The American Interest
Analysis by Walter Russell Mead & Staff
Boomer Power and the War on the Young

The Economist ominously reports:

The struggle to digest the swollen generation of ageing baby-boomers threatens to strangle economic growth. As the nature and scale of the problem become clear, a showdown between the generations may be inevitable.

The statistics are frightening:

The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort.

Boomers’ sponging may well outstrip that of younger generations as well. A study by the International Monetary Fund in 2011 compared the tax bills of a cohort’s members over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes (see chart), an obligation 17 times larger than that likely to be left by those aged 25.

The Boomers are a powerful, large group of both voters and policymakers:

More worrying is that this generation seems to be able to leverage its size into favourable policy. Governments slashed tax rates in the 1980s to revitalise lagging economies, just as boomers approached their prime earning years. The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort.

This is part of what Via Meadia calls the War on the Young. Already young people are suffering because of complications arising from Boomer policies and ideas. Think of Obamacare, student loans, the terrible job market, the national deficit, exploding pension costs, expensive infrastructure plans of dubious benefits, unpaid internships, and much more. The Obama administration has been particularly tough for young people, but this is a bipartisan war. And it’s one the young are losing already, though they probably don’t know just how badly.

Published on October 4, 2012 3:00 pm