The jobs we are creating? Think 800,000 waiters and bartenders versus 100,000 manufacturing jobs. I have children who work in the food service industry, and I can tell you they are making barely enough to provide for themselves, let alone raise a family or save for retirement.
In other words, I don’t think we can invest our way out of this. The obvious answer – extend the retirement age – has the unwelcome side effect of reducing job opportunities for younger workers. At some point that might be okay if low birth rates create widespread worker shortages, but the adjustment will take time.
What we do know is this: An unsustainable situation will not be sustained. Retirement as we know it is unsustainable. It will give way to something else, and maybe soon. Frustration is building in America because of the problems I highlighted above, and we could well see an administration and Congress that will push through a much less friendly VAT plus income tax increases, not cuts.
Think it can’t happen? When your back is against the wall and you’re down to your last few bullets and the enemy just keeps coming, you start to very quickly consider all sorts of options. Within 10 years we are not only going to be thinking the unthinkable, we will be doing the unthinkable. And not just in the US but all over the world. The unthinkable will be coming to a country near you, along with unbelievable science-fiction-grade technology.
Count on it.
A Wedding and the Virgin Islands
I’m not doing much traveling this month until Shane and I go to the Virgin Islands the last week of June. On Monday, June 26, she celebrates her birthday. Since I asked her to marry me on her birthday last year, we are going to get married on her birthday this year. Just the two of us on the beach, and the rest of the week relaxing and thinking of the future together. While this approach does allow me to only have to remember one important day rather than two, I am informed by many friends that it does not relieve me of the responsibility to buy two presents.
Shane and I have lived together for four years now, and she has pretty much figured out how I operate. She has amazing forbearance and patience – she not only puts up with my peripatetic lifestyle; she even allows me to withdraw into my chair to read or to sit in front of my computer all day writing. Not exactly the most exciting of activities.
We will stay in the Virgin Islands for eight days and then come home to a full schedule. And I’m fully committed to begin to bring together the various chapters of my book, The Age of Transformation. That project will hopefully benefit from my new commitment to write fewer words per letter. Maybe I can do that for a chapter or two of the book as well. The reality is that each chapter could almost be a book of its own. I have to make sure I don’t get carried away. The book will not be a deep dive but rather a sweeping pass over the transformations that are coming to our world, not just technologically but also socially, demographically, politically, and especially geopolitically. The economic world will be turned upside down as we make decisions to do previously unthinkable things to get clear of the enormous debt burdens and bubbles we created.
Officially, the US unemployment rate is 4.3%. There are 200,000+ manufacturing jobs that employers can’t find suitable, highly skilled candidates to fill. Last year, the labor force participation rate declined by another 0.2% to 62.7%. The employment-to-population ratio fell to 60%. Fewer of us are working and making enough to actually be able to save for retirement.
The solution may turn out to be something presently unimaginable. We don’t know where technology will take us and what opportunities it will create. We also don’t know what political alliances can create. What if the next time around we got not just President Bernie Sanders but a Bernie Sanders-compatible House and Senate? Could we see a wealth tax in addition to a whole slew of other taxes? Would our dear leaders be willing to tax your retirement plan so that people without adequate savings could enjoy a more pleasant retirement? Forget fairness to you as an individual, because they will be arguing about fairness to everyone in the country. Yet today the Republican majority refuses to consider instituting a value-added tax and lowering income taxes and corporate taxes to very low levels. They could do this, because they now have a majority. They are simply afraid of a VAT and are going to find themselves in far less sympathetic hands in a future crisis.
And with that I must hit the send button. You have a great week.
John Mauldin is editor of Mauldin Economics' Outside The Box.