Dec 26 2008
Blame America’s Economic Woes On Retiring Boomers
A lot of people are scratching their heads over the current economic downturn, but it really should not be a mystery. I myself have been waiting for it to begin for decades. The inevitable contraction has been exacerbated by really bad, leftist economic policy decisions instantiated over many years. These decisions are the hallmark of those who count their parents among “The Greatest Generation” ever. The contraction and the bad policies that made it worse are the work of the The Boomers – one of the most confused and radical generations ever. And like most confused radicals, they have left us a mess.
I have the fortune (or misfortune) of being one of those who is either at the end of the Boomers or the beginning of the post boomers – depending what year you cut the transition at. Most people use 1960 (my birth year) as the mark that ends the post World War II Baby Boomers. I prefer not to be part of the boomers, who seem to me to be on average (with many wonderful exceptions) to be self absorbed and a bit arrogant.
The boomers are now nearly all heading into retirement. They are selling the larger houses they raised their families in and heading to smaller dwellings in remote (and therefore cheaper) locations. Being a highly successful generation on a personal level, their departure from the market is leaving a mark in many dimensions. And as they begin to feed at the trough of federal and private retirement pools, the impacts are going to be worse yet.
One has to understand how large a group of consumers the Boomers are to appreciate their impact on the economy:
Seventy-six million American children were born between 1946 and 1959, representing cohorts that would be significant on account of its size alone. These several cohorts share characteristics like higher education than previous generations and assumptions of lifelong prosperity and entitlement developed during their childhood in the 1950s.
Because the Baby Boomer generation has found that their parents are living longer, their children are seeking a better and longer college education, and they themselves are having children later in life, the boomers have become “sandwiched” between generations. The “sandwich generation”, coined in the 1980s, refers to baby boomers who must care for both elderly parents and young children at the same time.
The age wave theory suggests an impending economic slowdown when the boomers start retiring during 2007-2009.[7]
Emphasis mine. The age wave theory is clearly more accurate than the Global Warming theory (another pet concept of those radical Boomers). I have know my entire life I would not really see much personal success until the Boomers were well into retiring. There are just not that many positions in society on the upper rungs for everyone, and with the largest group in American history waiting to retire there was a barrier for the rest of us to get our turn at the top.
With the current US population at 300 million, understand that 76 million Boomers is 25% of the entire US population. Think about it. Â When Boomers depart a region or sector then you find the smaller post Boomer generations and immigrants are what is left to fill the void.Â
I knew my age group would actually find a lot of opportunity later in life as the Boomers moved off to pasture. I knew that we would see cheaper housing, luxury goods, retirement options, etc because the Boomers will, from now on, leave a void instead of being a barrier.
And understand the mentality of the Boomers – they rejected their World War II parents. They were radicals obsessed with peace. They despised the military, the hallmark of their parents. Yes, there were a smaller group who respected and followed guidance of the World War II generation (George W Bush followed George Bush Senior, WW II Vet, John McCain, etc). But the Boomers had a very tough act to follow, and they went to extremes to distance themselves from their parent.
The Boomers, in trying to achieve distinction from their parents, tended to be more like Jimmy Carter and Bill Ayers. The interesting thing as been is while they were very liberal, they did not achieve acceptance by the other generations to lead. Nearly all US Presidents have to have a bit of the World War II security mentality in their character, and they have to minimize any liberal tendencies.Â
One only needs to look at the liberal home mortgage loan debacle to see the negative impact of the Boomers. Instead of demanding minimal capability and proven responsibility to handle a home mortgage, the radical bleeding heart nature of the Boomers caused them to try and hand out homes to those not ready for the responsibility. And a normal downturn turned extremely ugly as the result.
Boomers have a Santa Claus complex. They don’t want to demand responsibility, they want to give handouts. They supported the life-long economic trap of the welfare state. It was their idea to give loans to those not ready for them. It is they who seek to ‘level the playing field’ by taking from the wealthy. Except their money of course. They believe they are saving the planet by being green and following the Church of Al Gore. They have spent their entire existence trying to be more than their parents generation.
Even the one gift to mankind they did produce has become tainted with revisionist history and commercialization. Rock and Roll is the product of the Boomers. It was the power that swept a shattered post World War II Earth in the grip of a Cold War. While most Rockers were still raging against the machine of their parents, the message resounded behind the iron curtains of communism and began to open minds and eyes to a new world. The raging against the machine was very real to those under oppression.
And the fact that America’s newer generations agreed with the message created a world-wide bond that set the stage for a trust that would see the end of communism as iron curtains fell all over. Communism has always been threatened by capitalism, and all threats are met with force. Until the threat was reduced, there was no way to walk down the forces who were on a hair trigger, waiting for the inevitable next World War.
Rock & Roll was the avenue for building bridges and trust. It was the music more than the lyrics, in my humble opinion. It was the one thing the Boomers did that really did do something historic. But to this day they still see this phenomena as an act of revolution against the evil US Machine – their parent’s America. The Boomers are a very faulted generation. They rebelled against a great generation, they consumed madly and brought in the age of the ‘me generation’. In their mind they measure things by what value it brings them. They have tried to escape the shadow of the Greatest Generation – and failed.
And now, as they depart, they will leave economic upheaval and pain. Obama and Palin are my generation. It is now time for a much more moderate, less extreme group of leaders to take over. We enjoy the hell out of Rock & Roll and we are moved by the acts of patriotism shown by our armed forces. We savour all sides and are slaves to none. We have no beef with the Greatest Generation, and we have been patiently waiting for the Boomers like Carter and Clinton to make their mess and move on. We are use to cleaning up after the Boomers. We have been doing it all our lives.
Seems a bit ironic that the “Greatest Generation” fostered the “Worst Generation”. I was born in ’61 and have found myself lumped in w/ that generation despite sharing few of the stereotyped characteristics of it.
AJ you mentioned “rock and roll”, but didn’t mention drugs, sex and easy divorce. It is all part of the mind set, that responsibility for one’s behavior is just to hard and mean.
I am a boomer born years before the 60’s and many of US served in the military in Nam era.
Also I disagree with your economic impact.
There are many reports that the boomers will leave their expensive overtaxed liberal strongholds and move to low tax warm weather areas and the capital gains will still be massive for selling their houses they have held for 30 years or more.
I have plenty of friends moving now from Long Island to Florida selling their original purchase 17,000.00 homes for 400k plus and buying mid 150k houses and condos (which is high end here) and they are living off their pensions alone and have the rest to spend for all the things they want out of life.
Many are looking at picking up cash out foreclosed housing down here as investment property.
We have entire communities of ex ATT workers from NYC with thousands of retired members here for example.
AJ, As a boomer, I have to take offense at what you have written today. 🙂
I think you are targeting your comments toward the LIBERAL baby boomers for which I have not seen an actual percentage breakdown of such. The baby boomers I know are CONSERVATIVE. Very. And did not participate in the far left activities of the sixties.
I would like to see how many boomers voted for Ronald Reagan (as I did) and both George Sr. and George W. Bush.
My guess is that we are talking about a much smaller percentage of the boomers than we are led to believe were the 60’s radicals.
And didn’t I read that there is a baby boom right now from soldiers returning? 🙂
Imho, the current financial situation happened very quickly(suspiciously, imho) and for 3 reasons:
Sarbanes/Oxley’s requirement to “mark to market” ALL investments (another one of Congress’ hairbrain ideas, pretending to “regulate” and therefor look like heroes!)
Credit default swaps/short selling
CRA creating false housing prices;Fannie Mae/Freddie Mac corruption and forcing banks to make bad loans
This particular downturn isn’t the fault of the boomers. They are the “other shoe” that is due to begin dropping in 2011 when the babies born in 1946 begin to turn 65 and start retiring in droves.
At that point the market will go from net investment to net cashout. All those IRAs and 401Ks will go to net payout and contributions will stop. Houses will go up for sale and the generation entering the housing market will be smaller than the generation leaving it.
What we should be doing right now is having banks raze any home they foreclose on that is over 10 years old. Just remove the house and sell a building lot. We are going to have a huge surplus of single family housing in the 2-4 bedroom range if they don’t. Housing prices might stabilize now but starting in 2011 they are going to take another plunge.
But I have been trying to raise awareness of the impact the boomers are going to have on the economy as they retire. They individually won’t be to “blame” for it, it is simply the math involved with having so many people in a similar situation and taking similar steps all at the same time.
Just as the economy went into a spiral when the boomers started entering the job markets faster than the economy could expand to absorb them, the economy will spiral again when the boomers leave faster than they can be replaced.
Interesting times.
But what really irks me about the boomer generation is stuff like this.
No integrity and no ability to see the difference between legal and ethical.
To saddle an entire generation with the failed policies of the Democrat party is disingenuious and not hardly worthy of mention. I fear the final straw will be when the current crop of radical Dems means test social security benefits thus penalizing all of us who have lived within our means, saved for our retirement and not purchased above our ability to pay as many of the current geneartion are doing.
The rumblings of seizing IRA’s and 401K assets will be the final radical attempt at socialization of America and just may work. To blame this on a generation rather than an idiology is a mistake!
dhunter,
The problem is that as a whole the generation has adopted an ideology. So to blame the ideology is to blame the generation in an abstract sense. Boomers with their “peace at any cost” have cost the lives of many more people than would have died in combat in many cases. This is particularly true in Africa where “peace keeping” is killing thousands every year. Africa needs a strong benevolent power to come in, disarm the thugs, bring them to justice and build honest government institutions.
Boomers ask why America should be the world’s policeman and I say because A: the world needs one and B: I can’t think of a better candidate for the job. The world needs a policeman for the same reason a country or a state or a neighborhood does. Without one, nations with corrupt thugs in charge run amok Our attitude of “peace at any cost” is causing more violence over a longer period of time than we would have otherwise. Our believe that (endless) negotiation for the sake of negotiation itself is somehow “good” and that “talking” is always better than combat and that “war is never the answer” is resulting in the wholesale slaughter of millions on this planet.
The boomers are also quite narcissistic economically and politically. They were handed a US that was on top of the world and they don’t realize that we aren’t anymore. Our military is 1/4 the size it was overall in the 1980’s. Our Navy is even smaller still than that. But boomers still seem to have this attitude that the US can somehow legislate things that make a global difference. We can’t anymore. China and India are huge and growing fast. Russia is regaining her power and acting with her historical passion for domination.
Boomers are basically as a group a bunch of over fed, over paid, wimps who have never really suffered for anything and are “saving the world” to death.
First if you look at the election the over 30 vote was a split with only a 1% margin between them.
Second a significant number of the boomers are starting to retire at 55 not 65.
Their pensions make waiting till 65 not worth it. From private and government and yes UAW pensions they are so high for income levels that they don’t get their full social security amounts but are offset down in many cases to 1/2 that amount.
I know many here who are drawing a company pension and also a city pension they double dipped into after leaving their company since they only needed 8 or 10 additional years to be fully vested for a municipal pension.
Some are double dipping military pensions and municipal pensions.
To wait for 65 would only gain them less than 8 or 10% of their total retirement cash flow and they just don’t consider it worth it.
I know a few people who left up north and the high tax environment at 55 and are double dipping and now working for the state here heading for their third pension check.
“Second a significant number of the boomers are starting to retire at 55 not 65.”
Define “significant”. And can you provide any numbers to back that up? Everything I have seen says the number of people retiring at 55 has actually dropped (as a percentage of people eligible to retire at that age). Evidence is that people are working longer, not retiring earlier.
I have seen absolutely no evidence anywhere that more people are retiring at 55 but I hear a lot of people bandying that “fact” around.
Most people still working have no employer pension plan. The UAW pension plan, for example, is practically bankrupt.
For example this article on the current state of the UAW pension plan.
My neighbor worked all his life for United Airlines as an engine mechanic. He had been counting on that company pension. It was eliminated when he was three years from retiring.
Most boomers are not going to get any pension besides what they save themselves and social security. Employer pensions are a thing of the past.
My! I wouldn’t have thought there would have ben so many responses.
Seriously, AJ brings up some good points.
First, ALL political generations are 8-12 years. Not 20. The “Baby Boomers” actually divide into the Brat Boomers (born 1946-1955) and the Baby Busters (born 1956-1965). And the Brat Boomers are a really schizophrenic group. Half really steady folks…but the other half worthless brain-dead radicals.
And we Busters loathe the latter with a passion. Because we have spent our entire lives cleaning up after them.
But bear that 8-12 years in mind…the “Generation X” and “Gen Y” groups are equally mischaracterized.
I am still trying to figure out this “open season” on Boomers mentality. As a “Boomer”, I think your observations are way off the mark. I don’t know how others feel, but on the subject of Social Security, Medicare, etc, I’ve always operated on the assumption that there would never be anything “left for me”. I never wanted anything.
The only way I could see the “Boomers” causing a slow down would be the fact that as a generation we’ve aged beyond the point of our prime consumer years, and are now entering the “I don’t need as much” time of life. I’d not even thought much about it until now. I do believe this is a factor in a consumer “slowdown”. Heck, Baby Boomers are the consumer generation. We have our houses, vehicles, electronics, vacation homes, etc. We’ve bought the large appliances and really don’t need new ones. We’ve remodeled. We’ve been there and done that.
I know that sounds a bit fatalistic, but maybe we’re growing up. I don’t see how you can peg an entire generation by some vile liberals when thousands of Boomers lost their lives in Vietnam. George W. Bush is a Boomer. I do think my generation raised some HORRIBLE children. And, I do think those children are going to be a very real problem.
To blame a single generation is not fair. Where we are to blame is in the lack of values our children have. Remember, ours is the superficial, consumer generation, heavily vested in the “market”. Unfortunately the offspring of the younger “cusp” Boomers who were born in the late 50s or early 60s are the ones who propelled The One (elect) to glory.
As for retiring, I don’t understand that one. Why on earth would anyone want to retire? When it comes to the economics of retiring, pensions, Social Security, etc. We’ve all known it needs to be revisited, but no one has had the courage to do so. We’ve all known since the late 1960’s that we had a problem.
Let’s face it, Social Security – and the mentality it created, is the very real enemy here. It has created a welfare mindset in even the most conservative of individuals.
SJR
The Pink Flamingo
Excellent point, Mike M. The “busters” as you call them generally get to the trough after the “boomers” have cleaned it out. The boomers took all the jobs so by the time the “busters” entered the economy, we were unemployed. We will also be paying their retirement and social security will probably be broke when the “busters” get there.
“It has created a welfare mindset in even the most conservative of individuals.”
I disagree. Tell someone who has been self-employed all their life, like maybe a local hairdresser or mechanic at the corner garage that social security is “welfare” when they have been paying 15% of their gross earnings (plus another 3% for medicare) as long as they have been working. Now imagine if they had been depositing that 15% into a tax exempt retirement account instead.
This isn’t welfare, this is money the government took out of our checks, and then gave to Congress to use to cover deficit spending in exchange for IOU’s (special bonds that social security is required by law to purchase) that are going to come due here soon and Congress is going to run out of money to cover the deficits AND have to cover the IOUs.
There *IS* no social security “trust fund”. It exists as only a stack of IOUs. Congress already spent it. That is how they could run a budget deficit without just printing more money.
The chickens haven’t roosted yet, but they are circling.
AJ, I haven’t seriously disagreed with you since the immigration kerfuffle. But, this one, and some of the comments, are a load of (I’ll say) junk. The boomers are little different than any other generation. Not many at all went to SFO with flowers in their hair. There really weren’t very many people at Woodstock. Not many protested Vietnam nor did they run off to Canada. Most of us did not get into drugs. Basically, you have taken a few images and imprinted them on a whole generation.
The boomers have more than held up their end of the generational bargain. If you doubt it, tell me how willing you would be to regress to 1970 when the boomers were just starting out. Do you want that level of medicine or a 64K 360/30 being a large computer available only to relatively large companies? Do you really want to give up all that is available now that wasn’t in available in 1970. To what purpose?
We boomers paid into medicare and social security all through our working careers. We were told that that we would get our reward when we retired. The fact that the “greatest generation” screwed it all up and mismanaged the money is not our fault.
Your plaint about having to wait for the boomers to retire is undeserved. Like everybody else, we all started at the bottom and worked out way up over 25 or more years. If anything, the pace of change since 1970 makes it harder and harder to retire in place. The pace of change, ever increasing, gives the younger generations even more opportunity than we had. There seems to be three new things to get in on the ground floor every day.
There are some other foolish claims. No, the boomers are not going to cash out the 401k’s. They will take about 4% a year out and will still need growth to keep up. Given rational markets the increase in the 401k’s the boomers own will more than outweigh the loss of contributions. And, no, the economy did not go into a spiral because the boomers were entering the workforce. It may be hard for the young pups to understand, but the recession of the early 70’s was due to inflation from LBJ and the ones in the early 80’s were from Volcker purposely cratering the economy to finally end inflation. Non boomers may not remember the 12% prime rate.
Certainly, the current housing problem has nothing to do with the boomers and everything to do with the government pushing for loans to people who could not afford them. Will housing prices decline as the boomers move down? Who knows. But, if they do, that is only a bad thing for the boomers who are selling, not the younger generations who are buying.
Technically, I retired 10 years ago (at 52) when I left the big computer company (because they really didn’t want us high priced boomers any more), but I didn’t drop out. I have been running my little computer consulting business for the last 10 years and I will for the next 5-10 years. I think you will find that lots of us boomers are not retiring to the rocking chair like the “greatest generation” did.
Sure Social Security and Medicare may be a problem, but look to the people who caused that problem: FDR and LBJ with their forced Ponzi schemes. The Boomers were just forced along for the ride. We had no choice. The government wanted our money. Believe me, I don’t know a single boomer who was clamoring for Social Security and Medicare in the 70’s. Who was doing the clamoring. Why, it was that “greatest generation” again.
Rick
Oh, and Buddy Holly was not a boomer. He was born in 1936. That was the start of rock and roll.
Rick
SJR.
You have the core of my observations – that as the Boomers’ economic activity declines, as they put less in and take more out, the economy will naturally shrink.
But the Boomers, as a group, have really not been the best generation out there. Outside Rock & Roll (which is huge, being a Rocker myself) most of the Boomer’s decisions and issues and causes have been pretty bad.
Rick C,
I noted the exceptions to the general trend – chill. And it was the Boomers and their effort to revolt against their WW II and Depression era parents who gave R&R legs. If they did not listen and buy it would not have taken off.
“There are some other foolish claims. No, the boomers are not going to cash out the 401k’s. They will take about 4% a year out and will still need growth to keep up.”
No. Once you begin taking out, you are not allowed to continue contributing. Also, once you reach retirement age, it is too late for any “growth”. Your focus should be on preservation of what you have. When you retire, you should be pretty much done with the stock market and only be in with as much as you can afford to lose without hurting you, it is too late to “depend” on growth at that point.
So now you have o% accumulation because you are not allowed to contribute and (using your figure) 4% per year cashout. But … those cashouts will be from things like treasury bonds. The first of the boomers should already have been mostly out of stocks by now anyway. You don’t want to have much stock market exposure in the last 5 years before retirement to avoid seeing your 401K crater without enough time for the market to recover until you retire. So people with half way competent investment advisors that are due to retire within the next 5 years or so should not have taken much of a hit from this year’s market drop. People already retired should not have had ANY hit because they should be completely out of the market anyway. For people with 10 years or more to go before retirement, right now is probably the best buying opportunity you will ever see in the stock market.
But overall, the sum of 401K and IRA fundage will be negative starting in about 5 years from now. There is going to be a great transfer of accumulated wealth out of the accounts of boomers. Some of it will go as a trickle, some will go out all at once when boomers die and their kids collect those assets.
AJ:
I am a boomer, born in 1951 and no one ever gave me anything. I left home at 17 and have taken care of myself every since.
I got a real estate license and gave it up because I was sick and tired of listening to people half my age whine and complain if they could not afford a 3 bedroom, 2 bath with a double garage. My first home was bought on contract as part of a run down farm and I did not even have indoor plumbing at first. I had to put a new bathroom in and I heated with wood for years.
But the younger people do not want to make those kinds of sacrifices, they seem to think that giving up cable is a sacrifice.
I think the economy tanked because oil hit $145 a barrel and sucked all the money out of the economy. People could not pay their bills.