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The second issue relates to the fact that the richer , ageing Boomers are now moving into the lower-spending period of their lives , as they join the New Old 55 + cohort . They already own most of what they need , and their incomes are set for a major decline as they enter retirement . As the Wall Street Journal has reported , only 60 % of those in the pre- retirement 55 – 64 age group have a retirement account and even their retirement savings are just $ 104k . The 40 % without retirement accounts have savings of only $ 14.5k .
Generating Reagan-like levels of growth against this background is clearly impossible .
It also highlights the critical comparison between the Reagan-era and today . Reagan ’ s economic policy , like that of Thatcher and other Western leaders , was rightly focused on supply-side issues . Demand could indeed be assumed to be constant , given the spending power unleashed by the Boomers as they entered their Wealth Creator years between the ages of 25 – 54 . But today ’ s position is the opposite . Major demand-side reforms are essential in order to even stabilize growth at today ’ s levels .
Demand-side reforms are now essential to restore the potential for economic growth
Trump ’ s real challenge is to introduce policies that will increase incomes : One target area has to be the poorer Black / Hispanic cohort , who now constitute nearly a third of the total US population . Deporting the illegal element amongst them will not solve this problem . At best , it will only brush it under the table .
Similarly , he needs to use the ‘ bully pulpit ’ of the Presidency to focus attention on the need to retrain people in their 50s and 60s , in order to take advantage of increasing life expectancy .
THE PACE OF GLOBAL RECOVERIES SINCE 1975
125
120
115
110
105
100
95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
▲ Chart 2 The current recovery is very weak compared to those of 1976 , 1982 and even 2001
OECD REAL GDP , SEASONALLY ADJUSTED : REBASED TO 100 AT TROUGH OF EACH SLOWDOWN
NUMBERS OF QUARTERS AFTER TROUGH Source : OECD Quarterly National Accounts Dataset
1975
1982 2001
2009
The US cannot afford to allow 10k Boomers to continue retiring every day until 2030 . This would not only represent a shocking waste of human resources , but also push Social Security and Medicare closer to bankruptcy .
The US is , of course , not alone in confronting the economic challenge posed by an ageing population , although it is unique in containing 2 such distinct cohorts . The slowdown in demand is common across most countries , as chart 2 from the OECD confirms . Today ’ s ageing populations mean that the world has lost the demographic dividend of the Reagan- Thatcher years , and now suffers from a demographic deficit – manifested by the anaemic quality of the post-2008 recovery by comparison with its predecessors .
Chart 2 compares the current recovery against those from the 1975 , 1982 and 2001 recessions . We are now 20 months into the recovery , and yet GDP in the OECD has only grown by 9 % from the trough - compared with 22 % after 1975 , 16 % after 1982 and 13 % after 2001 . This disappointing outcome has taken place despite a background of major fiscal stimulus ( the $ 700bn TARP programme and similar initiatives post-2008 across the major economies ), and unprecedented levels of monetary stimulus .
The wishful thinking evident in the Trump Rally also contrasts quite sharply with developments in the “ real world ”, as