This article was originally printed in Numismatic News.
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Hoo boy, here we go again.
Once again, Donald Markay of Fargo, N.D., (“Viewpoint,” May 3) cannot resist the temptation to taint economic issues with appeals to morality. That is the stuff of politics, Mr. Markay, not economics.
OK, let’s wax political for a few paragraphs, but if I promise to keep it short, will you please remember you started it?
He writes, somewhat ominously, “How is it moral or good public policy to punish those who have saved in order to provide for themselves?” He reveals here what his agenda is – create policies that, instead of rewarding physical personal sloth (also a bad idea), reward financial sloth, by raising low-risk interest rates so that the retired don’t need to put their money at risk in equities, or dipping into their principal. Well golly, that’s nice work if you can get it, isn’t it?
Where is the morality in that? Does the transfer back in current and future estate settlements make up for it? It surely will enrich estate lawyers. What about the Gen-Xers and Millennials who will pay out the nose and be left with virtually nothing?
The point is, Mr. Markay, that lines you use somewhat cavalierly such as “why is it wrong to wish to keep what one has honestly earned” are not as clear-cut as they might at first seem. Has anyone ever truly earned the most generous governmental pension-like income flows the world has ever seen or is likely to see again? I’m not so sure. They surely have gotten it though political muscle. I’m not as sure the verb “earned” applies.
Is it moral to talk of budgets that slash opportunity-creating things like education while treating intergenerational transfer payments as the “third rail of politics” just because AARP’s foot soldiers can flex their political muscle? Just as in Charlie Sheen’s vocabulary, “winning” and being right don’t mesh much.
I’ll end the political rant there.
The problem with using morality arguments in economics is that core economic conditions are not eternal, but rather ephemeral. Morality needs to be eternal or darned close to it. Think about how nearly every morality-laced economic bromide of the World War II generation has been shaken to its core by later events. The world has fundamentally changed and mostly not in flattering ways. It is the height of silliness to import economic moralities from the past that don’t comport with modern realities whether they are hard money based on gold backing and the use of gold coinage, or the virtues of thrift.
The World War II generation didn’t need a university education to get and keep for a lifetime, a family sustaining job. Today, without at least a bachelor’s degree, you don’t even get in most doors. And real wages and salaries are well down, even with a degree. After the war, the possession of something called “moxie” (not the soft drink) was sufficient for success.
Remember when a owning a home was a sound investment? Now, even aside from the still hemorrhaging housing market, the economists tell us a person entering the workforce with a bachelor’s degree can expect to work in five to seven industries in their lifetime, two of which don’t yet exist, with almost all of those changes needing relocation. With a typical seven-year break-even period on a home sale, due to closing costs, how will young people ever acquire equity in a home? Home ownership now looks like a losing proposition, at least much more so than in the past. Maybe real estate sales commissions need to be slashed.
The baby boomers are the first generation to be required to support a massive percentage of their age contemporaries who are chronically dependent and unproductive (the welfare state). What hasn’t been taxed away from them by the payroll tax for generational transfers to their elders has been taxed by the federal income tax to support the needy of their own age.
As for their employment opportunities, the World War II generation and the older baby boomers never had to worry so much about their jobs being spirited away to people in foreign lands who earn just one-sixth of what they would earn if the job stayed here. Now, it’s not just what is happening, but the outlook is for acceleration of this trend.
It’s always easy to throw out lines similar to Charles Schwab’s “The Fed’s ... policy has driven down the security and spending power of savers, particularly those in retirement who played by the rules during their working years and now depend on the earning from their savings for a decent quality of life.”
Yes, all that’s true, and it’s a darned shame. I agree with all that. But whoever told us those rules that they played by were eternal and wouldn’t change over time? Well, he lied. I’ve seen that coming for decades now. Getting a decent return to support a decent quality of life without assuming stock market risk is over, done and finished. That era has died.
Younger folks’ incomes are under unprecedented downward pressure. How can mass thrift be any longer considered a virtue, since aggregate thrift, as opposed to individual, is undeniably contractive to an economy’s health, and is a job killer? If we were near full employment, then thrift would be great.
The World War II generation, Tom Brokaw’s “greatest generation” really did save the world. They defeated unspeakable evil and then they lived largely moral and relatively comfortable lives. To that extent, we should never begrudge such heroes their due. But anyone who has expected the typical economic conditions of that time to remain eternal is simply wrong.
The new “war” is not with bombs and bullets, but instead it is an economic war, about jobs and full employment, even though it remains undeclared. The menace is no less destructive. I hope we wake up in time to realize the internationalists, globalists and “citizens of the world” among us are imperiling our future. We have unilaterally disarmed in this particular war for far too long.
So now, in their golden retirement years, the World War II generation, and their immediate followers (call them the Korean War generation), are again being put at risk in a war. Or rather their financial nest eggs are. The new pseudo-morality is promoting jobs and domestic employment, not interest earning, and that requires incentivizing the use of financial ammunition to
job creation, rather than fixed income instruments. The Fed is the new draft board. Welcome back to the Army. As Schwab said, “savers and investors are being forced to take more risk with their money as they hunt for higher yields.”
Yup, it’s the new moral and patriotic thing to do. It’s time to end the era when all wealth is thought of as private and all risk is transferred to the public. The same applies to Main Street and Wall Street. Just because someone has retired doesn’t mean their societal obligations end.
“Money is like manure; it’s not worth a thing unless it’s spread around encouraging young things to grow.”
— Thornton Wilder (or was it Dolly Levi?)
V. Kurt Bellman is a hobbyist from Harrisburg, Pa. To have your opinion considered for Viewpoint, write to David C. Harper, Editor, Numismatic News, 700 E. State St., Iola, WI 54990. Send e-mail to firstname.lastname@example.org.