That’s the theory offered by economist Tyler Cowen, especially applicable to older Americans who are riding the Trump train:
Older white Americans are Donald Trump’s core support group, and that’s relevant to the success of Trump’s rhetoric. Commentators frequently cite globalization and wage stagnation as the economic forces behind recent political shifts, but there is a less heralded force influencing American politics: insufficient savings, most of all for older Americans. For those individuals, the prospect of falling standards of consumption – for the remainder of their lives – means the economy is worse than the GDP growth and unemployment numbers are indicating. Here is an unsettling statistic about the U.S. economy, although like many scary things, it reveals its full problematic nature only with scrutiny:“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.” That is from the new Oxford University Press book “Empire of the Fund: The Way We Save Now,” by William A. Birdthistle, a law professor at Chicago-Kent College of Law.
It is certainly true that Americans worry a lot about not saving enough for retirement. It’s our top financial worry, according to Gallup. And Donald Trump has stated he doesn’t believe in trimming promised Social Security benefits. (Trump-onomics will grow out way out of the problem, apparently.) So maybe there is something to Cowen’s theory.
But does perception match economic reality? Maybe not. Pre-retirees think about their future golden years a lot differently than those living through their golden years, as my AEI colleague Andrew Biggs notes:
Already, many more retirees tell Gallup they have enough money to live comfortably than do working-age households. That’s not a sign of undersaving. Neither is the fact that eight-out-of-ten retirees in the Health and Retirement Study say their life is as good or better than before they retired. Nor that 91% of HRS households call their retirements “very” or “moderately” satisfying. You won’t find those levels of satisfaction with working-age Americans…. The reality is that more Americans are saving for retirement today than ever before, and retirement savings and retirement incomes are rising, not falling.
Also this from Biggs:
But the typical American retiree, with a median disposable income of $26,250, has the third highest income in the developed world. America’s median retiree has an income on par with retirees in posh Switzerland and has a retirement income that is 19% higher than retirees in the Netherlands, Germany or Iceland and over 30% higher than in Finland, Belgium or Denmark. One reason U.S. retirees are so well off is low taxes. About two-thirds of all retirees pay no federal income or payroll taxes, according to a recent study from the Hamilton Project, while Tax Foundation data show that the typical combined state and local sales tax in the U.S. is about 6%. By contrast, the average OECD country has a Value Added Tax of 19%, which significantly reduces the buying power of retirees’ incomes.
All that being said, working-class/lower-income seniors or those nearing retirement age may have a more pessimistic view of retirement savings.
Theory: Perhaps as or even more important than retirement fears are (a) fears about demographic change, (b) economic and cultural nostalgia, and (c) concerns about declining living standards for the kids and grandkids.
This article has been cross-posted with permission from AEI.org.