Another day. Another tweet. Another tariff. Another volatile stock market day.
I was planning to write my quarterly blog about issues facing baby boomers as we age, but the topic of tariffs have taken center stage. Then I had an epiphany. These two topics are closely related and need to be combined. Why not place a tariff on all imported old people!
I know what you’re thinking. Chris, you’re brilliant. The money raised from the tariffs on old people coming into the United States will be used to reduce the strain on the Social Security and Medicare systems caused by the increasing population of people over age 65. And yes, as a bonus my solution also finally addresses two other thorny problems for President Trump—immigration and jobs.
As a student of the financial markets for more than 35 years and an amateur economist I know tariffs are a bad idea. About 90 years ago a senator from Utah named Reed Smoot and a representative from Oregon named Willis Hawley decided to put a tariff on two products that were facing foreign competition: sugar and wood. Well, if Smoot and Hawley thought it was a good idea to protect these two domestically produced products, wouldn’t it be logical to protect other domestically produced products? Of course! After hearing many proposals from other senators and representatives the Smoot Hawley tariffs ballooned from two products to more than 800 products!
No matter how beneficial tariffs might seem for the industries they were meant to protect, there are offsetting detrimental consequences called “downstream effects”. These downstream, unintended consequences typically cause the cost of other goods and services to rise, reduce competition, and reduce exports of US goods and services as other countries demand corresponding increases in tariffs from products exported by us.
Of course this is exactly what is happening today as what started with tariffs on two products, steel and aluminum, was immediately countered by Chinese government tariffs on 120 US (mostly agricultural) products. Then the Trump administration retaliated the next day with $50 billion in proposed tariffs on more than 1300 categories of Chinese products. China then added US soybeans, autos, and airplanes to their tariff list the following day. This was followed by a $100 billion threat by President Trump which would triple the number of Chinese imports subject to our tariffs.
As in most wars, even the “winners” sustain some casualties and damage. I believe this trade war will be no different. My hope is that this escalation has stopped but only time will tell. Time will ultimately tell which, if any tariffs actually go through at all. I believe we are currently in the “hot air” phase of the discussions. It has been less of a war and more a rhetorical tariff target practice. The initial tariffs on ALL steel and aluminum imports now exempt 50% of steel imported from Brazil, South Korea, Mexico, Canada and other countries. Remember that it will be many months before any of the proposed tariffs could be put into place. This could make panicked sellers look foolish if the “hot air” threats chill during what is likely to be lengthy negotiations.
Still you begin to understand why we’re seeing more stock market volatility. The eerie chill that I feel through my body is not from the 4 Nor’easters that came through Connecticut in a span of 20 days, nor from the continued April snow showers we’re experiencing. It’s the ghost of Reed Smoot and Willis Hawley that’s frightening me. I think I hear them saying “Don’t forget to tax the sugar and the wood”.
Back to my parity of ending the trade war once and for all. I am proposing the Import Plan On Old People tariff, or the IPOOP tariff.
According to gerontologist and author, Ken Dychtwald, “throughout 99% of human history the average life expectancy worldwide was under 18.” By contrast in the year 2030 all baby boomers will be over 65 and according to the U.S. Census Bureau by 2035 the projected number of seniors over age 65 (78 million) will exceed the number of children under age 18 (76.4 million). This is the first time in US history this will have occurred. According to the Social Security Administration website there were 159.4 covered workers to one Social Security recipients in 1940. In 2013, the last year shown on their website, that ratio was 2.8 workers to one recipient. The combination of falling birth rates and increasing lifespans will cause huge financial strains because fewer workers will be paying into retirement and healthcare benefits system for more retirees. Our public and private pensions are at risk.
And this issue is not exclusive to the United States. For example according to the Wall Street Journal 43% of the national budget of Brazil is consumed by retirement benefits and another 7% by healthcare benefits. These cost unfortunately crowd out payments for such things like education and infrastructure which receive only 3% each. Brazil’s generous government pension system often promises retirees benefits equal to their full salary prior to retirement. Upon death, spouses are typically entitled to their partner’s full pension. The incentive for young women to marry older men to continue to receive their pensions is now called “the Viagra effect” in Brazil. Please don’t get me started with Japan. They have been suffering from an increasing older population along with a smaller number of younger Japanese workers for years. This has led to a Japanese national debt which is 253% of GDP. Think debt to income. The US is approximately 104% national debt to our GDP. The ratios in both countries continue to rise.
In my opinion some countries would love to export these old people to the US. That’s why the IPOOP tariff should be implemented immediately. Of course we will let the young immigrants into our country without tariffs. Why? These young immigrants will be needed to work in jobs which will not only pay into the Social Security and Medicare systems but also provide needed services for us old people. These will be good American jobs that can’t be done by anyone overseas. No call center employee in India can mow my lawn or shovel snow from my driveway when I can no longer do these jobs. Also when we baby boomers can’t perform the ADLs, activities of daily living, we’ll need young people to help feed us, bathe us, help us in and out of the tub and the toilet, etc. I for one know I will need help from someone to remind me where I left my glasses and hearing aids.
In summary, the IPOOP tariffs solve the immigration problem, increase American jobs and relieves the financial and social strain associated with our aging population.
I would now like to thank the fantastic team of people I work with at New England Capital. I know they will be working harder this coming year while I am out of the office. First I expect to be in Washington DC to get the IPOOP tariffs through Congress and signed by the President. Obviously a nationwide speaking tour and the obligatory talk show circuit will follow. Finally a trip to Norway will be necessary to pick up my Nobel Prize in Economics.