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Predictions are that we will soon be seeing the “nuclear option” — central bank-created money injected directly into the real economy. All other options having failed, governments will be reduced to issuing money outright to cover budget deficits. So warns a September 18 article on ZeroHedge titled “It Begins: Australia’s Largest Investment Bank Just Said ‘Helicopter Money’ Is 12-18 Months Away.”
Money reformers will say it’s about time. Virtually all money today is created as bank debt, but people can no longer take on more debt. The money supply has shrunk along with people’s ability to borrow new money into existence. Quantitative easing (QE) attempts to re-inflate the money supply by giving money to banks to create more debt, but that policy has failed. It’s time to try dropping some debt-free money on Main Street.
The Zerohedge prediction is based on a release from Macqurie, Australia’s largest investment bank. It notes that GDP is contracting, deflationary pressures are accelerating, public and private sectors are not driving the velocity of money higher, and central bank injections of liquidity are losing their effectiveness. Current policies are not working. As a result:
There are several policies that could be and probably would be considered over the next 12-18 months. If private sector lacks confidence and visibility to raise velocity of money, then (arguably) public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.
A global recession starting in 2016 led by China is now our Global Economics team’s main scenario. Uncertainty remains, but the likelihood of a timely and effective policy response seems to be diminishing…
Helicopter money drops in China, the euro area, the UK, and the U.S. and debt restructuring … can mitigate and, if implemented immediately, prevent a recession during the next two years without raising the risk of a deeper and longer recession later.
Corbyn’s PQE
In the UK, something akin to a helicopter money drop was just put on the table by Jeremy Corbyn, the newly-elected Labor leader. He proposes to give the Bank of England a new mandate to upgrade the economy to invest in new large scale housing, energy, transport and digital projects. He calls it “quantitative easing for people instead of banks” (PQE). The investments would be made through a National Investment Bank set up to invest in new infrastructure and in the hi-tech innovative industries of the future.
Australian blogger Prof. Bill Mitchell agrees that PQE is economically sound. But he says it should not be called “quantitative easing.” QE is just an asset swap – cash for federal securities or mortgage-backed securities on bank balance sheets. What Corbyn is proposing is actually Overt Money Financing (OMF) – injecting money directly into the economy.
Mitchell acknowledges that OMF is a taboo concept in mainstream economics. Allegedly, this is because it would lead to hyperinflation. But the real reasons, he says, are that:
It cuts out the private sector bond traders from their dose of corporate welfare which unlike other forms of welfare like sickness and unemployment benefits etc. has made the recipients rich in the extreme…
It takes away the ‘debt monkey’ that is used to clobber governments that seek to run larger fiscal deficits.
OMF as a Solution to the EU Crisis
Mitchell observes that OMF has actually been put on the table by the European Parliament. According to a Draft Report by the Committee on Economic and Monetary Affairs on the European Central Bank Annual report for 2012, the European Parliament:
Considers that the monetary policy tools that the ECB has used since the beginning of the crisis, while providing a welcome relief in distressed financial markets, have revealed their limits as regards stimulating growth and improving the situation on the labour market; considers, therefore, that the ECB could investigate the possibilities of implementing new unconventional measures aimed at participating in a large, EU-wide pro-growth programme, including the use of the Emergency Liquidity Assistance facility to undertake an ‘overt money financing’ of government debt in order to finance tax cuts targeted on low-income households and/or new spending programmes focused on the Europe 2020 objectives;
Considers it necessary to review the Treaties and the ECB’s statutes in order to establish price stability together with full employment as the two objectives, on an equal footing, of monetary policy in the eurozone;
These provisions were amended out of the report, says Prof. Mitchell, largely due to German hyperinflation paranoia. But he maintains that Overt Money Financing is the most effective way to solve the Eurozone crisis without tearing down the monetary union:
It amounts to the ECB telling member states that they will provide the Euros to permit sufficient deficit spending aimed at increasing employment and production.
No public debt is issued.
No taxes are raised.
Interest rates would not rise.
A Job Guarantee could be introduced immediately.
The Troika can retire – no more bailouts.
As growth returns, structural changes – better public services, better schools, better health care etc. can be implemented. Growth allows structural changes to occur more quickly because people are happy to move between jobs if there are jobs to move between.
The Bogus Inflation Objection
Tim Worstall, writing in the UK Register, objects to Corbyn’s PQE (or OMF) on the ground that it cannot be “sterilized” the way QE can. When inflation hits, the process cannot be reversed. If the money is spent on infrastructure, it will be out there circulating in the economy and will not be retrievable. Worstall writes:
QE is designed to be temporary, … because once people’s spending rates recover we need a way of taking all that extra money out of the economy. So we do it by using printed money to buy bonds, which injects the money into the economy, and then sell those bonds back once we need to withdraw the money from the economy, and simply destroy the money we’ve raised…
If we don’t have any bonds to sell, it’s not clear how we can reduce [the money supply] if large-scale inflation hits.
The problem today, however, is not inflation but deflation of the money supply. Some consumer prices may be up, but this can happen although the money supply is shrinking. Food prices, for example, are up; but it’s because of increased costs, including drought in California, climate change, and mergers and acquisitions by big corporations that eliminate competition.
Adding money to the economy will not drive up prices until demand is saturated and production has hit full capacity; and we’re a long way from full capacity now. Before that, increasing “demand” will increase “supply.” Producers will create more goods and services. Supply and demand will rise together and prices will remain stable. In the US, the output gap – the difference between actual output and potential output – isestimated at about $1 trillion annually. That means the money supply could be increased by at least $1 trillion annually without driving up prices.
Don’t Sterilize – Tax!
If PQE does go beyond full productive capacity, the government does not need to rely on the central bank to pull the money back. It can do this with taxes. Just as loans increase the money supply and repaying them shrinks it again, so taxes and other payments to the government will shrink a money supply augmented with money issued by the government.
Using 2012 figures (drawing from an earlier article by this author), the velocity of M1 (the coins, dollar bills and demand deposits spent by ordinary consumers) was then 7. That means M1 changed hands seven times during 2012 – from housewife to grocer to farmer, etc. Since each recipient owed taxes on this money, increasing M1 by one dollar increased the tax base by seven dollars.
Total tax revenue as a percentage of GDP in 2012 was 24.3%. Extrapolating from those figures, $1.00 changing hands seven times could increase tax revenue by $7.00 x 24.3% = $1.70. That means the government could, in theory, get more back in taxes than it paid out. Even with some leakage in those figures and deductions for costs, all or most of the new money spent into the economy might be taxed back to the government. New money could be pumped out every year and the money supply would increase little if at all.
Besides taxes, other ways to get money back into the Treasury include closing tax loopholes, taxing the $21 trillion or more hidden in offshore tax havens, and setting up a system of public banks that would return the interest on loans to the government.Net interest collected by U.S. banks in 2014 was $423 billion. At its high in 2007, it was $725 billion.
Thus there are many ways to recycle an issue of new money back to the government. The same money could be spent and collected back year after year, without creating price inflation or hyperinflating the money supply.
This not only could be done; it needs to be done. Conventional monetary policy has failed. Central banks have exhausted their existing toolboxes and need to explore some innovative alternatives.
If you’re among the millions of Americans who feel bypassed by the economic recovery, you should pay attention to what the GOP-controlled Congress says it wants do to the federal government—via the 2016 budget—because if Republicans get even a fraction of what they have proposed, your living standards will start sliding downhill.
This is the takeaway from economists and experts who know how to ignore the right wing’s ridiculous rhetoric about freedom and opportunity, and instead see exactly who will be hurt, and how that will unfold—if the GOP rips the floor out of virtually every federal social safety net, as they propose, and also raises taxes on already struggling lower wage earners, which they also propose.
“The simplest way to understand these budgets is surely to suppose that they are intended to do what they would, in fact, actually do: make the rich richer and ordinary families poorer,” wrote Paul Krugman, The New York Times’columnist and Nobel Prize-winning economist. “We’re looking at an enormous, destructive con job, and you should be very, very angry.”
The GOP-controlled House and Senate budgets not only drastically cut spending on education, retirement, environment, road and bridges, climate change, immigration, job creation, Obamacare, food stamps, and other social welfare programs; but it gives the Pentagon a blank check, and includes tax cuts for the rich and corporations while raising taxes for lower-income Americans. That’s the analysis by the National Priorities Project (NPP), not just Krugman, and they make an even more disturbing point.
In almost every one of these budget areas, nationwide polls show that a majority of Americans strongly oppose what the GOP is proposing. In other words, the Republicans are not delivering the kind of federal government that Americans want; they are declaring economic war on average Americans by reshaping government to serve the upper classes and biggest businesses.
What follows is a summary of the NPP’s analysis, with its documentation, showing that Repubicans are brazenly ignoring public opinion and national needs—which isn’t just anti-democratic but reveals how deeply corrupt the modern GOP has become.
1. Bleed domestic programs to death.The budget is broken down into various areas that are reviewed separately, starting with domestic discretionary spending. This includes education, energy, environment, housing, job training and more. The White House wants modest increases in these areas in 2016. Polls show that Americans want more investment in infrastructure, climate change, the economy, immigration, and support higher tax revenues for these priorities. The GOP propose to freeze current spending or cut it back by hundreds of billions of dollars starting next fall, adding up to $5 trillion in cuts over the next decade.
2. Who needs new or better jobs? Two-thirds of Americans say improving job prospects is a key issue facing Washington. Obama wants to spend about half a trillion dollars over the next six years on road and bridge upgrades, research and development, and give tax credits to new manufacturers. The House and Senate budgets propose “no new funding” in these areas, NPP said, with the Senate saying that “reduced spending and regulation will indirectly lead to job creation.”
3. Who needs a good education? The same-size majority that wants to see more and better jobs, also wants to see Congress improve access to education. The White House wants to expand federal subsidies from pre-school through high school, and spend $60 billion to provide two years of community college for free over the next decade. Republicans propose the opposite. The House wants to cap federal Pell grants, which are awarded to low-income people for college and graduate school. That means “financial aid to fewer families,” NPP said. It also wants “substantial cuts” to discretionary education programs. The Senate is as bad. NPP said its budget has “no new funding for education,” and “unspecified cuts to domestic discretionary spending could mean cuts to education.”
4. Who needs healthcare anyway?Obamacare may have its problems because it relies on private insurers to be middlemen, but since its inception11.7 million people have gained access to healthcare and millions have subsidized premiums. The Kaiser Family Foundation, which tracks healthcare trends, reports that 56 percent of Americans want Congress to expand, improve and implement the law. Obama wants “small tweaks” in 2016, NPP said, whereas the House and Senate still obsess with repealing it entirely.
5. Next on the chopping block: Social Security. Here, too, even cautious pollsters like the Pew Research Center, report that 66 percent of Americans want to strengthen the program—which, contrary to GOP rhetoric, isn’t an “entitlement,” but the government acting as a retirement bank for decades of payroll deductions. Both chambers have already begun to attack a small part of Social Security that helps people with disabilties, saying they want to weed out fraud and cut payments. Meanwhile, the House wants a commission created to “study the program’s problems,” as NPP put it. The GOP agenda is not expanding payments to make life easier, but cutting senior benefits while allowing young people to give their payroll deductions to Wall Street.
6. Privatize Medicare, health care for seniors. Medicare is the federal government health plan for people age 65 and older. It is not free, but costs significantly less than private health insurance. Pew reported that 61 percent of Americans want this system fortified and improved. Obama wants to raise premiums for wealthy retirees, start co-payments for home health care, and allow the federal government to negotiate for lower drug costs, NPP said. The House GOP would also raise premiums for wealthier people, but starting in 2024 if would offer people a lump-sum payment to end their coverage, so they could theoretically buy private insurance. They also would ban the government from negotiating lower drug prices. Both of those proposals are giveaways that take money out of seniors’ pockets and give it to corporations. The Senate GOP simply says it wants to cut about half a trillion dollars from Medicare over the next decade, but doesn’t say how or where those cuts would be. That’s pretending no one would be hurt.
7. Kick 7 Million Poor People Off Medicaid. Medicaid is the state-run health program for low-income people. Under Obamacare, before the U.S. Supreme Court ruled that states don’t have to implement this part of the law, the federal government planned to give every state grants to allow all poor people to get coverage through Medicaid. Even though almost all red states have not helped millions of residents this way, 7 million Americans have gotten access to health care through this Obamacare reform. Sixty-two percent of Americans believethat this Medicaid expansion should continue.
The White House wants to keep it that way and start a project where Medicaid recipients would be able to access new long-term care options, which comes into play when people no longer can take care of themselves. The House GOP doesn’t just want to repeal Obamacare, kicking millions off this health plan, NPP reports, but it would cut overall Medicaid spending and turn the program—along with SCHIP (the State Children’s Health Insurance Program)—into one block grant. That scenario all-but ensures that health care for poorer families will shrink. The Senate GOP, as with Medicare, says trillions must be cut, “but does not specify how,” NPP reports.
8. Our century’s version of “Let Them Eat Cake.” Those infamous words were attributed to France’s queen in the late 1700s, when commenting about impoverished countrymen. Today, in America, the food stamp program (SNAP) tries to ensure that nobody goes hungry, and is supported by 70 percent of the public. The White House wants to continue it and make applying easier for seniors, NPP reports. The House GOP, in contrast, would make “deep cuts to SNAP” and turn it into a grant to states, where legislators might not even use the funds for food aid. The Senate GOP merely says food stamps should be on the list of programs that will yield $4.3 trillion in spending cuts over the next decade.
9. But give the Pentagon more blank checks. Sixty-three percent of Americans say the Pentagon spends the “right amount or too much on national security,” NPP reported, citing a Gallup poll. The White House wants to increase the defense budget by more than half a trillion dollars in 2016, which NPP said would make it “the highest base budget in history.” The House Republican budget writers say that’s not enough, however, and seek to use loopholes in war funding laws to add several hundred billion more over the next decade. The Senate GOP essentially rubber stamps that approach, offering no specifics.
10. And use the excuse of endless war to do it.Even though 85 percent of the public is afraid that getting involved in the civil wars in Syria and Iraq will be long and costly, the White House wants $51 billion in additional wartime funding in 2016, and another $5.3 billion to fight the Islamic State (ISIS). Not to outdone by Obama, the House GOP proposes spending an additional $90 billion next year, NPP reports, while Senate GOP wants about $60 billion more on top of the baseline Pentagon budget.
11. Corporate taxes are still too high, right? That’s not what 66 percent of Americans told the Gallup poll, which the White House sort of acknowledges. Obama, trying to reach some deal with Republicans on tax reform, would lower the top corporate tax rate from 35 percent to 28 percent, and 25 percent for domestic manufacturing, NPP reports. But the White House also would impose fees on Wall Street speculators to raise “$112 billion over 10 years,” close loopholes that let companies park billions overseas tax-free, and impose a 14 percent tax on that cash. House Republicans, in contrast, have only proposed lower rates for corporations and small businesses, NPP said, and nothing to recapture outsized wealth. The Senate GOP hasn’t proposed any corporate tax changes.
12. And the rich can’t afford to pay, either? In January, 68 percent of Americans polled said wealthy households aren’t paying a fair share in taxes. Obama’s budget would try to rebalance that by raising the capital gains tax—on investment income—to 28 percent, and close loopholes that only the wealthiest Ameicans can exploit, such as avoiding inheritance taxes, which would raise $208 billion in a decade, NPP reports. Obama also would implement a minimum tax rate for the richest people, and close a big loophole for Wall St. hedge fund managers, which would raise an additional $17.6 billion over a decade.
The House GOP, in contrast, only wants to lower tax rates “for individuals and familes,” NPP said, and eliminate the “Alternative Minimum Tax that sets a minimum tax for the wealthy.” The Senate GOP, as is the case with corporate taxes, hasn’t proposed any tax changes for the wealthy individuals, suggesting that the status quo works fine for them.
13. But working class and poor must pay more. In a January poll, 91 percent of Americans said that middle-class households paid enough or too much in taxes, and 79 percent said the same for low-income households. Obama’s response to these sentiments is to increase tax credits for all poor people—with and without children—and give a tax credit to students to help pay for college.
Both House and Senate GOP go in the opposite direction, phasing out two tax credits that now lower taxes for 13 million families, NPP reported. Their budgets allow “the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) to expire in 2017, raising taxes on more than 13 million working families.” In other words, the GOP won’t touch taxes for the rich, but will raise them on the poor.
14. Why Krugman called all of this a “con game.”In politics, there’s always a publicly given reason why something is proposed and the real motive, which is not stated. The GOP’s public rationale for these devastating cuts is their sanctimonious obsession with lowering the federal deficit, which makes them pretend to be responsible stewards. About two-thirds of the public say that reducing federal borrowing is a good idea. Obama has cut annual deficits bymore than 50 percent since he took office, fact checkers have found. Obama’s 2016 budget would continue this, cutting about half a trillion next year, and $1.8 trillion over the next decade.
But deficit reduction is not what is going on here. The House and Senate Republican budgets actually would cut less money from next year’s deficit—about $350 billion—than Obama, NPP said, and then decrease domestic spending by more than $5 trillion dollars over the next decade to “balance” the budget. What’s going on is the GOP wants to cut back the federal government to roughly where it was before the Progressive era began a century ago, when government helped the rich get richer and there were no safety nets.
“Think about what these budgets would do if you ignore the mysterious trillions in unspecified spending cuts and revenue enhancements,” Krugman wrote. “What you’re left with us huge transfers of income from the poor and the working class, who would see severe benefit cuts, to the rich, would would see big tax cuts.”
Krugman said this wasn’t Republican extremism as usual, but a declaration of economic warfare on behalf of wealthy Americans at the expense of everyday Americans who want, and expect, more from federal government.
“Look, I know that it’s hard to keep up with the outrage after so many years of fiscal fraudulence,” he concluded. “But please try. We’re looking at an enormous, destructive con job, and you should be very, very angry.”
The National Priorities Project’s budget analysis underscores that the GOP’s proposals aren’t just corrupt—a vast giveaway to the wealthy people and interests who fund their campaigns—but are fundamentally anti-democratic. Poll after poll report that a majority of Americans want Congress to invest in education, road and bridges, jobs, climate change, immigration, healthcare reform, retirement security, safety nets for the poor and vulnerable, and raise taxes on those who can easily afford to pay a fairer share.
Astoundingly, congressional Republicans not only oppose every one of those goals, but their budget proposals, if enacted, would undeniably make life harder for average Americans, millions of whom would slide down the economic ladder toward poverty.
STILL DRIVING Charles Kozlovsky and his wife, Margaret, of Waxahachie, Tex., riding to lunch in their 1957 Chevrolet. Mr. Kozlovsky retired in 2009 from his job as a truck driver and now drives a school bus.CreditBrandon Thibodeaux for The New York Times
WAXAHACHIE, Tex. — Most Americans suffered serious losses during and after the recession, knocked off balance by layoffs, stagnant pay and the collapse of home values. But apart from the super rich, one group’s fortunes appear to have held remarkably steady: seniors.
Supported by income from Social Security, pensions and investments, as well as an increasing number of paychecks from delaying retirement, older people not only weathered the economic downturn that began in 2007 but made significant gains, a New York Times analysis of government data has found.
As a result, America’s middle class is graying.
People on the leading edge of the baby boom and those born during World War II — the 25 million Americans now between the ages of 65 and 74 — have emerged as particularly well positioned in the nation’s economic timeline. While there are plenty of individual exceptions, as a group they are better off financially than past generations and may well enjoy a more successful old age than future ones, even those merely a decade younger.
“These are people who have been blessed with good economic circumstances, especially those who were able to ride the wave of postwar economic growth,” said Gary V. Engelhardt, an economist at Syracuse. “They’re definitely in a sweet spot.”
Older Americans’ ability to rise during the postrecession years when most households were falling reflects a broader trend that has unfolded in recent decades.
In the past, the elderly were usually poorer than other age groups. Now, they are the last generation to widely enjoy a traditional pension, and are prime beneficiaries of a government safety net targeted at older Americans. They also have profited from the long rise in real estate prices that preceded the recession. As a result, more seniors now fall into the middle class — defined in this case between the 40th and 80th income percentile — than ever before.
Median income for people 75 years and older has also risen, but not as much as it has for people in the 65-to-74 age group.
Seniors Are Working, Earning and Spending More
In contrast to the overall trend, seniors’ income has risen since the recession. As a result, the population ages 65 to 74 is more evenly distributed across all income levels than in the past.
Median household income
Seniors’ share of each income level
$60
,000
25
%
50
20
ALL HOUSEHOLDS
1989
2013
40
15
SENIORS
AGES 65-74
30
10
20
5
10
0
0
1989
2008
2013
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
POORER
Income deciles
RICHER
One big reason seniors’ income is higher than before is that more seniors are deferring retirement.
The increase in income is also reflected in spending — growth among seniors outpaces other age groups.
Percentage of the
population who are working
Consumer spending
Average annual household expenditures
35
%
AGE: 65-69
AGE
1989*
2013
CHANGE
30
$29,907
$34,382
+15
%
75 and older
25
39,738
46,757
+18
65-74
55-64
53,762
55,892
+4
20
70-74
45-54
67,770
60,524
–11
%
15
75-79
35-44
66,861
58,784
–12
10
25-34
50,129
48,087
–4
80+
5
Under 25
31,143
–2
30,373
0
All consumers
52,246
51,000
–2
1989
2008
2014
One of this relatively fortunate group is Monette Berryhill, 72. Six days a week she descends from her second-floor apartment for a treadmill workout in the poolside fitness room of her gated complex here in Waxahachie, south of Dallas.
A widow who says she enjoys her freedom too much to date, Ms. Berryhill dines out with friends from time to time and recently took in a country music concert. Her yearly vacation is a San Diego trip to see grandchildren, but this year she expects to splurge on an Alaskan cruise.
Ms. Berryhill’s past career in customer service at two banks did not make her rich. But her retirement is comfortable.
“I feel like I’m doing all right,” said Ms. Berryhill, whose red-framed glasses offset her snowy, spiked hair. “I really enjoy it.”
Gains Mask Inequality
Some researchers have found that the economic success of seniors is masking an even deeper gulf in income inequality between the upper tier and everyone else than what is evident in the overall statistics.
“It’s not so much that older people are experiencing unseemly gains in income,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “It’s more that middle-aged people are not seeing income growing or even keeping pace with inflation.”
Nearly half of seniors ages 65 and up consider themselves in excellent or good shape financially, according to a Pew survey last month, in contrast to younger baby boomers, who view their circumstances less favorably.
More secure in their finances, many older Americans have congregated in traditional retirement communities. The Villages — a Central Florida haven for seniors with its low crime and dozens of golf courses — has been thefastest-growing American metropolitan area for the last two years. Millions of other elderly people have settled in middle-income suburban and exurban areas like Waxahachie.
Living in the muggy weather and neighborhoods of classic gingerbread houses, most seniors here are thriving, riding an overall population boom. But the current crop reflects some different choices from those who lived in the area three decades ago. For one thing, many more of them are working to supplement their income.
“The whole meaning of retirement is changing,” said Gary Koenig, vice president for economic and consumer security at the AARP Public Policy Institute. “People are living longer; they have to fund more years of retirement.”
Charles Kozlovsky, 73, retired from his job driving an 18-wheeler in 2009. Two years later he went to work as a school bus driver. The job keeps him busy but the work can be stressful; on a recent day a student was suspended from his bus for bad behavior.
In between routes, Mr. Kozlovsky goes to the senior center, a popular hangout for its 1,350 members that offers everything from poker games to Zumba for anyone 50 and up. For holidays, he and his wife play host to grandchildren who live nearby, setting up tables in the garage and back porch to squeeze everyone in.
The couple tend their backyard lemon and peach trees; sometimes they take trips to Branson, Mo., to see musical shows. Mr. Kozlovsky particularly enjoys his meticulously restored, shiny red 1957 Chevy, which he shows off in the parade at the annual National Polka Festival in nearby Ennis.
WORKING OUT Dr. Mike Leath, a retired chiropractor, led a stretch-and-flex class at the Waxahachie Senior Activity Center. The city-run center offers a host of activities like poker games and Zumba for those 50 and up.CreditBrandon Thibodeaux for The New York Times
“Things got a little bit better when I started driving a school bus,” Mr. Kozlovsky said.
As recently as the late 1990s, only one in five Americans in their late 60s had a job. Now, that number has jumped to almost one in three. And unlike in their parents’ generation, more women are earning paychecks than in the past, contributing to household income.
Researchers say these factors are in large part responsible for the substantial rise in median household income that seniors in their late 60s and early 70s have experienced since 1989, even as Americans in their prime working years have mostly treaded water or lost ground.
Not everyone, of course, can work later in life. Health problems and age discrimination present major hurdles. And many of those who find jobs consider them barely adequate.
Pat Cherry, 72, has been earning minimum wage at a job in the library of the city-run Waxahachie Senior Activity Center. Ms. Cherry, who is divorced, had to retire early from a bookkeeping job after an autoimmune disease caused her to miss too much work. She could barely pay her bills until she found the part-time job through a government-sponsored work program, but it expired last month.
Ms. Cherry is worried no one will hire her again. “I need the money desperately,” she said.
Still, for those seniors who manage to work longer, the benefits can be significant, providing a much-needed enhancement to retirement income. And for those with enough money from a job to postpone receiving their monthly checks from the government, the value of future Social Security payments rises by about 8 percent for each year of waiting, up to age 70.
Photo
‘I'M DOING ALL RIGHT’ Monette Berryhill shopping in Waxahachie. Ms. Berryhill, who had worked in customer service at two banks, said her retirement was comfortable but she was worried about her two children.CreditBrandon Thibodeaux for The New York Times
Social Security benefits make up more than half the total income for a majority of the nation’s elderly — 52 percent of married people and 74 percent of unmarried people, according to the federal government.
Kathleen McGarry, an economist at the University of California, Los Angeles whose research focuses on the well-being of seniors, calls Social Security “the single most important tool in combating poverty among the elderly.”
For Jim Engel, 72, his government benefit offered a lifeline after he lost his bakery business during the recession. The checks let him put off the sale of his nest egg, a Tennessee walking horse barn, allowing time for property values to recover.
“I feel blessed,” he said.
Extra Responsibilities
To be sure, many older people have trouble making ends meet and some are saddled with responsibilities that exceed the reaches of the safety net. Mary Walker, 74, who fled New Orleans during Hurricane Katrina with no more than an extra pair of underwear in her purse, is now raising two young great-grandchildren on her own not far from Waxahachie. “At this age I shouldn’t be struggling,” she said.
But older Americans in general are significantly wealthier compared to previous generations.
The median assets of people ages 65 to 74 doubled between 1989 and 2013, a far greater gain than other age groups experienced. And while there has been a decline from the peak since 2007, largely because of the real estate bust, this age group lost less than others.
Ms. Berryhill, the widow in the gated complex, had no debt on her home on three acres when real estate prices were plummeting. By the time she put her house on the market in 2011, it sold in one week, at a significant profit. Besides that cushion, she gets about $1,600 a month in Social Security and has proceeds from retirement accounts.
She pays nearly $900 a month for a spacious, one-bedroom apartment decorated in red — the sofas, the computer mouse, the plates and even the napkins carefully folded into wine glasses are all red. On a recent day she bought an inflatable palm tree for her granddaughter’s luau-themed birthday party.
Government data on consumer spending reflects the new reality. Adjusted for inflation, older Americans spent 18 percent more per household in 2013 than in the late 1980s, while spending for other age groups remained relatively flat. Higher health care costs, which fall more heavily on the elderly, accounted for a portion of the difference, but seniors spent 57 percent more on entertainment, and significantly more on a wide range of items, including homes, rental cars and alcoholic beverages.
Ms. Berryhill was 66 when she retired. Her husband, Warren Berryhill, died of heart problems seven years ago. At age 68, he was still working full time as a debt collector.
“We thought it would give us more money to retire on when we did retire,” Ms. Berryhill said.
Ms. Berryhill is much better off than her parents, who grew up during the Depression. Her father, who was a gasoline truck driver, had to retire at age 61 because of a heart ailment. Her mother did not work outside the home. They were always able to pay their bills, but Ms. Berryhill said they never took a vacation trip, let alone left Texas.
“We weren’t rich but we didn’t hurt for being hungry or anything like that,” Ms. Berryhill said.
She worries how her two children will fare. Their paychecks are bigger, but Social Security payouts, she fears, could be smaller when her children reach retirement age. They might have to take out loans to help pay for their children’s college educations. They have 401(k) savings plans at work but those are not as generous as her employer-sponsored pension.
But she always taught her children to save, and she cannot do much more now, she says, than hope for the best.
