National Retirement Infrastructure

By J.D. Alt

1. Why we can afford it—2. Why we need it—3. How we can build it

1. Why we can afford it

We, who face mass retirement at the same moment our life-expectancy has been stretched far beyond the retirement savings we managed to set aside during our working years—and anticipating that future generations will face equal, or even more difficult retirement circumstances—we offer to provide the initiating, planning and management efforts required to build, for our collective use, a permanent “National Retirement Infrastructure.” This infrastructure will provide us with housing and social accommodations over the next several decades and, subsequently, be passed on to the next generations inevitably to follow.

The “Retirement Infrastructure” building effort we have in mind is not a “big government” program run by federal, state and local bureaucracies—it is exactly the opposite. It is a program that “big government” (except for one small piece of the puzzle) has no role in whatsoever. Instead, what we have in mind is this: the formation—on a national scale, all across the country—of small, cooperative groups of retirees who (a) plan and (b) manage the construction of modest, sustainable, cohousing projects which they subsequently will live in—for free—and then pass on to the following generations.

The last sentence above will have raised some questions and, no doubt, one or two eyebrows. First, how could retired people be expected to organize themselves into small, cooperative groups, on a national scale, all across the country? Second, if such groups were to be formed, how could they have the skills to plan and manage the construction of small cohousing projects? Finally, how could the retirees possibly live in the cohousing for free? More to the point, how would the cohousing projects be paid for? Where would the Dollars come from to purchase the land or the urban buildings, hire the architects, purchase the building materials, and pay the contractors and construction workers?

I’d like to try to answer each of these questions. Before starting, however, it occurs to me that many readers may not be familiar with the term “cohousing”, so I’ll briefly explain. It is a housing concept first introduced in Denmark in the 1960s. It has since been widely adopted in Europe and the U.S., though there aren’t a great many instances of it for the simple reason that the traditional cohousing process is difficult and time-consuming. (I’ll subsequently discuss this issue in part 3: How we can build it?)

In a nutshell, cohousing is a community of housing units which are privately occupied and maintained by individuals or families, but which share certain common facilities, amenities and, perhaps, social responsibilities and activities. What the shared elements entail depends on the specific interests and concerns of the cooperative group that initiates, builds and occupies the cohousing project. While potentially providing benefits to individuals and families of any age group, cohousing is particularly desirable for retired persons—especially those who may have lost a spouse—who wish to live independently, while at the same time being able to participate in the social activities and mutual support efforts of a cohesive, like-minded group. Cohousing has proven to be most successful when the number of “families” in the group is between 10 and 30, making it ideal for small, locally initiated and managed, cooperative projects. Successful cohousing communities are currently operating in a broad spectrum of settings: rural, suburban and urban.

The first question about this proposal I’d like to address is “affordability”: How could a National Retirement Infrastructure of cohousing communities, collectively owned by retired Americans in perpetuity, be paid for? Most people, I believe, would agree it would be a wonderful thing if we could only afford it. The benefits, both collective and individual, would be enormous: The cost of retirement living would be dramatically reduced for those who depend on Social Security payments alone, enabling them to stretch their monthly allotment much further than it currently goes. (This is the situation faced by 22% of U.S. retirees today—over 10 million people. More about their plight in Part 2: Why we need it.) The program would help retirees self-organize into mutually supportive groups, enabling individuals to live “independently at home” much further into their aging years. Retirees—especially those living exclusively on Social Security—would lead happier and healthier lives, reducing the growing burden on national health-care services. And each retiring generation would have the security of knowing that those among them who are less successful in a financial way, for whatever reasons, will nonetheless have at least a comfortable, supportive place to live for the last decades of their lives.

The question, then, is why can we NOT afford to build a National Retirement Infrastructure (NRI) as briefly outlined above? Before trying to answer, let’s calculate a ballpark estimate of how many Dollars we’re talking about. Let’s assume that by the year 2020 there will be 60 million U.S. retirees and that 25% of them will choose to live in an NRI cohousing project. (The rest, we’ll assume, have independent means enabling them to prefer living accommodations larger and more luxurious than what a modest, NRI cohousing unit would be.) Let’s say the average cost of a NRI cohousing dwelling is $150K. That calculates out to be $2.25 trillion that will have to be spent to build the cohousing infrastructure.

How could we possibly afford to spend that much money? Where would that many Dollars even come from? The U.S. Taxpayers certainly are not going to step up with their wallets open. It’s also unthinkable to imagine Congress allowing the federal government to borrow that much money to pay for retirement cohousing. Is the reality we confront telling us a National Retirement Infrastructure—desirable as it may be in concept—is actually an impossibility?

To begin formulating an answer, I’m now going to take a big detour. I want to go back and look at World War Two because those war years, I believe, illuminate something we have a very hard time seeing and understanding in the over-charged, “fiscal hysteria” of today’s politics. In the course of building (basically from scratch), equipping, and operating the U.S. Army, Air Force, Navy and Marine Corps during the years 1940-1945, the U.S. federal government spent around $340 billion. That actually doesn’t sound like very much today, but that was in 1940 Dollars. In 2010 Dollars, the federal government spent $5.3 trillion to fight WWII. The U.S. population at that time was 132 million, which means that it “cost” each American citizen $40,151 (in 2010 Dollars) to build and operate the U.S. war machine—or $8,030 per person, per year, between 1940 and 1945.

There are a couple of important questions to ask about this “cost”: First, where did the Dollars that were spent come from? Between 1940 and 1945, the average per-capita annual income in the U.S. was $9,885 (in today’s dollars.) If you believe the U.S. Taxpayers were paying for the war effort, then you’d have to believe they were paying close to 100% of their income in taxes! Another possible answer is that the U.S. government borrowed the Dollars to pay for the war effort. But who did it borrow the Dollars from? This was at the end of ten years of the Great Depression, so it’s hard to imagine the U.S. citizens had that kind of money stashed away in their savings accounts. Maybe the U.S. borrowed the Dollars from China? But in those times the Chinese didn’t even have any U.S. dollars—also they had been recently decimated by the Japanese, and so were hardly in a position to be financing the U.S. war effort. It’s unlikely that England loaned the federal government the Dollars either: England couldn’t even pay us for the ships we were building and “loaning” to them to replace a merchant fleet destroyed by German submarines. The only answer that’s even POSSIBLE is that the U.S. government simply “issued” the Dollars it needed—created them “out of thin air” as people like to say—and then spent the newly created Dollars to buy the ships and airplanes and ammunition it needed.

Which leads to the second important thing to ask: Who did the Dollars the federal government issued “out of thin air” get paid to? The answer is obvious: the Dollars got paid to the American citizens themselves! It’s interesting to consider that during the war years virtually every effort made in the U.S. economy—making steel, growing food, refining oil, building vehicles, sewing clothes…everything and anything—was directed toward supplying the war machine. There was civilian consumption, of course, but it was kept to a bare minimum by various rationing programs which preserved the vast majority of everything produced for the war effort. You might expect, therefore, to find a correlation between the income of American citizens during the years 1940-1945 and the “cost” of the war effort itself. You might expect, in fact, that if you added up the total Dollars the citizens earned during that period, it would be very close to the total Dollars the U.S. government spent on the war effort—but slightly higher to account for the civilian consumption as well. We’ve already seen a hint that this, in fact, is the case, but let’s do the numbers again, just to make sure:

The cost of the U.S. war effort 1940-1945 was $5.3 trillion (in today’s money). The average U.S. per-capita annual income for each of those years was as follows (again, in today’s Dollars):


Adding these numbers we get a total per-capita annual income during the war years of $49,429. Multiplying this total times the number of American citizens at that time (132 million) we get $6.4 trillion—higher than, but very close to, the cost of the war effort itself—exactly what we thought we’d find.

None of these calculations should really surprise us because the mathematical logic is so straightforward. What is surprising, though, if you give it some thought, is what these numbers mean about what “money” actually is—and what it can be used to accomplish. The Dollar “cost” of the war effort was not something the U.S. citizens paid out of their pockets—it was something that was paid to the U.S. citizens to put into their pockets! If you wrap your thinking around that fact—and, as we’ve just seen with our own eyes, it is very much a fact—then you can begin to formulate a correct response to the question we’ve been trying to build an answer to: Why could we NOT afford to initiate, design and construct a U.S. National Retirement Infrastructure?

But first, some further observations and clarifications are necessary. If the U.S. government simply “created” the Dollars to pay for the World War Two war machine (as in the idea of “printing money”) wouldn’t that have created hyperinflation? And if the government was simply “creating” the Dollars as it needed them, why did it dramatically raise the national income tax rates—and why did it sell War Bonds, requiring, in fact, that many workers buy them with a percentage of each paycheck? Doesn’t that sound like the government was trying desperately to collect enough Dollars to pay for the war?

In fact, high inflation was exactly what the federal government was worried about—and for good reason: they were in the process of paying the U.S. citizens 5.3 trillion Dollars without producing anything those citizens could use those Dollars to buy. What was being built were war ships and high-altitude bombers and plutonium bombs—not the kind of stuff citizens could, or even would want to purchase at their local department store. Furthermore, a large part of what was being produced was subsequently being destroyed, exploded, burned, sunk or vaporized—and therefore had to be replaced by paying the citizens even more Dollars to produce the replacements. In short, the U.S. citizens had way more money to spend than they had things to spend it on—which is exactly the situation that makes prices begin to skyrocket. So the federal government did become desperate—not to collect more Dollars for its spending, but to eliminate or “freeze” a big chunk of the Dollars bulging in the citizen’s pockets. Now you can see what the big income tax increases were really about: taking spending power out of the pockets of U.S. citizens. Also, you can see the purpose of the War Bonds: to take Dollars the citizens had today, and move them into the future. Using these strategies, the U.S. federal government did successfully control inflation—prices rose, but they never spiraled out of control and they stabilized when the conclusion of the war enabled citizens, once again, to spend their Dollars on what the economy was producing.

“Money”, then, is something that is created by a Sovereign Government through a process of issuing currency, and then spending it. “Inflation”—the tendency for prices to rise in the general economy as a result of Sovereign spending—is controlled by federal taxes and sovereign bonds, each of which take Dollars out of the general economy. Properly understood and managed, this balanced process enables a Sovereign Nation, collectively, to accomplish any goal it deems necessary or desirable—provided the real resources (labor, materials, technology and energy) are actually available to be employed.

Now: Let’s imagine a collective effort similar to World War Two, perhaps not on such an all-encompassing grand scale, but an effort nevertheless addressing an urgent collective need. Let’s further imagine the federal government issuing Dollars “out of thin air” to pay U.S. citizens to produce the work and build the things necessary to provide for that need. Finally, let’s imagine that the things created by that effort, instead of being things that would be destroyed, or things that citizens had no use for, were things they very much could use to their benefit every day—like, for example, a National Retirement Infrastructure of cohousing they could live in for free, generation after generation. Now that we understand we can actually “afford” to do something like that, why would we not seriously consider doing it?

16 responses to “National Retirement Infrastructure

  1. Erick Borling

    Thanks. Another well-written and useful exposition of the policy implications of Modern Money. The U.S. has quite a number of urgent public needs that will not be met until policymakers understand Modern Money. Highway Trust Fund? I never heard of such a silly concept before, and I’ve let all my congressional representatives know it.

  2. Even better…us 25 and younger who have zero idea if SS will even exist 40 years from now. Granted I know it’s not an affordability issue, but since most of our politicians, and the populace, don’t know any better… I’ll just prepare to work till 80.

    For a grander scale, this NRI is certainly an intriguing idea. I do like how WWII has been mentioned several times on this site, either here or in relation to the JG, because we really do lack a national unity these days, and even a purpose. Of course unity and purpose dedicated to fighting an enemy or the commies isn’t ideal, would be better to have the country pull together for economic greatness: full employment, provide better lives for seniors etc etc
    Shame the US is running out of its own money that it issues!

    • golfer1john


      Don’t work until 80. Retirement is too much fun. Just save some money while you’re working. Save as much as you can in your IRA and 401(k). It’s like getting a guaranteed instant first-year return of 15%, or 25%, or whatever your tax rate is, or 115% if your employer matches your 401(k).

      If you’re working at something where you can incorporate yourself, do it. Then your company can have a defined benefit plan, and defer taxation way in excess of the IRA and 401(k) limits. Or work for a government agency, there are other plans available only to them, similar to 401(k) but with much higher limits.

      While you’re working, you may not have the fastest car or the newest iphone or satellite TV with the NFL package, but you’ll have much more enjoyment from 60 to 80 if you save that money instead.

      And be sure not to smoke or do drugs (more unnecessary expenses), or you may not make it to retirement. Be healthy, if you want to live to 80.

      • Assuming a significant portion of your 401(k) doesn’t get wiped out by a .com style crash then followed by the financial crisis. Market based solutions have a real degree of risk.

        • golfer1john

          If you were in your 20’s in 2000 and had all your assets in the stock market, and kept them there, you’d still be be better off today than if you had kept it in a bank account. True, if it was all in, you’d have been wiped out, but that’s not the recommended way to do it. With a 40-year time horizon, there’s nothing that has done better with less risk than blue-chip stocks. But, if you want more safety, there are other things you can do with retirement funds besides stocks.

  3. Good article. But, shouldn’t this sentence,

    Adding these numbers we get a total per-capita annual income during the war years of $49,429.

    actually read,

    Adding these numbers we get a total per-capita income during the war years of $49,429.

  4. MDBill, Thanks for the correction! I believe you’re right.

  5. golfer1john

    Except that these buildings are apparently maintenance-free, how is co-housing different from a condominium complex?

    And why a WWII-style project of high taxation to prevent inflation, when we are already way overtaxed, causing millions to be trapped in poverty, unemployment and homelessness? Isn’t that a bigger problem? Why take care of only retirees? Aren’t the millions suffering due to high taxation a much more urgent problem, and the right one to address first?

    Could not many of those 22% be able to afford to house themselves, like the 80%, if they had not had FICA taken from them all their working lives? And if FICA were eliminated today, couldn’t their children afford to house them, especially when the children themselves were no longer unemployed?

    If this is just an illustration of the power of MMT, and not a serious policy proposal, then fine. It’s just that I’d have preferred a more relevant one.

    • golfer1john,
      NRI Cohousing is not “maintenance-free”, and I did not intend to imply this to be the case. Cohousing would be maintained in exactly the same way it is initiated, planned and built—by the local cooperative group living there, using Dollars issued by the Sovereign Government. The primary distinction between cohousing and condomiums could be summarized as follows:

      Condos are typically units in a for-profit development which are purchased by people who are strangers to each other, and who (in spite of sharing certain facilities such as parking and pool) remain strangers to each other. Cohousing is a not-for-profit, intentional community that is initiated and “designed” by the community members themselves for the purpose of having a community which shares certain activities.

      The suggestion that direct Sovereign Spending be used to build a National Retirement Infrastructure is NOT a suggestion that all the other things we need to do should be ignored, or that our tax structures shouldn’t be made more rational. I do not even mean to suggest that NRI Cohousing might be a “top priority.” I do believe, however, it is highly relevant since “retirement” is a condition of life that every U.S. citizen will have to confront. It sounds like you, personally, are having a lot of fun being retired—and I’m happy that you are. PART 2 of this essay looks a little closer at the many, many Americans who aren’t having any fun at all.

      • golfer1john

        The condo community where I used to live wasn’t like that. It was built by a developer, but when the building was done the management was turned over to the residents. We had elections and boards, just like a town. The leadership were volunteers, but we had a few employees, too, for office and infrastructure functions. Most of the other residents were strangers to me when I moved there, but we were all members of the clubs and organizations, so that didn’t last long. We were more “neighborly” than most of the other neighborhoods where I had lived in single-family homes or apartments.

        Once your original generation of planners expires, your co-housing will be just like my condo. New residents will be strangers at first, and will be attracted to that particular place because they share the same interests, just as I was attracted to the one where I lived. Maybe I was living in co-housing and didn’t know it.

        Not every US citizen will be lucky enough to “confront” retirement. If I had viewed it as a confrontation, I might have been inclined to keep working 🙁 I think that when allocating finite resources for “public purpose” we need first and foremost to be fair about it. Allocating $2.25T of real resources (plus the ongoing maintenance) based on age discrimination alone seems unjustifiable. If you want to do it based on income, after there are jobs for everyone who wants one, then I’d be more inclined to support it. It can’t be worse than our current public housing efforts. If everyone had jobs during their working years, they might not be homeless in retirement, either.

  6. Tadit Anderson

    Thanks for this bit of analysis. There are a few related details that might be added, imo. One is that Marriner Eccles was without doubt an important influence. There is a piece as well related to the downstream virtuous process of having that income in circulation for decades after that. Another piece might be the GI education Bill, how it was paid for and the lasting positive effects of several types including keeping the re-entry process for the GIs both spread out over time and toward increasing technological and industrial progress. The boost that came to academia as a result had mixed results. The draining of the national equity (aka “deficit”) started with Friedman’s bastard Keynesianism and into the neo-liberal figment of economics into the present day austerity/vulture “economics.” Taxation as a fiscal policy folio presents a means to control the concentration of wealth at the top, rather than at the bottom and “middle.”

  7. JD,
    Much has been made of the gold standard as it related to MMT. Can you address if/how a gold standard, which I believe was real during WWII, affected the government’s ability to issue money? Was it an actual constraint? Was it even considered? Was it relevant?

    thanks, and keep up the good work

    • golfer1john

      The gold standard after 1933 or so only applied to foreign trade settlements, and during WWII Europe was not exporting to us, we were exporting and lending to them. So, no, the gold standard didn’t adversely affect the US ability to spend, if anything it enhanced it. But I don’t think it would have been a consideration either way. I’ve never heard of the war effort in WWII being limited by gold or money, just by real resources. We (and all the other countries involved) were “all in”. Later wars, where not so much effort was required or employed, were different. The guns and butter policies of the Vietnam era were a major influence in the final closing of the gold window in 1971, and even today the cost of the wars in Iraq and Afghanistan are a consideration in economic policy, even though the gold standard is long gone.

  8. Pingback: National Retirement Infrastructure - Part 2 | New Economic PerspectivesNew Economic Perspectives

  9. Thank you for this great article , never has such an article been more timely and appropriate! I see a daily !
    I’m certain many people who study current social and economic conditions will find lots to like in your article!
    I certainly did, and now I would like to add to the dialogue with some not very original concepts / ideas/ and mussings.
    All designed communities should be designed as environmentally sound as our current state of technology can produce. That would mean structures safe from wind and cold and heat and water disruption. neither too much or too little ! Structures that require the least energy to provide the complete habitat for the location in which it is built. So that the developed community should be 90 % or better self sufficient when completed with all consumables produced on site of within the immediate area like 20? miles!
    The USA economy doesn’t need to afford to ship food more than 20 miles anywhere in the USA or people just need to rethink diet and need vs wants and wishes!
    MY neighbor said it best when she said “I want fresh salads in January ” … “because I can afford them” Societies needs to eliminate that ability, so that those who would waste resources and spend energy friverousely, simply can’t do it!
    My wife and I have been working towards a measure of self sufeciency for several years now and every year learn new and cogent lessons because of weather and resource differences in our inviornment ( local ) and attempts to streach our ability to expand our produced range of products, for safety and perceived overall benefit. We now produce vastly more than we personally need to survive and by cooperating with others who will share our philosophy and efforts can provide for even those who cannot plan or work to provide for themselves , the handicapped and helpless!
    Cities cannot support themselves they simply don’t have the necessary resources of scale to meet their needs even though their compactness requires less energy per capita .
    We all have neighbors who make daily trips by auto to get their mail or a simple single item from a store or use one of the many power implements to beautify their home like mowing the lawn to keep it even and looking neat. I read a piece in a conservation bloog about America’s absurd waste of resources, in that Americans use more commercial fertilizer of their lawns that India does on food crops ! Is our entire economy based on un-necessary or glammereous use of resources? When will our social consciousness catch up with reality.

  10. Pingback: National Retirement Infrastructure - Part 3 | New Economic PerspectivesNew Economic Perspectives