This is a pet topic, but one that remains strangely untouched, buried beneath the topsoil of Financial Journalism that blows with the day’s prevailing winds.
Remember the Super Committee? Eminence gris, a committee empowered to make the most brutal recommendations in easy memory for reducing federal debt. A wakeup moment, potentially, after the bankruptcy of Detroit and the climbing of public obligations even as the average citizen (or perhaps we should say the median) was right sizing things after a decade of leveraging up. Senators used to the delicate art of deferring to special interests spkke against their own most powerful interest group, the elderly. Alan Simpson’s treason against the AARP was the apotheosis – the gerontocracy narrowed its eyes and did what it does best. It waited. And the moment passed – recommendations were made, ignored, and the worries that spawned the Super Committee floated away on a (slightly) rising tide of economic growth.
But the problem is still here. I do not have a single numerate contemporary who believes there will be anything like Social Security three or (better for long term solvency) four decades from now, when we turn 70. I remember when I was first made to understand Social Security was an accounting gimmick, that the payroll tax revenue was not locked in a glorious vault in the Federal Reserve or Fort Knox, nor – less glamorously but still effective – a segregated account in a Treasury database. It is a pay as you go system. This was astonishing to me, and the math that came afterwards horrifying – more to come on that.
The fact remains that I cannot wrap my head around a federal defined benefit plan at a time when we see how important the swap to defined contribution must become. Otherwise we saddle our future comfort on the backs of the next generation. We have had societies in the past where a small group at the top of the pyramid lived in comfort based on the labor of much broader group or groups beneath. Those at the top justified their position by birth, blood, name, religion, caste, however you want to cut it. Not to say we have cast down every trace of these arrangements, but I think most rational people agree a society built on that foundation is unjust. And yet I think we have arrived at just such a society today – by accident not by explicit design – with the elderly at the top.
This isn’t a secret universal truth. The elderly are not, as a whole, living like kings. Poverty is real and serious, and the pyramid structure is an illusion as so many demographics and Financial Journalists have told us. But the fact remains that the system currently in place is fundamentally mismatched and not fit for purpose, and the underlying principles on which it is based will require heavier burdens on future Americans, burdens they never got to vote on but will be responsible for. The federal problem is well covered and a perennial discussion topic. I believe there will be reform, but only after a serious crisis that will leave some people to face dramatic changes in circumstances with little to no warning.
That brings us to Philadelphia…
smq.world 