Sunday, February 03, 2013
Timing is everything
This is why I so love Pete Peterson and Alan Simpson for launching their generational war. It's such fun being accused of being a "greedy geezer" when this is the result of the inevitable vagaries of capitalism: somebody's going to be on the losing side at the moment at which they no longer have time to make it all back.
Young graduates are in debt, out of work and on their parents’ couches. People in their 30s and 40s can’t afford to buy homes or have children. Retirees are earning near-zero interest on their savings.
In the current listless economy, every generation has a claim to having been most injured. But the Labor Department’s latest jobs snapshot and other recent data reports present a strong case for crowning baby boomers as the greatest victims of the recession and its grim aftermath.
These Americans in their 50s and early 60s — those near retirement age who do not yet have access to Medicare and Social Security — have lost the most earnings power of any age group, with their household incomes 10 percent below what they made when the recovery began three years ago, according to Sentier Research, a data analysis company.
Their retirement savings and home values fell sharply at the worst possible time: just before they needed to cash out. They are supporting both aged parents and unemployed young-adult children, earning them the inauspicious nickname “Generation Squeeze.”
But let's not let that get in the way of the narrative which holds that the baby boomers are the richest generation in history who are working as hard as they can to screw over the young for their own benefit. And it's a bunch of old millionaires who are funding the propaganda effort:
The Can Kicks Back (TCKB) is a non-partisan, Millennial-driven campaign to fix the national debt and reclaim our American Dream.
Young Americans have the most to lose if Washington keeps kicking the can down the road, and our future along with it. We believe it's time we kick back and demand a solution to our $16 trillion and growing national debt.
To achieve a “grand bargain” that puts our country on a sustainable fiscal path, the calculus among elected officials must change so that the political cost of cooperating and taking action is less than bickering and delaying action.
To this end, TCKB will educate, organize and mobilize over 100,000 young people to pressure elected officials achieve a bold, balanced and bipartisan deficit reduction agreement by July 4, 2013.
Read about our principles.
• Fix the Debt is a non-partisan movement to put America on a better fiscal and economic path. The Can Kicks Back serves as its Millennial outreach partner.
• Concerned Youth of America (CYA) is a nonpartisan group dedicated to promoting fiscal responsibility at the local, state and federal levels and promoting the investments to support future economic opportunities. CYA serves as the 501(c)(3) fiscal sponsor of The Can Kicks Back.
Dean Baker has often remarked on the hypocrisy and inconsistency of this propaganda, with Peterson and his pals ignoring any evidence that refutes their narrative:
The granny bashers’ theme is that Social Security and Medicare constitute an enormous generational injustice because the young, and those yet to be born, will be forced to pay for the cost of these programs for retirees and current workers. Of course the reality is that the vast majority of the granny bashers’ horror stories about generational inequity stems from the cost of sustaining a broken health care system, not from programs for retirees.
I don't think most people know the following, but it's hugely important. This demonstrates perfectly why Democrats are either corrupt or fools (or both) for going along with any of this:
But the granny bashers are not interested in fixing the health care system – that would involve confronting powerful interest groups like the insurance and pharmaceutical industries and the doctors’ lobby. In fact, the granny bashers are not really even particularly interested in generational equity. This is just an excuse for their real agenda: cutting Social Security and Medicare.
This point is demonstrated by the fact that their policy recommendations never change even when the evidence changes in very big ways. The granny bashers have treated us to three very dramatic examples of this “different facts, same policy” approach in the last 15 years.
The first example is slightly technical. It has to do with the claim that the consumer price index (CPI) overstates inflation.
And he goes on to discuss the evidence in the original article excerpted above: many baby boomers lost a huge chunk of wealth in this recession and will not be able to make it back before they are too old to work:
The CPI is our yardstick for measuring how much better off people are doing through time. If wages grow 4.0 percent and the CPI tells us that inflation is 3.0 percent, then real wages have grown by 1.0 percent. However, if the true rate of inflation is just 2.0 percent because the CPI overstates inflation by 1.0 percentage point a year, then real wages have grown by 2.0 percent (4.0 percent wage growth, minus 2.0 percent inflation).
Fifteen years ago, many economists and pundits (including much of the granny basher lobby) embraced the claim that the CPI overstated the true rate of inflation by at least 1.0 percent a year. If this claim was true then it undermined the core of the granny bashers’ story. It would mean that our children and grandchildren would be far richer than we ever imagined possible and that many older workers and elderly grew up in poverty.
If annual wage growth was 2.0 percent rather than 1.0 percent, then in 40 years, wages will be more than 220 percent of the current level, instead of just 50 percent higher. The granny bashers embraced the claim of the overstated CPI in order to justify cutting Social Security (retiree benefits are indexed to the CPI), but they never followed through the logic of this claim for their generational equity story.
This would be comparable to Al Gore maintaining a drive to reduce greenhouse gas emissions even after new evidence showed that the planet was actually cooling. Honest people don’t ignore such evidence.
The exact same issue arises with the speed up in productivity growth in the mid-90s. The granny basher crusade against Social Security and Medicare dates from the mid-80s when productivity growth was just 1.5 percent a year.
Productivity growth determines the rate at which society can, on average, get richer. In the mid-90s, the rate of annual productivity growth increased by a full percentage point – in effect bringing about the more rapid gains in real income that would have been implied by an overstated CPI. However, none of the granny bashers noted how the productivity growth speedup had enormously improved the prospects of future generations. They just maintained their insistence on cutting Social Security and Medicare.
[T]he recent collapse of the housing bubble and the resulting stock market plunge have reduced the wealth of older workers and retirees by close to $15 trillion. This is a transfer to the young, since they will be able to buy the housing stock and the corporate capital stock for a far lower price than they would have expected to pay just two years ago.
In fact, the real downside for the younger generation will be the fact that many of those older people will be forced to work much longer than they originally planned because their retirement income from pensions, 401Ks and real estate holdings were depleted which could have an effect on the job prospects for younger people. In that case, and further depletion of retirement security and health care through the plans such as those advanced by Peterson and Co will make things worse for the young people they are supposedly trying to "help." And it goes without saying that young people will someday get old --- if they're lucky --- and many of them will also need these programs. It should not escape their notice that the deepest cuts come to them, not the older generation.
In fact, they should look at what happened to this baby boom generation as an object lesson in timing. You just never know when the bottom is going to fall out and all your best laid plans for saving and accumulating wealth are shot to hell because a bunch of greedy bankers and financiers decided to gamble with other people's money. Most of those who wind up depending on Social Security are hard-working people who did everything right.
And that's why these millionaire plutocrats are such con artists. They are trying to preserve America for the young, alright. But it's for their own heirs. That's how moneyed elites turn themselves into Aristocrats.
digby 2/03/2013 03:00:00 PM