As my generation did not live through the Depression, World War II, and the agony of the immigrants who are our grandparents or great-grandparents; as we were raised in the greatest plenty the world has ever known and in the most just of societies, we have grown lazy and entitled (not unlike Marx, who lived as a parasite upon Engels, and never worked a day in this life). The baby boomer generation, my own, is content, if of the Left, to live out our remaining years upon the work and upon the entitlement created by our parents, and to entail the costs upon our children - to tax industry out of the country, to tax wealth away from its historical role and use as the funder of innovation. (page 43)
I had planned to write at some length about this but while Googling for something TigerHawk had said about Baby Boomers, I ran across a thread there (not the one I was looking for) where the comments lay out pretty well much of what I wanted to say. So I’ll keep this brief.
First, the Baby Boomers get blamed for a lot but who raised us? The Greatest Generation. I’m not “blaming my parents” for my shortcomings but I believe the Baby Boomers are the way they are - both the good and the bad - because of the way we were raised. The comments at TigerHawk go into some of this but I’ve always thought of it this way:
Every generation that comes along decides around the age of 16 that its parents are doing everything wrong; in fact, every generation that comes along is pretty sure all previous generations have done everything wrong. The Baby Boomers were nothing special in that regard. What was different was that we were the first generation where a fair number of our elders said, “You’re right. Tell us what we should be doing instead.”
To me, this request - insane though it was - simply looks like a continuation of the extent to which Baby Boomers were catered to by their parents. It’s understandable: our parents went through the Great Depression and World War II. I’m sure they appreciated their good fortune in surviving and prospering and wanted to lavish their children with the joy and plenty they had created. I also suspect that they looked back on what they had done at 18 and 20 - won the biggest war the world had ever seen - and let that convince them 18-year-olds knew enough about the world to run it.
Second, one of the outrages for which the Baby Boomers are most reviled is the huge amount of money we’re going to suck out of the system via Social Security and Medicare. We are, the claim goes, insufferably selfish for making it impossible for the government to cut these entitlement programs. Well, we are going to suck a lot of money out the system via Social Security and Medicare but it’s because there are so darn many of us not because we are somehow singularly selfish in insisting that government leave our entitlements alone. After all, the first reference to Social Security as the “third rail” of American politics occurred in 1982 - when the oldest Baby Boomer was 36 years old. The senior citizens who would vote out of office any politician who touched their government checks weren’t Baby Boomers back then.
That said, I personally have no problem with restructuring Social Security and Medicare so it is less generous to me and less of a burden to the generations that come after me. Gradually raising the age of eligibility, as Tiger Hawk suggests in his linked post, is one approach. Or we could cut, say, 10% from all Social Security checks - I could live with that. I can live with restructuring Medicare, also, although not via a straight decrease in the payments made to providers. I’m fine with having to ante up more for my own medical care but not fine with being unable to find a provider who will see me. Perhaps we could freeze government Medicare payments at their current rates but have everyone on Medicare pay 10%.*
The bottom line is that Baby Boomers are not more selfish about their “right” to Social Security and Medicare than previous generations. It’s just that this country desperately needs them to be less selfish. I hope we can meet that need. It would be a way of proving that the Baby Boomers at 65 can be just as self-sacrificing in service to a larger goal as their Greatest Generation parents were at 20.
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Notes:
* Honesty compels me to admit that I’d like to see a 10% cut in much of the rest of government spending to go along with this. If nothing else, I’d like to see the salaries, benefits, and staff of all current and former elected members of the Federal government cut 10%. This is partly just orneriness but it would also be smart politics. A wider 10% cut would make cuts in Social Security and Medicare easier to sell to the elderly, not because old people or Baby Boomers are selfish but because they are scared. The problem with being old is that one has few options: if the government cuts Social Security and Medicare, the elderly don’t find it easy to replace that income by getting a job. The idea of shared sacrifice might help allay fears that the government would be happy to balance the whole budget on the elderly and that if this causes widespread suffering among the old, well, too bad but, hey - it’s not like they’re productive members of society any longer.
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Reading:
Twenty-Somethings - An NRO post arguing that the “aimlessness” of twenty-somethings is behavior learned from their parents - the Baby Boomers. Where did the Boomers learn it?
America’s 401(k)s Are Disasters, but Are Pensions Any Better? - Megan McArdle on the delusions behind the abysmal retirement savings rate:
There's an almost delusional quality to our expectations of retirement. Somehow, we think we're supposed to set aside 5% of our after-tax income, and have enough to live comfortably for twenty to thirty years without working.
Of course, thanks to the baby boom, that delusion was true, for a while. The giant population bulge supported all the generations behind them by buying their houses and stocks, and paying the taxes, dividends, and interest payments that supported their elders in a comfortable retirement. The problem is that we now think that this is something like a natural law, rather than a very temporary aberration.
Posts
7 comments:
To pick a couple of narrow aspects of Social Security in particular:
When Social Security was enacted in 1938, the first monthly check was for $22.54. This works out to an annual income of some $270/yr. This sum compares to the annual income of a minimum wage earner of the time (at $0.25/hr) of $520/yr, assuming no time off for any reason (and, in 1938, assuming full time work at all). That annual SS income also compares to a "typical" family income of some $2,000/yr.
Also in 1938, the full retirement age of 65 compared to a then expected lifetime of around 70 years. Today, full retirement is still 65-67 (the upper end for us evil baby boomers), but now against an expected lifetime of our mid-80s.
Today's SS payouts are comparable (back of the envelope numbers: median household annual income in 2008 of $50k, SS annual payout of $12k, but they must be paid for far longer.
One contaminant, besides the coarseness of this back of the envelope set of numbers, is the comparison of an individual retiree's SS income to a family's income, but it's the same comparison in both time periods, so I think the point of the comparison remains.
There is chatter about raising full retirement to 70, today, and lots of backchat about how cruel this is--but raising full retirement even to 75 would only return the system to its original payout duration--and SS as originally conceived was never intended to be the full income; it was intended to supplement the income of the retiree while his/her family remained involved in the welfare their retired member.
But to some extent, this seems to me a non sequitor. SS--and Medicare and Medicaid--ought to be privatized. A New York child should not be paying for my concurrent retirement. That worthy should be putting his/her money aside for his/her own future retirement.
Eric Hines
Hey, Eric.
Thanks for the math - always interesting to see actual numbers.
I have no problem raising the retirement age in theory but a couple of specific concerns. First, there are some jobs that are very difficult to do at an advanced age. Second, I wonder if companies will be willing to keep people on as they age, especially with the increasing health care burden. That's not a reason not to raise the retirement age but it behooves us to keep those points in mind when we design our new system.
As for "SS as originally conceived was never intended to be the full income" I think that depends on how you interpret that. My aunt, who was born in 1918, remembered her parents being told that if they just contributed this little tiny bit of their income every month, that would be all the retirement savings they needed. Part of her parents' interpretation of that - rightly or wrongly - was that it meant they wouldn't be a financial burden on their children in old age.
I've written (under the category "Catastrophic Comparison") about how I think we should be handing health insurance, including Medicare and Medicaid. As for privatizing Social Security, can you point me to a good summary of how that would work? I hear it referred to a lot but have never sat down and read a good description of it.
What your aunt was told was part of the sales job for SS. Nothing unusual there. And if the moneys actually were left alone in her retirement account for her use in those later days, this government-controlled retirement program would be a lot less onerous than it is today.
Also, keep in mind that there is a difference between being a burden and being fully independent. The supplementary-to-family-support nature of the original SS was intended to alleviate the burden aspect without removing familial responsibility.
The some jobs that are very difficult to do at an advanced age problem is real, but I suggest that it's a whole lot less today than it was in 1938: ditch digging and road building are done mostly with powered equipment today, where these were done by manually handled pick and shovel in 1938, for instance.
In a properly free market, individual decision-making milieu, health costs to the employer would be a whole lot lower, so the company's concern would be more clearly isolated to the employee's capacity to do the work--a concern that is independent of age, other than all that experience accruing from time on the job.
As for privatizing SS, the only real effort in recent times, I think, was Bush the Younger's effort--which was only a partial effort. Wkipedia, with its own biases, carries one summary as well as its view of the ideologies of the pros and cons: http://en.wikipedia.org/wiki/Social_Security_debate_%28United_States%29 . My own view of how to do this, though, flows from my attitude that Americans aren't as dumb as our Progressive Patrician class make us out to be. Thus, cancel the payroll taxes altogether. Let business do what it will with its immediate 7.65% reduction in the cost of labor. Require employees to invest their 7.65% in retirement and health savings investments, using the current split between SS and Medicare taxes to start. Eliminate income and annual limits in individual contributions to their retirement programs (401(k)s, for instance have an upper bound, this year of $16.5k ($22k, if you're a geezer)) and to their health savings accounts (HSAs are limited to the relatively wealthy due to their requirement to be associated with high deductible health insurance, and the upper bound annual contribution is in the neighborhood of $5k). The difference, here, though, is critical. These programs would be under the control of the individual: his investment vehicle choice. His risk. His responsibility. He just has to take the 7.65% of his paycheck that he never sees, anyway, and that now goes out the door to a currently retired person in IL, or CA, or NY, or TX, or etc, and put it into his own future retirement package.
Eric Hines
Thanks for the link and the thoughts, Eric. The Wikipedia article looks interesting and exhaustive. I'll spend some time with it and may end up writing a post about this.
I agree that Americans are not dumb but some of them are. Further, some will make bad decisions and some will just experience bad luck. What do we do about people who invest their 7.65% in Fly By Night Securities and end up with nothing in their retirement account?
What do we do about people who invest their 7.65% in Fly By Night Securities and end up with nothing in their retirement account?
Shorter term answer, if a bit weasel-wordy: to answer this requires a prior answer of why that New York child is obligated to support this California retiree wannabe who made bad decisions--or even just had some bad luck. And why that New York child should be tapped ahead of the retiree wannabe's family and local community.
Longer term answer: this gets into the need to fundamentally revamp our education system (which does not mean government intervention). But Finance needs to be the fourth R in our K-12 education. Managing money and investing isn't rocket science, but it does need education and care. The outcome of this will be a vast reduction in the number of suckers and a large shift of the vastly smaller number of failures from "sucker" to "bad luck." These remaining 14 individuals would likely need assistance--discriminating between hands up for the bad luck and handouts for the perennial incapable.
Eric Hines
requires a prior answer of why that New York child is obligated to support this California retiree wannabe
I don't think younger people are obligated to support older people's retirement but we are not, as a society, willing to let people starve - or even go without. That is, if we implement a program under which the feckless (or the unlucky) suffer for their lack of feck or luck, we will then start reading story after story about their suffering and the cry will go up to do something about them. I think you acknowledge this is some extent by advocating making retirement savings mandatory.
I would prefer a plan where my savings go to fund my retirement. How do we fund the transition from the current plan to your long-term plan?
I don't think younger people are obligated to support older people's retirement....
And yet this is the current system. And the current system would seem to be anti-family as a result. Today's children aren't supporting their own parents or grandparents. It really is that NYer supporting that CAer--and every other retiree in the country as well as his own parent and grandparent; his tax money is thrown to the winds.
...we are not, as a society, willing to let people starve - or even go without.
We need to be willing to let them go without. Their mere existence does not entitle "them" (whomever these are; this wouldn't only include our retired) to equal outcomes. Even our Christian and Judaic holy books don't require equal shares for all. However, giving them just enough (leaving aside, for now what might constitute an adequate hand up and talking in the rest of this thread only about hands out) to live in squalor would seem inadequate, also. For all that, government still must remain a last resort, not a first, and I envision government hands out--that New York child being called on to support that California retiree who has nothing at all otherwise--to be something along the lines of a work for funds kind of thing. What can a healthy 90-year-old do? Not much. But s/he can do something. What can a 90-year-old deep into his Alzheimer's cups do? Not a thing. But, you're right, we won't--or shouldn't--toss that one onto an ice flow and row away.
How do we fund the transition from the current plan to your long-term plan?
Beyond, umm, grandfathering in the current aged--the new plan applies to those 55 and younger, or 45 and younger--the transition will be horribly expensive as the number of those paying into the current system are drawn down while the those needing (in some sense deserving, since they've been dragooned into this system all their lives) continued support continue to live on. But that period I anticipate being "only" 20 or so years--a single generation. Beyond this top-level thought, I've not run any numbers.
Eric Hines
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