The Hidden (yet obvious) Stimulus Program

If you have been following our economy at all in recent months, you will have undoubtedly heard how many economists and other supposed economic experts have been a bit puzzled by the continuing strength of the American consumer. Despite all of the carnage in the emerging market economies and the dramatic collapse of the oil industry, consumer spending here in the states continues to be quite robust. The truth is that the only thing that is surprising about our strong spending is the fact that so many people are surprised by it.

For the past several decades, the Baby Boomers have been doing all that they can to try and set aside enough money for their retirement. In addition, the government has been setting aside trillions of dollars earmarked for their retirement within our Social Security system. All of this saving has robbed the economy of much needed demand.

To help offset this demand reduction, our financial system has been creating a tremendous amount of debt. By borrowing the savings of the Boomers and spending it in our economy, borrowers are able to restore much of the demand that was lost due to the saving (at least temporarily).

Now that the Boomers are finally retiring, “true” demand is being restored to our economy. I say “true” because it is demand that is coming from savings and not from debt; thus it does not need to be paid back.

In short, millions of Boomers are finally retiring. Therefore the government is mailing out millions of Social Security checks every month. And the number of checks keeps growing every month!

In essence, the government is running a multi-billion dollar stimulus program every month. The government is mailing out billions of dollars, almost all of which will be spent directly in our economy. And this is only the spending coming from Social Security. There will also be billions of dollars of private savings spent in our economy as well. The fact that nobody seems to be talking about this is truly bewildering.

All of that spending is restoring much needed demand and helping to create thousands (if not millions) of jobs in the areas most utilized by seniors: healthcare, personal services, travel, entertainment and leisure, etc… Of course the obvious problem with this scenario is that when the boomers die, the stimulus program comes to an end. So all of the healthcare and service jobs being created to support the retiring Boomers are essentially just long-term temp jobs that will go bye-bye right along with the Boomers. But hey, why worry about a potential crisis now when it is so much more exciting to wait for it to land on our doorstep!

#EconomistsAreMorons