Jun 22 2009
A Different Approach to (Social) Security
I want to discuss today in some detail an idea that I think is very important in dealing with the coming crisis of retirement for the Baby Boomers. First, we need to make note of the fact that retirement is really not that much about how much you save. Saving is of course important if for no other reason than the need to protect the individual’s share of output that is devoted to retirement spending by a given society. It is not, at least in my opinion, in any other way important.
As far as I am concerned, both economists and financial planning professionals have missed the point about retirement. They stress savings on a social level, but fail to make the point why that is import.
The reason savings is important is how it affects the current and near future productivity of the economy. One of the reason traditional societies are said to experience high rates of population growth is because children are viewed as their retirement in the their old age. Supposedly, we as a nation have gotten away from that view of retirement but we have not.
Income is produced by those who are in the working world, not by those who are not working. The share of retirees is represented by the claims that they have on the present output of society. Their share may be established by government fiat through a mandated government program, as in Social Security, or it may be determined by the interest generated from a very healthy bank account. In either case, it comes from present output, not from carrots growing in a field or cows in a barn.
So our concern for providing for retirees as a nation, depends in a vital way on the younger generation of Americans and of their ability to produce an income. In this respect, we have completely fallen down as a nation and I make that a bipartisan criticism. We need to be concerned with stretching the earning capacity of the population cohort iaged between 20 and 40. We need to be asking questions of how we can increase the economic productivity of this cohort and what is going to happen to this population group in the future.
The study of demography is a much neglected discipline in the social sciences in my opinion. I think we should incorporate demographic research into our manpower planning for the future. That we should take a strong and serious look at labor force projections for the high productivity cohort between 20 and 40 and try to figure out what direction that group is taking. It may be that the size of this population group is decreasing in either absolute numbers or relative to the total population (highly likely). We simply don’t know.
I have seen nothing in the way of a public debate at high levels on the idea of manpower planning. What kind of manpower do we need as a nation to maintain our productive economic base. I don’t think the question have been debated or even considered. It may be, as a result of such a debate that we may see a need to increase legal immigration into this country. It may be that we need to either increase, or attempt to decrease the rate of automation of our industrial base. These are discussions we should have as we consider the direction of our nation.
Despite these caveats, or intellectual cautions, however, I think there are certain things we can do specifically to increase the productivity of the 20 to 40 population cohort. Productivity depends in a fundamental way of the assets one has at his disposal. Thank in part to our high debt, consume everything now, culture and the ongoing march of inflation, capital accumulation is limited for the younger generation.
Capital accumulation is also limited because the cost of capital goods has risen so dramatically in the last two decades. Entrepreneurial young men and women have all but been priced out of the economic opportunity to start a new business. Likewise, young men and women with the training and background to succcessfully operate many types of contracting businesses have been priced out of the opportunity to enter those businesses because the cost of the capital goods needed to do the job is beyond their reach.
It is therefore my proposal and belief that we should remedy this situation. What I propose might be called a share crop system, or a public private partnership. I think the federal government should establish a new federal corporation that would lease capital goods critical to business operations. These leases would function as what are called triple net leases in that the lessee would pay all costs associated with the operation of the equipment. They would pay a francise fee to cost the federal portion of the cost of this program, and they would pay a charge equal to the depreciation on the equipment. But they would not pay a capital lease or otherwise go into debt. If the sales volume is not sufficient to operate the equipment due to a market decline, the lessee could return the capital equipment back to the federal government.
I would further propose that after a certain period of time, there would be provisions to sell the equipement for fair market value. I would say, for the sake of illustration only, that after ten years, the equipment would be automatically placed on the market. Sale terms would be so adjusted to ensure that the federal government recovered its original cost in the capital equipment.
This is one step that I think we can take to increase the productivity of America such that the retirement of the Baby Boomers will not bankrupt the Treasury, as so many economic trends threaten to do. I think there is more that the Stewardship Party can do to preserve and protect our retirement system. I hope that the day will come when we will do more to strengthen our retirement system, and much much more.
“we may see a need to increase legal immigration into this country.” Are you kidding me? Have you looked at the present unemployment rates and you advocate increasing those numbers by allowing more people to enter the U.S. with little hope of gainful employment thereby increasing the number of people out of work. Your proposal may have merit to it in the future; provided our economy recovers. But as for now; it’s ludicrous.
The computer, so they said, was to make life easier for people. To implement a higher efficiency and negate QC problems, it has surpassed that, it has made man un-necessary, it has produced a generation of youth that are more reliant upon it than they are even their parents…and we will never turn back to the manually labored skill persons. The whole idea, in a nut shell, is make it faster, quicker, cheaper, and sell it at a profit.