Under current projections, by 2100 the number of people over 80 will be six times the number today. Meanwhile, the number of children under 6 will drop by half. Scary.
We’re facing a global workforce downgrading — too many oldsters like me and not enough youngsters. Think of Huntington streets now, then imagine them with six times the grandparents but half the grandkids. Sounds like a Florida retirement community but in fact, it will be our world.
As the population ages, it’s less productive. Economic productivity peaks in our 40s and then declines. While being less productive, seniors also use more public resources — a lot more. Though some are wealthy, most seniors are dependent on Social Security and Medicare.
The U.S. median household income for people 65 and older is $47,620, the lowest of any age group, and that includes Social Security income. As a result, we spend 40% of our tax dollars on older people; that will increase to 50% in six years.
Additionally, 19% of our gross domestic product (the market value of goods and services produced and sold) pays for hospital and other health care, which young people hardly use. If I sound like an economic policy wonk, I mean to be. We need to understand the numbers.
What doesn’t work are the so-called solutions we talk most about — raising age eligibility for Social Security and income testing to cut payments to the wealthy. One proposal in the U.S. is to raise Social Security eligibility to 70 and Medicare to 67. However, Washington projects that by 2035, these changes would only reduce program payments by 4% and 5% per year respectively.
Another Band-Aid proposal is to means-test Social Security payments — reduce payments to the rich. Two problems: First, we already do this through current taxation. Social Security benefits are taxable, which takes bigger bite from those with other higher income.
Second, if we went further and stopped paying the wealthy, there aren’t enough rich old folks to make it work. Three-quarters of Social Security payments go to seniors who make less than $20,000 per year, and 90% go to those making less than $50,000. So we’d only save between zero and 4% of benefit payments, depending on the cutoff. A pittance.
We have to grow out of the problem. At a national level, there’s a workable solution: immigration. Our nation was founded by immigrants. Immigrants are the lifeblood of business formation in America, responsible for half of our biggest companies.
The richest person in the world is an enterprising young guy from South Africa. He emigrated to the U.S. and started an electric car company, a lithium battery company, a space satellite internet provider, and a space exploration business. Oh, what’s his name?
Attracting and retaining ambitious people from abroad is the easiest way to for a country to grow and get rich. Like many countries, we’ve made the issue political because humans naturally distrust strangers. But let’s be clear: Welcoming immigrants has always been America’s superpower.
But that still won’t be enough. We also need home-grown solutions that encourage Americans to have more children. I again thank New York University professor Scott Galloway for many of these points. More later.
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