On November 21, 2013, Paul Krugman writes in The New York Times:
Suddenly, we’re hearing open discussion of the idea that Social Security should be expanded, not cut. Talk of Social Security expansion has even reached the Senate, with Tom Harkinintroducing legislation that would increase benefits. A few days ago Senator Elizabeth Warren gave a stirring floorspeech making the case for expanded benefits.
Where is this coming from? One answer is that the fiscal scolds driving the cut-Social-Security orthodoxy have, deservedly, lost a lot of credibility over the past few years.
Beyond that, America’s overall retirement system is in big trouble. There’s just one part of that system that’s working well: Social Security. And this suggests that we should make that program stronger, not weaker.
One is that we should raise the retirement age — currently 66, and scheduled to rise to 67 — because people are living longer. This sounds plausible until you look at exactly who is living longer. The rise in life expectancy, it turns out, is overwhelmingly a story about affluent, well-educated Americans. Those with lower incomes and less education have, at best, seen hardly any rise in life expectancy at age 65; in fact, those with less education have seen their life expectancy decline.
So this common argument amounts, in effect, to the notion that we can’t let janitors retire because lawyers are living longer. And lower-income Americans, in case you haven’t noticed, are the people who need Social Security most.
The other argument is that seniors are doing just fine. Hey, their poverty rate is only 9 percent.
There are two big problems here. First, there are well-known flaws with the official poverty measure, and these flaws almost surely lead to serious understatement of elderly poverty. In an attempt to provide a more realistic picture, the Census Bureau now regularly releases a supplemental measure that most experts consider superior — and this measure puts senior poverty at 14.8 percent, close to the rate for younger adults.
Furthermore, the elderly poverty rate is highly likely to rise sharply in the future, as the failure of America’s private pension system takes its toll.
When you look at today’s older Americans, you are in large part looking at the legacy of an economy that is no more. Many workers used to have defined-benefit retirement plans, plans in which their employers guaranteed a steady income after retirement. And a fair number of seniors are still collecting benefits from such plans.
Today, however, workers who have any retirement plan at all generally have defined-contribution plans — basically, 401(k)’s — in which employers put money into a tax-sheltered account that’s supposed to end up big enough to retire on. The trouble is that at this point it’s clear that the shift to 401(k)’s was a gigantic failure. Employers took advantage of the switch to surreptitiously cut benefits; investment returns have been far lower than workers were told to expect; and, to be fair, many people haven’t managed their money wisely.
As a result, we’re looking at a looming retirement crisis, with tens of millions of Americans facing a sharp decline in living standards at the end of their working lives. For many, the only thing protecting them from abject penury will be Social Security. Aren’t you glad we didn’t privatize the program?
Social Security and job creation are not enough given the reality that tectonic shifts in the technologies of production continues to destroy jobs and devalue the worth of labor as “machines” replace labor in the production of products and services. And privatizing Social Security is not the solution without the necessary reform of the financial system and the conduct of corporations.
Social Security is based on JOBS and payroll taxes. Because the function of technology is to “save” labor or in order words shift from labor intensive production of products and services to the non-human productive capital input, jobs are increasingly being replaced by human-intelligent machines, super-automation, robotics, digital computerized operations, etc.
President Obama stated: “What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” As long as working people are limited by earning income solely through their labor worker wages and rely on their Social Security benefits, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in upheaval. Dependent on a tax on wages and salaries, Social Security will falter as tectonic shifts in the technologies of production destroy and devalue jobs.
The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly—if at all—and at a livable earnings level, that the value of their homes will rebound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital owners whose productive assets do their work, as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.”
Unemployment is high, and will continue to be so, and there is an accelerating displacement of labor workers by technology and cheaper foreign labor, resulting in greater economic uncertainty and unstable retirement incomes for the average American citizen––causing the average citizen to become increasingly dependent on government wealth redistribution programs.
The stark reality is that we are in a depression reflected in rising unemployment and underemployment and instability that we will never escape from until we change our economic policy. Increasingly, more Americans will not be able to ever purchase a home, due to the packed inflationary wage and welfare base factored into the cost of building homes, which inflate prices, and will be forced to rent their entire life or depend on government living assistance––not able to accumulate equity that can help to sustain them in their retirement years. And this is the new reality now facing people in the middle class. The uncertainty of holding onto a good job is frightening to an increasingly wider base of middle-class working citizens. When you factor in the average non-salaried worker, even with a government-mandated minimum labor wage rate of $10.00+ per hour in some states, the outcome is grim. Never mind that consumer demand continues to dwindle because of insufficient income, solely tied to labor worker wages. The impact of the decline in consumer demand due to declining labor worker wages is that production will decline or desist without sustainable consumer demand.
The solution is to CREATE new OWNERS of wealth-creating, income-producing FUTURE productive capital assets. Unfortunately, conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.
What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.
The solutions can be found in the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, Monetary Justice reform at http://capitalhomestead.org/page/monetary-justice and the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
See “Saving The Social Security System” at http://cesj.org/homestead/reforms/other/savingsocialsecurity-nk.html and “A Comparison with Leading Proposals For Saving Social Security And Medicare” at http://cesj.org/homestead/reforms/other/ssmatrix.pdf.
http://www.nytimes.com/2013/11/22/opinion/krugman-expanding-social-security.html?ref=opinion&_r=0
