The Boomer Bust

The Associated Press reports on the grim financial future of the Baby Boom generation: “Through a combination of procrastination and bad timing, many baby boomers are facing a personal finance disaster just as they’re hoping to retire.”

“Bad timing?”  You want to know what “bad timing” was?  Riding at anchor in Pearl Harbor on December 7, 1941.  The Boomers screwed themselves.  The factors combining to ruin their retirement are the result of policies they support, promoted by politicians they insisted upon.

The AP lists a few of the top reasons for the Boomer predicament: the disappearance of traditional pension plans, falling stock prices and home values, inadequate Social Security income, and a predilection for spending instead of saving.

The disappearance of pension plans is the most complex of these topics, but it essentially boils down to the problems of guaranteeing a future benefit that isn’t linked to performance, in a dynamic economy where people generally don’t work for companies long enough to earn it.  Pensions are fixed amounts that must be paid no matter how the company is performing at the time of payment.  Fiscal security would require the company to fund a huge cash reserve to pay these benefits, even if the future held poor earnings or bankruptcy. 

If this is not done, a huge unfunded pension liability is created.  Have you heard the term “unfunded pension liability” recently?  Sure you have.  It’s the reason many state governments are teetering on the edge of insolvency, with Washington not far behind.  Public-sector union pensions are a bomb that will blast capitol buildings into clouds of red ink when they detonate.  The market long ago realized this danger, as a rapidly changing economy moved away from manufacturing, and workers no longer pursued lifetime careers with a single employer.  The government is about to learn an excruciatingly painful lesson the private sector avoided… because government policy has been shaped by Boomer attitudes.

It’s true that the worst fiscal weapons of mass destruction, Social Security and Medicare, were armed by the Greatest Generation.  The Boomer entitlement mentality electrified them into the untouchable “third rail” of American politics, insulated from even the most reasonable discussion of reform.  Something tells me the young men and women who defeated the Axis would have listened more carefully to people like George W. Bush, when he spoke of preserving benefits for the elderly, while giving tax serfs a chance to opt out of a dying Social Security system.

Worse, the “spend instead of save” ethos led to the big-spending modern government, which caused all of the other Boomer problems by asserting ideological control over free markets.  The housing crisis was created by Democrat insistence on using Fannie Mae to spread “social justice” by showering unaffordable mortgages on people who never should have qualified for them.  Stock prices have suffered from an implacably hostile tax and regulatory environment, including one of the highest corporate tax rates in the world.  Expensive bailouts have short-circuited the creative destruction of capitalism, as Washington picks winners and losers at taxpayer expense.  

Our crushing deficits are the direct result of Boomers embracing Great Society ideology, and bankrupting us with trillion-dollar crusades to “end poverty” or provide “free health care.”  Uncle Sam was reborn as the quintessential Baby Boomer, roaming the mall with a wallet full of credit cards and buying everything his bratty constituencies point at, to keep them from raising a fuss in public.  Even now, with a national debt soaring past $13 trillion, many Boomers sedate themselves with the delusional belief that fiscal sanity can be restored by taxing rich people a little more.  They don’t worry about those revolving charge balances until the cashier at Whole Foods tells them their MasterCard has been declined.

Welcome to the future you made, Baby Boomers.  If you think retirement is tough now, just wait until Generations X, Y, and Z arrive in the future you made for them.