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War on the Young
Boomers Mismanage Their Pensions, Millennials Pay

The University of California’s regent board passed on Thursday a plan to raise tuition by 28 percent over the next five years. This vote, which went 14-7, came after Wednesday protests in which hundreds of University of California students blocked doors and parking spaces, jumped police lines, and even broke campus property.

Amidst the protests, the board didn’t budge, because the system is being squeezed by decades of poor pension planing, as this piece in The Sacramento Bee notes:

UC officials say the system also needs the money to help rescue its pension fund—neglected for two decades and facing $7.2 billion in unfunded liabilities—and to cover the growing cost of retiree health benefits.

“They’re going to have to ramp up contributions considerably over the next few years in order to maintain the financial health of the system,” said Adam Tatum, a retirement systems specialist at California Common Sense, a nonpartisan policy research organization. “What is certain is that the UC needs more money to pay off these unfunded liabilities – if not now, then in the future. That’s inevitable.”

Both the state government and the board of regents itself opted to stop paying into pension funds in the 1990s because the system seemed healthy. By 2010, the folly of that decision had become evident, and the college began to pitch in again. But it was too little, too late, and now students will have to pay. Student debt, we know, is not just a temporary inconvenience but a serious drag on young Americans’ ability to build wealth and form households. That Boomers are forcing millennials to bail them out from the consequences of their own failure to correctly mismanage pension funds tells you almost everything you need to know about the legacy millennials will inherit.
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  • Anthony

    To paraphrase, sustainability is ultimately about fairness across generations specially regarding social and political institutions – pensions, education, etc. “What matters is the balance between the resources we use up and the resources we leave behind.” As economist Robert Solow has argued, there exists an obligation to leave future generations the ability to be at least as well off as we are – if not the same world we inherited.

    • Fred

      I agree, but the problem is any attempt to put entitlements on a sustainable footing will have cynical politicians, short-sighted beneficiaries, and the sensationalist press claiming the reformers want to throw widows and orphans out in the snow and push granny’s wheelchair over a cliff. And the collective drooling, mouth-breathing moron that is John Q. Public will, as usual, fall for it hook, line, and sinker.

      • Anthony

        Thanks. Perhaps with sincere effort a reawakening of American virtue and prosperity can counteract John Q. Public’s predilections (one can have faith).

        • Fred

          I don’t know about faith, but maybe hope.

  • Boritz

    In all fairness to the milleninals, they would never vote for administrations at any level, local, state, national, that would refrain from doing this kind of thing. They may gripe and gripe and gripe but they won’t pull a different lever in the voting booth than the one they have been programmed for. When they leave college, with or without a degree, they will face the same kind of ruin outside the Academy and will do their part to support it.
    Their destructors have their full support and would explain this as a “contract between generations.” It doesn’t seem so bad when you give it a nice name. Of course there has always been a contract between generations and once upon a time it didn’t suck the marrow from the bones of the young, but they don’t need to think about that. Keep voting for the party that is depicted as cool, hip, and compassionate in movies and TV. 2016 is a chance to undo the most recent voter anomaly.

    • Clayton Holbrook

      In 2010, 2012, and 2014 those aged 45 – 64 made up about 45 percent of the electorate. That’s about as much as those 25 – 44 and 65 and older combined. Over 50 percent of Congress was born between 1945 – 1964. This is a gov’t ran by Boomers voted in by other Boomers.

    • FriendlyGoat

      Some people see the “millennials’ problem” as being too much money given away to older generations in the form of pensions and elderly health care. Others of us see the “millennials’ problem” as too much money given away to older generations in the form of high-end tax cuts. Before the millennials assume the first scenario and charge off to elect Republicans, they might want to consider that the second scenario is the one actually “killing” them and that they are now being courted as potential willing fools to cast their plight into permanently-set concrete.

      One reason younger people might want to think about this is that nearly ALL of them have parents and grandparents who must be supported and who may (because of Social Security and Medicare) leave something behind. But only a relatively-small SOME number of them have parents and grandparents managing large portfolios—-the main beneficiaries of high-end tax cuts.

      • Loader2000

        The other beneficiary of high end tax cuts are any business in the united states or any products built or designed or based here in the US where the company got its start from venture capitalism. Every percentage you raise high end tax rates, you making a decision to siphon off a certain amount of money from start-ups into something else. In a sense, you are choosing a certain number of businesses which will never get off the ground (which would have) in exchange for more money for lower tuition, military spending, welfare or whatever it is the taxes are being raised for. I’m not saying it still ins’t worth it to do so. I honestly believe there are some legitimate trade-offs and some good reasons to raise taxes, particularly when it comes to health care. However, due to this trade-off, I don’t believe the good reasons for raising taxes are as manifold and obvious as many would like to think.

        • FriendlyGoat

          My main reason for wanting higher tax rates at the high end is not necessarily to get more money paid into government. The high income and capital gain tax rates should function to keep businesses investing in PPE and people as the ONLY alternative to actually paying the high taxes on income sitting still or on income exiting the business in cash to owners. Gee, what can we buy and who can we hire to hold down the taxable income and hold down the taxes? This used to actually work very well. I lived it through the 1970’s on the inside of a privately-held company.

          • Anthony

            FG, deep social cleavages masked by ideology have led to demonization of taxation. Similarly as you know, taxes are rarely popular (they are seen by some as a denial of freedom itself) and an anti-tax sentiment is ingrained in American political discourse. Yet your observation is merited – tax cuts are not self-financing and carry implication fiscally that contradicts (many) proponents’ rhetorical beliefs.

          • FriendlyGoat

            Sometimes I feel like I’m the ONLY person in the United States arguing that tax cuts are destroying more of the so-called “good jobs” than they are creating. With the exception of Obama’s election twice, the rest of the election results from 2010, 2012 and 2014 are catastrophic for young people. They don’t seem to know that GOP Supreme Courts rule against them, that the 3.59 trillion of cash sitting in 500 corporate treasuries is being used for anything BUT hiring them, that no one in the GOP cares whether they have health insurance or not, and that the GOP hopes to cut THEIR Social Security and Medicare (not that of the present elders, due to politics).

            But the conservative “message machine” churns on with absolutely unlimited funding for future campaigns of misinformation. Someone has to break through to each set of 18-year-olds coming forward, and it ain’t easy to do——if the 2014 election is any indication. Citizens in general, and young ones in particular, are irretrievably losing soooo much and few seem to even notice.

          • Anthony

            The hardest change to pull off FG is constructive change in stressful times. Vested interests work overtime to play on human tendencies to divide (as you call it tribal identification) while maintaining lion share of the harvest – all the while pointing fingers at the so called “others”. During this time the young (Millennials) have been biding their time, trying to stay afloat amid high unemployment and little income. In the midst of this, you have the “Backlash” of an angry cohort who think both their economic security and social dominance is threatened which avails them to the messaging you write to and also allows for easy manipulation by status quo; but don’t confuse their receptivity with Millennials because Millennials are indeed different and they have the long-term play. They are ethnically diverse, socially liberal (generally), and better educated among other characteristics – and yes struggling to pay tuition. FG, as you know real change will not come easily. As a matter of fact, we may well continue to choose badly – cutting taxes further despite gaping deficits. Nonetheless, keep ypur eyes long-term and that’s where Millennials provide hope (education, diversity, geopolitics, etc).

          • FriendlyGoat

            We need the backlash started, in my view, by busting the one over-riding myth: That tax cuts create jobs. That particular fib is the one thing keeping the under-30 crowd from gagging on the whole GOP platform. If they EVER become convinced that the job claim is false, we will have a political revolution.

            Most of the present millennials (or whatever we’re going to call the 18-year-olds of 2015, 2016, 2017, 2018 etc,) are not going to be software coders in Silicon Valley, phone-app entrepreneurs, winners of “The Voice” or somehow making big bucks driving their cars for Uber and Lyft. There is a disconnect between hopes driven by culture and the reality of the jobs we are creating.

            Nearly no young man can graduate high school in May, marry his H.S. sweetheart, and get a job in June that can possibly support himself and his sweetheart—–with or without any soon-coming baby. (Not many young men with associate’s degrees could pull this off at 20, and plenty with bachelor’s degrees cannot pull it off at 22.) Given the premium that church people USED to put on this kind of model for young people, WHERE ‘o WHERE are those conservatives who SHOULD be screaming to high heaven about the “young family” ideal being made virtually impossible in our society? You know where they are? They’re out supporting low taxes for trading and speculation, not willing to see that if they don’t threaten corporations with ONEROUS taxes for not hiring their kids—the corporations will not hire their kids.

            Meanwhile, we just had an election with serious consequences for making the trend worse.

          • Anthony

            No argument here especially regarding typical (whatever that means) American Millennial and prospective wife and child. To your other concern, gullibility and muddle headedness may be a function of cognitive… The intelligent person is prone to make significant distinctions, to analyze, compare, reflect and seek out difficulties in proffered propositions whether flattering or promising to himself or not. Perhaps, skeptical self analysis is beyond the powers of the gullible because they already truly feel insecure and need comfort in (fill in the blank). Regarding tax cut myths and recent state and national elections, the system offers (ostensibly) wide though not unlimited free choice and many think they have chosen wisely if some other appears punished. Though in reality, that’s rarely the case because generally they are victims of their own choices and then backlash. But FG this you already know. So, don’t stop fighting and know that you are not alone (a wise old man told me once that the negatives are louder than positives but they don’t out number you).

          • FriendlyGoat

            Thanks. As you know, TAI readers are mostly a tough audience. But this forum at least raises lots of important issues and is small enough in the comment section to be manageable. So, on we go.

          • Corlyss

            “I lived it through the 1970’s on the inside of a privately-held company.”

            What are the percentages of businesses and employees we’re talking about here?

  • jeburke

    Strictly speaking, with some exceptions, it’s not millenials picking up the tab. It’s their Boomer and GenX parents.

    • rheddles

      True, but it’s so much fun for academics to play to their adolescent fanboys by pillorying their elders.

    • FriendlyGoat

      Are the exceptions the trillion dollars in student loans?

      • jeburke

        The average cost of college runs around $23,000 PER YEAR at state schools and $45,000 PER YEAR at private institutions.
        Meanwhile, the average debt borne by graduating seniors is about $29,000 in toto. While student loan debt is a problem for some individuals, by and large, it is far from oppressive. Mostly, big debts of $200,000 or so are acquired by graduate and professional students.

        • FriendlyGoat

          How much debt is borne by people who don’t graduate?

        • Josephbleau

          Parents pay a huge amount of the total tuition bill. I ate Rahman noodles and cosigned for loans that I eventually paid off. I think that the smart but poor have many routes to higher Ed. It is very seductive to convince yourself that you need a four year party financed by easy loans to be psych major or something. Are we ever able to say without damaging some egos that 50 percent of the population does not need a university education? Perhaps Meads touted online studies can sort out this by requiring online prerequisites to in residence including remedial work.

  • Jacksonian_Libertarian

    Supply and Demand says this isn’t going to work, and will simply accelerate the move to cheap and flexible online education. Already reduced admissions are hitting Universities nationwide as tuitions drive students to pass on furthering their education.

  • GS

    “…their own failure to correctly mismanage pension funds…”
    A bullseye. There are several ways to mismanage, true, but which one of them is the correct one?

  • Fat_Man

    Of course they wouldn’t want to take the money out of the salaries of the faculty and administrators who are going to get the fat pensions. That wouldn’t be fair. Let the students pay, after all they are powerless.

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