Recently in a comment I mentioned that, while I don't draw on Social Security, I feed at the public trough by other means--my Civil Service annuity. In this way you readers support my life of relative leisure, devoted to discussing moot matters. In my defense, I work hard at this, but that doesn't change the fact that the general public doesn't get a choice--even if the individual contributions to my annuity are miniscule.
Call it belated pangs of conscience--I never thought of these things when I was in my 20s and I'm not sure what I could or would have done differently. I think these considerations first came home to me when the federal government switched retirement systems from CSRS to FERS and tried to talk legacy folks like myself into making the switch voluntarily. Without running the numbers I knew that the switch would not be a good deal for me--even though I was nearly buried under mortgage and private educations expenses at the time.
At any rate, my comment "triggered" a reader to write a lengthy and thoughtful email that addresses these matters in a big picture way. I've brooded on these issues in a disorganized way over the years, as I'm sure the rest of you have as well. It's about our children and grandchildren.
Here is that email, with some slight editing:
As an amateur student of demographics, and economic history, I've often thought about writing a Michael Crichton sort of book on how society would deal with the matter of unfunded promises made in the cradle to grave, nanny State system we've constructed in the U.S. As I am approaching my own retirement, without the benefit of a Civil Service pension ..., I am going through the Medicare labyrinth now. How do you "knock off" a bunch of aging beneficiaries of the current, bankrupt system, without them knowing it is happening?
If you're not already aware of Steven Greenhut, I suggest you start reading some of his work product. He wrote a book, back in 2009 entitled "Plunder! How Public Employee Unions are Raiding Treasuries, Controlling our Lives and Bankrupting the Nation". As he is based in California, most of his examples involve the California pension system and public employee unions. The overriding theme is how the political class, used promises of ever more generous pensions to buy support in current elections. Simply put, they used the taxpayer credit card to buy votes today, knowing they'd have moved on, or be gone, when the bill came due. We're seeing that all over the country with the underfunding of all sorts of pension systems.
Where the Crichton-"ish" novel comes to mind is how society deals with the past due bill of fulfilling all those promises. We either have to inflate our way out, re-neg on the promises, or......reduce the number of expected beneficiaries (to your blog entry of today). I've suspected that was the unspoken motive behind Andrew Cuomo's handling of the Covid "crisis" in New York.
Where this really came home was while my wife and I were sitting with a young (like younger than my adult children - 20 something) "Senior Health Insurance" agent, discussing Medicare Part D plans. I figured out a long time ago that the massive, inter-generational transfer of wealth is a system that is unsustainable. We subsidize the health care costs of the most affluent generation, by taxing the least affluent. Grandma may be living on a few thousand dollars of monthly income from Social Security, but she's living in a house that is worth several 100s of thousands. Meanwhile, her grandson is struggling to pay his rent, car payment, etc., and save money to buy his own home. Once the generation of the grandson figure out how they are being screwed, it will change. I guess that means the "Progressive experiment" will finally come to a close.
An excellent description of the "compassion" of socialism, that ends up impoverishing all but the rulers, until ...
The rulers, as we are now seeing with the Russia Hoax, Election 2020, the Zhou Regime, and--far from least--Covid, believe they now have the tools at hand to keep this thing going.
One thing that should concern all of us, of every generation, is what the FEDs policies of low interest rates is doing to those institutions with actuarial obligations to meet, such as pension funds, and insurance companies. If they can't meet those obligations using traditional methods (low risk bond portfolios), they get forced further and further out on the risk spectrum. I liken it to the finger in the dike story, of trying to stop leaks, until there are more leaks in the dike than one has fingers to plug them with. We are there and the FED is rapidly running out of policy choices.
A couple of more suggests, as you seem open to them. You should read Danielle DiMartino-Booth's 2017 book, "Fed-Up". You can look up her biography so I won't clutter this message with that. She worked for Richard Fisher, the now retired President of the Dallas Regional Federal Reserve Bank, who was the only Regional FED Presidents to NOT possess a PhD in Economics. Rather, he had an MBA, and practical, Wall Street experience. He was often the only dissenting vote in the FOMC meetings, bucking Bernanke and the rest of the Fed Governors on policy matters during the Great Financial Crisis.
The point in sharing that documentary is to understand that we may be in a very similar situation that the Japanese put themselves in, albeit for different reasons. We're there, with ridiculous valuations in stocks, interest rates detached from reality, and real estate values completely out of sync with the utility of that property. This, too, will end badly. It is just a question of when, and what the "trigger" will be. In my 40 years of doing this, it has been my experience that asset bubbles, funded with ever expanding credit, always ends poorly. As commercial banks are responsible for creating 97% of our money supply, they must continue to expand credit to protect the collateral value of the existing loan base they have. It is a vicious, cyclonic spiral that must be maintained at all costs.....until some extraneous forces causes it to collapse.
The documentary that my correspondent refers to above is: Princes of the Yen, based on a book by Richard Werner. He also recommended to me a blog that combines economics with demography--Econimica. The most recent post there: Federal Reserve Induced Inflation Has Resulted in Collapsed US Births...Twice. The relevance of that post to our current situation--if a non-economist may be permitted to take a stab at it--is that it illustrates the vicious circle of socialism. On the one hand, the older generation needs an expanding population to fund its own lifestyle in retirement, on the other hand, the burdens of current expenditures--as politicians seek to buy the votes of ever younger voters--become increasingly unbearable by society at large.