
Battle between generations due to baby boomer debt legacy - sbochins
http://www.economist.com/node/21563725?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709
======
lkrubner
The Iraq war, or new roads and bridges and clean coal burning plants?

Massive tax cuts for the rich, or investments in education?

Lax regulation of bank loans and credit card loans, or time-tested traditions
of banking prudence?

Multi-million dollar payouts to health insurance CEOs (Cigna CEO David Cordani
made the most, at $19.1 million, in 2011) or universal health care for all
citizens?

A vast bureaucracy devoted to keeping entrepreneurs in their home countries,
or the "Land of opportunity" offering a warm welcome for the worlds
entrepreneurs?

There were many decisions made that lead the USA to its current situation.
Anyone who argues that government debt is the sole issue, or even the main
issue, has failed to pay attention.

~~~
sbochins
Unfortunately I think the baby boomers have had a hand in most of those issues
or were too naive to know that they are problems. For example, seniors are
against medicare reductions and don't want universal health care. This
viewpoint has caused the debt to increase. Seniors are mostly against
immigration, this has halted economic growth (therefore hindering government
revenue). Seniors were more in favor of the Iraq war then younger folks. The
list goes on...

~~~
paulhauggis
The debt will increase with universal health care.

"Seniors are mostly against immigration"

Most Seniors I've talked to are against allowing anybody to come into the
country with little or no incentive to pay taxes. This is much different than
being against immigration.

"Seniors were more in favor of the Iraq war then younger folks"

Can you provide proof of this?

"Unfortunately I think the baby boomers have had a hand in most of those
issues or were too naive to know that they are problems."

Since we are generalizing here, I will thrown my 2 cents in. Some of the
opinions I see are similar to a child not listening to their parent because
they only see what's in front of them and don't have the life experience or
the forethought to see what can and will happen. Many older folks have the
life experience and wisdom.

Universal health care is a good example. Every time I see an article on here,
Reddit, or anywhere else on the Internet, none of the proponents will talk
about the negative effects of universal health care. They aren't even willing
to discuss them. I've lived long enough to know that nothing in this world is
perfect. If we can't talk about it honestly, I will never vote for it.

I know I'm not alone.

~~~
sbochins
"Most Seniors I've talked to are against allowing anybody to come into the
country with little or no incentive to pay taxes. This is much different than
being against immigration."

[http://news.yahoo.com/poll-senior-citizens-
league-77-seniors...](http://news.yahoo.com/poll-senior-citizens-
league-77-seniors-oppose-obama-040040880.html)

Apparently they're against the President's immigration reforms. Taxes is one
issue of immigration. These people will be paying payroll taxes when working
legally. Most Americans (especially older folks) would not do the work
immigrants are coming to the US for.

Unfortunately I don't have polls for the Iraq war stuff. I just have examples
I have encountered in my life.

As far as universal health care is concerned, it has been adopted by
practically every first world country besides the US. Taiwan in the not too
distant past offered universal health care and the main lesson they said they
learned from the US was, not to them.

Older folks have an incentive to not have universal health care for everyone.
They already have it or will have it soon. Giving it to everybody would
decrease the quality of care for medicare. Most people that have looked into
this issue have come to the conclusion that a single payer system works the
best. There would need to be a lot of evidence to overcome the overwhelming
evidence in favor of universal health care. Care to elaborate why the US
shouldn't have it?

------
meric
"....boomers now sell off assets to finance retirement, putting pressure on
equity prices and denying young workers an easy route to wealth"

Not true. Imagine if all stocks had 250 P/E and are now coming back down to 10
P/E in one month. Who benefits?

Cheaper equity means higher yield, and higher yield means an easy route to
wealth.

If you are young, don't let the reserve bank fool you into thinking rising
prices is good. You have a whole life of investing in you. Would you celebrate
every time, after you fill up a tank of petrol, the price of petrol goes up?
That's ridiculous, and I encourage you to think the same for prices of
investments.

Prices are kept high means when you buy the overpriced investments from other
people, some of your wealth is being transferred to them.

~~~
AnthonyMouse
>Would you celebrate every time, after you fill up a tank of petrol, the price
of petrol goes up?

The flaw in the analogy is that inflation isn't the price of petrol, it's the
price of everything. Including wages. If in week 1 you make $1000 and spend
$1000 and in week two all prices go up (including the price of your labor) so
that you make $2000 and spend $2000, you don't actually care that the nominal
price of commodities is increasing as long as they don't rise faster than your
pay. And most investments work the same way: If you own a share of Ford and
the Fed prints a trillion dollars, the nominal share price is going to go up
the same as the price of anything else.

The people inflation hurts are those who have long-term agreements with fixed
price terms. If you have a fixed-rate mortgage, you benefit from inflation,
and the bank that owns the mortgage pays for it. If you have a ten year fixed-
rate certificate of deposit, the bank benefits from inflation and the CD
holder takes the beating.

But as a general rule, retirees will tend to be the ones who have CDs or
fixed-rate annuities or the like, and the youth will be the ones to have
student loans or owe large amounts of principal on a mortgage.

~~~
meric
Sorry, I meant in real terms but I didn't specify it.

Or they'll be like me with barely $5000 invested in stocks - To get a
comfortable retirement I'll probably need to invest at least $10,000 a year.
However, if the price of investments rise faster than my wage, I'll need to
spend more to purchase investments to produce the same absolute yield. The
income from my investments would also be reduced (due to reduced yield). You
can argue they are capital gains, but the "capital gains" would only be
permanent if the company's assets or income was increased permanently.

What I am saying is the increase in price for investments resulting in lower
yield without justification is not a good thing for buyers of said
investments.

I have a $50,000 student debt owed to the government, whose interest is
indexed to CPI. There is no point for me to pay off my loan early besides what
the government requires me to do. So, I constantly invest my excess earnings.

~~~
AnthonyMouse
>Sorry, I meant in real terms but I didn't specify it.

You can't have inflation "in real terms" -- real means adjusted for inflation.
What you're talking about is increases in the relative value of one thing over
another, e.g. the price of gas or stock goes up while the price of labor stays
the same. But that isn't caused by printing money, it's caused by Peak Oil and
concentration of wealth.

>There is no point for me to pay off my loan early besides what the government
requires me to do.

You mean other than the fact that the interest rate on the loan (even
subsidized loans) is likely to be higher than the risk-adjusted return on most
investments?

There are two primary reasons to invest new income instead of paying off money
you've borrowed at interest. The first is that you have an investment
opportunity (like your own business) which you're confident can produce a
higher return on the investment than you're paying in interest on the loan.
The second is that you anticipate a significant probability that you'll need
to spend the money in the short to medium future, and the interest rate on re-
borrowing the money you've paid back will be sufficiently higher than the rate
you have on the existing loan to absorb the relative gains you'll make by not
paying loan interest in the interim.

Don't let "low" interest rates fool you -- they're low compared to unsecured
and unsubsidized loans, but they're still high compared to the ROI you get
from investing in typical index funds.

------
stephengillie
Their generation got lost in space, and left behind the rest of us in the
ashes of their world. We have to deal with the aging infrastructure, horrid
basic education system, a re-broken economy, and now sky-high debt. And that
generation is forcing us to pay them for aging, then pay for our own old age
as the system will be broken by then.

~~~
bromang
Is the American education system really that bad? What are the obvious ways of
improving the situation?

~~~
yummyfajitas
The US education system is fine compared to those of Europe and Asia.

[http://super-economy.blogspot.com/2010/12/amazing-truth-
abou...](http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-
scores-usa.html)

[http://super-economy.blogspot.com/2011/01/how-well-do-
above-...](http://super-economy.blogspot.com/2011/01/how-well-do-above-
average-american.html)

~~~
tokenadult
_The US education system is fine compared to those of Europe and Asia._

The factual statement is incorrect as to results of instruction, and the
statement is well known to be incorrect by any widely traveled person who has
studied the educational system in multiple countries, especially those who
have made specific study of typical school textbooks and teaching methods in
various countries.

Anyway, the links offered in support of your prima-facie false statement are
not written by a person who is familiar with United States education and have
been called out before here on Hacker News as crap links, contrary to

<http://ycombinator.com/newsguidelines.html>

"Essentially there are two rules here: don't post or upvote crap links, and
don't be rude or dumb in comment threads."

AFTER EDIT: As I go out to take my son to his soccer practice, it occurs to me
that the factual assumption in the grandparent comment needs examination as
well. It IS a fact that schools are quite well funded in the United States
compared to how they are funded in other countries. School funding in the
United States is quite uneven from region to region, but in almost all regions
is well above world averages, and some United States schools receive more
dollars per pupil than schools nearly anywhere. So my statement about the
RESULTS of schools in the United States should be interpreted as a statement
that United States schools disappoint compared to what a large percentage of
public funds are devoted to them. Many countries do better in that regard of
efficiency. To the point of the submitted article, one fiscal overhang that
older generations of school employees are leaving for younger generations of
pupils and students is large pension obligations for those school employees,
which are far from fully funded in most states, and are very lavish by
worldwide standards.

SECOND EDIT: The ball is in your court this time, yummyfajitas. I invite the
readers of HN to determine whether you have ever been a straight shooter on
this issue any of the many times you have submitted that crap link. I'm not
aware that you have done any of the travel or reading necessary to evaluate
the statements in those links accurately. Let's ask lots of HN participants to
take a close look at the actual evidence on education peformance per dollar
expended in different countries and think carefully about how well the United
States is really doing. (My user profile, which readers can view in my absence
from this discussion, explains some of my basis for knowledge for why I say
the United States school system does not do as well as it ought to do.)

~~~
yummyfajitas
As always (<http://news.ycombinator.com/item?id=3315028>), you fail to address
the data, preferring instead to make logical fallacies (typically argument by
authority, now borderline ad-hominem). The HN readership is smart enough to
see through this, and I'd be very surprised if you convinced a single person.
Why do you persist in it?

[Edit, in response to your edit: I cited data. Do you dispute the data or not?
Note that an argument from authority is not the same as a data-driven
argument.]

~~~
stephengillie
drama++

------
jf
This is a little bit of a tangent, but I recently found this animated GIF
which does a great job of illustrating just how _big_ "the baby boom" is:
[http://en.wikipedia.org/wiki/File:United_States_Population_b...](http://en.wikipedia.org/wiki/File:United_States_Population_by_gender_1950-2010.gif)

~~~
quantumhobbit
That is a really cool GIF. I love how you can see the "echo" of the baby boom
when they started having their own kids.

It also shows the incredible increase in life-expectancy we have seen over the
past century. Instead of dying off, the top of the chart just seems to grow
upward.

------
adjwilli
A option they seemed to have left out is raising the "inheritance tax". If
these baby boomers got Reagan tax breaks in their prime earning years, we
should compensate by increasing the "death tax".

~~~
jug6ernaut
The "death tax" should be abolished. Its ridiculous, even beyond the
ridiculous notion of taxing someone to die, how many times should YOUR money
get taxed? Once? Twice? Three times? When does it stop?

Our (U.S.) tax code is absolutely horrible, but even with that revenue isn't
the problem, spending is. I would say that politicians will ALWAYS spend every
dime they have, but in reality they spend money they dont have. Awesome system
we have.

~~~
sbierwagen
The estate tax doesn't tax the first $5,000,000 of an estate. After that, the
rate is 35%.

It's a tax on the one percent. The vast, vast majority of Americans will never
be bothered by it.

~~~
jboggan
Yes, and under current law that is set to go down to $1,000,000 in less than
three months. It is not a tax on the "one percent".

~~~
dmm
In 2010 the IRS received 142 823 000 individual tax returns.

An estimated 52 500 returns will pay estate taxes in 2013.

(52000 / 142823000) * 100 ~= 0.036

You're right. It's not a tax on the "one percent", it's a tax on the "one-
third of one-percent"

[http://www.census.gov/compendia/statab/cats/federal_govt_fin...](http://www.census.gov/compendia/statab/cats/federal_govt_finances_employment/federal_individual_income_tax_returns.html)

[http://www.taxpolicycenter.org/briefing-book/key-
elements/es...](http://www.taxpolicycenter.org/briefing-book/key-
elements/estate/how-many.cfm)

------
joshuahedlund
It's simple mathematics. A whole bunch of people are forecasted to receive a
bunch more than they put in, which is unsustainable once the population isn't
growing fast enough to make up the difference. For an illustration of how
difficult this will be to solve, just read some of the Boomer comments on this
article, expressing outrage at the notion that they should have benefits cut
because of how much they have put in, as if it's unthinkable that they will
receive _more_ than they put in, and that this is unsustainable.

------
tokenadult
I think this article has been submitted before. (The submission here is not a
submission of the canonical URL.) Anyway, by the usual generation labeling in
the United States, the most profligate generation in United States history is
the "Silent Generation," the generation mostly born during the Great
Depression (who make up the parent generation of the younger half of the Baby
Boom). They began and sustained the trend of spending far in advance of
revenue, all the while thinking that they "earned" their government transfer
payments. I, a Baby Boomer, have a higher retirement age than my parents have,
and have paid a higher rate of payroll or self-employment taxes into Social
Security than my parents generally did.

But the submitted article is correct that the older generations in the United
States will have to rethink their attitude toward "entitlements" (transfer
payments) even more if our children's generation is to have any prospect of
continued economic growth. On my part, I'm happy to see my retirement age
nudged up some more, and also for old-age benefits and other government
benefits to take actual cuts (rather than merely decreases in their rate of
increase over time) to make sure that they are funded on an actuarially sound
basis. I vote like that, and I discuss the issue with my generation-mates in
these terms. The older should be helping the younger, in general, not the
other way around.

~~~
AnthonyMouse
>I, a Baby Boomer, have a higher retirement age than my parents have, and have
paid a higher rate of payroll or self-employment taxes into Social Security
than my parents generally did.

I think the key observation you're making is that baby boomers' parents will
have had a better _retirement_ than the baby boomers are likely to, because at
the time their parents were retired, the boomers were in their prime working
age and there were plenty of resources to care for the then-retirees.

The trouble is that the converse is happening and about to happen. And there
isn't really anything anyone could have done about it, other than maybe for
the boomers to have had more kids. All of the attempts to do it through
economic hocus pocus are kind of missing the point. The social security trust
fund is a piece of paper that says there is a social security trust fund. The
bonds it redeems still have to be paid by the treasury in the year the money
is spent. The same goes for private retirement savings -- when you cash in
your stocks and buy nursing services, you take a productive worker out of the
economy to provide nursing services when that person could otherwise have been
a scientist or small business owner or the like.

The problem stems from the fact that the things retirees want are, as a
general rule, less economically productive than the things working people
want. Boomers having saved a substantial amount of money for retirement would
actually make that problem _worse_ because it means all the more resources
under their control to be allocated to leisure and non-research medical care,
rather than education and R&D and other such things that retirees have little
personal incentive to demand.

The article's suggestion (inflation) is only a solution in the sense that it
reduces the economic power of the retirees, meaning that they get less
healthcare and the young get more education and infrastructure. But the
tradeoff is still inevitable -- they're just pointing out a method of making
it in a way that moves the slider away from retirees in the face of the strong
political power of the AARP, by placing the decision in the hands of the
federal reserve board which is not as easily influenced by lobby groups as
elected officials.

------
eli_gottlieb
A half-truth being told to distract from the broader class struggle which the
_Economist_ 's ideology says cannot ever happen.

------
MaysonL
Of course, in 50 years, when we boomers are almost all dead (assuming no
singularity), to whom will the debt be owed? To the children and grandchildren
of the boomers. This between generations battle BS is just BS.

~~~
stevenkovar
It's less about to whom the debt is going so much as where.

------
ktizo
I wonder if people in general will ever get wise to divide and conquer
distractions. It nearly always works. This one is particularly insidious
however.

