Occupy AARP?

In the United States, and other countries, Occupy Wall Street (and other places) were all the rage last summer. Now that the snow is departing, it will be interesting to see if the Occupy protests return to all the (formerly) public places.

The various Occupy movements primarily target capitalism. Quite ironic when you watch the protesters in their Nike clothing, using multiple Apple products. But expected when you see the financial backing and support of the unions. 

Now I am not a fan of these movements. But if they do exist, should the young people attack capitalism? Probably not. If angry at anyone, the young should be mad at the elderly.

Occupy Wall Street? No. Occupy AARP? Definitely.

Why Occupy AARP?

In Occupy AARP, Veronique de Rugy looks at how much government spending goes to seniors. And of course, government spending is financed either by tax income from those who work (and consume) or debt (from which interest must by paid by by future generations).

I recommend reading the article as well as looking at the data Ms. de Rugy links to in her post. If you want to learn more about economics, I also recommend reading Veronique de Rugy in general. Perhaps a little detailed, but good analysis.

And if you want to cover the economic basics, you can never go wrong with Thomas Sowell. A very sharp economist, he has written some great introductory books on economics.

I am not interested in getting into a discussion as to whether seniors are “owed” anything by the young or how they paid into the systems all their lives. I just want to point out the facts.

Young Versus Old

In the U.S.,

Nice.

in 1970, spending on Social Security and Medicare was one-fifth percent of the budget (blue portion). This portion has since grown to nearly 37 percent of the budget in 2010. By 2030, half of the entire budget will be consumed by payments for senior citizens.

That means that other government service levels will have to be reduced. Or taxes increased yet again. Or both. If you are working between now and 2030, you will feel the crunch.

And yes, 2030 is just the end of the analysis. Obviously, it will get worse even further out.

But seniors are poor. They need the assistance. That is what the AARP advertises on television. And yes, some seniors are in tough situations. But the facts in the U.S. are,

According to the Pew Research Center, “In 2009, the typical household headed by an adult 65 or older had $170,494 in net worth, compared with just $3,662 for the typical household headed by an adult younger than 35,” and “the current gap is by far the largest since the Census Bureau began collecting these data in 1984. Back then, the age-based wealth gap was 10:1. By 2009, it had ballooned to 47:1.”

Makes sense. The older you are, the longer you should have saved, the greater the accumulated wealth. It is the power of compound returns.

Those are the facts today. You can come to your own conclusions on the future.

My Own Conclusions

For young adults, capitalism is not the problem. Over the next generation, the real issue will be transfer payments from the working class to the retirees.

We can argue the rights and wrongs of this until the cows come home, but this is the real issue.

Over time, a higher and higher percentage of government spending will go to seniors under current legislation. And though I use U.S. data above, this same issue exists for almost all developed nations.

If you are young, you will have to pay higher taxes to maintain the same level of government services that you enjoy today. Or you can expect reduced services.

If you are approaching retirement now, I fully expect that we will soon reach a tipping point. Where governments can no longer delay the inevitable. Social welfare programs will need to be reformed. Really reformed, not just cosmetically. And soon.

1 Response » to “Occupy AARP?”

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