Why I Need to Say This
Three years ago I wrote an open letter titled “Last Chance to Save America” and sent it to my entire email list. It went viral, and I received almost a thousand emails in reply. I also promised not to send another letter to my entire contact list, ever.
So today I am using my blog, with the hope that you will forward a link to others if you agree with me. Like before, discussing a complex and important issue can’t be done in a few hundred words, so please bear with me.
Regardless of your political leanings, you have to be concerned about the state of leadership in America. Public opinion of our elected officials is at all-time lows. They (and we) seem to be unable to muster the intestinal fortitude to really deal with our budget and deficit issues. As one economist said, “Americans want to be socialists on benefits, and libertarians when it comes to taxes.”
As a business owner, I understand only too well that you can’t spend what you don’t have, or at least not for very long. I’m proposing that we fix one thing, just one thing, to prove that we still have the will as a generation and as a nation to tackle tough questions. Let’s start with Social Security.
Social Security: A Quick Primer
The irony of the Social Security deficit in relation to the Boomers is painful. We funded everyone else’s retirement, and we are going to be vilified for not funding our own.
For the last five months I’ve studied the impact of the Baby Boomer generation on the American economy. I’ve developed a presentation about it in relation to the coming wave of Boomer business owners approaching retirement. Video excerpts are available on You Tube and at my own site, The Boomer Bust. The numbers are startling.
More importantly, the numbers are undeniable. We can’t change the birth rates from the 1940’s through the late 1980’s. Like gravity, it is what it is. Psychologists say that most people occasionally dream of flying, of not being bound by gravity. Acting like the economic issues of the Baby Boom will not have a massive impact over the next 20 years is equivalent to group dreaming.
Social Security began in the 1930’s as a way to allow older people who couldn’t work in factories any longer to afford a few years of retirement without starving. The age was set at 65, because the life expectancy was about 67. Although it was presented to America as a savings account, in reality the Federal Government began replacing the cash with IOUs almost immediately. That was obviously a bad idea, but it’s gravity. We can’t unwind it now.
For the last 60 years life expectancy has increased dramatically while we simply ignored the impact on Social Security for political reasons. Most folks in their 70’s, and almost all in their 80’s, now draw as much in annual benefits as they paid in a lifetime. They believe, however, that they are still getting “their” savings from the program. They vote in massive numbers. Meddling with Social Security benefits has been termed the “third rail” of American Politics for the last 30 years. Touch it- and you die as a politician.
Here is the first part of the irony. Who paid in the massive amounts that kept the Social Security Fund balanced, even if it was just on paper? The Baby Boomers. The competitive, workaholic, two-income-family Boomers. The growing contributions of the largest, wealthiest, most productive generation in history allowed benefits to be paid to many more people, for a much longer time, than had ever been envisioned.
It’s not just the population numbers. The generation that collects Social Security now is the steak-and-potato generation. It’s the two-martini or shot-and-a-beer lunch generation. It’s the I’d-walk-a-mile-for-a-Camel-generation.
What will happen to the life expectancies of the I’ll-just-have-a-salad, meet-me-at-the-Pilates-class generation? You know the answer. There are many more people, who will collect much more money, for a far longer time.
Who Takes the Rap?
That is the second part of the irony. The Boomers are going to wind up with the blame for passing on the expense to future generations. We are already being characterized as profligate and irresponsible. The younger workers I know accept it as a fact that “We are going to get screwed, because we will wind up paying for your failure to take care of yourselves financially.”
The fact is, we spent the bulk of our working lives taking care of the WWII generation. The first Boomer President was Bill Clinton, and he was the first one to balance the budget since 1957! Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan and Bush 41 all happily raised retirement benefits with the economic tail wind of the Boomers’ productivity to back them up.
So should we fix the problem, or just wait until the next generation spits on the sidewalks in front of us? Believe me, when the pain comes, there will be a substantial collection of pundits and politicians ready to tell the younger working populace that it’s not their fault.
I think we need to step up, and accept the fact that we have to take the hit to solve the problem. It isn’t as bad as you might think, and we are just the right folks to do it.
Why We are the Right Ones to Fix Social Security
No characterization of a generation is 100% accurate. I’m drawing broad generalities here, but they are largely true.
The Boomers are hard-working. They are going to work longer, meaning later into their lives. They don’t have factory jobs or do manual labor for the most part. It is the most educated generation in history. Boomers tend to work in offices, and with paper or computers. Their hard work in the quest for success is ingrained. Their biggest complaint about the younger generation is a lack of similar work ethic. That isn’t entirely true (a topic for another day), but it is true that other generations don’t take nearly as much pride in how hard they work, or personally identify as much with their career or profession as Boomers.
We are the generation of the two-income family. Boomers created terms like “quality of life” and “work-life balance.” The majority of Boomers I know plan to work beyond age 65, both because they want to, and because they wish to continue living a lifestyle of material comfort.
The Boomers are healthy. We will live longer, and will be productive much longer than preceding generations. The industries created around Boomers are legion. Health clubs, running shoes, personal trainers, cosmetic surgery, pharmaceuticals, athletic apparel, vitamins, diet plans, workout videos, spas, joint replacement, and that list goes on and on.
The Boomers have a sense of responsibility. I admit we can be self-centered and aquisitive. We are, after all, the Gordon Gecko generation. But we are also the generation that drove environmental consciousness, women’s rights, citizen initiatives and corporate responsibilty.
So if we accept that fixing Social Security isn’t our fault, but that it needs to be our responsibility, then we have the proven ability and the attitude to make it happen. The good news is that it isn’t as difficult or painful a rescue as you might think.
The Social Security Fix.
Fixing Social Security won’t take care of the budget. There are other, larger issues, especially Medicare and tax reform. Social Security, however, can be fixed if the Boomers are willing to take the hit, and it isn’t as painful as you might think.
Some of the ideas here come from the Peter G. Petersen Foundation, which has campaigned for budgetary responsibility for years. Others are my own. I don’t expect anyone to like them, but someone has to start a conversation that says we are willing to do what’s needed to get back on track as a solvent and thriving America.
First, we will have to accelerate the delayed eligibility schedule for benefits, in order to reflect the population’s greater health and longer life expectancy. The benefit eligibility age should increase to 67 for those born after 1950, to 68 for those born after 1955, 69 for those born after 1960, and 70 for those born after 1965. That covers all the boomers, but leaves sufficient time for financial planning.
Those who are disabled and can’t work can already access benefits before the standard retirement age. That leaves those who work in labor-intensive jobs, where their physical abilities may not stand the lengthened career period. These workers could be eligible at the former retirement age, but with a caveat. From the time they start taking benefits, to the time they would be eligible under the new regulations, these workers would be required to spend their time earning benefits by teaching new workers their expertise.
We are facing a dramatic ageing of our skilled labor and trade populations. Unless we want to run out of electricians, plumbers and machinists, we had better find a way to pass those skills on to a new generation. What better way than to utilize Social Security “pre-retirement” benefits to support the transfer of skills and experience?
Those two steps are the toughest. If we can suck it up to accept that, the rest is pretty easy. We need laws to stop Congress from balancing the budget with Social Security funds. Inflation adjustments should be held to a percentage of the cost of living, or be calculated on a separate “senior index.” Senior citizens don’t use as much gas, go to as many events, consume luxuries, or spend like younger folks. Finally, we should automatically index future retirement eligibility to life expectancy.
I was born in 1951. I would have to work another 8 years under the plan. In reality, I’m going to be working that long anyway. All I need is someone to publicly ask “Who would support sacrificing a bit to save the system?” I’ll step up. I’d like to be part of a generation that is remembered for taking responsibility and doing the right thing.
Pass this along. Maybe we can find the leadership to make it happen.
