There is little doubt that the economy needs some kind of breakthrough in order to get moving again. Official readings tell us that the recession is over, but with unemployment remaining high very few people believe it. There is one simple and very direct solution to kick-start job creation if the federal government is willing to take drastic action – which I think is essential. That would involved making people close to retirement age eligible for Social Security and allow them to tap their retirement funds ahead of schedule, freeing up jobs in the private sector for a new generation of workers.
This last recession has shed about 8 million jobs throughout the economy. Currently, about 51 million people receive Social Security benefits averaging about $1,000 a month. If we were to extend eligibility to 4 million people who are within, say, 10 years of being eligible on their own, the annual cost would run about $48 billion per year, or about $240 billion in total one-time payments into the Social Security fund if the average time of this supplement is about 5 years. The cost of allowing them to tap 401-k and related retirement funds would cost some small amount in tax receipts over the same life.
Part of the cost would be offset by reductions in unemployment benefit costs, which are at least similar in size. In short, if we are going to wind up paying people to not work it makes sense to take the oldest out of the workforce to make room for those who have young families to support.
It would help the economy in several ways. The most important is to achieve a generational turnover in the workforce and tap the energy of young workers that has often languished. Job creation would create a more dynamic economy in general, kick starting retail and other businesses that rely on a buoyant mood and general feeling that things are moving again. The most important effect, however, is the admission that investment alone does not make an economy – it takes the heart and arm and brain of workers doing their part every day.
There is little doubt that once a generational turnover is achieved that we are poised for some great success. Our working age population is the largest as a share of the total population since this was measured, owing in large part to the “Boomlet” of kids who are the children of “Baby Boomers.” Their entry into the workforce in large numbers has put a lot of downward pressure on wages that will not be relieved until their parents retire and open up opportunities.
This is not the only way that the Federal government can create jobs. A concerted effort to reduce the overhead per employee, including a reduction in payroll taxes, is absolutely essential. Research into much-needed transformational technologies such as those that will create energy independence coupled with substantial public works programs like those already in place are also helpful. But for immediate effect the best way to create jobs is to move the generational shift along as quickly as we can.
This may not sit well with many people who are rightly concerned by the size of our deficit to create a new program like this. It is worth noting, however, that the estimated cost is about one third of the TARP bailout and, on an annual basis, about 15 percent of our Defense budget. The money has always been there for other things – why not have it be there for the American worker when they need it the most?
A one-time increase in eligibility for Social Security can transform our economy and get many things moving again. Along with a few other simple steps we can move ahead towards a restructuring if we start to look at our problem not as a shortage of investment in dollars but an inability of our investment to support the real source of all wealth – work. A new generation of workers is ready to do their part. All they need is an opportunity. Let’s give them that and then stand back to watch what amazing things they can do with it.
This piece contains many links to outside sources that are very insightful and valuable. If you have any questions, please follow the links. As always, your additions and questions are essential to making this simple proposal stronger and more effective, so please do not hesitate to comment below. Thanks!