Social Security Is Solved By Work

I have yet to fully formulate an opinion on how to handle social security from a federal perspective, but I figured I'd start thinking in writing here. As a capitalist pig, I believe we should each fend for ourselves. However, as a hippie liberal, I also believe that we should work for the common good. I'm torn. So it goes.

Bill Gross of PIMCO made these comments relating to social security:

"Rob Arnott of Research Affiliates LLC, sub-advisor of PIMCO's all asset strategy and a co-collaborator with Peter Bernstein on several articles about risk and future asset returns, has advanced what I consider to be the most realistic take on Social Security and Medicare trust funds. Pre- funding these systems, he argues, 'is basically irrelevant.' And (in my own words) it matters little whether the system is pre-refunded with Treasury bonds or privately held stocks. The fact is that both of these financial assets represent a call on future production. If that production could possibly be saved, like squirrels ferreting away nuts for a long winter, then Treasury IOUs or corporate stocks might make some sense. But they can't. Future healthcare for boomer seniors can only be provided by today's teenagers, twenty-somethings, and even the yet to be born. We cannot store their energy today for some future rainy day. Nor can we save food, transportation, or entertainment for anything more than a few years forward. Each must be provided by the existing generation of workers for those who have retired and are presumably incapable of working."
So, basically, the issue of social security is one of supply and demand. The boomer generation will demand goods and services, and because there are not enough workers, the economy will not be able to supply enough goods and services, and workers will demand more of the saved assets of retirees for what they produce. This can come as increased prices for the production, as a drop in the value of the saved assets, or both. That means either an inflation in prices or a deflation in wealth or a combination of the two.

It is not the amount of money the retired population has saved that impacts our prosperity for the next thirty years. The critical factor is that someone has to do the work so that things and services can be bought. So, Seth Godin breaks up the party with the quote:

I know how to fix Social Security. Let's just raise the official retirement age for everyone who is currently under fifty. We'll take it from 65 to 70.
I'll stand there and agree with him wholeheartedly. If there are not enough goods and services to meet demand, prices will rise. This will make it difficult for people to afford to retire on their savings, and thus they continue to work. And, since the number of available working people isn't supposed to dramatically change (barring an explosion in youth immigration), boomers are just going to have to work longer.
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