Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Retirement Planning > Social Security

The boomer legacy: an economic mess

Your article was successfully shared with the contacts you provided.

I write these lines on the 72nd anniversary of D-Day. That day in northern France was the pivotal day and its story was the pivotal event of the 20th century. As Omar Bradley pointed out, every man who set foot on the beaches of Normandy on June 6, 1944, was a hero — the men who took the cliffs to fight tyranny and took back a continent for freedom. I dare you to try to watch film footage of and about that horrible, dreadful, wonderful day with dry eyes or a cold heart.

Here’s to the boys of Pointe du Hoc. In the words of the poet Stephen Spender, these are men who in their “lives fought for life and left the vivid air signed with [their] honor.”

For what they did at D-Day and beyond, we describe that group of men and women as the “greatest generation” — who had, in FDR’s phrase, a “rendezvous with destiny.”

They were largely born in a time of promise and prosperity shortly after what was supposed to be “the war to end all wars.” But instead they saw many of their dreams dashed by depression and yet another world war. Still, they persevered. They left us their legacy of liberty and so very much more.

When they “left the field” to us, America had become the world’s sole superpower, with an economy that was the greatest the world had ever known and filled with opportunity for those with the industry and ingenuity to make the most of it, a tremendous educational system, a vibrant middle class, state-of-the-art infrastructure and a functional and representative government.

Not anymore.

America has been left largely in the hands of us baby boomers, more than 75 million strong. And even though we’ll deny it vociferously, the evidence is clear that we’ve made a mess of things pretty much across the board, in large measure due to our unwillingness to put the interests of our children first. In sum, we are selfish, entitled toads who hate our kids.

Cookie crumbles

At least we come by our selfishness and sense of entitlement naturally. Consider the “cookie experiment” led by Berkeley psychologist Dacher Keltner. In this study, teams of three students were instructed to produce a short policy paper. Two members of each team were randomly assigned to write the paper while the third member was handed a leadership position by being tasked to evaluate the paper and to determine how much the other two would be paid.

After 30 minutes of work, a plate of five cookies was brought in to each team. No one was expected to reach for the last cookie on the plate, and no one did, consistent with good manners.

But what about the fourth cookie? It was still an extra and also one that might be taken without any awkwardness. It turns out that even just a little bit of power went to the heads of the leaders — none of whom even earned their status. These leaders not only tended to take the fourth cookie. They also displayed signs of “disinhibited” eating, chewing with their mouths open and scattering crumbs widely. They ruled the roost and acted like it (after just 30 minutes!).

This study confirms what we already recognize from experience: power tends to corrupt.

As leaders of this country, we boomers have not handled power very well. In stark contrast to our forebears, we look out for No. 1 at the expense of our kids. We’re not the greatest generation — not by a long shot.

Fading glory

Our biggest failing (among several big ones) with respect to our children is the lack of substantive opportunities we are providing them today. As noted, we boomers are more than 75 million strong and the first of us turned the traditional retirement age of 65 just a few short years ago. However, we are increasingly postponing retirement and thus crowding out opportunities for the younger generation. Our reasons include our poor savings records, a weak economy, a volatile stock market, home values still less than we’d like and even self-actualization. Whatever the reason, however, it is an unfortunate reality for our kids.

Perhaps even worse, as we boomers retire, we will be net sellers of equities, putting downward pressure on stock prices, hurting us as well as our kids — who may just be beginning to save and invest. Indeed, our children are already terrified of the stock market and are afraid to invest generally.

Moreover, our K–12 educational system is in shambles for reasons ranging from severe and ongoing funding cuts to the lack of support, commitment and involvement of parents (us again). Meanwhile, the cost of higher education continues to grow at a pace nearly double to that of inflation (as it has for decades), leaving recent graduates with an enormous debt burden. Total student loan debt has reached more than $1.2 trillion and now even exceeds credit card and auto loan debt. Today, 94 percent of those graduating with a bachelor’s degree are in debt (averaging over $35,000) compared with 45 percent two decades ago.

Even worse, by an overwhelming margin, kids no longer think they will do better than their parents did. As the Boston Globe just reported, “students are often being loaded up with staggering debt that is completely out of whack with the earnings boost they’ll likely get…”

Meanwhile, because there are so many of us, the ranks of the retired will continue to grow while the ranks of those supporting us (our kids) — via paying for entitlements such as Social Security and Medicare along with the possibility of more direct support — will continue to shrink. And we’re living longer too. In 1950, the average American lived for 68 years and more than 16 workers supported each retiree. Today, the average life expectancy is 79 and fewer than three workers support each retiree. Health care costs continue to explode higher too. And don’t forget, we haven’t saved for retirement very well either.

The non-profit National Institute on Retirement Security recently reported that even after counting households’ entire net worth — a very generous measure of retirement savings — fully two-thirds of working families fall short of conservative retirement savings targets for their age and income based on working until age 67.

The Social Security Administration claims that “Social Security is a compact between generations.” But that claim is patently false. Our kids never consented to those obligations. Both Social Security and Medicare are promises we boomers made to ourselves that we expect our children to fund. Even worse, we haven’t managed those programs very well either. Each year the trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs. This year’s annual report again says, as it does essentially every year, that the finances of Social Security and Medicare are in trouble.

Predictably, representatives of the primary political factions — our representatives (the average age of House representatives is 59 and of senators is 64; they’re boomers) — continue to blame each other and do nothing. It’s easy to blame Congress (with good reason), but we do not demand more and better from them either.

Expect things to get worse, too. Right now, the ratio of those 65 and older versus those 15–64 (the “dependency ratio”) is about 22 percent here in the U.S. By 2050, that ratio will increase to 36 percent and the proportion of people 65 and older will increase from 13.1 percent to 21.4 percent. Even with good planning we will be a big burden on the next generation. The future isn’t very promising for our kids and it is largely our fault.

Debt and dysfunction

Beneath all this is a simmering government debt crisis, as long-postponed hard policy choices come home to roost. We aren’t Greece (yet), but the news isn’t promising. Simply put, we have too much debt. According to statistics compiled by the St. Louis Fed, total federal debt has risen to around 105 percent of GDP, compared to some 30 percent in 1980. Unless and until we fix the current debt problem, our kids are in for a very rocky future (and we’re only saved from a deficit crisis by historically low interest rates). To this point, nobody in power seems willing to pitch in to fix things.

Despite these big and difficult problems, there seems to be little chance of any political solution. Simply put, a majority in Congress (consisting of members of both parties) has been and remains unwilling to require the federal government to live within its means over the long term while the president cannot or will not do anything about it. At the same time, a (different but still) majority in Congress (consisting of members of both parties) has been and remains unwilling to enact tax legislation sufficient to pay for the spending it has authorized, while the president cannot or will not do anything about it.

Finally, and perhaps most tellingly, there is little reason in the current political climate to expect one side to compromise if there is a significant chance that credit for any subsequent benefit will be attributed to the other side. Today, political positioning seems to take precedence over the national interest far too often.

The popular culture — across media and political outlooks, from the film “Mr. Smith Goes to Washington” to the television series “The West Wing” to the Jack Ryan novels by Tom Clancy — typically suggests that politicians would do better by being good and magnanimous, by putting the interests of the country first. Sadly, there are few recent examples of anyone being willing to test that idea. The political system is broken, nobody in power seems to want to fix it, and we voters are willing to settle for the same old thing.

A D-Day of sorts is approaching for those of us who are boomers. We are headed toward a “point of no return” with respect to the giant problems we have created and nourished. Solving them will require creativity, strength, intelligence, courage and sacrifice. Those are characteristics Americans have often demonstrated in crisis and characteristics our brave men and women in uniform — our kids — demonstrate every single day. If it’s not just talk and we really do love our kids, it’s time to step up, put them first, and get about fixing the messes we’ve made. But we’d better start soon because time is running short.

See also:

Baby boomers in worsening shape for retirement

Is it too late for baby boomers to build a secure retirement

Americans’ views on financial security vary by generation

Let’s continue the conversation on Facebook!


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.