Goodbye December

[Daveparts]

Goodbye December
By David Glenn Cox
http://theservantsofpilate.com




It has been a given that when people get older, they should be able to retire. It is not only a noble, social ambition, but economic as well. If older workers never leave the job market, there is no room for young workers to become established.

In earlier times, in mankind’s primordial past, the old were considered the keepers of wisdom and holders of the secrets of the universe. With a life expectancy from the mid-thirties to the mid-forties, time was fleeting and there was much to learn. That, added to a tight family structure, allowed for workers to perform lighter duties as they aged. Today, however, that affection has effectively been drained from the system; either produce or die.

The addition of Social Security in America in the 1930’s was a first step towards bringing the US up to European standards. Germany and Great Britain had instituted old age pensions at the beginning of the 20th century. Combined with private pension schemes, American seniors rose from the poorest demographic to the wealthiest. But, as they say, those were the good old days.

Depression era laws limited what sort of investments the pension funds could invest in. Reaganomics taught us that that was bad; it limited the potential growth of pension plans, and the government should get out of your business, anyway. Death to the Nanny State! All hail the Sucker State!

With a cornucopia of investments freed from government intervention, seniors awake today in their golden years to find themselves fleeced. There's the famous Madoff scandal, sure, but also a host of other investment schemes, hedge funds and real estate investment trusts that now find themselves sucking wind and swirling in red ink. Real Estate values continue to fall and hedge fund customers are fleeing, all as the market continues to bleed to death.

The out-going President even tried to modify Social Security so that we all could get in on this great bull market; to free us from those small returns of “safe” investments. In Italy a similar plan to the President’s was successfully passed, and thousands of seniors now wait as the government promises to help them to make up some of the losses incurred. The largest employee's union in Israel threatens to strike if something isn’t done to stem their losses. In America, land of the free, that’s where Wal-Mart greeters come from.

Money runs uphill and the crisis has now reached state employee pension funds. Assets for 109 state employee pension funds have declined in value by 37%. The city of Philadelphia’s fund lost $650 million in the first nine months of last year alone. Estimates nationwide say the losses will reach $865 billion, or $165 billion more than the entire Tarp fund. More than the Tarp fund and the bailout of the American automakers combined!

The financial whiz kids euphemistically call it, ‘Accelerating Complications;’ translation, you’re screwed! “When we are experiencing a negative cash flow and we are having to eat capital to make payroll, we are accelerating the complications,” said Mike Burnside, director for the Kentucky Retirement System. “We can’t make enough on investments to drive out of this hole if all you do is depend on investments,” says Burnside. The choices are to cut benefits, which some states have already done, or to ask the hated Nanny State to raise taxes to recover the short fall.

The future looks bleak for those of us lucky enough to be employed today. Few employers still offer the brick and mortar pensions that our parents retired on. This current generation relies on 401K plans, or as is the case for most of the middle class, Social security, odd jobs and poverty. Today’s retirees worked and earned in the fifties, sixties, seventies and eighties, when the American economy was still growing, back when wages for working people still grew along with all those things now missing from today’s economy.

The corporate moneymen know where the money is, from power chairs to Poly-grip, the stream of advertisements aimed at the elderly are almost endless. But what will they do when this wealthy generation of elderly have left us? When they are replaced by a generation of elderly without disposable income, ineligible for reverse mortgages or even for standard mortgages.

It would appear that we, as a society, have killed the goose that laid the golden eggs. Only teenagers as a group have a higher level of disposable income and that is only because of the volume of teenagers compared to the number of elderly. Teenagers buy blue jeans and I-pods while the elderly buy Winnabagos and Buicks. So, while we worry about the viability of General Motors or Citicorp, we forget that the average Cadillac buyer is fifty-five, as are those saving most for retirement.

Maybe there was a reason why that Nanny State imposed those burdensome regulations, not to impinge on our liberties but to protect us from the robber barons. Maybe that’s why they called it Social Security instead of end of life annuity. The name describes both the program and the purpose of the program, Social Security. For the people on it and for those who are going to be on it, for those who profit from it.

Perhaps we are all valuable to this economic system; maybe this belief by some that the lowest wage is the best wage is only half-right and all wrong. These people, locked out and pushed aside, will become a burden on society rather than contributors to it. They will need more of the so-called Nanny State's resources to feed them and keep them warm. Rather than driving Buick’s they will sleep in them. They won’t buy Winnibago’s or power chairs or Poly-grip; in fact, they won’t buy anything.

They will stay in the job market longer and be rehired at the bottom of the job market, limiting openings for the young. Shortening their earning years, and so it goes and goes, in a downward spiral. Prosperity is contagious; we catch it from each other and we lose it the same way. When we eliminate prosperity from any one class or group, we eliminate it for us all. Free markets aren’t free, trickle down doesn’t, and as our mothers used to tell us, “Those rules are there for a reason.”