Predictably, the monkeys in D.C. who created a Ponzi government are riding it down the drain. The current molehill from which they’ve created a mountain is the debt ceiling. Shall we raise the debt ceiling with a fig leaf of cuts or shall we play chicken with default because fig leaves are too much “sacrifice”. This is a choice?
I won’t play that game. Defaulting is disastrous and stupid. Raising the limit to briefly prop up unsustainable spending is irresponsible and stupid. I won’t choose between two bad options. The fact that it’s paralyzed Washington means I’m not alone.
Federal debt isn’t merely inflicted by politicians. Citizens collude. Voters want paved bike trails, tofu studies, and sports arenas. Things they don’t value enough to buy with their own money. They desire subsidized retirements and medicine that most adults could (and should) self fund. What they want exceeds what they’ve chosen to pay for. Voters want unicorns, cake, and magic. So long as this remains true another encounter with the debt ceiling was inevitable. (Note: Since March 1962, the debt ceiling has been raised 74 times. This is not new.)
End result? The economy seems unstable.
Decades ago I saw this coming. If you understand demographics you did too. It was frustrating watching my nation (and Europe) deliberately choose long term failure. I didn’t want to go along for the ride. I was hoping for an exit. But there was none. Now that economic shit is hitting economic fans I’m slightly relieved. Seeing clouds on the horizon feels worse than being in the storm.
It's been coming for thirty years...lets just get it over.
I don’t know how government’s profligate expansion will change but the status quo is just about over (both in the US and in Europe). My guess is that events will take one of three paths; voters will learn, voters will die, or voters will be stopped.
1. They could learn. The most ideal outcome. In theory every voter (or enough to sway elections) could conclude that “an honest man is one who knows he can’t consume more than he has produced” and act accordingly. Yeah, and I could be a Chinese jet pilot.
Pictured above: A Chinese Jet Pilot.
2. They could die. People may refuse to learn but they cannot refuse to die. The biggest threats to solvency are Ponzi structured entitlements. They’ll change radically as Baby Boomers who saved too little demand too much. Demographics has sealed their fate. Whether it takes years or decades; it’s a done deal. Human mortality tells us that Baby Boomers will all be dead in 50 years. (Note: I didn’t pull that number from a hat. The census defines Baby Boomers as births from 1946 to 1964. By 2064, or 53 years from today, every Baby Boomer will be a centenarian or dead. Aside from Keith Richards, who is unkillable, it’s statistically likely most of them will be gone much sooner. All things end.) I think (this is conjecture) that subsequent generations will lack the ability to vote themselves free toys. Whether with a crash or a fade, Ponzi games won’t outlast the Boomers. We may have programs with the same names in 2050 but they will be entirely different animals.
3. They could be stopped. The wildcard. I try to live within the ancient and archaic concept of “if you can’t afford it you can’t have it”. Suppose I didn’t? At some point my creditors would impose the restraint that I’d failed to provide. Economics does the same with government. The form is hard to predict but if internal restraint fails external restraint is a certainty. My best guess is that inflation (hopefully not hyperinflation!) will drag us kicking and screaming down to the lower standard of living which we can afford. It’ll be a hard transition but “if you can’t afford it you can’t have it” cannot be denied.
So there’s the silver lining; the frustration of waiting is pretty much over. Fussing over the debt ceiling today is evidence that the transition is already here. If we were still whistling past the graveyard it would have passed weeks ago with a pile of expensive riders on a Friday afternoon before a three day weekend. The fact that it’s causing heartburn is heartening.
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First, let me point out that I don’t necessarily disagree with what you have written here. However, I do detect a bit of misplaced anti-boomerism (is that a real word?).
Here are a few fun facts for you to mull over…
Nobody gets to choose when they are born. The fact that a lot of people got birthed between 1946 and 1964 is not the boomers fault. Blame that on their parents – the so called “Greatest Generation”.
The Ponzi scheme you are referring to is, of course, social security. That was enacted in the mid thirties, well before any of the boomers were born, much less reached voting age. You can blame that one on their grandparents and great grandparents.
Medicaid, that other massive budget killer was enacted in the early sixties. At that time, the oldest boomers were teenagers and the youngest were still unborn or in diapers. The voters were all of their parents or grandparents generation.
The accounting tricks that looted the social security “trust fund” and turned it into just another revenue source for government free-spending started in 1968. At that time the very oldest boomers, those that were 21 and 22, had just started voting. The vast majority of the people that went for this scheme were – you guessed it – their parents and grandparents.
And now fast-forward to today – the Year of our Lord 2011. It just so happens that 1946 was just 65 years ago. So that means that the very oldest boomers are just now starting to retire with full SS benefits. So what does that mean? It means that, in aggregate, the boomer generation is the one that has been *paying* all these years, not collecting. And as far as those “Boomers who saved too little” and “demand too much”. Well, as a matter of fact, the boomers *did* save – at the point of a gun. It’s called FICA and has been regularly looted from my paycheck since I was 16 years old. (I’m 57 now.) To demand some return on this forced investment might be unrealistic, given the present state of our monetary system, but it is *not* unreasonable. And almost all of the boomers I know have indeed saved for their retirement outside of SS, utilizing either 401K’s, IRA’s, or other investments. The problem is that the coming collapse is going to render all of that savings worthless – boomer or not.
As I said, I don’t necessarily disagree with what you have said here. But the fact of the matter is that it is the boomer generation that is the one that, up to this point, has been looted the most.The one thing I *do* blame the boomers for is not fixing the problem in the past 20 years when we had the chance. And the profligate government spending spree? Well, that’s a multigenerational thing that spans from the parents of the “greatest generation”, through the boomers, and on into generation X, Y, Z, and everyone born before about 1990.
Everyone alive when the collapse finally comes will wind up paying the price.
Roy
You’ve got some good points Roy. I am probably too biased against Boomers and have painted with an overly broad brush. That’s not entirely fair since, as you pointed out, Boomers didn’t enact the legislation and they were forced to contribute. We both agree their main mistake was to ignore an obvious problem for decades. Since no other generation has addressed the issue, Boomers are hardly unusual in that context.
The unfortunate fact, and one that I probably described with too much vitriol, is that they’re the demographic group which will push various entitlements from “unsustainable in the long term” to “unsustainable right now”. The silver lining in “unsustainable right now” is that the can can’t be kicked down the road any more. The entitlement system will wind up utterly different (presumably vastly reduced…possibly indexed back to a human lifespan as it was when Social Security was created?). America won’t have the resources to weather the demographics without change. Just as “when something can’t go on forever, it won’t” it is also true that “when you can’t avoid something, you’ll encounter it”.
Certainly not a fun prospect to face at retirement. But it is instructive to know the scope of the problem and a rough guess as when uncertainty will be “over”; some number much less than 53 years. (Except Keith Richards who will probably live forever.)
I also sympathize with Boomers who contributed (without a choice!) and want a return. Who wouldn’t? Even worse, Boomers started their careers with entitlement systems they trusted (unlike younger folks who know it’s a loss from day one). They should get a fair return but alas nobody can have what doesn’t exist. Like it or not, Americans (including Boomers) have already gotten the return Boomers funded…vast spending over decades in excess of what taxes support. The money is just plain gone. From that point of view Boomers really have gotten shafted.
It is my impression that surveys indicate Boomer’s (non entitlement) retirement funds are generally inadequate. This is what I meant by “saved too little”. Obviously many people in every generation save carefully…as you indicate of yourself and friends…wise move! I’m optimistic that a Boomer who saved wisely might ride out uncertainty as well as anyone.
The good news in all this is that a child born in 2011, who will not start “working” until about 2031 will be less likely to get stuck with unsustainable Ponzi style entitlements than any current adult generation. This is heartening.
I have just recently discovered your blog, AC. And after reading back through your archives, I find that we agree on a lot of things.
As I said, I am 57 years old. My plan *was* to retire around 66, the year I reach full SS eligibility. However, even though SS was just a small fraction of my planned retirement financing, I doubt that it will happen. A lot of folks have been telling me that at 57, I don’t have to worry because SS will be there for us. But here’s what I believe is probably going to happen.
First, I’ll get my “benefits” because SS is politically untouchable – especially for people over 50 years old. (Yep – the dreaded boomers.) No politician – of either party – is going to risk his office by screwing around with it, even if it is for our own good. But as you said – and I fully agree with you – we can’t have what is not there. So what the politicians are going to do is keep running the printing presses and writing the bad checks until the entire economy finally collapses. When that happens – and it *will* happen – my benefits and my investments- all of them, SS my 401K, my savings, my stocks, bonds, all of it – will be nearly worthless. After all, what good is a $3000 stipend when gas is $30 or more per gallon and a loaf of bread is $10 or more. So that will mean that I will have paid my dues for forty years with good money, and my return on investment will be in worthless script.
Great!
Now maybe you will see why I am a little sensitive to the whole boomers-as-the-bad-guys thing.
I should point out that the Boomers, while not enacted the legislation, also did nothing to stop it either.T The Ponzi nature of the schemes became patently obvious on their watch.
I was born in 1970. I have saved for years knowing SS wouldn’t be there for me.. and now thanks to both the Bush and Obama administrations I have at least 10 fewer years to save and prepare. I had 20 years to prepare for retirement before the age of inflation, where my standard of living will drop, and I will NEVER retire. Its not an option on the table. . So yeah, while this has been coming since 1964, and the boomers were happy to screw both themselves and their children, because they were too cowardly to do the right thing in their time, bribed by the prospects of the shiny baubles that their parents left them. . By the time my generation came on watch, Clinton was President and the economic fate of this country was sealed. The Boomers deserve at least part of the blame because they were the ones drunk at the wheel. Self inflicted as their injuries are, they failed to protect the children and grandchildren in the back seat.