Aging Population Defies Economic
Projections
"Will the last person working please remember to turn off the lights?" That
should be the motto for the U.S. economy now.
Back in 2010 when details of the Affordable Care Act were emerging, one of
the first outcries was over the "death panels."
Not that they were going to directly kill anybody but, despite denials,
when budgetary concerns over-ride everything else the bean counters in charge of
allotting medical services to an aging population put the seniors at the back of
the line because the ability to contribute to society is vastly lessened.
Therefore the death panels would hasten the path to the grave by denying older
people health care simply based on a cost prospectus.
The aging population phenomena is having carryover effects right now.
Politicians and regulatory agencies are having to come to grips with some very
simple, very unpleasant truths about the state of the economy and the long-term
future caused by the supply-side demand on services by an ever-growing segment
of the population--the seniors.
Here's the ugly truth of why this recession has lingered for over six years
despite the efforts of the politicians and the bureaucracy. Seniors take more
than they can replace from the economic future. Seniors strip the economy of
vital resources. The situation is not limited to the United States but
is gripping the entire developed-country portion of the globe. The chronically
weak economic growth and more volatile international economic woes are only part
of the problem though.
Back in 2006 then-Fed Chairman Alan Greenspan recognized the age threat and
oddly enough his biggest fear was the risk of future financial crises caused by
innovative investments called "death derivatives."
That is coming to pass. The inclusion of the Obamacare "death panels"
simply recognizes that fact. It also illustrates why it was so important for
this bill to never see the light of day. It fundamentally changes the single
largest sector of the economy at a time the economy cannot stand any more
stress.
Stress on the economic engine is being exacerbated by the fact the senior
portion of the population outnumbers the working age people. The economic engine
was not designed for this happenstance. Everything that has been done by
the government since the days of FDR's New Deal has been geared towards an
economy with ever increasing numbers of workers, not an surging growth rate in
the number of takers and a decline in available jobs.
The Baby Boomers fueled government's increasing disdain of individuals. The
Boomers set America up with a ready-made source of workers and consumers for the
future. But that future is now past. The aging portion of the population
increasingly is having to put on work clothes long past the expected retirement
age and labor on--not in positions they are suited for but positions they can
find like retail clerks, home-care companions or fast food preppers.
A 2012 study conducted by the National Academy of Science showed the
declining birthrates and longer lifespans were a recipe for economic disaster.
The Academy predicted output per person--particularly in technological advanced
societies--would allow for only a fraction of the growth rate seen over the past
half century. What was missed was the affect on the developing nations like
Mexico, China and Brazil. They had no economic surplus to withstand any
unforeseen effect on their financial well-being.
The crux of the problem is the usual tools employed by central banks around
the globe will not work in a economy not being replenished in the number of
workers but increasingly top-heavy with the elderly who are not nearly as prone
to impulse buys as consumers.
In this world, interest rates must be kept artificially low compared to
past norms. This begs the economy to keep flirting with deflation and encourages
foolish private-sector borrowing. The situation lends itself to stifling
innovation but keeps dinosaur companies alive--such as what happen with TARP and
stimulus financing by the government.
Where this aging will be felt most is in the established pension plans.
Already resource poor and unable to meet current demands, what will be the
result if pensioners' life expectancy rises just a few months? The expected
demand could obligate the plans to expend 8-12% more than currently projected
for EACH pensioner. Those plans, including Social
Security and Medicare, were not built to take such a hit and the load will
revert back to taxpayers, working taxpayers that is and they are already an
endangered species.
In a sluggish economy those people will not have the extra income necessary
to support the additional financial demands, putting further pressure on the
economy to implode.
In August the Joint Forum of the International Bank of Settlements in
Switzerland, noted the increased activity in "longevity risk" in derivative
swaps, bonds and hedges. It flatly stated "Losses arising due to longevity risk
may affect the stability of the entire global financial system."
It is ironic, in many ways, that the very prosperity and tech progress
seen following the end of World War II to now, undermined the financial system
it built.
The falling workforce participation rate reflects this unstable foundation.
A workforce smaller than the rest of the population is not new. But a
workforce mostly mandated to permanent part-time employment is new. All the
projected economic futures based on this new reality are not uplifting but show
a steady, sharp decline in the standard of living.
A way to avoid or at least delay that is to eliminate as many of the
non-productive as possible. At least this theory supports the basis for the
Affordable Patient Care Act's inclusion of "death panels". As a cost-efficient
mandate, it is better than anything anybody has come up with since Hitler began
eliminating as many mouths as possible from his poverty-stricken country in the
1930s and followed closely by Stalin in Russia, Mao in China and other
cash-strapped dictators around the globe.
Only when the normal order, on which government has been operating since
the mid-1930s, is restored and when workers can support the burgeoning weight of
the takers, will the economic picture improve.
This means America has more pain coming its way from the economy and the
attendant bureaucratic red tape. The worst truth is the aging person in the
mirror is the guilty party.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas Jefferson
No comments:
Post a Comment