By J.D. Alt
2. Why we need it.
What is retirement anyway? For most people it seems to be the end of that middle period of their lives where some business, or institution, or civic entity has paid them Dollars in exchange for their labor or personal services. This “Dollar-earning-in-exchange-for-work” period can end at various points in a life-span, for various reasons planned or unplanned: Some of us become disabled by health catastrophes in our 40s or 50s, some find the particular skill we learned or developed over the years is suddenly no longer in demand (and it’s much too late to start over again). Many people are forced to stop providing their labor or services at a certain age by retirement rules designed to create employment openings for the younger generation coming along behind. While a few are fortunate enough to continue earning Dollars in exchange for their services right up until the very end—entertainers, writers, highly specialized professionals come to mind—the vast majority of U.S. citizens all share the same basic fate: at some point in time, with many years or even decades remaining in our life-span, we will cease earning Dollars in exchange for our labor or services.
While many U.S. citizens will have accumulated, during their Dollar-earning years, enough pension assets or financial wealth to continue paying their living expenses going forward, the number of retiring citizens in this fortunate situation is rapidly declining. Among households approaching retirement age (55-66) the median balance held in a retirement account is only $12K. Defined benefit pension plans, guaranteeing payments for life, are being phased out by businesses and civic authorities across the country. In 2013, the Social Security Administration reported that nearly 25% of retired couples, and almost 50% of single retirees relied solely on Social Security payments to cover 90% or more of their living expenses. In other words, a very large—and rapidly growing—group of Americans are having to dramatically, and suddenly, reduce their consumption.
The degree of this decline in purchasing power is startling. Nearly 50% of American retirees—citizens who, during their Dollar-earning years, might have been earning $30,000-$40,000 per year—will retire this year below the poverty line. The average Social Security check is about $1,230 per month—equivalent to a working wage of $7.10 per hour (not even equal to the minimum wage.) Deduct from that $115 per month for Medicare part B, $30 per month for Medicare part D, and $165 per month for a Medigap plan to put in place health insurance that’s not full of potentially bankrupting holes, and the average retiree is down to $920 per month—for everything else. If you’re lucky enough to have paid off your mortgage, you might squeeze by on this. But the mortgage banking fraud of the 2008 financial crisis managed to put most American home-owners under-water—stuck paying mortgages on homes they can’t afford to sell. If you’re fortunate enough to just pay rent, you might find a bedroom available with a mini fridge and hotplate for $500 a month—plus your share of the electricity and heat—leaving you just $100 a week for food, transportation, phone service, socks and toothpaste.
Or, possibly, you might be lucky enough to have children or relatives who’ll give you a place to sleep and bathe for free—and who’ll give you rides to the store, or the doctor as well. But more and more of our children and relatives are, themselves, “retired” because American industry just doesn’t need them anymore—having “discovered” (after the mass letting-go of the Great Recession) they can produce most of their products and services using digital computing, robotic mechanisms, and cheap foreign labor.
So the fate more and more of us now face, as retiring U.S. citizens, can only be described as both dismal and lonely—not just for the Boomer Generation, but increasingly for the generations to follow who, it now appears, will have even less of an opportunity to save a decent retirement nest-egg than we did. There is, then, an enormous collective need unfolding before our eyes—and this collective need demands a collective response.
As we clearly saw in Part 1 (Why we can afford it) a collective response is exactly what our sovereign monetary system is designed to make happen. We can do things together as a sovereign nation (like building the most powerful military machine in human history) that we cannot do as individuals. Collectively, through our sovereign government, we can issue “money” (Dollars) to pay ourselves to provide the services and build the things we collectively need. The only limitation on what we produce are the real resources—labor, materials, energy and technology—that are actually available to be put to work. If the real resources are available, Dollars CAN be created to marshal those resources to the effort. The question then becomes: What shall we try to accomplish?
There are, of course, many approaches that could be taken to address the sudden collapse of purchasing power for a large segment of society (specifically, retirees living almost exclusively on Social Security payments.) If the sovereign government is going to issue currency, it could simply be used to increase Social Security payments to a level enabling retirees to pay rent and buy food, clothing and services like an “average” working consumer. This approach is sometimes referred to as a “helicopter drop”—simply giving ourselves Dollars to spend on things. From my perspective, this approach overlooks or misunderstands the true, potential power of sovereign spending: paying citizens to actually create real and very specific goods and services that, collectively, we can use to better our lives, health, and prosperity.
Which brings us back to the topic of a National Retirement Infrastructure. The benefits of unleashing sovereign spending towards the building of locally initiated retirement cohousing projects would, I believe, go far beyond what could be accomplished by simply using the new Dollars to increase Social Security benefits:
- To begin with, retired citizens choosing to participate would be given something interesting and worthwhile to do: Working with a peer group to envision a cohousing community that you, yourself, are going to live in, can be an exhilarating and rewarding experience. Knowing that what you create will be passed on to following generations gives the work—and reward—an even greater meaning.
- Something of very specific usefulness would be created that directly provides for the collective need of retired citizens: a comfortable dwelling to live in for FREE which is, furthermore, an integral part of a supportive peer community. Creating these kinds of active settings would substantially and pro-actively contribute to the health and well-being of retirees, reducing strains on the U.S. health-care system.
- Hundreds of thousands of jobs in the planning, facilitating, architecture, engineering, sustainable energy and construction industries would be created—and hundreds of thousands more in the care-giving industries likely to become associated with each of the cohousing projects.
I should say again, most emphatically, that what is being proposed is NOT a “big government” program to build housing for retired people. I would not want to see the Department of Housing and Urban Development get within a hundred miles of it! Retiring U.S. citizens deserve much better than having to deal with the useless wheel-spinning and lethargic layers of a massive federal bureaucracy. The hurricane Sandy relief effort is the most recent proof we have of that. What I have in mind is something exactly the opposite, and that is what I will now give consideration to in Part 3, to follow.