Paying for it all....

In another blog, I note that my niece's generation will be expected to pay for the Boomers' Social Security needs. The problem with this is that this generation is being expected to pay for the sins of their parents and grandparents. Is this fair? To the young adults now graduating from college, the social contract is a rip off. Many of these adults are crippled with student debt, and there are few jobs available for them to earn the money to pay off this debt. Couple this with increasing Social Security taxes (which will shift wealth from the relatively frugal young to the wasteful older generations) and you may see major (but passive) social disruption.

What will happen if the younger generation decides not to work as hard as their forbears, as they will not get their full rewards for working hard or for taking risks? If they decide to live on lower salaries (because good jobs are no longer available) and within their means (because cheap credit is no longer available), what will happen to the Ponzi scheme (read: Social Security) that the older generations now depend?

We know that most of the low income jobs out there do not provide medical benefits. Would it make sense for young Americans to consider leaving the United States for opportunities in better managed countries (with better social safety nets)? I'm beginning to think that it no longer makes sense for the average young American to limit his/her horizons to the United States. But what does this mean?

Let's say that someone of my niece's age decides to move to Canada. The Loonie (read: Canadian Dollar) has traded at near parity with the American Dollar during the past year, and is likely to do it again. Since nominal Canadian salaries are in the same dollar range as American salaries, it might make sense for a person who wants greater stability to leave the USA for the land of Tim Horton's Donuts and Coffee. Let's now say that the person wants to take greater risks for greater rewards. American ex-pats are doing very well in many places across the globe - as long as they are knowledge workers whose trades follow them around.

Right now, I don't think the United States will self destruct. But I think we must address these important issues:

1. How do we pay off our debts without bankrupting our younger, and soon to be child-bearing generation?
   
2. How do we provide this generation with enough opportunities, so that they can afford to have children (and reproduce above ZPG)?
3. How do we provide this and future generations with the confidence they will need to prosper, whatever the world hands to them?

I don't have any easy answers. But I think it is the responsibility of the Boomers to see that their needs do not take priority over the needs of their children. The Boomers must also make it possible for their children to afford to have children of their own - lest we solely depend on immigration to have a growing work force. And lastly, the Boomers should make quiet sacrifices for their offspring, so that their offspring will know challenges - and have the confidence to overcome those challenges.

Stalemate - The all American way

It's been several months since our president floated the balloons which he hoped would morph into an American health care system - and I'm very disappointed at the results. Not only do we have nothing we can be proud of, but we've shown that our political system is completely dysfunctional. Even the pundits on Sunday Morning talk shows are starting to talk about the need for a third party - to break the log jam and address many of the issues America needs to tackle now.

The so called "tea parties" are showing increased voter frustration at government. Right now, they tend to tag the Democrats with the responsibility for our mess. But once they put the Republicans in charge, they will find them just as impotent in getting an agenda passed. When will they learn that Washington itself is the problem? But even if they realize this, it will not be enough. Approximately 80% of Federal spending is mandated - Who wants to tell our seniors that they have to die earlier so that we don't spend as much paying for their health care? I certainly don't. Who wants to tell our seniors that they can't retire on time, because we've squandered the "investments" which were meant to pay for their retirements? I certainly don't. But who wants to pay more into a system to cover expenses which were inadequately funded that are now coming due with the Baby Boomer retirements? I certainly don't. And if the rest of America is like me, then we have problems. We are going to be forced into making some very hard and unpopular choices - and will have hell to pay for decades of inaction.

I propose some simple actions:

1. Immediately push forward the dates to collect social security at full benefit levels by three years. Early retirement would take place at 65 instead of 62.
2. For those who have already retired and are collecting Social Security before the enaction of proposal #1 above, a new Federal Estate tax of 10% (on all affected persons' estates) to bulk up the coffers of Social Security.
3. Increasing the quotas for new immigrants, so that they can bulk up the funding for Social Security. (If we aren't growing our population by native birth rate, we might as well import new immigrants to help pay for current expenses.)
4. Implementing an import tariff based on the balance of payments. When we are earning more money from exports than we are paying out for imports - there is no tariff change, or there will be a slight reduction to put the payments in balance. When we are not earning enough money from exports to pay for the goods and services we import, we raise the tariff enough to buy fewer enough foreign goods to being our payments into balance.
5. Replacing a significant portion of America's income taxes with equivalent consumption taxes to spur investment. We could use a floor, where everyone gets a consumption tax rebate, so that the net tax change to our poor would be nil - yet, we'd discourage the needless consumption of underpriced foreign goods that are putting American workers on the unemployment lines.
6. Implementing the "Pickens Plan" to shift America's energy use from expensive imported oil to renewable resources such as wind power.

One problem - do we trust our government NOT to hide net tax increases to fund their pet pork projects?

The disgruntled blogger.