
The bigger economic disaster: 78 million baby-boom retirees - ksvs
http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm?postversion=2008103010
======
mynameishere
You know, I've been aware of this problem for years, and (far from thinking
there is a macro-level solution) I honestly can't come up with a personal
strategy that doesn't involve moving to Uruguay or the badlands of Montana.
The problem is that we are faced with very different possibilities:

1\. Argentinian-style perpetual insolvency. In this case, buying gold and
certain foreign debts is the best strategy.

2\. Cuban-style socialism. In this case, offshore accounts will be needed.

3\. Bolivian-style hyper-inequality. In this case, it's probably best to bet
on a few big corporations and hope they get most-favored status by the
government.

4\. Chilean-style clown fascism. Least likely, but in this case, petty
dictators come and go, leaving the usual bodies behind. Best bet here is to
just shut up and mind your business.

5\. Mexican-style mediocrity. In this case, everything is pretty much the
same, but everyone is poorer and the public infrastructure is shabbier.
Really, this is most likely, because people won't see it coming, and won't
have to shift their portfolios around too much.

~~~
alecco
US can just go back to normal historic policy and be open to immigration. That
was it's growth engine in the past and can make it recover within years if
properly regulated (i.e. make them pay taxes and slowly earn privileges.)

But suburban mild racism is in the way.

~~~
petercooper
It's not racism (thought it _used_ to be - US immigration policies regarding
"Orientals" were shocking at one point). If it were racial then it'd be
ridiculously easy for western Europeans to emigrate to the US - and it's not.
I've wanted to move to the US for a few years now.

However, like you, I've wondered why immigration isn't being discussed as a
serious solution to our economic problems - so good one for bringing it up.

~~~
alecco
I am Latino and had to suffer US border checks many times.

To be fair, on the last couple of times the immigration officers were _very_
friendly, while the customs and (Homeland Security) ones were worse than ever.
Uneducated bigots are the norm.

Let me tell you the last one. A customs officer started speaking to me in
Cartman-Spanish (after a brief exchange in English) making a whole scene in
front of about 50 people queuing behind me. After a while my patience was gone
and I answered loudly "I'm very sorry but you _don't_ speak Spanish and I
cannot understand what you want. You are speaking in infinitive and skipping
words, so it isn't clear if you are asking where I've been, where am I going
to be, or the reason of my stay. Migrations didn't have a problem, so either
check my luggage or let me go." At that point it was 50-50 he would kick me
back out, but I guess the dirty looks he got from the people in the queue
convinced him to just let me get through.

I don't even look Latino and had a valid visa right there in my passport. What
my friends, relatives, and fellow Latinos go through is nauseating, like the
occasional cavity search. It is very ironic this happens often in states named
in our Language.

So trust me, it _is_ racism.

~~~
hugh
Well I'm perfectly white and I still get randomly treated like a jerk by the
various US border agencies, so relax. Also, in this story:

 _Let me tell you the last one. A customs officer started speaking to me in
Cartman-Spanish (after a brief exchange in English) making a whole scene in
front of about 50 people queuing behind me. After a while my patience was gone
and I answered loudly "I'm very sorry but you don't speak Spanish and I cannot
understand what you want. You are speaking in infinitive and skipping words,
so it isn't clear if you are asking where I've been, where am I going to be,
or the reason of my stay. Migrations didn't have a problem, so either check my
luggage or let me go." At that point it was 50-50 he would kick me back out,
but I guess the dirty looks he got from the people in the queue convinced him
to just let me get through._

it seems like the only person acting like a jerk is you. All he's trying to do
is speak in Spanish, and you went and made fun of him for it.

~~~
alecco
(Did you need to call me "a jerk"?) OK, I'll bite...

Perhaps I didn't put enough emphasis on the "making a scene" part and didn't
_explicitly_ put he was asking about things out of his sphere. He was talking
in a very _aggressive_ tone in Spanish _after_ he saw I could speak English
fluently, after I showed him both my European and US visas, and after I
explained it was a trip to my employer's HQ. He wasn't saying "como esta
amigo", he was asking random questions that didn't make any sense _related to
migrations and completely unrelated to customs_. I've been many times through
different airports in US and _never_ a customs officer asked me those
questions. Specially in front of other people. It went on for _at least_ 10
minutes while people were almost walking by in the other queue (including a
friend of mine who had to wait and later told me he was thinking in calling
the office for help.) I was the only one stopped out of dozens of people, just
after he noticed my passport was from south of the border.

At that point I decided I rather get rejected from US and perhaps lose my job.
And you know, if US rejects your visa, for whatever reason, you never get
another one again. Luckily most people present clearly thought the guy was out
of line.

This random uneducated guy on a power trip surprised me because it happened
just a few minutes after maybe the nicest migrations interview I ever had (we
even talked about football and his recent holidays in South America while we
had to wait for a software reboot of some kind.) This is why I put the "to be
fair" disclaimer on migrations vs. Customs and TSA/Homeland Security.

Normal in exchange with customs on every other country in the world:

    
    
      * In the most common case you just walk.
      * Second most common, one question: Something to declare?
      * Worst possible case, rare: Can you please take your luggage over here?

------
nostrademons
I'm not sure this is as big a problem as he makes it seem...

Baby boomers don't seem to be retiring. Or if they are, they're taking a
second career. Like my mom, who retired from teaching to become a teacher
consultant, or my friend's dad, who's starting his second company at age 70.
Instead of drawing down social security, they're putting more into it.

The nature of work has changed since social security was enacted. Back then,
most Americans worked in physically-demanding manufacturing jobs. They
physically _couldn't_ work past 65, because their bodies wouldn't hold up.
Now, most Americans work in white-collar knowledge or service work, and
there's nothing stopping them from going to work until they die (though many
want to cut down their hours).

------
patrickg-zill
Claim you are Amish: <http://www.amishnews.com/amisharticles/amishss.htm>

_Tucked into the 138 page bill was a clause exempting the Old Order Amish, and
any other religious sect who conscientiously objected to insurance, from
paying Social Security payments, providing that sect had been in existence
since December 31, 1950. After Senate approval in July, the signing of the
bill by President Lyndon B. Johnson on August 13, 1965, made it official and
canceled tax accounts of some 15,000 Amish people amounting to nearly
$250,000._

~~~
lief79
I have to recommend not e-filing, if you decide to do this.

------
curiousgeorge
James K. Galbraith wrote the best response to these harpies who - lest we
forget - were advocating a Social Security privatization (read stock market
pump and dump) scheme as little as a year ago.

\-------------------------------------------------

Source: [http://economy.nationaljournal.com/2008/10/is-there-room-
for...](http://economy.nationaljournal.com/2008/10/is-there-room-for-fiscal-
stimu.php#1152033)

Excuse me for asking an impolite question.

But did David Walker, Eugene Steuerle -- or Peter G. Peterson himself --
devote even five percent of the vast resources that they have lavished in
recent years on the supposed "entitlement crisis" to warning about the
impending mess on Wall Street?

Did they write anything about it? Did they speak out against the Bush
administration's abandonment of supervisory responsibility in the financial
system? Did they protest the massive abuse of unsophisticated home buyers by
the loan originators in the subprime sector? Did they comment on "liars'
loans," "neutron loans" and "toxic waste"? Were they heard about the risks
involved in securitizing subprime loans? Did they foresee that credit default
swaps could collapse like a house of cards? Did they caution that the stock
market might crash, ruining the private retirements of millions of Americans?

If they did, I must have missed it.

Peter G. Peterson is one of the leading figures on Wall Street. Isn't it
reasonable to ask, that if he and his team wish to be taken seriously on
matters of public finance, that they should have shown some leadership, some
wisdom, some insight and some foresight on the disaster brewing in their own
backyard?

As the disaster on Wall Street developed, George Soros was heard from. Warren
Buffett was heard from. Was Peter G. Peterson heard from? Was David Walker
heard from? Was Eugene Steuerle heard from? I think they were not.

What is Mr. Walker's approach to subprime crisis today? His comment above
makes his approach clear. It is to use the crisis as a rhetorical springboard,
in order to divert the conversation back to what he calls the "super sub-prime
crisis associated with the federal government's deteriorating finances..."

But the fact is, the subprime crisis is real. The collapse of interbank
lending is real. The collapsing stock market is real. The disintegration of
the financial system is real. The collapse of the housing sector is real. The
credit crunch and the recession are real. You can see this in the interest
rate spreads and in the credit that is unavailable at any price.

Mr. Walker's "super subprime crisis" of the federal government is not real. It
is a pure figment of the imagination. It is something Mr. Walker sees in his
mind's eye. He sees it in his budget projections. He sees it in his balance
sheets, which are the oddest balance sheets I've ever seen, because they have
all liabilities and no assets.

But the financial markets do not see it. How can we tell? Because those
markets are willing, today, to lend unlimited sums to the Federal Government
on supremely favorable terms. What is the 20 year Treasury bond rate? Last
month, it was 4.32 percent. That is almost exactly what it was in December
1959, in the last month of the Eisnehower administration. The United States
Government wasn't going bankrupt then and it isn't going bankrupt now.

The point is directly relevant to the question posed by National Journal: "is
there room for fiscal stimulus?" Of course there is.

Not only that, sustained fiscal expansion (I dislike the term "stimulus"
because I do not think that a short-term policy will work) will be essential
in the next administration if the financial rescue just undertaken is to
succeed. It will be necessary to stabilize the housing sector. It will be
necessary to stabilize state and local government spending, undercut by
falling property tax revenues. It will be necessary to stabilize the incomes
and expenditures, in the aggregate, of the elderly. It will be necessary to
finance new capital spending at the federal, state and local levels.

Failure to do this will cause the housing crisis to get worse. And that will
cause the losses in the financial sector to multiply, overwhelming all efforts
to stabilize finance.

I was at the Peterson Institute the other day. There I heard a very good panel
discussion of the financial crisis, featuring Fred Bergsten, Adam Posen,
Morris Goldstein and others. All agreed that the deficit would exceed one
trillion dollars next year. All agreed on the need for the expansionary and
stabilizing steps outlined above. Nobody was defending, in any serious way,
the Walker-Steuerle line.

I found this greatly encouraging.

~~~
mynameishere
Can I suggest not copy-and-pasting an entire article?

What he's saying is this: "Keynesianism sure did a great job ending the
depression, right? Let's try it again!"

That's what he's saying, and he's saying it in the context of an old,
indebted, war-weakened country. In 1929, the US was young, solvent, and free
from a large standing army.

~~~
gaius
It's not the size of the military that's the problem. Salaries are dwarfed by
the cost of the equipment and supplies to wage expeditionary war.

------
edw519
Entitlements?

Hmmm, that's not what they called it when they took the first 15% of every
check I ever received.

STFU and give me my money back.

~~~
marvin
The crowd that hangs out at HN isn't really the main problem, you guys make
more than enough to be able to retire on your own. But for the rest of the
US...

In Norway, which actually has a working health care and retirement system,
that number somewhere in excess of 50%. (33%+ tax on income, 25% VAT on
everything and any number of specialized taxes on most services people have to
use). Social services are a _lot_ more expensive than most people realize.

What is the total tax level in the US? If it is even 30%, you shouldn't expect
that the state will be able to cover everything. Your real problem is that
wages are lower than in the rest of the industrialized world, and hence that
the average worker is unable to save up enough money to retire comfortably in
_any way_.

The way I see it, the US has been living a dream for the last 30 years. It's
going to hurt. The median wage has to double, and you need to _save_ the
excess. Or else you'll have a major poverty problem.

When I say this in other forums, people always bring up the discussion of
private vs. public social services. This is a red herring. A well-run public
system doesn't waste more than half of the money we put into it - if that is
the case, you have more than one problem.

~~~
edw519
The 15% was for Social Security and Medicare only. That's all I want back.

I didn't include the other 20 to 30% for federal and state income taxes, 7%
sales tax, not to mention property taxes, excise taxes, etc., etc., etc. We
all _know_ that money is gone.

------
DanielBMarkham
At the core of the problem is the fact that one generation of politicians can
get elected promising goodies that another generation of politicians have to
pay for. As long as elections turn on "what's in it for me", the system is
spinning out of control. This example is just the biggest symptom of the
underlying problem.

Options? At a national level, I don't see a solution without restructuring
government. Once the federal government completely usurped the states, there
was no longer and tension or balance between who was responsible for what. The
feds are into everything, and the states don't have an even playing field.
National politicians get elected not on national issues, but on how much money
they can get spent in their district.

Personal/Startup options? I'd move my location to the best place for each
stage of growth. Need to be in the Bay Area to start out? Fine, but you might
not need those same environmental things at 2 years in. Then you might want
lower cost-of-living, low taxes, and cheap infrastructure. The only way to
survive is to be able to grow where the best soil is. BTW, that's the same way
it is today, but the difference is that instead of just moving one time, a
small startup might move 2 or 3 times -- sometimes across national borders.
You can have a separate discussion of whether that's patriotic or not, but I'm
just talking survival.

~~~
zvikara
A democracy is always temporary in nature; it simply cannot exist as a
permanent form of government. A democracy will continue to exist up until the
time that voters discover that they can vote themselves generous gifts from
the public treasury. From that moment on, the majority always votes for the
candidates who promise the most benefits from the public treasury, with the
result that every democracy will finally collapse due to loose fiscal policy,
which is always followed by a dictatorship.

The average age of the world's greatest civilizations from the beginning of
history has been about 200 years. During those 200 years, these nations always
progressed through the following sequence:

From bondage to spiritual faith; From spiritual faith to great courage; From
courage to liberty; From liberty to abundance; From abundance to complacency;
From complacency to apathy; From apathy to dependence; From dependence back
into bondage.

~~~
noonespecial
I've heard this many times but I always felt that a stable reaction was
possible by limiting the size of the public treasury. Citizen's resistance to
taxation seems to be a reasonable force capable of doing just this.

I feel differently now because it has morphed, via healthcare, into a moral
issue versus a strictly financial one. People have grown into the idea that a
person has a right to have _any_ amount of money spent to prolong their lives,
even for a few weeks. Previously this was impossible. Death was almost always
quick and cheap because there was only so much medicine could do. Science is
changing this rapidly.

You can imagine how this would lead to the collapse predicted with a simple
thought experiment. What if every person could, at the end of their life,
press a magic "science button" and get one extra year? What if this button
cost $100 million to press?

~~~
hugh
My preferred solution to this problem (bear with me for a while, since this is
a pet theory I only unload very rarely):

Many democracies (e.g. the US, UK, Australia) have bicameral legislatures in
which legislation must be passed by both houses, but where one of the houses
no longer properly serves its original purpose. In the US and Australia the
role of the Senate was to represent the voice of the individual states -- this
doesn't happen any more and it just winds up filled with the same parties as
the other house in slightly different numbers. In the UK the House of Lords
was supposed to represent the interests of the nobility, but that's no longer
seen as a desirable goal anyway. I'm not totally sure about the details of the
systems in other countries.

Anyway, my suggestion is to keep the House of Representatives in its present
form and replace the nonfunctional upper house with a "House of Taxpayers", in
which the representatives are elected by voting among the nation's taxpayers
with each taxpayer's vote being worth an amount proportional to the amount of
tax they pay. This would ensure that any law being passed by the legislature
would have to be approved both by all the people who might benefit from it
(the House of Reps) and the people who would have to pay for it (the House of
Tax). It might also have the added benefit of encouraging the lower classes to
shift more of the tax burden onto themselves in order to have more say in how
it's spent.

It's probably not practical to pioneer this kind of constitutional reform in
any existing democracy, but I certainly think it should be considered by
anyone setting up a constitution for a new one.

~~~
gaius
_In the UK the House of Lords was supposed to represent the interests of the
nobility, but that's no longer seen as a desirable goal anyway._

The House of Commons necessarily can't see any further than the next election,
at most 5 years out. The House of Lords is full of people who know (or used to
anyway) that any problems they create, their own grandchildren would have to
sort out. Regardless of anyone's feelings about heredity, that was a very
valuable capability and it has now largely been lost.

~~~
hugh
Good point, I'd never thought of it that way.

I still don't think the benefits are worth the costs, but that's certainly a
benefit.

------
hs
i'm unfamiliar with social security

what happens if a person can live to 200 yo? Will USA, starting from
retirement age, pay till s/he dies?

what if the person only lives to retirement+1 age? can descendant carry over
the benefits? ot it just poof?

~~~
DanielBMarkham
Everybody jump in and correct me if I'm wrong.

Social Security was put forward as part of the New Deal in the 1930s. The idea
was that truly old people would never be destitute. Once you reached a certain
age, the federal government would send you a check each month. Sort of a
"retirement package just for being a citizen" At the time it was enacted, the
activation age was about a year more than average life expectancy, so it
wasn't a huge promise. The checks would be paid for by the younger folks
working. I believe at the time there was a ratio of workers-to-receivers of
something like 45-to-1

Several things have happened in the last 75 years. People are living a lot
longer. The benefits have been increased to cover people with profound
disabilities, no matter what their age. Most critically, the boomer generation
is coming through, taking the ratio somewhere south of 5-to-1. That means that
five workers have to come up with the money to pay one person -- no matter how
long they live. If life expectancy increases to 120 due to some new medical
miracle, we're hosed. It's already common for people in their 90s to have
receive benefits longer than they have worked.

You might ask -- what about all that money that was put into the system when
the ratio was high? Surely that has accrued interest and is more than able to
pay these costs. Well -- we spent it. Seemed like a good idea at the time. The
current phrase is "intergenerational promise" -- in other words, it wasn't
your money, it was ours, and we promise to make these new young workers help
you out. And no -- unlike something that would be your money, this is just for
you, and just for as long as you live (there are exceptions for a surviving
spouse, I believe)

The current trick is to see how long we can keep from actually working on this
problem while we invent even more wonderfully great, moral. feel-good ideas
that some later generation can screw up.

~~~
ars
>If life expectancy increases to 120 due to some new medical miracle, we're
hosed.

Not really. They would just increase the retirement age.

~~~
sutro
I don't think you get it. For us not to be hosed in this scenario, the
retirement age would have to be increased _now_ , not in 50 years when we
realize that the boomers have all survived to age 120.

~~~
ars
Oh really? What new medical breakthough has resulted in all the boomers living
to 120?

Once you get the breakthough you can change things.

It's not like there is a switch: if you were born before date X, you will live
an extra 50 years - it's a continuum, it's very easy to tell average lifespan
by looking at the other people who live right now (remember them?).

------
petercooper
That guy's plan about a bipartisan committee that can bring everyone together
on an agreement is one option. A more effective, one, however, is probably
going to be learning survival skills, and running out into the Canadian
wilderness in about 10 years' time..

