An economic civil war is about to engulf the United States. The root is the 73-year-old lie called Social Security, the foes are Baby Boomers and their children and grandchildren.
Despite what the government says, Social Security is a certifiable Ponzi relying on an expanding economy and workforce. Both are declining and the influx of revenue isn’t there.
Boomers are asking what they have paid in during a lifetime of work. Their offspring are facing diminishing wealth opportunity while burdened by education debt that isn’t paying off with higher wages. Heated dinner discussions threaten to spill into the streets.
America’s population is aging. History teaches the elderly are the heaviest anchor on any economy. In America’s past, the tribes deserted the old on the prairie, the Eskimos left them on the ice and in times of famine, the elderly were the last fed. In those times the old faced the fates with dignity and grace. Not so today, hence the battle.
Everything economic has a shelf life. Even the stock market is facing its own mortality. The high levels of 2010 won’t be seen again for 15 years and that only if the corporations can match the profit gains achieved from 1954-2010. The reliance on government largesse crushes republic principles. A smothering government will cause the biggest financial debacle in history.
Economic principles Boomers were weaned on are dying. What they’ve forgotten is those principles have only been around about 400 years and required five things: more energy consumption, increasing population, more productivity, more government tinkering and more easy credit. It worked well, especially in America in the latter 20th century. America thought it had mastered ‘Manifest Destiny’ but had become its slave.
In 2007 the slave was put firmly in his place. Energy use per capita leveled abruptly; population aged; credit shrank; productivity fell; and government flailed.
The aging population was the key. As you age, the newest gadget is not a “must have.” As you age, designer clothes are not a “must have.” As you age, climbing corporate ladders isn’t worth the effort. Seniors’ wants wan before the body does. America, about 1970, shifted from a producing economy to a consuming one. The effects took hold 40 years later.
Eneergy consumption was measured in raw output, not net production. Energy must produce more than it costs or modern economy shrinks. As costs rise, technology applications rewarded less. Now all it is adding is bells and whistles on the locomotive.
The shocker came in credit. No one suspected credit had a shelf life. At first it bolsters both economic and political policy. Credit was the great weapon of the 60s but is a deadly curse for creditor and debtor today. Mix in more regulation and GDP growth from credit doesn’t outweigh the cost.
The “more” in the surreal norm’s mantra of the Boomers no longer works.
Government didn’t adjust. Wall Street didn’t adjust. The worker didn’t adjust. They figured things would return to “normal” in time and they would continue to amass wealth. Now the falsehood of the government Ponzi is laid bare.
Since Boomers started working, they coercively paid into the government scheme. But the required base of young workers diminished just as the demand for service exploded. Instead of the .2% taken from each worker in 1940, to balance the books today will require 17%.
With everything in the economy contracting, the Ponzi payout cannot be met except through induced inflation which shrinks purchasing power and makes workers begrudge every removed penny.
The resentment from both sides escalates because the economic contraction cannot be reversed by any government method used since America’s inception. A new sheriff, demanding lower standards of living, is master now. That is a bitter pill for Boomers.
But when the elderly are removed and living conditions still deteriorate from contraction, the authority, that would take more from workers for those who have earned nothing, will become the definitive target for the anger. That’s a fitting epitaph for a 73-year-old-lie.