Skip to comments.As the Boomers Head for the Barn
Posted on 05/15/2012 6:40:08 AM PDT by Kaslin
When the April figures on unemployment were released May 4, they were more than disappointing. They were deeply disturbing.
While the unemployment rate had fallen from 8.2 percent to 8.1 percent, 342,000 workers had stopped looking for work. They had just dropped out of the labor market.
Only 63.6 percent of the U.S. working age population is now in the labor force, the lowest level since December 1981.
During the Reagan, Bush I and Clinton years, participation in the labor force rose steadily to a record 67 percent. The plunge since has been almost uninterrupted.
Here is a major cause of the economic malaise of the 21st century, a condition over which a president has little control. A shrinking share of our population is carrying an ever-expanding army of dependents.
If this were a result of American women going home to have kids, that would be, as it was after World War II, a manifestation of national vigor and health.
But that is not the case here.
The number of Americans of working age not in the labor force grew in April from 87,897,000 to 88,419,000 -- by an astonishing 522,000. This is an immense army for the rest of society to carry.
Why are Americans dropping out?
Some have given up looking for jobs in towns they grew up in, because the jobs are gone and not coming back, and they don't want to leave. Some are rejecting the low-wage unskilled work being offered, because the alternative -- unemployment checks and federal and state welfare -- is not all that torturous.
With some, the work incentive was never implanted. With others, the option of moving back in with the parents is not all that terrible.
America, it seems, is becoming less like the country we grew up in, in its attitudes about work and idleness, and more like Europe.
Whatever its causes, this social and economic torpor that seems beyond the capacity of presidents to correct or cure is a dark cloud over the hopes of Barack Obama for a second term.
And yet another ominous cloud, no longer on the far horizon, is now directly above: the impending departure from the labor force of 70 million baby boomers in the next two decades.
According to the Statistical Abstract of the United States, from Jan. 1, 1930, to Dec. 31, 1935, there were 13 million births in the U.S. From January 1940 through December 1945, there were 16 million.
This was the Silent Generation, born in Depression and war. It never produced a president, and never will, unless Ron Paul catches fire pretty quickly. The Greatest Generation gave us six presidents, starting with JFK and ending with Bush I. Our three most recent presidents -- Bill Clinton, Bush II, Barack Obama -- are all baby boomers.
And here we come to the heart of our next economic crisis.
If one adds up all the children born between Jan. 1, 1946 and Jan. 1, 1965, the era of the great American baby boom, the total comes to 77 million babies born in the United States.
Why is this so significant now?
Because this year, 2012, the first wave of baby boomers, all those born in 1946, like Clinton and George W. Bush, will reach 66, and eligibility for full Social Security and Medicare benefits. The boomers, en masse, will start moving off payrolls onto pension rolls.
Let us assume the 77 million boomers are down to 72 million. This means that over the next 20 years, boomers will be retiring and reaching eligibility for Social Security and Medicare at a rate of 3.6 million a year, or 300,000 a month, or 10,000 every day.
Three hundred thousand a month leaving the labor force may help to explain its shrinkage. And as the boomers are the best-paid, best-educated generation we produced, the loss of their collective skills, abilities and tax contributions will be as heavy a blow to the nation as the funding of their Medicare and Social Security will be a burden to the taxpayers they leave behind in the labor force.
Since Roe v. Wade, abortions have carried off 53 million of the generations that were to replace the boomers. While those 53 million lost have been partially replaced by 40 million immigrants, legal and illegal, our recent immigrants have not exhibited the same income- or tax-producing capacity as boomers.
In 1965, LBJ announced his plan to convert our ordinary society into a Great Society. Since then, trillions have been spent.
The fruits of that immense investment? The illegitimacy rate, dropout rate, crime rate and incarceration rate have set new records, as the test scores of high school students have plummeted to new lows.
Our labor force is shrinking, the number of dependent U.S. adults is growing, our social programs are failing, and our best educated and most productive generation is retiring.
To borrow from Merle Haggard, "Are the good times really over for good?"
“Most of these boomers have been paying SS tax since they were 16 with their first job. So the majority have paid into the system for over 40 years. What happened to all that money?”
It went to the retirees of that time. SS has always been a pass-through system, money doesn’t accumulate anywhere.
“SS has always been a pass-through system....”
I’m sure you meant “ponzi scheme”....
Us boomers have targets on our backs. If gen ex’ers don’t kills us, obamacare will.
” You can thank tricky Dick for inflation when he took us off the gold standard. I hardly remember inflation mentioned before that. “
Inflation had already been a problem for at least a decade before Nixon closed the gold window in 1971. It just wasn’t as visible as it became after Nixon.
Inflation is why silver was removed from American coins after 1964 and silver certificates were removed from circulation. The value of the silver exceeded the face value of the money.
The root of the inflation was something called the Triffin Dilemma, a problem caused by the dollar’s role as world reserve currency. It would have been necessary to contract the American money supply to defend the value of the dollar, but neither Kennedy nor Johnson nor Nixon were willing to endure the hard recession that would follow.
One result of all this is that there was a dual price for gold during the 1960s, the official conversion price and the free market price. The French didn’t believe that this situation would last so they started demanding gold for their dollar holdings. This increased the pressure on the dollar and Nixon decided to ‘resolve’ the situation by breaking the last link of the dollar to gold. Ironically enough I think you will find Milton Friedman suggesting that Nixon do exactly that.
The 1970s is when inflation became visible domestically but it had been a problem for the dollar internationally for over a decade. The expansion of the supply of dollars to facilitate its role as world reserve currency after WWII was the cause.
“Onset during Bretton Woods Era
“Due to money flowing out of the country through the Marshall Plan, U.S. military budget and Americans buying foreign goods, the number of U.S. dollars in circulation began to exceed the amount of gold backing them up in 1959.
“By the autumn of 1960, an ounce of gold could be exchanged for $40 in London, even though the price in the U.S. was $35. This difference showed that investors knew the dollar was overvalued and that time was running out.
“There was a solution to the Triffin dilemma for the U.S.: reduce the number of dollars in circulation by cutting the deficit and raising interest rates to attract dollars back into the country. Both these tactics, however, would drag the U.S. economy into recession.
“To maintain the Bretton Woods system and exert control over the exchange rate of gold, the U.S. initiated the creation of the London Gold Pool and the General Agreements to Borrow (GAB) in 1961 which sustained the system until 1967 when runs on gold and the devaluation of the pound sterling were followed by the demise of the system.
“The Nixon Shock
“In August 1971, President Richard Nixon acknowledged the demise of the Bretton Woods system. He announced that the dollar could no longer be exchanged for gold, which soon became known as the Nixon shock. The “gold window” was closed.
“In order to maintain the Bretton Woods system, the U.S. had to do two things:
“1) run a balance of payments current account deficit to provide liquidity for the conversion of gold into U.S. dollars. With more U.S. dollars in the system the citizens began to speculate, thinking that the U.S. dollar was overvalued. This meant that the U.S. had less gold as people started converting the U.S. dollars to gold and taking it offshore. With less gold in the country there was even more speculation that the U.S. Dollar was overvalued.
“2)run a balance of payments current account surplus to maintain confidence in the U.S. dollar.
“Obviously, the U.S. was faced with a dilemma because it is not possible to run a balance of payments current account deficit and surplus at the same time.
I was just reminding my kids about how bad FDR was. All they hear is “how he ended the Depression” (FALSE - he extended it by 7 years) in school. I told them that I thought he was a great president too until I got older. And I could never understand as a kid why my dad hated FDR so much.
I told them I wish my dad had explained things back then. I wonder if he thought that my “innocent” mind shouldn’t be burdened with the adult world. I recall him watching a few minutes of “Hogan’s Heros” everyday as he passed through the den. Then he would shake his head with a chuckle and say “Oh those crazy guys”.
My kids? I pull up photos of the piles of bodies from the camps and videos of the Nazis shooting people in front of open trenches.
I told my kids that perhaps I have been too “real world” with them over the years. I don’t think so though - it isn’t like they mope around the house thinking about it. They do make things difficult for themselves in school sometimes for with their Conservative ideas. (Makes a father proud!).
I think the younger generations are becoming a bit more conservative - but they probably don’t have the numbers to sway things all on their own.
Ok but as I understand the pop numbers globally as well as nationally there doesn’t appear to be a first world replacement for the quantity involved ... Though I’m sure the plunge protection team will step in...
Yes, I recall that Friedman was on board with this and I have heard of the Triffin Dilemma. Still, in the graphs, inflation is not so manifest until after the decoupling.
Not to argue the situation with silver etc. All relevant. While Nixon may not have been the one to start the process I still contend he kicked the can over the cliff.
Your reference to contracting money supply just supports the whole premise that wrong things are done for the right political reasons for the advantage of someone. Nobody gets hard decisions do they?
Gramps is right. Many boomers aren’t able to retire because their 401Ks are now 201Ks.
However, many of us boomers saw Reagan try to fix SS, and were skeptical. We have been living as though SS and Medicare wouldn’t be here at present, and have lived our lives as though we could not rely on seeing one thin dime of our forced “investment”.
Gramps is, also, right about government union retirees. Their retirement packages aren’t sustainable.
Support Gov. Walker in his recall election. That is the second most important election this year.
” While Nixon may not have been the one to start the process I still contend he kicked the can over the cliff.”
I agree with you. I’m not trying to minimize Nixon’s role in lighting the inflation torch.
My point was that inflation had been a problem since the late 1950s, but it was a problem primarily known by central bankers. Inflation wasn’t visible to most Americans until the 1970s after Nixon cut the dollar loose.
Nixon was confronted with the same problem that Kennedy and Johnson had been kicking down the road. And rather than make the hard choices that would have defended the dollar he decided to turn the dollar into a purely fiat currency. Not that Nixon understood what he was doing, there is little indication that any politician has a grasp of monetary theory. Their primary grasp of money is to shove as much of it as possible into their own pockets.