Cutting the Net When We Need It Most
At the very time when the social safety net is most needed, investors the world over are calling it a drag on the world economy. Here in the U.S., wages are stuck, income is down, unemployment remains around 10 percent, with almost half of those out of work for six months, consumption trends are flat, and Main Street is hurting. In Europe, where the safety net is a proud tradition, cries for cuts are even louder. "The current system," wrote the New York Times of Europe over the weekend, "is unsustainable." According to the European Commission, in the 1950s there were seven workers for every retiree in advanced economies. By 2050, Europe's ratio will flip, with less workers supporting more pensioners. With the retirement of the baby boomers, the number of pensioners will rise 47 percent in France between now and 2050. The French state pension system today is running a deficit of 11 billion euros. French state pensions, Social Security in the U.S.--investors are pushing hard to cut these programs, unwilling to entertain higher taxes. But people who sound alarms about fiscal demise rarely point out that stagnant wages leave little room for enhanced savings and putting a lid on retirement income -- here and in Europe -- drives down consumption. There are alternatives but low consumption means low growth. Something's gotta give. The F Word is a regular commentary by Laura Flanders, the host of GRITtv which broadcasts weekdays on satellite TV (Dish Network Ch. 9415 Free Speech TV) on cable, and online at GRITtv.org and TheNation.com. Support us by signing up for our podcast, and follow GRITtv or GRITlaura on Twitter.com.