money from their jobs into the economy. But, they will still need  money to meet their living expenses. Sadly, for many, their 401k money has gone up in Republican smoke.  They have little other savings. In the near future the U.S. will soon be facing another major financial crisis, because millions of these boomers have almost no retirement funds, and they won’t be able to survive on their paltry Social Security check. This is a recipe for financial disaster.

And nobody, as usual, in our government is thinking about it or planning for it.

But the Boomers are coming, and they’re coming soon.

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It was inevitable.  For the past forty or fifty years a bulge in the U.S. population, known as the Baby Boomers (because they were born in the aftermath of World War II) created a moving spike in the U.S. economy. This huge group of people needed more schools, and more schools were built.  They needed more cars, and more cars were built.  They needed more houses, and more houses were built.  The economic expansion of the past forty years probably owes as much to the presence of this market as the effects of the Second World War itself.  However, as an ancient philosopher once said, “This too shall pass”.  And so it is. The age of the Boomers is coming to an end; they are beginning to retire and exit the productive economy.

And that is the problem.  As more and more Boomers retire every day and apply for the Social Security benefits they have earned, the Social Security system is beginning to draw down its reserves.  Like any good pyramid scheme, Social Security depends upon an ever growing number of contributors in order to pay out its dividends.  It isn’t designed to cope with a population bubble – at least not the backside of the bubble, which is where we are now.  Social Security is going into the red. More and more Boomers are about to be collecting Social Security while fewer and fewer people are paying into it.

This, however, isn’t the only problem.  Think about health care. Many Boomers will be looking at Medicare as their source for health insurance – and why not? They paid into it for most of their lives, now it’s time to collect, right?  Yes, but.  You see, Medicare is another government Ponzi scheme, and it only works when the number of contributors is increasing.  Boomers, who can look forward to a life expectancy much greater than their parents, may face a future where they have to get by on meager Social Security payouts and meager health benefits.  The generation that brought us the mass demonstrations against the Vietnam war, the mass protests against racial discrimination, and the sexual revolution are unlikely to take this lying down, especially since they are much more physically fit than their parents were at this age.  Expect to hear from them.

Which brings me to another point.  Many of the Boomers who are applying for Social Security are doing so because they are being forced out of the job market – a job market that has become extremely tight due to the Global Recession.  Even before the recession began many employers had clandestine (and illegal) programs in place to get rid of the highly paid Boomers so they could replace them with lowly paid young people who had just graduated from universities.  That’s just how our capitalistic system works.  It happens to everyone when they get older, you get moved out – it’s nothing personal.  In a strong economy, the Boomers who were forced into early retirement from their jobs might have just gone somewhere else – but not today.  There is no place for many of them to go.  So…it’s time to kick back, relax, and collect Social Security and Medicare benefits! The problems is that it won’t last long – certainly not until the Boomers reach their 90’s or even 100 years old.

If we had a robust economy and more enlightened capitalists – the Captains of our Industry, we would find that the economy would adapt and jobs would appear for these redundant Boomers, and they would still be productive, paying taxes and not collecting benefits.  But our economy is anything but robust and our Captains of Industry are mostly devoid of imagination.  The result is a looming crisis that any half-intelligent person can see coming, which explains why it is invisible to our government.  Wait a while – maybe a year or two – then watch what happens. We’ll have a sudden crisis because we don’t have anymore money for Social Security or Medicare and besides that with the Boomers no longer paying massive income taxes from their high-paying jobs we’ll have a huge run up in our national debt, which will devalue the dollar, and thus plunge the nation into a new financial crisis.

And it will all be a big surprise as the Baby Boomers churn by, like a gigantic supertanker. The economy of the nation will heave sickeningly and maybe even capsize as it is caught by surprise by another enormous financial tsunami – the wake the Boomers leave as they pass by.

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It’s like being on the Titanic and seeing that the lifeboats are already all full.  The ocean is littered with icebergs and the water is freezing. The stern of the ship is rising out of the water and you are left alone to fend for yourself, there is nothing the crew can do for you, the Captain is standing at the sinking ship’s wheel, knowing that the end is near.

America’s older people, the retirees and the near-retirees, the baby-boomers who had stashed away everything they could into their 401k funds for as long as they can remember, can only look at their account statements and weep.  Their money is gone, at least most of it.  Their jobs are gone because they retired or were simply laid off.  They hadn’t planned on this.  Who had? They can’t go back to work because most employers, despite all the equal opportunity laws in the world, prefer younger, lower paid, more energetic, workers.  They can’t get by on only Social Security. And they are ignored by the government’s Stimulus Plan. The job creation, tax cut, road building, green energy, education supporting, bill has nothing for them.  It’s as if Yeats had instead written, “Cast a cold eye on retirees,  Lawmakers pass by.”

We are a country incapable of anticipation. We only take action after a disaster has occurred. We couldn’t see the housing bust coming.  We couldn’t see the meltdown of our economy coming.  Now we can’t see an absolute disaster coming for the millions and millions of retired and near retired Americans who suddenly realize that their ship is sinking. Their only retirement money has vaporized as the stock market has lost 50% of its value.  They are quiet people, these old ones.  They’re not marching in the streets. Instead their lives are becoming quietly desperate as they sit in their living rooms and watch television, knowing that next winter they probably won’t be able to pay the heating bill and that their car will only last another 10,000 miles but they can’t afford to buy another. And their house? Yes, it was their ace in the hole. They thought they could always sell it if they had to and downsize perhaps to an affordable apartment – but not anymore, for their house is no longer even worth what they paid for it, and besides no one is buying houses anyway. So they sit in their quiet houses and wait for a government to save them. A government that barely knows they exist and is looking for a way to “solve” the Social Security problem.  A government that isn’t coming.

The problem is that half of the government is made up of people whose philosophy is “You’re on your own”, and the other half is concerned with helping the young people find jobs and go to school. The retired, the near-retired, the old and infirm can’t help but think of those poor, unfortunate, older people who found themselves stranded on Titanic’s deck after the lifeboats had departed.  They knew, more clearly than most, perhaps, that death was waiting and no help would come for them.  They would soon be forgotten as the world went about its business of business.

The great poet William Butler Yeats wrote his own epitaph:

Cast a cold Eye

On Life, on Death.

Horseman pass by!

Unless our comatose government wakes up, we will find that he also wrote an epitaph for an aging generation of Americans.

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