Remember what I said about Wall Street workers? Let me refresh your memory:
The finance class actually consists of a bunch of overqualified strip miners. They’re overworked, which might explain the number of bad decisions they make, and their compensation system decouples the consequences of their actions from the actions themselves. They are being paid to make “deals” and the purpose of those deals is to extract “wealth”. In a way, it’s not that much different from getting into the cab of some giant piece of earth moving equipment and mowing down the side of the mountain and then loading that potential ore onto a conveyor belt to be separated from dirt. They live in a “company” town and are paid “company scrip”. It’s a truck system for them as well. The compensation is not proportional to the amount of work they do, they can be fired at will and they’re never going to leave that mountain because they owe their souls to the company store. The more they work, the more compensation in bonuses they are promised but it’s never enough.
Once you think about this metaphor of Wall Street doing the work of strip miners, the present set of circumstances will start to make a lot of sense.
We know that Social Security does not add to the deficit. In fact, we have a trust fund worth almost $3 trillion dollars. Sure, that trust fund has taken a hit in the past four years because so many people are out of work and can’t pay their taxes but once people are working again, the kitty will start to grow again. And if all that is needed is a couple of tweaks to solve the minor shortfall, it’s really not as damaging to the economy or rich people’s ability to spend ungodly amounts of money on themselves as they pretend.
So, it’s not a deficit problem- at least not from the government’s side of things. Sure, Medicare does need to be fixed but that requires some spine stiffening on the part of the Democrats to crack down on providers. Did I tell you about my lab partner’s husband’s 4 hour hernia operation and recovery in the hospital? $70,000. No, that is not a mistake. There’s something truly out of whack when if comes to costs and payments to hospitals, doctors, insurance companies. It’s a real problem. And since the rest of the developed world has found reasonable solutions at much lower costs, it’s moronic for our elected officials to tell us that the costly ACA, with downstream repercussions they failed to study, is the best we can do. Please, do we look stupid to you?
Anyway, back to Wall Street. The Social Security trust fund is solid and fixable and millions of us late boomers paid into the surplus funds to cover our own retirements. What isn’t solid and fixable is the 401K system, which really is a Ponzi scheme. Pretty soon, a lot of aging baby boomers will be taking money out. That’s going to hurt someone’s bottom line. The bonuses and skimming going forward isn’t going to be nearly so lucrative as it was over the past two decades. After the Baby Boom came the Baby Bust in the late 60′s. Looks like The Pill really caught on in a big way.
In the past couple of decades, many companies ditched their pensions for the 401K. Let the kids pay for their own retirements. None of this deferred compensation crap. And life was good for the shareholders and the bankers. But once that money starts to get withdrawn, the salad days will be over. So, Wall Street must get more people into 401Ks or they won’t be able to continue strip mining. The problem is that most people are already in one if their employer offers it. The market is finite and pretty soon will plateau. At some point, the investment portfolios are also going to reach a steady state.
BUT, if you raise the retirement age and keep a lot of older people working, they will be forced to put their money back into the market. Well, they won’t be able to retire until they’re much older than their parents were at retirement. If they have any hope of ever taking time out to go travel or garden, they’re going to have to risk their money in the market, hope that it will pay off so they can get out of the job market before they’re dead and forget about social security.
My theory is that raising the retirement age forces more savings to stay in the market longer and that with a pool of people who can’t retire yet still working, the amount of money going into 401Ks and IRAs is going to go up. Stripville!
It makes sense from a timing perspective. There’s really no need to cut a deal with Republicans right now. The Democrats have enough seats to keep things pretty much unchanged. If the tax cuts expire, it’s going to look bad for Republicans to hold middle class tax cuts hostage in order to satisfy their rich friends. In fact, just about anything the Republicans stamp their feet and insist on is going to look bad for them.
But Obama still wants to cut a deal and make us all a lot poorer as a nation and as individuals. And he really doesn’t have to do this. So, why do it? I think it’s because the strip miners have told him that if he doesn’t, the market is going to start to drop and it will pick up speed and saving the banks is the most important thing ever!!! All serious people agree about this. If he doesn’t cut the social insurance programs in order to prop up the 401K system, it will be all his and the Democrats’ fault when the market finally starts to fall.
Yep, that would suck for seniors who are about to retire so if I were them, I’d start looking around for other places to put that money. But history has shown that Obama and his droogs at Treasury will bend over backwards to please bankers even if it means opening a revolving line of credit for the bankers to the taxpayer cash stream in perpetuity. (Read Neil Barofsky’s book for more horrific details).
It’s been my feeling that the 401K is behind a lot of what’s really messed up in our economy and for some reason, we never hear anyone of sufficient gravitas talking about it. But just imagine what would happen to the economy if we tried to phase it out even if most of us hate it with a white hot passion.
All hell would break loose.