Charles Hugh Smith with some basic facts that cannot be denied. More than 4 million old Boomers per year will start collecting Social Security and destroying the Medicare System for the next 13 years. If you think the economy is shitty now, wait until this sucking sound really gets going. There is nothing that can change these facts. NOTHING. It’s just math.
The Fiscal Cliff and Demographic Drag
October 25, 2012
Federal spending is heading for a fiscal cliff while millions of retirees are starting to draw Federal benefits.
We know two things about the future:
1. Borrowing 35% of Federal expenditures every year is unsustainable. (2012 Federal budget = $3.8 trillion, Federal deficit = $1.3 trillion, 34.2% of every Federal dollar spent is borrowed)
2. The Baby Boom generation of 75+ millionmay be working longer, but they are also retiring en masse, joining the ranks of Social Security and Medicare beneficiaries at the rate of 10,000 per day, a flood that will not ebb until the late 2020s. (The Baby Boom is generally defines as those born between 1946 and 1964, though many quibble with the 1964 date. The choice of parameter doesn’t change anything about the consequences.)
The first Boomers qualified for early Social Security retirement (age 62) in 2008 and for Medicare (age 65) in 2011. The biggest cohort years (almost 4 million a year) will start reaching early retirement (62) in 2014 and Medicare (65) in 2017. The number of people entering these programs will rise every year from 2014 to 2020, and then remain constant at 4+ million a year until 2025.
Here are three views of the Baby Boom for context:
Frequent contributor B.C. calls this enormous transfer of people from wage earners to retirees drawing government benefits the demographic drag, as it will reduce consumer spending, wages and taxes while dramatically increasing Federal spending.
Here is a chart courtesy of B.C. that overlays year-over-year changes in private-sector wages+Federal expenditures, Treasury bond yields and the consumer price index (CPI).Note the downtrend in wages+Federal spending and Treasury yields, and the range-bound CPI.
Here is B.C.’s commentary:
The sum of the year-over-year change rates of wages and Federal spending is deeply into historical recessionary/depression territory. With the demographic drag and fiscal cliff constraints ahead, who knows how slow the rate will be hereafter, and for how long.
B.C. also submitted this year-over-year chart of Federal expenditures.Despite the unprecedented size of Federal deficits, both in dollars and as a percentage of peacetime budgets, the recent spurt of spending growth was lower than previous spikes.
To reduce the deficit–i.e. address the “fiscal cliff”–Federal spending will have to decline for many years. Such an extended period of declining Federal spending would be unprecedented.
This raises the obvious question: if Federal spending must decline, then where is the money going to come from to fund 75 million retirees? Calling the Central Bank of Mars: Greetings, Martian friends. Please send us 10 trillion quatloos every year from now until 2029. We promise to pay you in 2030 (heh).
youcanthavemyglock says:
Paging Raytheon, Northrup Grumman and Lockheed, please build more drones, I will approve all strikes as long as a target is a boomer.
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25th October 2012 at 3:09 pm
Eddie says:
Raise the retirement age NOW!
Cut the medical bennies to a sustainable level now!
I’m a boomer who supports a sustainable future. Am I the only one? Is everyone else just out for what they can get?
Thought so.
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25th October 2012 at 3:15 pm
GovtRunAmuck says:
I’m a boomer, and I fully realize that all federal government “entitlements” must be cut. In my opinion, Boomers who are only concerned with their own needs to the detriment of future generations are not patriots in any sense of the word.
I know on this blog that Boomers are viewed with disdain by some, and that’s alright because much of what has gone wrong with this country happened during our tenure. However, I think that the problems in this country relate more to a time in history where all the excesses we have seen were possible. After all, if the GenXers and Millenials were really any different or smarter than Boomers then it wouldn’t be possible for Obama to be reelected(and Romney wouldn’t be elected either).
Human nature is what it is, unfortunately, and it doesn’t change from one generation to the next.
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25th October 2012 at 4:05 pm
Stucky says:
Oh goody, after a short hiatus we have another boomer bashing party. Her comes AWD. And SAH.
If I get sick I FULLY expect everyone, especially the government, to take care of me. I earned it. That’s how it works … the young take care of the old.
Deal with it.
Or, fuck off.
And, blow me.
Hot debate. What do you think?
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25th October 2012 at 4:28 pm
TeresaE says:
I’m sorry Mr. Smith, in America we cannot, will not, do not, concern ourselves with such trivialities as “math,” or “reality,” or “fucking over our children.”
NOTHING can be cut. EVERYTHING is a sacred cow.
Until the day it all stops. Which seems to be approaching ever faster.
I asked my dad (only income SS) and my sis (FSA, trying for disability) if they would support a 2% cut to their benefits if it helped to make things a bit more sane (though still unsustainable, but baby steps).
OMG!
You would have thought I asked them both to cut off their arms and mail it to GE. I got a 20 minute screaming lecture of all the reasons why the “rich” and the “businesses” had to pay more. All the reasons why “they” could not sacrifice one thin dime.
I explained that the US and the Western World’s socialism was completely unsustainable and if it crashed their “benefits” were likely to be worth nothing. I then explained that 100% of nothing is still nothing, it quieted them down, but didn’t stop the thinking.
When I explained that if the Market House (local food store) pays higher taxes, they include those increases in the price you pay for food (plus), they calmed down a bit more.
But, in the end, the reality was the same. NOBODY will EVER voluntarily give up their shit. Never.
Math just don’t matter. Until it does.
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25th October 2012 at 5:50 pm
sensetti says:
Question does the math matter? We can’t pay our bills now, if normal accounting rules applied we are already broke. Is this not correct? So when and at what point does the math apply.
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25th October 2012 at 6:49 pm
GovtRunAmuck says:
When will the math matter? We’ll only know that in retrospect.
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25th October 2012 at 7:33 pm
jimski says:
Sorry off topic.
I would like to nominate felix salmon for the tbp monkey poo award for today. This kenisian fuck was on npr explaining to the room temp iq’s why deficit’s and debt do not matter. In his world debt was 3rd on his list after ficticious employment numbers and overall debt to gp. Why npr picked this idiot off of rwire is beyond me. Made me want to puke. Then i got mad. Then i got an rwire password. Then i got banned. Been a hellova 1/2 hour
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25th October 2012 at 8:42 pm
AWD says:
Stuck has taken to front-running anything smelling like a boomer post.
Deal with it.
Or, fuck off.
And, blow me.
Now, that we got that out of the way, Thank God 100 million people on welfare are reproducing, so the size and cost of welfare will go up up exponentially. Oh wait, that’s bad, they won’t be paying taxes or have FICA deductions. Ponzi schemes always crash unless you have an ever increasing base paying into the scam, which we don’t have. The people that are supposed to be productive, pay taxes and FICA are living in their parent’s basements.
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25th October 2012 at 9:02 pm
Roysyl says:
Lowering life expectency would help with SS, Medicare and retirement. Now if we can figure out what to do with MIC and the FSA we could possiably balance the budget.
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25th October 2012 at 9:12 pm
AWD says:
Life expectancy IS dropping, like a lead brick. It’s called obesity, and boomers have the market cornered. Medicare IS making massive cuts in medicine and services already, now, today. Obamatax will mean much less healthcare, especially for Medicare recipients, and more free healthcare for the FSA. Sorry, Medicare is going to be a shadow of it’s former self in 2 years when Obamatax fully kicks in. Better get your hoveround now while you still can.
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25th October 2012 at 9:21 pm
Ron says:
I think they well just take all the gold away from all you folks buying it up.Confiscate your 401k and you well live in an tent like the rest.HeHeHe im going to be one of the rich ones living in a home made from pallets! Its only “fair” as Obummer would say.Spread the…..misery.
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25th October 2012 at 9:24 pm
Kill Bill says:
Barry and Mitt….are….wait…..for …..it
BOOMERS!
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25th October 2012 at 9:54 pm
Anonymous says:
Birth rates from 1934-2004
Notice that birth rates started to climb again around 1970 and continued upward until about 1992.
You whiny snot nosed X M hypocrites are creating another generation of social security dependents.
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25th October 2012 at 10:03 pm
Anonymous says:
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25th October 2012 at 10:03 pm
marissa says:
The government has been stealing money out of my wages for FORTY fucking years.
I want my money back! Period.
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25th October 2012 at 5:28 am
Tator says:
As a Boomer I will be the first to admit THEY bought the nanny-state propaganda. I say THEY because I was raised Libertarian and my dad taught me from day one, Social Security would not be around long enough and was mathematically unsustainable for me to expect a dime. I planned accordingly.
But it must also be pointed out today’s under 35s are just as stupid…maybe more so. They overwhelmingly vote Democrat believing socialism/collectivism works. Add on top of that, they have the benefit of unfiltered news/information via the Internet. Until ~ 1990 the only information/news Boomers heard was Progressive, pro large government, nanny-statism via ABC, NBC, CBS, and PBS. There was no “other side”.
So who is the most at fault, Boomers who for the first 30 years of their lives knew nothing but Progressive propaganda and voted on that filtered information or today’s under 35 who have had access to unfiltered information and opposing views, yet still vote for more government spending?
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25th October 2012 at 6:14 am
Administrator says:
Barry is Gen X
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25th October 2012 at 7:29 am
Pirate Jo says:
Marissa, the government gave your money to your parents and grandparents. You will only get your money back if your parents and grandparents saved some of it for you.
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25th October 2012 at 11:10 am