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Next Generation’s Economy

There is little doubt that the economy needs some kind of breakthrough in order to get moving again.  Official readings tell us that the recession is over, but with unemployment remaining high very few people believe it. There is one simple and very direct solution to kick-start job creation if the Federal government is willing to take drastic action – which I think is essential.  That would involved making people close to retirement age eligible for Social Security and allow them to tap their retirement funds ahead of schedule, freeing up jobs in the private sector for a new generation of workers.

This last recession has shed about 8 million jobs throughout the economy.   Currently, about 51 million people receive Social Security benefits averaging about $1,000 a month.  If we were to extend eligibility to 4 million people who are within, say, 10 years of being eligible on their own the annual cost would run about $48 billion per year, or about $240 billion in total one-time payments into the Social Security fund if the average time of this supplement is about 5 years.  The cost of allowing them to tap 401-k and related retirement funds would cost some small amount in tax receipts over the same life.

Part of the cost would be offset by reductions in unemployment benefit costs, which are at least similar in size.  In short, if we are going to wind up paying people to not work it makes sense to take the oldest out of the workforce to make room for those who have young families to support.

It would help the economy in several ways.  The most important is to achieve a generational turnover in the workforce and tap the energy of young workers that has often languished.  Job creation would create a more dynamic economy in general, kick starting retail and other businesses that rely on a buoyant mood and general feeling that things are moving again.  The most important effect, however, is the admission that investment alone does not make an economy – it takes the heart and arm and brain of workers doing their part every day.

There is little doubt that once a generational turnover is achieved that we are poised for some great success. Our working age population is the largest as a share of the total population since this was measured, owing in large part to the “Boomlet” of kids who are the children of “Baby Boomers”.  Their entry into the workforce in large numbers has put a lot of downward pressure on wages that will not be relieved until their parents retire and open up opportunities.

This is not the only way that the Federal government can create jobs.  A concerted effort to reduce the overhead per employee, including a reduction in payroll taxes, is absolutely essential.  Research into much needed transformational technologies such as those that will create energy independence coupled with substantial public works programs like those already in place are also helpful.  But for immediate effect the best way to create jobs is to move the generational shift along as quickly as we can.

This may not sit well with many people who are rightly concerned by the size of our deficit to create a new program like this.  It is worth noting, however, that the estimated cost is about one third of the TARP bailout and, on an annual basis, about 15% of our Defense budget.  The money has always been there for other things – why not have it be there for the American worker when they need it the most?

A one-time increase in eligibility for Social Security can transform our economy and get many things moving again.  Along with a few other simple steps we can move ahead towards a restructuring if we start to look at our problem not as a shortage of investment in dollars but an inability of our investment to support the real source of all wealth – work.  A new generation of workers is ready to do their part.  All they need is an opportunity.  Lets give them that and then stand back to watch what amazing things they can do with it.

This piece contains many links to outside sources that are very insightful and valuable.  If you have any questions, please follow the links.  As always, your additions and questions are essential to making this simple proposal stronger and more effective, so please do not hesitate to comment below.  Thanks!

19 thoughts on “Next Generation’s Economy

  1. An excellent idea! This has to be the cheapest way of creating jobs we have, plus it takes the most expensive (experienced) workers out of the workforce and frees up money for employers.

    This needs to be noticed by politicians. It’s exactly what has to be done. Bravo!

  2. I’m not against a very targeted stimulus, but I do worry about the deficit. This may be a very good idea but it sets a lot of precedents that are very important. If we can pay for it as we go, then it’s great but I think we have to be very careful what we do.

    It certainly makes sense to do something bold to get things moving and it would be great to see workers get something for a change. I just hope we can be careful with these kinds of things and not throw a lot of money around like we have been doing.

  3. I agree with you that some of the old jobs are never coming back, especially in housing construction (primarily a younger man’s job) and other related tasks in F.I.RE. sector. But how are you going to pay for the older worker’s medicare/ medicaid and health insurance? A delinking between employment and healthcare would be a start.
    As you know I went thru something like this 3 years ago. I remember telling some of my workers both younger, same aged and older the arguement for keeping middle aged workers. Physically up to the demands of the job, experienced, hard to start over with kids in the jr and senior high schools, etc. etc. It did not go over too well with some of the older workers those in their late 50’s and early 60’s. It turns out management fired all 20 of us and gave the jobs to union workers who had featherbedded in their old jobs. It still makes me mad when I see a green STRIB truck drive by. The drivers dress sloppy in t shirts when visiting clients and it is very apparent to me that thet don’t take care of the racks like I used to (no graffitti etc.)
    I lost out on a lot financially (probably took a hit to my career earnings over 250K) and vacation and health care benefits.
    On the plus side I got to try out 2 jobs so far (I hope my 2 year job sticks)
    got away from silly sales pressure (basically I collected info and cash) and my back and upper respiratory health is great.

  4. And if it wern’t for the sedative affect of trazodone I’d probably hardly sleep at all except for exhaustion.

  5. Jim: Thanks!

    Anna: I didn’t have at my disposal all of the ways that this would reduce costs, but I do think that Social Security is similar to unemployment benefits. It may be close to a net wash. I do agree that some sense of “pay as we go” is necessary, at least moving *towards* balance in a short time.

    Dan: I agree that decoupling health insurance and work is the most important thing to do, and we made a bit of a start towards that. I’d like to get a few other things moving, too, but finishing the job is very important.

  6. On the serious side would this increase business for Harley Davidson or back to the fifties? I hope when and if I retire I am still well enough to do some outdoor work at a camp.

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