Connecting the Dots: The Coming War Between Generations
Almost everyday the newspaper headlines across the country warn of problems with local government budgets centered around public sector employee wages and benefits. Today one read, County Pension System Hits Tipping Point. The other day it was how one city wasn’t funding its medical retirement benefits.
Some are trying to make what is happening in Wisconsin a workers rights issue. This is complete nonsense, in our opinion. Though the political approach to a solution may differ, this is more about the beginnings of the coming war between generations that we have written about in prior posts. President Obama — of all Presidents — should understand this and it may be why younger voters stayed at home during the mid-term elections, resulting in the political facial he received from the Tea Party.
The fact is, we have never fully funded our defined benefit public sector retirement programs (including social security and medicare), relying instead on rosy scenarios and fantasy assumptions about investment returns either to prevent tax increases or a reduction in public services. The markets have started to revolt and the chickens are coming home to roost.
It is also time to connect some dots. What we are witnessing in the Middle East where the young, who have little or no political voice and a not so bright future are throwing off their autocratic gerontocracies at an incredible pace. Something similar will manifest here and the rest of the aging west, though probably in different way, when younger generations realize the consequences of being saddled with a massive debt and declining public services as the tax revenues are diverted to debt service and retirement benefits. Not to mention the world full of carbon they have inherited.
They to, like their Facebook brethren in the Middle East, will revolt and throw off the gerontocracy that will control the political system as baby boomers age, which over taxes them to pay the debt used to finance the excessive consumption and current retirement benefits of their parents and/or grandparents generation.
It doesn’t take a C.I.A. analyst with a Ph.D. to realize the potential for political blowback when one generation is rendered into servitude due to the excesses of another. Or does it?
This, of course, assumes our creditors don’t beat them to it. Even then, we’re starting to have our doubts about the country’s political capacity to deal with these issues. We spent years as analysts in Latin America during their days of hyperinflation and witnessed that public sector unions, though not the only problem, were a big part of the fiscal imbalances, which were financed by the printing presses.
This is really a problem of state and local governments and not so much at the Federal level. We cannot, however, blame the public employees who are just are playing by the rules that our political leaders and unions have set up. But shame, shame, shame on those leaders who have not led and have failed Demographics 101 in such a big way.
The Wall Street Journal really nails it today, writing about the huge distinction between public and private sector unions,
We’ve previously mentioned FDR and Fiorello La Guardia. But George Meany, the legendary AFL-CIO president during the Cold War, also opposed the right to bargain collectively with the government.
Why? Because unlike in the private economy, a public union has a natural monopoly over government services. An industrial union will fight for a greater share of corporate profits, but it also knows that a business must make profits or it will move or shut down. The union chief for teachers, transit workers or firemen knows that the city is not going to close the schools, buses or firehouses.
This monopoly power, in turn, gives public unions inordinate sway over elected officials. The money they collect from member dues helps to elect politicians who are then supposed to represent the taxpayers during the next round of collective bargaining. In effect union representatives sit on both sides of the bargaining table, with no one sitting in for taxpayers.
We’re hoping that our generation, the baby boomers, will do the right thing here and give the younger ones a fighting chance. If that means playing muni golf courses instead of Pebble Beach and Pinehurst as we move into our sunset years, so be it. (click here if charts are not observable)
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March 1st, 2011 at 1:04 pm
We’re hoping that our generation, the baby boomers, will do the right thing here and give the younger ones a fighting chance.
HA! HA! HA!
That was meant to be funny right. Having followed in their trail for 20 working years I can assure you the boomers will go down fighting and will in the end be declared insane because of their selfish acts. That is how I see that demographic shift turning out
March 1st, 2011 at 1:19 pm
I’m sure the top .1% loves the notion of an intergenerational conflict as opposed to a class conflict.
And now that the top .1% have helped themselves to Joe Sixpack’s home equity and future earnings the only thing that Joe has left that’s worth stealing is his retirement. And what better way to do that than pretend that the money will end up helping poor struggling twenty somethings.
After this raid on retirement accounts is complete you might want to ask the twenty somethings if they actually got their cut of the take.
March 1st, 2011 at 1:29 pm
I think it more likely the coming war between the generations is being over-advertised to distract us from what the events in Wisconsin were actually about – the war of the wealthy upon the poor, which they are winning handily (http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph)
I agree that it is complete nonsense that what is happening in Wisconsin is about worker’s rights – that’s just part of the distraction for the robbery. The real issue is that there was never a budget crisis until Governor Walker gave away about $140 million of state funds to special interest groups, and then he turns around and says there is a “budget crisis” that we are short about $140 million!! (http://www.onewisconsinnow.org/press/walker-concocts-scoop-and-toss-borrowing-scheme-to-pay-for-140-million-in-special-interest-spending.html)
March 1st, 2011 at 1:36 pm
How are public sector union monopolies any different that monopoly electric utilities?
I could also point to any number of studies which show union membership falling over the past 30 years, but that is also beside the point.
Removing the ability for ALL of them to lobby is one possible answer.
The boomers will reap what they sow, it’s going to be a bitch living in a state hospital with minimum wage slaves cleaning out your diaper.
March 1st, 2011 at 1:56 pm
@macroman: Connecting the dots? Really?! Let me suggest some ‘dots’ it appears you may have overlooked…
How about beginning with the strawman argument of “…. we have never fully funded our defined benefit public sector retirement programs.” Is there a kernel of truth in this claim? Yes, programs didn’t “fully fund” because it was NOT NECESSARY. Why, you may ask? Because of 6 to 8 percent annual investment returns and a nifty concept called “compounding.” It’s the similar principle behind your 401 (k) or Roth not being “fully funded” at age 45 or 50, because time and future contributions will help to arrive at the final investment goal.
Your article indicates there have been some important structural changes, so let’s start with you explaining how senior citizens and public employee unions were able to engineer TWO stock market crashes in 8 years? How about giving us a detailed explanation of how seniors and SEIU union members forced the Bush Administration to embark on an aggressive revenue reduction strategy (i.e. tax cuts) that squandered a budget surplus and unleashed deficit spending for as far as the eye could see?
How about explaining how ‘gerontocracies’ and collective bargaining was used to force the Bush Administration to launch two foreign wars without any increases in revenue to pay for said adventures? Or maybe an easier narrative for you to explain is how public sector unions and grannies used their enormous political clout to insist that Wall Street create collateralized loan obligations (CDO’s) and credit default swap (CDS’s)? Can you provide photographs or other documentary evidence of frail elders and AFL-CIO members marching on the Treasury and Federal Reserve Bank with torches and pitchforks to demand that the Federal Government run the printing presses with tens of trillions of dollars in liquidity to save the big banksters?
Can you elaborate on where these expenditures fit into the debt service picture? Can you provide some charts and graphs showing our debt levels without these factors?
You state, “….shame, shame, shame on those leaders who have not led and have failed Demographics 101 in such a big way.” Do tell. Might those leaders have names?
Finally, where was the hue and cry over the tax burden today’s seniors shouldered in the post-World War II era? Their sacrifices didn’t end on the shores of Europe, North Africa and the Pacific. They came home and built the infrastructure of this country through the use of higher education (i.e. GI Bill), ingenuity and industriousness. And they paid more than their fair share in taxes to build a modern system of schools, highways and utilities. They created transistors, television, sent men to the moon, created satellites and DARPA (now the Internet), just to name a few.
All these things we now take for granted are things THEY PAID FOR – not you, not I. And yet, you find it so convenient to scapegoat these citizens because it fits your narrative of them being decrepit, lazy, unworthy of consideration.
I can’t discern if it’s more jealousy or contempt that animates your writing, “macroman”, but at best, it’s wholly misdirected. At worst, it’s seeking to incite the victimization of frail and vulnerable seniors who have taken nothing… but have given other citizens every opportunity to succeed.
SOME BONUS READING:
Reagan’s Forgotten Tax Record
http://capitalgainsandgames.com/blog/bruce-bartlett/2154/reagans-forgotten-tax-record
Keep Your Government Hands Off My Government Programs!
http://economix.blogs.nytimes.com/2011/02/11/keep-your-government-hands-off-my-government-programs/
Geithner’s Gamble
http://www.project-syndicate.org/commentary/johnson17/English
Know Nothings and the Death of Political Compromise
http://www.calbuzz.com/2011/02/know-nothings-and-the-death-of-political-compromise/
March 1st, 2011 at 2:23 pm
Thank you “bear_in_mind”.
You saved me the time and effort as well as saying things a lot better than I would have.
I had started my response; “macroman, you ignorant douchebag…..”
March 1st, 2011 at 2:39 pm
re: BBoomers
see, also http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Locust+Plagues
while keeping in Mind http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+Ant+and+the+Grasshopper
http://michellemalkin.com/2008/09/26/the-ant-and-the-grasshopper-2008-edition/
~~
“We’re hoping that our generation, the baby boomers, will do the right thing here and give the younger ones a fighting chance.
HA! HA! HA!
That was meant to be funny right(?)….” – HTCMSI, above
x2
March 1st, 2011 at 5:18 pm
@macroman: About that connection between youths and their implied opposition to collective bargaining, some internals from Pew on ‘unions versus the governor’ provide further clarity: “Among those ages 18 to 29, nearly half (46%) say they side more with the public employee unions, while 13% say they side with the governor.”
So, 3 to 1 favor unions over the governor?! Now why might that be?
Could be that your argument fails to take into account the greatest burden from unemployment and wage repression has fallen squarely on the young (and the aged). The young and inexperienced (sans Ivy League credentials, anyway) have precious little leverage with corporate employers… and they know it! They understand that with record-high corporate profits and productivity, it’s global sourcing, not public pensions that’s thwarting their employment opportunities.
Pew: The public sides with the unions
Daily Kos
by DemFromCT
Tue Mar 01, 2011 at 02:30 PM EST
http://www.dailykos.com/story/2011/03/01/951398/-Pew:-The-public-sides-with-the-unions
March 1st, 2011 at 8:09 pm
As someone who has a 6-handle on his age I find these type of posts to be somewhat amusing. So the Baby Boomers are the cause of our economic woes. Seems akin to the argument that the Community Reinvestment Act caused the housing bubble.
Many of the posts above highlight the dynamics of the past 30 or so years that have been a part of getting us to the current state of affairs. If you want to connect dots you need only connect them between D.C. and Wall Street (with a detour to K Street).
March 1st, 2011 at 8:50 pm
Well put “bear_in_mind “!!
May I add that most of this younger generation reaped the direct benefits of the so-called ” excessive consumption” that was forced upon them by your parents
I also agree that this is massive campaign to focus the public away from the real issues and those responsible for this financial trauma….our many self serving elected & appointed officials that were willing bow down to corporate interests.
Macroman, WAKE UP!
March 2nd, 2011 at 9:54 am
It’s the numbers, stupid. I was born in 1936, the nadir of U.S. births. Being among the low percentage of subsequent populations has proved to be a golden path to my success. Reflecting on my current old age, it’s easy to take care of low numbers, progressively difficult as the numbers increase. A poor family moves into a rich neighborhood; the rich neighborhood embraces them and a feel-good story results. A thousand, two thousand, etc. families move in; the rich neighborhood wants them gone.
March 2nd, 2011 at 12:58 pm
the attack on macro seems oversold .. bear_in_mind that was a good read too
“nifty concept called compounding.” .. gotta mention population growth & inflation of cash in flow
that Gov in Wisconsin and his 20min telephone conversation – revolving door to KStreet .. why he still has any streetcred – ranks up there with OmarKad
http://www.huffingtonpost.com/2011/02/23/scott-walker-buffalo-beast-phone-prank_n_827058.html
back onT – the story is pointing @ tough issues to work thru – deficits in state accounts – age’g population – live’g longer – no jobs for kids – no cash in retirements accounts – SPELLS
The Music Man “Ya Got Trouble”
http://www.youtube.com/watch?v=LI_Oe-jtgdI
March 5th, 2011 at 11:13 am
Sorry, but the Baby Boomers aren’t going to make any sacrifices for anyone. They never have, they never will. Those born in the Post-War affluence have never had to sacrifice—or when they had to, they found a way to dodge the bill, and let someone else pay for it.
The Baby Boomers realize the entitlements they “deserve” won’t be available to them, unless they tax the bejeezus out of the younger generation.
So that’s what they’ll do: They’ll tax my generation, and the ones coming up, all in an effort to protect “what they deserve”. And since Baby Boomers have the demographic numbers on their side, there’s nothing the younger generations can do about it. Except leave the U.S.
Guess where I am.
GL
March 6th, 2011 at 2:13 pm
@GonzaloLira:
I agree that the short and mid-term fiscal outlook is poor and worsening. But that’s the sole responsibility of the Boomers? The crux of your commentary seems to emphasize that it’s your cohort’s birthright is to continue paying the lowest marginal tax burden of any cohort in the last century. And you talk about entitlement(s), eh?
I’m situated on the latter cusp of the Boomers and on-average my cohort has achieved greater education attainment with markedly less social mobility / income growth than the ’45-’55 cohort. Is the earlier cohort to blame for this? Of course not. These are structural changes prompted by multi-national corporations. But engaging in internecine battles is exactly what Big Money is encouraging through the corporate media (hello, TIME Magazine).
Look, if we’re brutally honest, “It’s the rich, stupid!” (to appropriate James Carville’s paroxysm). Since 1980, virtually every change in deregulation and the tax code has been to benefit the gentry and offer crumbs for the bottom 95-98 percent of the populace. That applies to Boomers and non-Boomers alike.
The federal gov’t has aided and abetted this behavior, a result of laissez faire and Ayn Rand-ian ideologies by the likes of Ronald Reagan, Alan Greenspan, Robert Rubin, Larry Summers (x2), Bu$hCo, Geithner, Bernanke and all the rest of the Faustian players railing for the interests of corporate raiders and traders. Again, that’s not been at the behest of Boomers, per se.
The effects certainly haven’t been to the benefit of most Boomers. It’s created massive misallocations of resources and capital, hugely amplifying stratification (i.e. haves vs. have nots) and leaving the masses with a colossal unfunded liability. Said another way, we’re seeing economic oppression. Couple health care and education costs multiplying like locusts since the early-90′s, and then Banksters setting housing alight with rocket fuel, has left taxpayers with a mind-boggling tab. While the rich are drowning in profits behind their gated communities, it’s the less-than 98-percenters who are going to get saddled with the costs — regardless of their generation.
The only hope is to overhaul the tax code and return to a level playing field where the rich and corporations paid their fair share. It may take a populist insurrection to accomplish it, but if we continue with the same fiscal policies that got us in this fix, there may be no alternative.
March 6th, 2011 at 8:52 pm
Robert Reich just penned a blog post (Friday) that nails wage repression right on the head:
But to get to the most important trend you have to dig under the job numbers and look at what kind of new jobs are being created. That’s where the big problem lies.
The National Employment Law Project did just that. Its new data brief shows that most of the new jobs created since February 2010 (about 1.26 million) pay significantly lower wages than the jobs lost (8.4 million) between January 2008 and February 2010.
While the biggest losses were higher-wage jobs paying an average of $19.05 to $31.40 an hour, the biggest gains have been lower-wage jobs paying an average of $9.03 to $12.91 an hour.
In other words, the big news isn’t jobs. It’s wages.
It’s concise and a good read… also check out the National Employment Law Project (NELP) graph on Page 3 of their brief showing the hiring trends by median income. Yikes.
The Real News on Jobs
By Robert Reich
Friday, March 4, 2011
http://robertreich.org/post/3638565075
A Year of Unbalanced Growth:
Industries, Wages, and the First 12 Months of Job Growth After the Great Recession
National Employment Law Project
February 2011
http://www.nelp.org/page/-/Justice/2011/UnbalancedGrowthFeb2011.pdf?nocdn=1