Megan McCardle on the Change Coming with the Baby Boomers Retirement

Shopping is the least of it. Everywhere I go, I meet people who would never have lived so long if they’d been born a few decades earlier. Indeed, I’m one of them; I’d likely be deaf without penicillin for childhood ear infections, and dead without the al­but­erol inhaler that was only approved in the U.S. in 1981. Western New York is not the mighty economic colossus that once let Buffalo boast more millionaires per capita than any other city in America, but it is still a better place to live in now than it was then. And it is getting better all the time.

That, too, is our future. Aging will make the economy grow more slowly than we would like, and probably more slowly than we are used to. Social Security and Medicare will almost certainly be financed by a combination of benefit cuts, increased taxes, and higher retirement ages””which means that all of us will work longer than we want to, and pay more in taxes than we have before.

The political battles over all of this will be bitter, and they will probably be, too often, won by the retirees, who vote in force (though not always as a bloc). Those same retirees may also vote against things that are actually in their interest””thus shutting out the immigrants who could help them stay at home, and out of the nursing home, longer; turning down school taxes that could create a more productive workforce to support them; fighting for zoning restrictions that make it harder for the low-income workers who provide their services to live within easy commuting distance.

But if we will be worse off than we could be in an ideal world, we will still be better off than we are now, workers and retirees alike. We’ll not only be at least somewhat richer; we’ll also have years and years more to enjoy our health and wealth. The past in Newark is lovely, but the future, while not without its blemishes, is likely to be better still.

Read it all.


Posted in * Culture-Watch, Aging / the Elderly

7 comments on “Megan McCardle on the Change Coming with the Baby Boomers Retirement

  1. New Reformation Advocate says:

    This highly informative and quite upbeat article is vintage stuff so typical of The Atlantic. It’s a good example of why I find The Atlantic one of the most helpful and illuminating secular magazines to read. Very thoughtful, factually based analysis, and well-written.

    But I still think the piece is perhaps too optimistic and rosy about the future. Among other things, it fails to take into account how lonely and empty are the lives of so many of the elderly. It’s great that we are living ever longer, healthier, and generally more comfortable lives. But what are we living for? Our materialistic, hedonistic society has little to offer the elderly once they become dependent on others.

    As a society we tend to devalue the old and feeble and “unproductive” members of our society, who are a drain and threat to the rest of us. We warehouse many of them in nursing homes, where they are often ignored or neglected. And euthanasia is on the rise. In such a “culture of death,” the Church must somehow make known in a compelling way the gospel as the promise of eternal and abundant life. Now and hereafter. For the young and old alike, and everyone in between.

    David Handy+

  2. Sidney says:

    Economic growth derives from a very simple formula; it is basically equal to the increase in the labor force, plus the increase in productivity.

    The scientist in me started when I read this.

    Look, production could be roughly calculated as (Size of labor force)*(productivity). If you want to measure the change of that, you have to make use of the product rule, which means the change in economic activity is roughly (current labor force)*(change in productivity)+(change in labor force)*(current productivity).

    Is this the ‘sum’ the writer is talking about?

  3. TWilson says:

    #2: There’s another seemingly small but quite important “miss” in the article: “A high price-to-earnings ratio means investors expect fast growth in future earnings. If you think economic growth is going to slow, the stock market looks overvalued today.Historically, stocks in aggregate have tended to trade at P/E ratios between 12 and 20. Right now, the P/Es of the three major indexes are on the high end of that range, implying the expectation of faster-than-usual economic growth.” First, companies can grow earnings in slower-growth environments – it’s harder, but can be done, since earnings and the economy are two different things. Second, the S&P;500 is trading at at a forward PE of about 13.7 according to WSJ. What seems to be keeping forward multiples low now is a higher risk premium – even if you believe earnings will grow as projected, a higher premium means you discount future earnings more heavily. Little things make me as the reader (nit-picky, yes) doubt the whole. One point the author brings out (more or less implicitly) is the different tranches of retirees. Folks retired recently or retiring now might seem very happy – one hopes their portfolios were mostly in fixed income, and they’ve gotten nice rides out of house values. I worry more about folks looking at retirement in the next 5-10 years, particularly those counting on home equity.

  4. Bob (aka BobbyJim) says:

    The immigration issue is also slightly distorted. The problem is not that we don’t want (and need) more immigrants (tax paying workers), but they should be LEGAL immigrants.

  5. Bob (aka BobbyJim) says:

    BTW, I am a war-time pre-boomer gray-beard still working as an part-time engineer, and enjoying my active semi-retirement. I would certainly never include any primary residence as an investment vehicle. Personal savings (mutual funds, etc.), 401k, IRAs, company retirement plan for the extremely fortunate yes — but never a home! If your home accidently provides a financial benefit, fine. However, to count on it happening, never! Too many variables with changing demographics, real estate booms and busts, manufacturing relocations, etc. etc.

  6. SamW says:

    The Atlantic, for several years, was better than The New Yorker; but now … [shrug the shoulders]. This is a slick young writer who knows enough to pretend she knows what she is talking about — probably got A’s at Swathmore. This is just such a mess it is hard to begin. TWilson (above) notes her peculiar interpretation of the PE ratio of stock indices — and even that relatively stable value has changed greatly in the past 6 years! (We are not a goods producing country anyway.) Her definiton of production and productivity just boggles the mind: econ 101 from a very bad teacher. But all of her prose is punctuated with a slimey saccharin sentimentality; the undercurrent is: Gosh I wish they would all die so that I wouldn’t have to be burdened with them.
    I particularly liked this off-hand sentence:” That, too, is our future. Aging will make the economy grow more slowly than we would like, and probably more slowly than we are used to.” A child of Reagonomics and Greed is Good; never faced a real recession. She is probably not old enough to remember 1980-82. “We.” Further evidence that the Main Stream Media is made up of glory hogs who have never broken a nail or stubbed their toe in a production line.
    Astonishing college-speak.

  7. Yooper says:

    [ We in the USA have an unsual phenomena going for us. The birthrate in the USA is 2.1 and is above the rest of the industrialized countries (esp Europe where its at 1. ) . So our children will be able to shoulder some of the increased burden. Also with new drugs being discovered ( such as the recent one that will cure Alzheimer’s ) will significantly lower overall health care costs. And with newer drugs and treatments seniors are able to be more active and not a burden on the health system or their children. Seniors shouldn’t get greedy either, I agree. But I am optimistic that with our health care system as it is will provide answers for a lot of new diseases with drugs rather than hospitization. I know, because my wife was given a new drug called all trans retinoic acid for acute promelocetic leukemia. That pill was $4,000 per month. But it saved her life. You see the survival rate is now 95% with that new pill rather than 5% with the old treatment which was was much more expensive and didn’t work.
    We have the new drug for lymphoma that keeps people alive that was previously a killer. Multiple myeloma is treatable with with medication. Years ago that drug caused deformities in babies in Britain in mothers who were using it during their pregnancy(Thalidomide). So the picture is not so grim.
    I agree with the gentleman that said your house is not part of your retirement nest egg. You do have to live somewhere.