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Why your parents are ripping you off
BBC News ^ | Tuesday, 23 March, 2004 | By Laurence Kotlikoff

Posted on 03/23/2004 4:04:37 AM PST by gd124

Are we heading for conflict between the older and younger generations? It's the scenario played out in this week's drama documentary If...the Generations Fall Out.

Will the young rebel against paying to support an ageing population? Far-fetched? Not so, says Laurence Kotlikoff, professor of economics at Boston University, who thinks that unless the baby boomers pay up, parents and children could soon be at war.

Whether we want to accept it or not, the entire developed world is getting old, indeed, very old.

Over the next three decades the numbers of oldsters in the EU, Japan, and the US will more than double, while the number of workers expected to pay the elderly their state pension and health care benefits will rise by less than 10%.

The developed world is not just getting old. It's going to get old and then get even older. In 2100, the elderly share of developed world populations will be higher than in any year in this century.

The magnitude of the prospective ageing is hard to wrap one's head around.

In 2030, the entire United States will be older than present-day Florida.

Two decades later, the number of old-old Americans, those 85 and older, will suffice to fill up New York, Los Angeles, Chicago, and several other major US cities.

And the number of American centenarians in 2050 will suffice to populate Washington DC.

Imagine visiting Washington DC and not meeting anyone younger than 100.

Fiscal strain

If this sounds old, note that America will be the young kid on the block. Both Europe and Japan will be significantly older than the United States.

This demographic phenomenon is unprecedented in human history.

It will generate enormous social, political, economic, and fiscal strains, the prospects of which are being largely ignored by our political leaders.

With respect to fiscal strains, we need to realise that right here and right now the developed world is bankrupt; there is no possibility of raising taxes high enough to cover all the pension and health care benefits promised to current and future retirees.

And trying to drop the entire bill into our children's laps isn't any solution. It's not only immoral, it's also infeasible. Doing so would entail more than doubling their lifetime rates of taxation.

Unstoppable force

Radically and immediately restructuring and cutting benefit programs is essential, but, it seems, politically unacceptable. But when an unstoppable force meets an immovable barrier, something has to give.

What will give in this case is the printing press.

Governments throughout the developed world will resort to printing money to "pay" what they owe. The result will be extended periods of very high inflation, if not hyperinflation, during which governments renege on what they owe by paying their bills with waterdown currency.

There are meaningful, if very painful, policy reforms that can still save the day.

But they have to be undertaken immediately.

These reforms include asking the current rich and middle class elderly to help pay off existing government pension liabilities and then setting up a rational, efficient, inexpensive, and highly diversified system of individual compulsory saving accounts.

Another key reform is providing government health care to the elderly through a voucher system in which individual vouchers are determined based on the elderly recipient's current health status and the overall expenditure on vouchers is capped at what the country can afford.

Another Argentina?

Another key reform is to switch from economically meaningless deficit accounting to generational accounting - a new method of long-term fiscal planning that focuses on the fiscal burden to be handed to young and future generations.

These and other reforms could keep the developed world from becoming another Argentina, but their acceptance by the public will require a degree of maturity and concern for the next generation that goes far beyond anything we've seen to date.

This grim assessment suggests that we each need to look out for ourselves and plan for a much rougher retirement ride than we had expected.

This entails saving much more, thinking about how to avoid future taxes, looking out for high future rates of inflation, and realising that when the fiscal system implodes, the economy will do likewise.

Professor Kotlikoff has written a book on the issue called: The Coming Generational Storm: What You Need to Know About America's Economic Future.

He is also taking part in the BBC programme If...the Generations Fall Out which will be broadcast in the UK on BBC Two on Wednesday, 24 March, 2004 at 2100 GMT.


TOPICS: Culture/Society; Foreign Affairs; Government; Miscellaneous; News/Current Events; US: Massachusetts; United Kingdom
KEYWORDS: argentina; babyboomers; boomers; economiccollapse; inflation; old; socialsecurity; welfare; young
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To: Mr. Bird
If you are saving it for 25 yrs out, I doubt you'll get much since a good number of the boomers will have kicked off by then. You'll be threatening an already strapped generation of xers and y with something when they would be happy right now with reform.
21 posted on 03/23/2004 5:06:59 AM PST by cupcakes
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To: gd124
The simple fact is the government has promised some $40 trillion to seniors, government retirees, foreign bondholders, etc. That's roughly $400,000 per American family. I don't know about the rest of you, but I would have a hard time affording a 30 year payment schedule for that amount (I'm 41). Add in my share of the freeloaders and I'm way under.

If the politicians don't cut benefits we would either be forced to default at least partially or hyperinflate our currency into economic catastrophe.

22 posted on 03/23/2004 5:07:09 AM PST by palmer (Solutions, not just slogans -JFKerry)
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To: gd124
Gee whiz, even Americans can't make socialism work.

Who'da thunk it?
23 posted on 03/23/2004 5:07:36 AM PST by headsonpikes (Spirit of '76 bttt!)
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To: general_re
The system is broken, and cannot continue in this fashion.

I've been hearing that for at least the 27 years I've been working and paying. Every fix is worse than the last. Best of luck to you geniuses in getting it right.

24 posted on 03/23/2004 5:10:35 AM PST by Glenn (The two keys to character: 1) Learn how to keep a secret. 2) ...)
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To: Glenn
The government could pay back what you and your employer put in plus the typical interest rate for a bank savings account reflecting each year they had your money, then when you use it up in Social Security and/or Medicare, stop the payments. Then people can either keep working, or start taking out reverse mortgages on their homes and using up their investments. End the other welfare programs now --- end food stamps, WIC, NAFTA-TAA, government housing etc and let everyone work for what they want.
25 posted on 03/23/2004 5:20:52 AM PST by FITZ
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To: FITZ
bump
26 posted on 03/23/2004 5:21:57 AM PST by holdmuhbeer
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To: gd124

cap.jpg (10288 bytes)

capbldg.jpg (14158 bytes)

oldman.jpg (13086 bytes)

27 posted on 03/23/2004 5:23:02 AM PST by Incorrigible (immanentizing the eschaton)
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To: Glenn
Every fix is worse than the last.

That's because the real fix is politically unpalatable, albeit tolerably obvious. Benefits will have to be reduced, or the retirement age will have to be raised, or payroll taxes will have to rise, or some combination thereof. Any other proposed "solution" - besides scrapping it entirely, of course - is a shell game. But, speaking broadly, the greyhairs don't want benefits to be cut, the boomers don't want the retirement age to be raised, and neither the boomers nor the x-er's want payroll taxes to rise, so we keep applying duct tape and coathangers to keep an increasingly infirm system propped up. Eventually it'll crash, and those steps will be the only remedies available - the only question is how much pain we're willing to tolerate by waiting for that day, because the longer we wait, the more painful that fix gets.

28 posted on 03/23/2004 5:23:22 AM PST by general_re (The doors to Heaven and Hell are adjacent and identical... - Nikos Kazantzakis)
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To: Incorrigible
Carousel!
29 posted on 03/23/2004 5:24:44 AM PST by general_re (The doors to Heaven and Hell are adjacent and identical... - Nikos Kazantzakis)
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To: qam1; ItsOurTimeNow; PresbyRev; tortoise; Fraulein; StoneColdGOP; Clemenza; malakhi; m18436572; ...
Xer Ping

Ping list for the discussion of the politics and social aspects that directly effects Generation-X (Those born from 1965-1982) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details.

30 posted on 03/23/2004 5:26:08 AM PST by qam1 (Tommy Thompson is a Fat-tubby, Fascist)
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To: gd124
"These reforms include asking the current rich and middle class elderly to help pay off existing government pension liabilities..."

So essentially the Govt. will be saying to millions of Americans, "Hey we blew the money you've been giving us for 30 years to save for your retirement so you will have to start all over."

31 posted on 03/23/2004 5:31:37 AM PST by joebuck
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To: tdadams
Your father may have died at age 63 and never collected a penny of his social security, but if your mother is still alive at age 65 she will collect hers and his. That may actually be a good thing for her.
32 posted on 03/23/2004 5:34:41 AM PST by wingnuts'nbolts
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To: gd124
I'm 44. Looking at the demographics, there is NO way I will collect a dime. As somebody once joked, "By the time our generation retires, we'll all be depending on 6 Burger King workers for our Social Security."

So no use crying over long-ago spilled milk, it's clear that SS...or the SS Titanic, is going down and it is only a matter of time before hypertaxation and/or hyperinflation ensues. But I'm interested in what other Freepers have to suggest to go against the herd to survive. Precious metals? Moving to Costa Rica? Any thoughts...

33 posted on 03/23/2004 5:39:09 AM PST by guitfiddlist
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To: gd124
If they'd just raise the retirement age to 80-90 it would go a long way towards helping things out a bit.

I'm not going to pay the 70%+ tax rates that are going to be necessary to support retirees. I'll not ask my children to do so either.

34 posted on 03/23/2004 5:42:25 AM PST by zeugma (The Great Experiment is over.)
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To: general_re

round.jpg (15153 bytes)

35 posted on 03/23/2004 5:42:50 AM PST by Incorrigible (immanentizing the eschaton)
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To: Glenn
I have the perfect solution. Unfortunatly, too many will refuse the solution.

End it.

36 posted on 03/23/2004 5:45:13 AM PST by Dan from Michigan (""I don't need no doctor"")
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To: qam1
Related Thread:

We boomers will bust the federal budget (Mulshine)

 

37 posted on 03/23/2004 5:48:06 AM PST by Incorrigible (immanentizing the eschaton)
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To: gd124
Not to turn this into a debate about abortion, but 45,000,000 dead since Roe v Wade has helped depopulate the ages that would be paying for these socialist programs.
38 posted on 03/23/2004 5:49:40 AM PST by Dad was my hero
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To: gd124
The only thing that bothers me about this article is the notion that kids won't take care of their parents. I'm sure most people don't have a problem about taking care of their own parents, its the stranger down the street, and the geezer using his SS to go on his monthly golf trip that angers most. (self included) I figure it should be a natural and heartfelt reaction to take care of our parents financially, if ever the need came up. I know I will. All parents arent perfect, at best they deserve honor from their kids...whether a dad was a good father, or a mean nasty sonofabitch. JMHO.
39 posted on 03/23/2004 5:53:36 AM PST by BureaucratusMaximus (Space for rent)
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To: Incorrigible
There's a remake in the works, but there's apparently no truth to the rumors that in the new version, Logan decides to flee to Sanctuary because of his massive FICA deductions ;)
40 posted on 03/23/2004 5:56:46 AM PST by general_re (The doors to Heaven and Hell are adjacent and identical... - Nikos Kazantzakis)
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