Empty Savings Accounts Drive Support for Trump
I have a new and somewhat different economic theory of the Trump movement. Yes, globalization, immigration, and wage stagnation are all factors, not to mention the cultural issues. But there is another culprit: inadequate savings. This, by the way, helps explain why so much of the Trump support comes from relatively old people.
Here is one bit from my Bloomberg View column today:
“The Center for Retirement Research at Boston College reports that for those on the cusp of retirement – workers between the ages of 55 and 64 – the median balance in household 401(k) or IRA accounts is $111,000.” …
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Half of older Americans are in even worse shape.These days, the 20-year retirement is extremely common, and savings must hold for longer yet for those who will live to 90 or 100 years old. For a 20-year retirement, that $111,000 in savings can work out, under plausible assumptions, to no more than $7,300 a year. And that is the median, so half of America’s older workers are in a worse situation. …
Social Security is already the primary source of income for retired Americans, yet Social Security benefits for the elderly average only $16,000 a year, and traditional private-sector pensions have dwindled in importance.
The typical Trump primary voter was high-income and low-saving.When it comes to comparative retirement security, in an international comparison the United States finished 19th for three years in a row. Even relatively optimistic assessments suggest that only about 28 percent of American households will be able to maintain their pre-retirement living standards. …
As for today’s 45-to-69-year-olds, only 36 percent claim to be engaging in net savings. And only 45 percent of all people earning $75,000 to $100,000 a year claim to have net positive savings, as measured in 2012. That helps explain why the typical Trump voter in the Republican primaries earned a relatively high income of about $72,000 a year and still worried about his or her economic future.
We all know that falling incomes often have more political salience than low incomes. Furthermore, this weakness of the American economy does not show up in either GDP or unemployment statistics.
My conclusion is this: “Trump is himself often portrayed as impetuous. It is less commonly remarked that he may be in part the result of a broader and larger impatience that has plagued American society for decades.”
Do read the whole thing.
Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics, as a professor at George Mason University, and is co-author, with Alex Tabborak, of the popular economics blog Marginal Revolution.
This article was originally published on FEE.org. Read the original article.