Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Why Seniors Need a Basic Income

America’s Seniors need a basic income because Social Security no longer pays enough.

The average monthly Social Security benefit in April 2019 was $1,348.12, the Social Security Administration (SSA) estimates. Meanwhile, Social Security’s average Old-Age and Survivors Insurance benefit was $1,395.71 in April 2019.

Neither of these figures leads to a great income. I calculate the average Social Security benefit provides a yearly income of $16,177.44 a year. Additionally, the typical Old-Age and Survivors Insurance generates an annual income of $16,748.52.

Consequently, if you retire with nothing but Social Security you will live in poverty. Unfortunately, tens of millions of Americans are retiring with nothing but Social Security.

Seniors need Basic Income because they’re Broke

Despite the low pay there’s nothing wrong with Social Security. Politicians designed the Social Security system for an America in which most people had either pensions, or retirement savings.

However, we no longer live in that America. In fact, the US Census Bureau estimates the balance of the average American retirement account is zero, ThinkAdvisor claims.

Frighteningly, 57% of Americans; or over 100 million people, have nothing in retirement accounts like 401ks, the Institute for Retirement Security estimates. To make matters worse, 77% of Americans will never meet their retirement savings targets.

Finally, four out of five Americans have less than one year’s income in retirement savings, PBS’s Phil Moeller claims. Thus, those people will find themselves with nothing but Social Security.

Social Security is a lousy Deal for Women

Sadly, people receiving $1,395.71 a month will the lucky ones. Disgustingly, Social Security short changes many Americans – particularly women.

My mother receives around $500 a month even though she put in several decades of work. The problem is they only base Social Security on wage or salary labor.

Thus, all the hard work my mother put in raising me; and my brother. and keeping house does not count towards Social Security. Additionally, the SSA will not count all the unpaid labor she put in helping my dad run his business.

Beyond mothers, artists, entrepreneurs, farmers, small owners, writers, freelancers, and anybody else who did not work at a traditional job gets shortchanged by Social Security.

America’s Pension Catastrophe

Consequently, tens of millions who have worked hard for decades will have nothing in their golden years. Sadly, millions of Americans who think they have “good pensions” will soon be joining those people.

State and local pension funds were short $1.91 trillion in 2016, the Hoover Institution calculates. Frighteningly unfunded state and local pension obligations could be as high as $3.846 trillion, the Hoover Institution’s Joshua D. Rauh claims.

America’s pension crisis threatens many union members and private sector workers too. Forbes reports that up to 400,000 Teamsters could collect a small fraction of their pensions. As a result many Teamsters are back driving trucks in their Golden Years.

40% of Middle Class Americans face poverty in Retirement

“If we do nothing in the next 12 years, 40% of middle-class older workers will be poor and near poor elders,” New School Economics Professor Teresa Ghilarducci writes.

In a Forbes essay, Ghilarducci predicts the number of poor people over 65 will increase by 25% between 2018 and 2041. Economically, this could be catastrophic.

Those seniors will spend less; which will decrease economic activity. Less economic activity means more jobs, lower tax bases, and more pain on main street.

Is Basic Income the Solution to America’s Retirement Crisis

A basic income or national dividend is the best solution to America’s retirement crisis.

For instance, we could pay every American $1,000 in cash a month. This will increase the average Social Security recipient’s monthly income to $2,395.71. We can sell a Basic Income to Seniors by paying with their Social Security.

Thus we can turn seniors into basic income fans by promising every Social Security recipient a $1,000 a month raise. Furthermore, a retired couple will receive a $2,000 a month raise.

Under those circumstances, I predict many Trump supporters will run to jump on the basic income bandwagon. A Democratic candidate campaigning on a $1,000 basic income pledge will see many “Make America Great Again” hats at his or her rallies.

Why a Basic Income Retirement Fix Makes Sense

A basic income is the logical fix for the retirement crisis because it will not set Americans against each other.

Schemes to shore up Social Security or pensions will probably involve higher taxes on the wealthy or the young. Taxing young people, who are making less than their parents, to pay for a comfortable old age for seniors is unfair. Such taxes will be a godsend for extremist Republican politicians with dreams of destroying Social Security.

High taxes on affluent retirees; who could have up to $16.9 trillion in retirement accounts The National Institute for Retirement Security estimates, could be politically impossible. Meanwhile, cuts to government services to fund pensions are unfair to taxpayers, politically impossible, and potentially illegal.

How the VAT can Pay for Basic Income

I think the basic income; however, is doable because we could fund it with a Value-Added Tax (VAT). Governments charge a VAT on the incremental cost of a good or service at all stages of the thus supply chain.

A VAT raises more money than sales because they collect it on the total value of goods and services. Additionally, the VAT is fair because almost everybody pays it.

Notably, the Congressional Budget Office estimates a 5% VAT in the United States could raise up to $2.9 trillion in revenue between 2019 and 2028. Moreover, insurgent presidential candidate Andrew Yang proposes funding his Freedom Dividend basic income with the VAT.

How the Freedom Dividend Could help Seniors

Unfortunately, Yang admits he will not pay the Freedom Dividend to Social Security recipients. I predict that imbecilic policy will doom Yang’s policy and his campaign.

However, I think a Freedom Dividend paid to all Social Security recipients could take Yang straight to the White House. Few seniors would listen to candidates like Donald J. Trump (R-New York) and Joe Biden (D-Delaware), if they knew Yang was planning pay them $1,000 a month.

America needs to do something about the retirement crisis fast. I think a Freedom Dividend available to all Americans is the best answer.

How Basic Income could End the Retirement Crisis

A basic income could end the retirement crisis and prevent a vicious inter-generational war.

Seniors-only programs like Social Security could be politically unsustainable because of changing demographics. Niall Ferguson and Eyck Freymann estimate 62% of American voters will be under 58 in 2039. To explain, Ferguson and Freymann calculate Generation Z (born after 1996) and Millennials (born between 1981 and 1996) will make up a majority of American voters within a decade.

Since those voters will have less money than their parents they will vote for politicians willing to gut Social Security and aggressively tax retirement benefits. However, the same voters will have a strong incentive to vote for basic income.

Notably, many of those voters are already filling Andrew Yang rallies and buying MATH Hats. Thus, a strong basic income scheme that covers Americans of all ages is the best way to end the retirement crisis and prevent inter-generational warfare.

Furthermore, the political party that makes basic income a reality will enjoy a long-lasting majority in Congress and the Electoral Congress. Remember, the Democrats had a nearly unbreakable lock on Congress from the 1930s until the 1990s because of Social Security.

Given those realities, I predict many politicians will join Andrew Yang on the Freedom Dividend band wagon.