Sunday, September 28, 2008

The Baby Boomer Factor

Seventy-six million American children were born between 1946 and 1964. This is known as the baby boomer generation. The oldest among the baby boomer generation is now 63 years old. Some are beginning to retire - others have some working years left. 

I'm exploring this in today's post because of the current turmoil on Wall Street. There have been a number of books published in past years which point to the retirement of the baby boomers as a turning point for Wall Street. Of course, they were not envisioning the housing bubble and the fiscal irresponsibility of government regulations on the lending industry... they were envisioning large numbers of people beginning to retire, collect social security, and live off their investments. Once these boomers really begin to retire, what will happen?

Back in 2005, the Seattle Times published an article - "Retirement of Baby Boomers May Reverberate In Workplace." According to this article, baby boomers make up 1/3 of the nation's workforce. Arlene Dohm, an economist with the Bureau of Labor Statistics in Washington, D.C., says "Baby boomers are going to be retiring in droves starting with the end of this decade. There are certain industries and professions that are going to be hit very hard." Then, there are those who say that baby boomers retiring won't be a problem at all because "free-spending boomers haven't saved enough to quit... and they're too work-obsessed to leave before they have to be carried out." But according to economist Robert Willis, everything from the financial health of countless companies to the solvency of Social Security is at stake as boomers retire in coming years. "These are literally trillion-dollar questions."

Running the numbers, between 2008 and 2020, tens of millions of people will be leaving the workforce (assuming traditional retirement age holds true). What does this mean for the national economy? For government budgets? If you have fewer people in the workforce (paying income taxes) and a shrinking economy (due to fewer people working to enlarge it) and a growing government outlay in programs such as Social Security and Medicare, how do you balance those books?

In January of this year, there were multiple columns written about how the retirement of baby boomers may bust the housing market. Oops. I guess we took care of that for them. But if that was a thought before, does that mean that the retirement of baby boomers will create a greater housing market problem? If so, what does that mean for the current bailout going on in Washington? Is that 700 billion dollars going to be a tourniquet to stop the bleeding, or a band-aid on a mortal wound? 

So here we are, our government spending money like it's going out of style. "You need a hand? Here - have a couple billion. Have a couple hundred billion." I've heard it said that the government created the problem (and yes, they certainly had a hand in it with their social engineering -- demanding that lenders allow every Tom Dick and Harry the American dream of owning their own home regardless of whether they could afford it) and the government is obligated to help fix it. I guess there's a certain amount of sense to that -- but is handing out ready cash going to fix it? We have bigger problems on the horizon, too. 

How much can the government give without going bust themselves? With the upcoming years giving us a population in which only half of us is working, how in the world are we going to pay for everything? 

And now we have two well-known presidential contenders... one of whom wants to solve the problem by eliminating earmarks (which is a nice start, don't get me wrong -- but nowhere near enough) and another who wants to mostly ignore the earmarks as insignificant and focus on what else the government can add to their obligations (nationalized health care, etc...). There are other choices as well... Libertarian Bob Barr with running mate Wayne Allyn Root, Peace and Freedom party's Ralph Nader with running mate Matt Gonzalez, Constitution party's Charles O. Baldwin with running mate Darrell Castle, America's Independent party's Alan Keyes with running mate Brian Rohrbough, and Green Party's Cynthia McKinney with running mate Rosa Clemente. That's a fat lot of presidential contenders of whom most people have never heard!

What we need? 

An overhaul of our politicians (with precious few exceptions). A return to our roots - remember the constitution, enumerating the powers of the federal government? Let's find that old-fashioned document, dust it off and read it. And lets dig in and pay the price we need to pay NOW, lest the interest added by putting it off bankrupt us entirely.

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