The conventional view of the Baby Boomers' retirement is a happy story: since we're living longer and remaining productive longer, Boomers will not be as much of a burden on Gen-X and Gen-Y as doom-and-gloomers assume.
Not only are Boomers staying productive longer, they will draw upon their vast generational wealth as they age, limiting the financial burden on younger generations.
This happy story is nicely summarized in this lengthy piece The Fear Factor: Long-held predictions of economic chaos as baby boomers grow old are based on formulas that are just plain wrong.
In this view, the only thing needed to prop up Social Security for the rest of the 21st century is a higher tax on high-income earners, in effect moving the limit on earned income exposed to Social Security taxes from about $114,000 to $217,000.
This happy story is wrong on multiple counts. Let's start with the most egregious errors:
1. It ignores the End of Work and the decline of full-time jobs
2. It ignores the Elephants in the Room, Medicare and Medicaid
3. It ignores the inconvenient reality that there is nobody to buy the Boomers' overpriced stocks, bonds and homes when they start to unload them
Put another way: the happy story ignores the changing nature of work and jobs, the unsustainable cost trajectory of Sickcare (a.k.a. healthcare) and the inability of Gen-X and Gen-Y to buy Boomer assets at bubble valuations. Take these factors into minimal consideration and the claim that 76 million people (out of 316 million) can retire with no negative repercussions falls completely apart.
1. The end of work and changing nature of jobs: I have covered this for many years, most recently in a program with Gordon Long: The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube).
Insert end of work in the custom search box on this site and you'll get 10 pages of articles published here on that topic. For example:
Global Reality: Surplus of Labor, Scarcity of Paid Work (May 7, 2012)
The reality is sobering: 57 million people draw Social Security benefits, tens of millions more draw Medicaid, Section 8 housing credits, etc., and full-time jobs number 118 million:
The Good And The Not- So-Good News About US Jobs In One Chart (Zero Hedge)
That's a ratio of roughly two workers for every retiree and considerably less than that for workers to the total number of government dependents. As the Baby Boom retires en masse, if full-time jobs don't rise as dramatically as the number of retirees, the system fails.
The happy story repeats the usual falsehood that Social Security has a Trust Fund it can draw down. This is a falsehood because the Trust Fund is fiction: when Social Security runs a deficit, the Treasury funds it by selling Treasury bonds, the same way it funds any other deficit spending. If the Treasury can't sell bonds, the phantom nature of the Trust Fund will be revealed.
2. Everyone who looks at numbers rather than fictional claims knows the intractable problem is Medicare and Medicaid. In Sickcare, there are no real limits on cost, and so every attempt to impose cost discipline fails or triggers blowback. Read more