Tuesday, April 2, 2019

The Aging United States

In my laid up state of a broken foot I’ve had too much time to read the news, specifically the politics, than is probably best for me. For those that I don’t get into these discussions with much, economics are always interesting to me, politics is generally just frustrating. In other words, I can geek about about tweaking marginal tax rates, or eliminating the payroll tax cap, or basic incomes, but listening to confirmation processes and gridlock turns me off. 

Today’s topic is the aging of the United States and a few effects that is having, and will continue to have. 

First, the birth rate for native born Americans is below replacement levels. The only reason the US is still growing is that we have immigration. This means a few things, it means that jobs that cater to the 65 and older crowd are only going to increase. It also means that jobs that cater to babies and infants will likely decrease. For jobs that cater to the middle there might be not a huge affect because of immigration again.

Second, changing subjects quite a bit, as it relates to the 2020 presidential election, I haven’t read any analysis about this and it’s a point worth mentioning, I think. Instead of looking at 2020 through a broad impersonal lens, let’s start with the 2016 and 2018 elections. People voted for Trump for a variety of reasons. Starting with these 2016 Trump voters, which are generally older and whiter than Clinton voters, I would assume that a larger percentage of Trump voters will die than Clinton voters, simply based on the 10+ point swing for Trump from voters over 65, and 10+ point swing for Clinton for voters under 30. So, with the addition of four years of 18 year olds, who will likely vote for the Democrat, for Trump to do exactly as well as he did in 2016, assuming the same number of people vote, there will have to be people, around middle age, that voted for Clinton in 2016 and plan to vote for Trump in 2020, and I’m not sure who that person is. Or third party voters in 2016 that become Trump voters in 2020. In other words, I have not heard anyone say, “I voted for Clinton in 2016 but Trump is doing such a great job he’s already got my 2020 vote.” I’m sure that person does exist, I just haven’t met that person.

Third, again a large subject change, I’ve read a few articles about housing lately, and it speaks very directly to me. Over the past 20 or so years as the baby boomers reached their peak earning years and started to retire, a wealth of large houses in the 2500+ square foot range were built. However, people are not getting married as young as their used to, and more importantly, not having as many kids as they used to. I’m a perfect example, I’m 32 and single, and I’m feeling my 950 square foot apartment is actually about 200 square feet more than I really want. Sure I would love to get married and have a few kids and live in a larger house, but with each passing year and failed romantic relationship attempt that seems more and more unlikely. Plus, while many call me minimalist, it’s really more of a utilitarian and practical view that I have. Who needs two guest bedrooms? As infrequently as most people have guests, does it make sense to have more bathrooms than people in a house? The upside to this is that as older people age out of houses with stairs, private airplanes, and driving little sports cars hopefully prices should be a little more attainable for those luxuries.

Fourth, social security. I propose two changes, first eliminating the payroll tax cap. Along with that change, there would be no cap on social security payments. Meaning, if you earned $10 million a year for 35 years, your social security benefits would end up being huge! The best part is that everyone would benefit, because of the three different rates of social security payout (90%, 32% and 15%), when you are above average earnings of about $5400 per month for 35 years, you only receive 15% of that in benefits, which essentially means the government is making something like 85% profit on those taxes. Or another way to look at it is, the taxes from that one person are funding multiple lower earners who end up living longer than their average life expectancy. (I know the math is way more complicated than assuming that $1 into social security for person X means $1 out of social security for person X.) The second change is raising the ages that social security pays out to better align with current life expectancies. I'm open to suggestions here, one year would make a big dent in the amount required to pay out. Perhaps part of that is not placing a cap on the age that benefits no longer increase. Instead of age 70.5 being when you max out your pay out, lets those benefits continue to increase at 5-8% per year until you want to collect. Only about 2-4% of people wait until age 70 to collect, might as well provide more incentive to let those people delay even more.

Fourth, as a whole, I don’t really know what the aging of the US, and also the world in general, means. My parents who are baby boomers lived in a time when there were kids everywhere. I live in a time where kids are now a bit rare, sort of a luxury item. In 30 years, I suppose kids will be even more rare? Are bars and loud restaurants going to close because the under 30 crowd is smaller? There will be a transfer of wealth from the dying older people to the younger people, which I have a feeling will accelerate inequality. I do think that service jobs, like the baristas standing in front of me, will see a pay increase because there will be people who are in their 70s who want services, but few people under 70 to provide those services. Although I could easily be wrong about that. 

I just wanted to share those thoughts with you, because whatever the effects, I’m sure that that there will be effects. 

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