Jul

18

Here's the brewing problem that I think about every day: "The Real Class Warfare is Baby Boomers vs. Younger Americans".

I'd claim it drives me to drink, but do I really need excuses?

While my parents worry about my future… I worry about the solvency of the programs that their generation built… and how 14 percent of my freelance revenues might as well be lit on fire because (let's be honest) my social security and medicare taxes are not coming back with the same purchasing power or benefits guarantees (The healthcare system in 2053 will be tremendous, I'm sure).

These programs obviously need some means testing, as Pelosi's generation and anyone with 20-30 years of business experience will likely be much better off in the U.S. at their age then my generation will at 50 through 70, given resources, expanded competition from abroad and so on.

I personally feel sorry for anyone under the age of 27.

I graduated in 2004 (in a bad job market) and was still just able to sneak out and get 4-5 years of solid experience before the bottom fell out in 2009. Then I was able to go onto grad schools…I think I barely escaped. But it appears that fewer and fewer in 2008-2011 undergraduate classes are able to get the practical experience before they hit 30.

I spend a lot of time researching the impact of the recession on MBA education, and I'm seeing the ages go up, and applicants 22-27 being shown the door before they even get a chance to say hello. How we're going to sustain and educate our next crop will be a new gap. I am interested to see if there will be a significant pay gap between individuals 30-40 today, and individuals 30-40 in ten years.

Every day, Australia looks better and better to me for a 2014-2015 move. Too bad the IRS will meet me at the docks once I get off that slow boat.

Ralph Vince writes: 

Garrett,

Thanks for your posting. Your post deserves comments from the more geezerly here. Permit me to be the voice of those despised boomers.

I agree with you on inter-generational warfare notion. I hear it incessantly from the younger (<35) crowd, and not that it is without merit, I find it's rather one-sided. I am left wondering, despite the miserable economy and resultant job market of recent years, why the animosity? I, for one, twice your age, having been paying into the Ponzi schemes at over 18% per year for over 4 decades of my working life. Most in my circle seek to dismantle these Ponzi social programs, and agree the place to begin is clearly through means testing. I too don't expect to see a dime from these systems (not that I would qualify under means testing, but I would prefer we stop the Ponzi nonsense and consolidate it all under Welfare. Actually, I would prefer they do away with it entirely for that matter!)

Don't forget, roughly half of us boomers have been relentlessly voting against any of this nonsense our entire lives, and have sought to have it dismantled, but we have been outnumbered by the handout crowd — I believe your generation fear the boomers now becoming the handout crowd, an understandable concern given the demographic imbalances. Here is what they evidently don't teach in grad school (and I don't say this with condescension, rather because I find a conformity in perspective among the < 35 crowd). Straight-line forecasts into the future never work. The image presented to those your age — the straight line, cause and effect, demographically created scenario — that demographic doomsday isn't going to happen. Things always, invariably, descend from outside the system, rendering the straight-line forecast of the masses substantially wrong.

I don't know precisely WHAT those outside influences will be, but I'm pretty certain they will be severely pro- economic growth. This will have profound and far-reaching economic effects on the generation of workers now < 35. I'm not talking in the distant future either, but rather this decade. Don't be surprised to see home values surge, 200 to 300 percent over an 18 month stretch — when people least expect it. Don't be surprised if we need to bring in a few million qualified tradesman, or real competition among medical services in the US, wrought from outside the US. Don;t be surprised with plentiful, inexpensive oil and electricity. There are a myriad of factors now conspiring to create an enormous economic boom. Don't buy the "We are going the route of Japan" scenario. We are not Japan. Don't be surprised by double-digit GDP growth at some point this decade. The ground is shaking right now, and the < 35 crowd is unwittingly standing atop a mountain of opportunity for those who can shed the yoke of perspective that has been sold to them.

Lastly, Australia? Forget about it. Throughout my entire adult life, I have been of the mind that the US is really NOT the place to be if one wants opportunity and economic growth. I believe that is now flipped, and the states very likely presents the prospect for great growth and opportunity in the coming decade. This is a time to sit tight, take chances, and if things soften more, risk more, buy into it.

That's my two cent take, I wish I was young enough to capitalize on it the way a young man could, but I'll stake my future entitlements on it.


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4 Comments so far

  1. Ed on July 13, 2012 8:07 am

    I like your insight. However I think the principle can be taken farther. There are multiple “cold war-class war” situations going on in domestic politics that are based on irreconcilable differences. Economics, ethnicity, race… Americans briefly felt they were “building a nation” however I think it would be more accurate to call it now an administered imperial territory - From citizen to subject in a few generations.

  2. steve on July 13, 2012 10:28 am

    Things with me are mostly academic. I can limp to retirement and will be able to collect some social security and medicare.

    I was in the middle of the baby boomer generation. I envy those who were burn at the beginning of the war years 1939 and onward. They enjoyed the greatest expansion of the world up to the beginning of the new century. There were interruptions of course in economic expansion during the very dark Carter years but they are by all accounts part of the greatest generation.

    As for the younger generation of today. I truly feel pain for them going foreward. Government has grown so incredibly large, spending is ridiculously out of control and the future is very cloudy due to the extremely poor jobs outlook. If I were starting a family today, I would be so terrified I think i would lose my mind.

    This once great nation is being driven inexorably to that of a socialized state. Political parties are separated by dogma It is a remake of the Hatfields and the McCoys and the Montagues and the Capulets all over again. Now they are called Democrats and Republicans. They have been feuding for so long most of them have forgotten the reason way. Maybe it is because of a pig.

    This whole insane process reminds me of the movie War Games “Strange game Professor Falken. The only winning move is not to play.” Care for a nice game of chess?

    I am also reminded of the movie The Untouchables. Sean Connery says to Kevin Costner “Everyone knows where the distilleries are the question is what are you going to do about it.” “Once you go through this door, there is no turning back.”

    Finally, If the Government ran the desert, there would be a shortage of sand. Ragan said it best “Government is not the solution to the problem it is the problem”

  3. Craig on July 18, 2012 6:07 pm

    A low average age of country’s population is why people were excited about South Korea and Ireland. Interestingly, Germany now has one of the older populations. Australia is slightly higher than the US. Maybe that’s something to consider.

    http://en.wikipedia.org/wiki/List_of_countries_by_median_age

    Iben Browning used to say that the opposite of freedom is security. You can’t have both. I want to believe Ralph but we seem a little closer to martial law every day. The civil war cycle peaks around 2030, so we’re probably going to see some of the pressures that goes with that cycle even if we don’t break up.

  4. JDT on July 19, 2012 3:58 pm

    @Ralph: the implicit argument you are evincing is a common one. “If one my policies had been enacted instead of the actual ones the world would be the perfect one”. It is coupled with the “I may/may not have supported this person but I didn’t support this particular policy or bad outcome thus I bear no responsibility”. Poor outcomes are the product of collectivized decision making while good ones are always directly the product of the individual.

    My friends to the left of Che frequently tell me “if only President Obama was a true leftist, he would win with 90% of the vote” while those of a more right wing persuasion insisted that had President Bush followed a more ideologically pure course all poor outcomes could’ve been avoided.

    I agree - you and many of your generation did not support the expansion of the entitlement state to its present form. Unfortunately, your generation was in power politically and economically thus right/wrong/indifferent, I’m simply unsure what other large group can bear responsibility.

    Further we are not looking at some distant future projection for this discussion. This is now. Welfare for middle class and affluent people (for example public sector pensions) is already destroying my west coast state and we are not alone in this. The destruction in wealth caused by rising taxes that buy diminished services is already here.

    I will sell your double digit growth this decade without a second thought as well. Telling me we are not Japan is not evidence, merely a claim. Japan however is not a terrible outcome - certainly it is better than Greece, Italy, et al. The question that is never fully answered is “does the US want growth anymore?” Building infrastructure is a nightmarish process, industry is something to be avoided at all costs. I simply cannot see double digit economic growth (or even sustained 5%) if nothing can be built except wind turbines (and even then with controversy).

    As for the larger meta point - I am under 35. At the risk of overstating my case, my generation looks at yours and says “young people never control the circumstance of their coming of age. You entered the adult world in a time of opportunity, got rich, built a system to protect you, and now in this economic downturn have shown little interest in sharing any of our suffering”. What nice trivialities we get - stay on our parents insurance until 26, 3.4% student loans. Wonderful. And we look at the system for the middle aged and middle income and say “why not that?”. It is designed to protect and enrich them. It is immaterial if one refuses to accept the validity of the modern welfare state, those benefits exist and they matter.

    The rigging of markets to protect the financial health of my parent’s generation is both obvious and distasteful. If you live in your house for a long time (prop 13) you pay little tax compared to a young person. The mortgage market is propped up to protect the little equity left in housing. State support for higher education has dropped precipitously in favor of prison spending. I can continue ad nausem but it’s already overdone. In essence, a young, relatively rational person could see the world as a system where the playing field is systematically tilted against them. (I personally do not share this belief with any great fervor but it is certainly logical). Yes maybe the future will hold unforeseen explosive growth but most a reasonable person might struggle to identify where that will be and if it will ever come.

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