And The Greatest Generation begat the Greediest

A few years ago there was a lot of celebrating the WW II generation that was reaching the end of their time. It was a whole generation who went to war as a country, instead of hiring people who need the money, to defeat facism.  The people who stayed home endured rationing, the nation took on an enormous debt, and millions of soldiers died.

Then after the war was won that generation came home, had lots of babies, and dominated the country from 1945 until 1980.  They supported candidates who voted to impose heavy tax burdens, particularly on the wealthy, to pay down the war debt.  They believed in our democratic Government because they had seen how government had saved the world from greedy, power hungry fascists, and many were old enough to remember how big business had blown up the world economy in the 1920's.

Then their kids grew up.  As the 1980's dawned the kids began to dominate politics, just by sheer weight of numbers.  They elected people to Congress who cut taxes, but somehow forgot to cut expenses to match the lost revenue so the country began sinking into debt again.  They bought into the notion that business is good and government is bad.  Then they cut taxes again, and again, still ignoring the fact the National debt continued to rise.

Here are some statistical facts from an Economist article (*) that sparked this blog.  

In 1981 the federal tax rate for a median income American household was 18%.  Today it is 11%.  The drop in tax rate correlates with a rise in Federal debt.  Boomers also supported politicians who granted an expensive prescription drug benefit without bothering to figure out how to pay for it.  One economist calculates the average baby boomer can expect 2.2 million dollars in net transfers from the Federal Government (SSN, Medicare etc) over their lifetime.  Those aged 65 in 2010 may receive 333 billion more than they pay in taxes, 17 times more than what someone who was 25 in 2010 is likely to receive.

The debt involves more than just money.  Annual spending on infrastructure (roads, bridges etc) dropped form more than 3% of GDP in the early 1960's to less than 1% today.  We have a big infrastructure debt.

There is no quick fix.  By 2030 the over-65 voting age population in the US will rise from the current 17% of total voters to 26%.  Older voters won't like inflation. so the Fed will have limited powers to inflate the national debt away.  

We boomers have painted ours kids into a corner.

*  Economist, September 29, 2012, p.75 "Sponging Boomers"