Wednesday, March 7, 2012

How Demographics are Going to Change Everything

Demographics are the art and the science of statistics about population. Before you immediately assume they are boring and irrelevant, read one more paragraph.

In the late 1990’s, the U.S. economy had ten new working-age taxpayers to help support each newly retiring senior. That’s ten to one. (10:1) But in 2012, for the first time in our country’s entire history, we have more newly retiring seniors than we have new working-age population! (I know it is unpopular, but we have aborted 40 millions potential workers, too).

It gets worse. Much worse. By 2022, there may well be only one new working-age citizen for ten new senior citizens. (1:10). It is a total reversal of the system, as we know it.

Understand, that all of Social Security, taxes and even the stock markets are based on the idea that new workers will be funding those that have retired. After all, if the seniors sell their stocks to live, who will buy them when ten sell and only one worker is buying?

How will Social Security survive with only one worker’s taxes trying to support ten retirees? Unless it changes, it cannot. We live a lot longer now, too. In 1950, most people expected to live only five to eight more years after reaching age 65. Currently, that has doubled to about fifteen years, and it’s climbing.

With this kind of increase in the sheer numbers of retirees, and with retirees living twice as long as they ever have, cuts will have to be made and they will be unpopular. It might just be political suicide to touch this electrified “third rail” of politics.
Someone--sooner or later--will have to deal with this issue. As for me, I do not think that Social Security can survive, as we know it. The problem is in the demographics.