Mr. Rucker is President of The Eddy-Rucker-Nickels Company, Management Consultants.
The difficulty of satisfying immediate needs during our working lives leaves many of us with little time to think of the economic challenge of retirement. But the challenge stands.
Just now the senior citizens of the United States number more than 12.5 million; population experts tell us that by 1975 our number will be 21 million. If that number of us oldsters then expect an average yearly income equivalent to the present per capita fig-ure—about $2200—our total claim would exceed $46 billion, an amount greater than current annual expenditures for national defense.
But our senior citizens are not, and will never be, the sole claimants to our production of food, clothing, housing, and other economic goods. Today, there are about 44 million dependent children in the United States. Should present high birth rates continue to 1975, we then would have approximately 75 million youngsters under 15 years of age.
So, there stands the challenge. Simultaneously rising longevity and birth rates mean that for some time to come the proportion of dependents in our population will be rising. Our working population, especially those between the most productive ages of 20 and 50, will not begin to grow in proportion to total population for at least another decade, if then.
We must remember that all the people who will go to work in the next 20 years have already been born. Also, there is constant pressure to reduce working hours per person. In other words, we face at least 10 and perhaps 20 or more years in which productive man-hours, relative to total population, will be definitely below past experience.
That forces our attention toward increasing the other great factor of production—the quality and quantity of tools or capital—at a faster rate than the 3 per cent annual average of the past 40 years. The more far-sighted industrial leaders see the problem. But far too few industrialists and far too few other citizens are yet aware of the tremendous need for accelerated capital investment to meet the economic challenge of a population loaded with youngsters and oldsters.
Here is a field of interest and personal endeavor in which our citizens, especially our senior citizens, may well enter—even if only to show, demonstrate, and educate young and old alike to the imperative need for ever-greater capital accumulation in industry. The amount of, and the ease with which we can obtain the food, the housing, the clothing, and the amenities of life for our later years will depend upon a sharp acceleration of the growth of tools of production.
I have high confidence that we shall attain the production increases needed, especially if we seniors will use some of our time in cultivating a local and national political climate that will encourage individual saving and stimulate new investment and risk-taking.
But, granting that we can accelerate the increase in annual output, how shall it be distributed among our senior citizens? In an economy in which the necessaries of living come to us in exchange for money, how can we assure adequate incomes to all senior citizens?
Now this is a problem which historically most of us have tackled individually. During our working years we are accustomed to earning income from personal effort, thus assuring ourselves of a continuing supply of goods and services that make up our scale of living. Many of us, if not most, have also foreseen the day when our personal earnings would diminish; we have therefore set aside or saved for our retirement. Our savings consist of life insurance, stocks and bonds, income-producing real estate, contributions to pension funds, and so on. Those voluntary accumulations of individual savings have largely found their way into capital for productive tools and facilities. In brief, the thrifty people of our nation have voluntarily provided the means of expanding our national output—thereby providing themselves an income for their old age.
As I see it, the problem of distributing tomorrow’s production so as to provide for us senior citizens is chiefly a problem of how much how many of us save today. We need vastly to enlarge the number of voluntary savers among those who are working now, thus affording them a means of future self-support. Thereby, we tend to assure the capital growth that will provide the new and better tools of production we need tomorrow, and also to assure a widely diffused flow of income to those who will retire and semi-re-tire in the coming years. This is the time-honored voluntary system of the American republic.
I think that it can not be replaced by a compulsory distribution of income without loss of individual dignity and independence, and perhaps the ultimate destruction of personal liberty. Whatever the merits of the federal social security program, its basic moral defect is that it is compulsory and not voluntary. Its basic economic defect is that the payroll tax which finances it in part does not represent savings and capital accumulation. It contributes nothing to expanding the tools and equipment of industry and agriculture so imperatively needed to expand output for the future. Its basic political defect is yet to be exposed; it consists in taxing the working population to support those who no longer can work—and when that burden reaches the $50 billion a year total, or more, we shall see a tragic political cleavage, youth arrayed against age, son against father, and daughter against mother. Those three defects—moral, economic, and political—may well undermine this republic which we here now think we have bequeathed to our children and our grandchildren.
If we are to pass on to our descendants that heritage which we received from our forefathers, we senior citizens must take a firm stand in behalf of our traditional liberal ideas. These ideas of saving and thrift, independence and personal dignity are not exactly new, but they are nonetheless genuinely liberal. Their antithesis, the concept of state compulsion, is neither new nor liberal. Liberality does not consist of making free with other people’s money and freedom. Our senior citizens had best not retire from the eternal task of preserving the American heritage.
I want to pinpoint this opportunity and challenge. Many of us already know at firsthand what it means to live on a “fixed income.” So long as the inflationary expansion of our currency continues, it means that those living on fixed incomes are inevitably condemned to a steadily declining scale of living. Let me repeat that—we are condemned to live on less and less each succeeding year. And also let me give you the reason in nontechnical language.
The reason why we have inflation is that the supply of money is subject to political rather than economic regulation. Both major political parties are openly committed to the theory of a “steadily expanding money supply.” This policy, otherwise known as deficit spending, enables the federal government to claim goods produced and saved by individuals. In short, inflation is a method of taxing away the value of private savings.
The practice of this monetary “miracle” in the United States means that the increasing productivity of the American system is not for those on fixed incomes, not for the elderly who earn little or no income from wages and salaries. It means an end to the natural tendency of higher productivity to lower costs and prices relative to incomes and thereby increase the purchasing power of money. In this way and only in this way can people on fixed incomes buy more each year; only in this way can our huge market among the senior citizens become an expanding market for industrial output. Only in this way could our senior citizens enjoy, along with other Americans, a rising scale of living. The monetary policy of the federal government, of both major political par-ties, denies them that opportunity.
The aged and the elderly are not only denied an opportunity open to Americans of working age; they are condemned by this “free-wheeling” monetary policy to suffer a continuous reduction in the purchasing power of their dollars.
To any thoughtful student of monetary history, ancient and modern alike, the deadliest enemy of the man and woman over 65 years of age is paper money under political control. Presently, over 12 million of our citizens are over 65; by 1975, some 21 million will be in that age group. Most of today’s senior citizens and those of tomorrow must live off a “fixed income.” The deficit-backed dollar condemns them to accept a scale of living that shrinks yearly, compounded, as long as inflation continues.
Let me show you from personal experience: My father, on retirement in 1933, had lifetime savings which he thought ample for a comfortable living throughout his remaining life. But he was wrong. In that year, our government abandoned the gold standard and outlawed private possession of monetary gold. In ten years, each $1000 of Dad’s retirement income had shrunk to a purchasing power of $747. When he died in 1951, each $10.00 of his fixed income was worth less than $500 in terms of living costs. This was his reward for a lifetime of hard work, thrift, and prudence. Today, over 12 million others like him are receiving the same sort of “reward.”
Mark this: Our senior citizens will number 21 million in 1975. Sometime between now and then, they will represent the largest block of votes in the nation which can be mustered behind a single, crucial issue—how to avoid or to halt pauperization brought on by a flood of tax receipts disguised as paper money.
In the attempt to avoid or to halt that process, the votes of this politically superpowerful group of elderly citizens will be mustered by some future leader. They will force either a return to a dollar which cannot be “counterfeited” by the government, or, alternatively, they will force such an outpouring of more fiat money as a means of raising old age benefits, that well may topple the fiscal pillars of this republic. I do not pretend to know which way we shall vote; I do know that 21 million of us will not submit in perpetuity to a sentence of pauperization from the depreciation in the purchasing power of our fixed incomes.
But either we shall have to stop further inflation of the price level, or we shall have to force an inflation in our fixed incomes, equal to price inflation.
Mark this well: it will be one or the other. And do not let any rationalization make you think otherwise. If you are now 45 or 50 years old, you are likely to be among the 21 million of us voting to make one of these two forecasts come true.
Here, I think, may be the greatest challenge of them all to our senior citizens. The problem of expanding output to provide for a rising population of both youth and age is a great one; the problem of so encouraging saving as to diffuse income among the retired citizens of the future is an even greater one. But to me, the task of halting the inflation that well may beggar them in the last years of life is the greatest challenge of them all.
Surely our mature judgment, our experience and our courage offer the hope that we can meet this triple challenge. By thus defending our savings and ourselves we build, at the same time, an impregnable foundation for the lives of those whom we proudly hail—our children and our grandchildren.