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December 09, 2013

The Coming Demographic Tsunami

Demographics is often cited as one of the primary forces behind the liberalization of our electorate. We are told that as more minorities, immigrants (legal and illegal), and women vote, elections will be harder and harder for conservatives to win.

But increasing numbers of women and minorities aren't the only demographic changes likely to influence future elections:

Last week, a federal judge ruled that Detroit qualifies for municipal bankruptcy. This almost certainly means that pensions and health benefits for the city’s retired workers will be trimmed. There’s a basic conflict between paying for all retirement benefits and supporting adequate current services (police, schools, parks, sanitation, roads). The number of Detroit’s retired workers has swelled, benefits were not adequately funded and the city’s economy isn’t strong enough to take care of both without self-defeating tax increases.

The math is unforgiving. Detroit now has two retirees for every active worker, reports the Detroit Free Press; in 2012, that was 10,525 employees and 21,113 retirees. Satisfying retirees inevitably shortchanges their children and grandchildren. Though Detroit’s situation is extreme, it’s not unique. Pension benefits were once thought to be legally and politically impregnable. Pension cuts in Illinois (last week), Rhode Island and elsewhere have shattered this assumption. Chicago is considering reductions for its retirees.

What’s occurring at the state and local levels is an incomplete and imperfect effort to balance the interests of young and old. Conflicts vary depending on benefits’ generosity and the strength — or weakness — of local economies. A study of 173 cities by the Center for Retirement Research at Boston College found pension costs averaged 7.9  percent of tax revenues, but those of many cities were much higher: 17 percent in Chicago, 15 percent in Springfield, Mass., and 12.9 percent in New York. Health benefits add to costs.

At the federal level, even this sloppy generational reckoning is missing. The elderly’s interests are running roughshod over other national concerns. Social Security, Medicare and Medicaid — programs heavily for the retired — dominate the budget, accounting for about 44 percent of spending, and have been largely excluded from deficit-reduction measures.

Almost all the adjustment falls on other programs: defense, courts, research, roads, education. Or higher taxes. The federal government is increasingly a transfer agency: Taxes from the young and middle-aged are spent on the elderly.

The explanation for this is politics. For states and localities, benefit cuts affect government workers — a powerful but small group — while at the federal level, it’s all the elderly, a huge group that includes everyone’s parents and grandparents. As a result, the combat has been lopsided. Political leaders of both parties have avoided distasteful choices. Younger Americans have generally been clueless about how shifting demographics threaten their future government services and taxes.

This may be changing. One reason is the Affordable Care Act. Among other things, Obamacare expands the young’s compulsory subsidization of older Americans (in this case, those not yet 65). Under the law, some of the young will pay artificially high insurance premiums to cover the medical expenses of older and sicker Americans. The young seem to be balking. A poll by Harvard University’s Institute of Politics finds that less than a third of uninsured 18- to 29-year-olds plan to enroll in the program.

Many moons ago, the Editorial Staff opined on the vast difference between supporting redistribution in the abstract and supporting it when the price tag is plainly visible.

The price tag for redistributionist economic policies is about to become painfully obvious. Over the weekend, the spousal unit talked to an old friend whose policy premiums just went way up as a result of the so-called Affordable Care Act. Predictably, he wasn't happy.

It's one thing to answer survey questions about whether you wish everyone was taken care of and no one ever had to struggle in the affirmative. It's quite a different question to ask, "How much more would you personally be willing to pay in taxes or health insurance premiums to ensure that others don't have to struggle?

There's a reason survey questions are never worded that way.

Posted by Cassandra at December 9, 2013 06:52 AM

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Demographics certainly makes that tsunami look more like a trough than a crest. As I've suggested before on VC, a massive train wreck lies not far in the future when Roe and OASDI collide. Here's a link with some further thoughts along that line:


http://theaquilareport.com/americas-baby-bust/

Posted by: Roy at December 9, 2013 04:49 PM

I think it will be interesting to see if seniors vote their narrow self interest (wealth transfer to seniors from young people), or whether they vote for what's good for society (older people take care of younger people).

I've always thought the age conflict issue would be a great wedge issue Rethugs could use to chip away at the female vote. Most women are, whether by nature or nurture, friendly to the idea of protecting children and - by extension - future generations.

Thanks for the link - I'll check it out!

Posted by: Cass at December 9, 2013 05:18 PM

It's quite a different question to ask, "How much more would you personally be willing to pay in taxes or health insurance premiums to ensure that others don't have to struggle?

For me, part of the problem with ObamaCare is that it not only takes money from me, it also takes choice. If someone had said to me three years ago, "Are you willing to ante up $1000 a year to help those who can't afford or can't get health insurance?" I would probably have said "Yes" (assuming the plan for using that $1000 seemed workable).

Instead ObamaCare says, "The cheapest health insurance you can have that comes anywhere near meeting your criteria will cost you an extra $1000 a year." So now I'm paying more for less and I don't have any choice about it, at last legally.

I understand that I give up the $1000 in taxes I may have to give up my current health insurance also but *I* decide that. Maybe I'll give up something else to keep affording my current health insurance, maybe I'll keep everything else and step down to worse insurance. But the choice is mine.

Take my money in taxes if you can pass a law to do so but don't try to convince I'm somehow "buying" something with the money you're taking from me. I'm never going to be happy about paying an inflated price for something.

In addition, there's the fact that the obvious costs are (so far) very narrowly targeted so I feel like all my friends and neighbors who love ObamaCare but get their health insurance at work are getting a free ride. This means that for them, so far, the price tag for redistributionist economic policies has not become painfully obvious. Rumor is that will change in the Fall of 2014 and one of the things I hate most about ObamaCare is that sometimes I find myself feeling happy about their pending misfortune. Not the kind of person I like to think I am.

Posted by: Elise at December 9, 2013 05:19 PM

In addition, there's the fact that the obvious costs are (so far) very narrowly targeted so I feel like all my friends and neighbors who love ObamaCare but get their health insurance at work are getting a free ride. This means that for them, so far, the price tag for redistributionist economic policies has not become painfully obvious. Rumor is that will change in the Fall of 2014 and one of the things I hate most about ObamaCare is that sometimes I find myself feeling happy about their pending misfortune. Not the kind of person I like to think I am.

Well, I've said many times that I fully expect my employer-provided policy to go away (at least in its present form). I'm still painfully aware that other people have already been hurt by this law.

I think you made a very astute point - it is human nature (if not our best nature) to feel the way you're feeling. Most of the marketing talk revolves around fluffy, do-gooder feelings and caring but honestly, most people - even liberals - just don't think that way. They don't.

They may want to, but when it starts costing them money or freedom.... I've seen this behavior in my mother in law a gazillion times and my husband was hearing it from his friend. No one's happy about it, but still there it is.

Posted by: Cass at December 9, 2013 05:37 PM

Hello again Cass,

Hi Cass,
and with great respect and kindness I observe that the r*tsh*t dumbsh*it stupid selfish *ssh*l*s in Detroit 'public service unions' make them own it. Public service' unions screwed themselves. Noone can 'print' money forever, and no municipality can pretend to for long. Screw them. Seriously, not one G*d d*mn red cent more than what was actually saved.

This is a case study in the failure of 'modern liberal' governance, and GOP ought t

Hi Elise,
Not exactly where you were going, but the awful truth is that 'the numbers' do not, never did, and never will add up for Obamacare. This is going to be a serious drag on the economy until at least 2015.

Best Regards,

Posted by: CAPT Mike at December 10, 2013 03:03 AM

I do think most people are willing to help others - there's more to human beings than pure self-interest. I also think that very few people are willing to help others when doing so interferes with their ability to take care of themselves and their families (friends, loved ones) - there's a bedrock of self-interest in human beings. People resist (or revolt or throw a hissy-fit) when they are forced to help others to such a degree or in such a way that their ability to take care of themselves and their families (friends, loved ones) is threatened or diminished or damaged.

What that degree is and what that way is almost certainly varies from person to person. So for me, it's not the money that ObamaCare is extracting from me; it's the threat to my and my husband's ability to have good health insurance. If I were younger, poorer, in better health, it might well be the money.

I don't believe a third party can decide the amount of helping others and the resultant damage to me that I - or anyone else - "should" be okay with. Given that, I'm angry at some attempts I've seen to convince me that I'm selfish or immoral if I oppose ObamaCare. I'm also sorry for the extent to which that kind of argument works on young people - they shouldn't have to carry the huge burdens our debt and our entitlements have placed on their shoulders. Even more, they shouldn't be made to feel guilty for not wanting to fund their elders' profligacy.

CAPT Mike - I think whether the numbers add up for ObamaCare (or any government undertaking) depends on how you look at it. Clearly they don't and can't add up in the world where "stuff" has to be paid for and behaving stupidly drives up the cost of that "stuff". But the government doesn't live in that world because it (we) can borrow money and let future generations pay the bill. In that sense, the government can always make the numbers add up.

And I agree with you, Cassandra, that what our spending and our debt is doing and will do to future generations should be a great issue for Republicans. Two things, however. First, using that issue would require that Republicans actually be committed to reducing spending - without exempting their own favorite projects from those reductions. Second, I'd frame the issue as an appeal to older people to give a little and I'd be sure that if older people end up taking less from the government, other parts of society take less, too - especially "the government". For example, perhaps a proposal to means test Social Security could be accompanied by a proposal to cut Congressional pensions and or perqs.

Posted by: Elise at December 10, 2013 08:46 AM

I do think most people are willing to help others - there's more to human beings than pure self-interest.

I agree - didn't mean to suggest otherwise. But we're more willing to help friends/family/people we have a connection with than strangers - and I think that's a smart stance with considerable survival value. Those people are more likely to reciprocate (and less likely to take advantage of us).

I don't believe a third party can decide the amount of helping others and the resultant damage to me that I - or anyone else - "should" be okay with. Given that, I'm angry at some attempts I've seen to convince me that I'm selfish or immoral if I oppose ObamaCare. I'm also sorry for the extent to which that kind of argument works on young people - they shouldn't have to carry the huge burdens our debt and our entitlements have placed on their shoulders. Even more, they shouldn't be made to feel guilty for not wanting to fund their elders' profligacy.

BINGO. I am a big fan of contributing to worthy charities, and I don't mind giving until it hurts. But I don't want to be TOLD who to give to (whether or not I think they deserve my help).

Where I have a problem with the liberal ethic of care is that it often comes at the expense of justice (which is at least equally important if we want people to opt in to community endeavors). All of civilization is founded upon two ideas: one, that if we voluntarily act in pro-socials ways, our acts will be reciprocated.

How long would most of us continue to obey the law if we looked around and saw that no one else was obeying it? And that no one else was being punished for flouting the law? The system works because we have reasonable confidence that if we obey the law, so will others. And those who don't will be penalized in some way.

The second tenet is the suppression/discouragement of free riders. Free riding can't be entirely eliminated, but it MUST be discouraged or people no longer trust that the voluntary daily sacrifices they make to live in a civilized world are being reciprocated.

When you tell people that they must work so others they don't even know won't suffer, AND you tell them that you're not going to require those others to contribute ANYTHING to the common weal, they start feeling like chumps. They are depriving their own families for complete strangers who aren't being asked to make the same sacrifices.

Posted by: Cass at December 10, 2013 09:04 AM

I've been complaining for years about the popularity of schemes that make the other guy pay for my favorite charity initiatives. I never thought anyone would be dumb enough to enact a law that so obviously placed the bill right back in the lap of the people who claimed to support the charity. As furious as I am about having an extra $5K cash burden laid on me every year from now on, I'm also fascinated to see how the public will react. Is it possible, I wonder, for us to enter a new era in which people vote to support only those charity initiatives they are also willing to support out of their own pockets? It might actually cause a lot of us to give a flat tax a fresh look. In my view, the progressive income tax is the prime example of tempting people to vote for charities to be funded by others.

Posted by: Texan99 at December 10, 2013 10:33 AM

If we're going to have a income tax (and I prefer it to other taxes) then I like a progressive income tax. (I was impressed by the Parable of the Widow's Mite at an early age.) I think the problem is that too many people pay no income tax at all. I'd opt for a progressive income tax, no deductions, everyone pays something (however small a percent), and the brackets are linked: if you raise (or lower) one bracket, all the other brackets change in tandem.

Of course, I'd also like to see a lot less done by government in general.

Posted by: Elise at December 10, 2013 11:32 AM

I've been complaining for years about the popularity of schemes that make the other guy pay for my favorite charity initiatives. I never thought anyone would be dumb enough to enact a law that so obviously placed the bill right back in the lap of the people who claimed to support the charity. As furious as I am about having an extra $5K cash burden laid on me every year from now on, I'm also fascinated to see how the public will react.

Me too. Can you imagine if we paid some sort of flat tax to cover "essential services" we all benefit from and then, after that, we could decide how our money was to be spent? That would force programs to justify themselves to the taxpayers.

I'm not sure it would really be a better result, though. But it would be entertaining to watch.

Posted by: Cass at December 10, 2013 12:50 PM

I think the problem is that too many people pay no income tax at all. I'd opt for a progressive income tax, no deductions, everyone pays something (however small a percent), and the brackets are linked: if you raise (or lower) one bracket, all the other brackets change in tandem.

You mean we should be more like Europe?

Because over there, it's far less common for anyone to pay NO taxes :p I can almost hear the weeping, wailing, and gnashing of teeth.

Posted by: Cass at December 10, 2013 12:52 PM

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