Pimco boss urges cut to US deficit

The outspoken chief executive of US-based bonds specialist, Pimco, Bill Gross has pointed to the ageing population in the US and the ratio of retirees to workers as being the underlying challenge facing the US administration.

And, in similar fashion to the Australian Government’s retirement incomes policy, he has suggested that one of the more realistic answers for the US in dealing with an ageing population is for people to postpone retirement.

Gross has used his monthly newsletter to decry proposals by the Bush Administration to privatise elements of the US social welfare system, claiming that neither privatisation nor “any goodly number of Government bonds deposited in the social security trust fund” can alter the underlying retiree/worker equation.

“While these paper assets may “pay” for goods and services, their value will be market-adjusted in future years to exactly match the quantity of things we buy and that quantity will be substantially a function of the available workforce and the price they command for their services,” he said.

Gross said that where social security and privatisation advocating were erring was in their assumption that retirees’ goods and services could somehow magically be generated or even multiplied by the existence of a certain amount of government or private IOUs.

He said that what needed to be understood was that production could only come from employed workers.

“So the basic solution is to produce more workers either through immigration or postponed retirement for the existing workforce,” Gross said.

He said that a better strategy for the US in terms of meeting the retirement needs of baby boomers would be a reduction in the size of the US budget deficit, “and especially that portion of the deficit owed to foreign governments”.