Wednesday, June 6, 2012

The Retirement Age

There is a story linked from Drudge that says France has cut the retirement age from age 62 to age 60 for those who entered employment at 18.  Earlier in the week, Drudge linked to a story, quoting someone who said that the retirement age (in the U.S. I believe) might have to be raised as high as 80.

Of course, the first thing a libertarian might ask is, why is the government determining a retirement age?  It is up to each individual to decide what age he will retire.  The reason that the government talks about the retirement age is because of Social Security and Medicare (or their equivalents in other countries).

It is crazy that the French government would actually cut the retirement age, given the current economy and the massive budgetary problems that countries in Europe are having.  If anything, the age should be going up so that the government can stay solvent.  The new French government is admittedly socialist, which means they believe in free lunches and fairy tales.

As far as the U.S. goes, I think the retirement age (referring to Medicare and Social Security) will go up eventually.  The public sector unions lost in Wisconsin yesterday.  Next, the senior citizens will lose in the whole country.  Some think I'm crazy for saying this because seniors make a powerful voting block.  But when young people have their backs against a wall, they will vote to cut grandma's Social Security check before they have to pay even more in the way of taxes.

This is why I don't really worry about the unfunded liabilities too much.  They certainly are an issue, but it is an issue that can be quickly fixed by raising the retirement age.  A portion of the federal debt is also made up of intra-governmental debt, which is simply debt that the government owes itself.  Intra-governmental debt is almost $5 trillion of the total national debt of almost $16 trillion.  About $2.7 trillion alone is owed to the Social Security Trust Fund.  Just raise the eligibility age to collect Social Security to 80 and this would wipe that debt off of the books.

The squeeze is on.  The governments of the world keep trying to kick the can down the road, but things are coming to end.  They are really close for Greece.

In the U.S., things may chug along for a little while longer.  Eventually, Congress will be forced to cut back, assuming that the Fed doesn't go into hyperinflation mode.  I think Americans will reject large tax increases.  We will eventually see spending cuts.  Since Medicare, Social Security, and the military make up the majority of the federal budget, those things will not be left alone.

I don't think Social Security and Medicare will go away entirely any time soon.  But it is quite reasonable to think that changes will be coming in the form of reduced benefits and a higher age for eligibility.

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