Aging boomers face stark economics - CNBC TV

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Aging boomers face stark economics

Declining finances, rising health care costs threaten a generation

CNBC

updated 12:12 p.m. CT, Thurs., March. 4, 2010

Not so long ago, Michael Blattman lived in the upscale Washington, D.C., suburb of Potomac, Md., earning $225,000 a year as senior vice president for a student loan company. As he reached his 50s, it never really occurred to him that his job wouldn’t last forever.

“To be perfectly honest, I didn’t really go there,” he said. “Yeah, there was always a risk. Everything in business is a risk.”

In January 2008, Blattman, along with 500 other employees, was laid off by his company. With an $188,000 severance, he wasn’t worried at first.

“The barometer was always something like five or six months until you landed something comparable,” he said. “So I figured, ‘Oh, OK, six months?’ OK, I could do this for six months.  And find the next one. Well, there was no next one.”

As his generation confronted an economic storm of historic proportions, Blattman found himself humbled — and living in a one-room apartment. After applying for 600 openings and getting only three interviews, he was still looking after two years. 

His old boss recently gave him a stark assessment of his prospects.

“He said, ‘How’s it going?’” Blattman recalled. “I said, ‘Nobody’s talking to me.’  And he says ‘That’s because you’re an old white guy.’ And that stopped me in my tracks.”

Blattman gets some solace from the knowledge that he’s far from alone. More than 4 million baby boomers are unemployed, according to the Bureau of Labor Statistics. For many, retirement at 65 is no longer an option.

Facing shrinking nest eggs and mounting bills, they need to work, but they wonder if anyone will hire them again.

“The hardest thing each day is to get up and say, ‘OK, what am I going to do today?’ It’s a constant cheerleading effort every day. The thing is, I’m the cheerleader. And I am the team.  So I’m all in one.”

Blattman starts every day checking out online job sites and sending out resumes for jobs that pay much less than his old salary.

“I have applied for jobs that are one-fourth, one-third of my previous income level,” he said. “And I would have been thrilled to get it. There are just too many of me and everyone else out there. I just wish there was a place for us, to kind of land.”

All the want, the wishing, can lead to worry and to stress.

“People who are in this position can have heart attacks, could get strokes, because of the intense stress levels,” said Blattman.

For Blattman, the chronic stress has induced him to grind his teeth, which has led to several root canals, damaged his implants, and worn away his bank balance. When his health insurance expired in August, he was left with $13,000 in out-of-pocket expenses.

It’s a double whammy: no job and no health insurance. Many boomers are in far worse shape than Blattman. Some have turned to free clinics. It’s just one indication that the health care crisis is really an economic crisis.  And for the boomers it’s only going to get tougher, according to Harvard financial historian Niall Ferguson.

“If they’ve done their homework, then they’ll be afraid,” he said. “Very afraid.”

Ferguson says it won’t be easy to care for a generation with ailing bodies and many more years to live.

“The baby boomers have set us on a path towards a massive fiscal crisis,” he said. “Which is going to hit as the baby boomers retire.”

The recession, though devastating, will pass. But rising health care costs as boomers age may bring lasting harm to this generation’s financial well-being. By the time all boomers are 65, the senior population will have grown from 40 million now to about 72 million. Who will pay their medical bills?

“This thing is going to blow up,” said Ferguson, “because A: The number of retirees is about to zoom upwards just the way the number of teenagers once zoomed upwards in the ’50s, ’60s and ’70s; and B: Because the costs of these systems are completely out of control.”

The strain that the burden of caring for aging boomers will put on the health care system could overwhelm the economy.

If current trends continue, in 20 years almost a third of everything we spend on goods and services will be spent on medical care.

“The cost of health care for the elderly has been explosive,” said Ferguson. “And that is the crisis which seems to be the really big crisis lying ahead of us. We simply don’t have an answer as a society to the problem of a very large number of relatively unhealthy people who live into their 80s.”

Blattman and other boomers have woken up to a new reality. Their long-cherished belief that their lives would inevitably improve over time may no longer be true. It’s a cautionary tale for future generations.

“Never assume things will be better tomorrow than they are today,” he said. “It doesn’t mean you’re going to be worse off. Just don’t take things for granted and enjoy what you have.”

But he hasn’t given up hope. “Never,” he said.

The Jobs for Main Street Act of 2010, H.R. 2847

December 17, 2009

The House introduction of the anticipated “jobs package” provides states with sizeable infrastructure and potential job-saving initiatives to help weather the current economic lull.
The Jobs for Main Street Act of 2010 contains both emergency and non-emergency funding that is partly covered by savings from the Troubled Asset Relief Program (TARP).  Included within H.R. 2847 is the enhanced Medicaid match through June 2010 along with a variety of components previously targeted in the American Reinvestment and Recovery Act (ARRA) to counteract unemployment and state revenue losses.
Other provisions included in the legislation is an extension of the Surface Transportation Authorization and allowing the Small Business Administration to continue temporary loan guarantee authorities through fiscal year 2010.  The Act expressly notes that all funds must be obligated by September 30, 2010, and will be subject to all requirements of Buy American within ARRA.
H.R. 2847 is one of several recent House measures to focus on job creation, public sector improvements and current laws about to expire.  The defense appropriations (H.R. 3326) includes add-ons such as delaying a scheduled cut in the Medicare provider payments, providing extended unemployment benefits, adding six months to COBRA benefits, providing states with $400 million for administration of the Supplemental Nutrition Assistance Program and extending authority for two small business loan guarantee programs.  These provisions are all extended until February 28, 2010.
Both H.R. 2847 and H.R. 3326 were passed by the House on December 16.  While the defense bill will likely pass the Senate and is expected to be signed before the end of the continuing resolution on December 23, the Senate is not expected to take-up the jobs bill before the end of the calendar year.
Detailed below are key provisions included within the Jobs for Main Street Act.

Medicaid and other Health Provisions

• $23.5 billion to extend enhanced federal Medicaid match funds through June 2010
• $12.3 billion to extend from 9 to 15 months the 65% COBRA insurance subsidy; the job lost eligibility date is extended to June 30, 2010

Transportation 

• $27.5 billion to make additional highway infrastructure investments
• $8.4 billion for public transportation investments, including $6.15 billion for urban and rural formula grants
• $800 million for capital grants for Amtrak
• $500 million for airport improvement projects

Energy and Water

• $2 billion for the Innovative Technology Loan Guarantee Program
• $1 billion for the Clean Water State Revolving Fund
• $1 billion for the Safe Drinking Water State Revolving Fund
• $715 million for environmental restoration and flood protection by the Corps of Engineers

Education

• $23 billion for an Education Jobs Funds for states (through the ARRA fiscal stabilization fund)
• $4.1 billion for school renovation grants

Housing

• $1 billion for the National Housing Trust Fund
• $1 billion for the Public Housing Capital Fund

Labor and Workforce

• $41 billion to extend expanded unemployment benefits
• $1.18 billion for law enforcement jobs (primarily COPS program)
• $750 million for grants for job training in high growth fields
• $500 million for summer youth employment
• $354 million for small business loans