The Saeculum Decoded
A Blog by Neil Howe

Millennials’ Concerns

 4th Turning (Crisis), Economics, Generations, Millennial, News, Topics  Add comments
Mar 312010
 

Is this Millennial’s views really representative of his generation? Here’s why I ask.  The mandatory (or “entitlement”) spending he talks about has been growing as a share of GDP more or less continuously over the last 45 years.  And it is projected to continue to grow over the next thirty.  I know many Millennial (born 1982-200?) who are very concerned about this trend—and when you talk to them, they do find it troublesome.  But to the extent of really motivating them to elect or defeat a political candidate?  If the Democrats’ new health-care legislation remains in place, that path has just been tilted further upward, i.e., accelerated.  Yet I can’t say I’ve heard many Millennials speak out about this law’s obvious fiscal impact.  This year, Social Security is going into a primary-balance deficit some eight years earlier than projected a few years ago.  Not much comment here either.

So again I ask: Do most Millennials share this writers view?  Maybe after the next great economic scare, but not quite yet, I think.  One can imagine a larger version of what happened after the 2008 meltdown, when everyone “woke up” to say omg we knew about those subprime mortgage and CDS’s all along… why didn’t we *do* anything about them?  Only this time they’ll be talking about the entire government sector balance sheet.

Pay as you go accounting has allowed a gap the size of the Grand Canyon to open up between what most Americans expect to pay to government over their lifetimes and what they expect to receive.  Absent blistering productivity growth or surging demographic growth (we’re not going to see either anytime soon), nearly all of that gap must be filled.  Get out your shovels.  There will be a day of reckoning.

Be Sociable, Share!
  • scotths

    I think this problem is greatly exaggerated. Consider the following graph:

    http://upload.wikimedia.org/wikipedia/en/6/64/G…

    This shows entitlement spending growth as it related to revenue and expected growth. The reality is that entitlement spending will likely grow to be closer to 15% of GDP if left unchecked. Most of that growth comes from Medicare with social security remaining rather stable The plot also assumes no revenue increases and thus explodes the amount of interest paid.

    Clearly something must be done here, but I don't think the problem is as serious as people have been taking it. We do need to look at ways to save money with regards to medical expenses late in life, and we are starting to do that with this bill.

    You mention the amount of money people pay in versus the amount that they pay out and that they expect more money out than they put in. Since 1980 we've seen rapidly increasing productivity but stagnant wages for workers. The top 1% has grown from about 7% of the national income to close to 25%! Steps should have been taking to keep this in check, and their taxes should not have been decreased to the extent that they were. The government allowed our wealthiest citizens to make massive increasingly untaxed profits while making promises to everyone else that they will have social security and medicare when they retire! The middle class didn't benefit at all by this set of circumstances.

    With the top 1% making 25% of the income, what if we increase their taxes by about 20 points? That would represent 5% of the GDP! Consider what happens on the plot if we increase receipts from just under 20% to just under 25%. If we combine that with increases efficiency in Medicare we should be just fine. We should also create a more aggressive estate tax to attempt to recoup some of these massive estates.

    I'm not saying that it won't require any tax increase amongst the middle class, but clearly the bulk of the tax increases are going to have to lie with the wealthy until such time as the income level of the middle class is back closer to where it was several decades ago. They were under-taxed for several decades now they will have to pay more (but still likely far less than the same demographic had to pay in the 50's!).

    The health-care bill doesn't necessarily add to the problem. Many of the provisions are not paid for with government funds. For instance, the health care exchange simply allows people to purchase plans the way large corporations do now by averaging over a large group of healthy and unhealthy people. This will also allow for free market competition isn't present today as customers for the first time will be able to easily change plans if theirs isn't working out for them.

    The low income subsidies are clearly an exception to this, but I think simply represent the reversal of lower and lower wages as a function of productivity that has been present over the past few decades. Most everyone agrees that working people should have access to health care, I am not sure it is that important HOW we pay for that. Whether it happens because workers organize and demand it of their employers, or we force their employers to buy it for them or we tax the employers and executives and use that money to provide them with insurance are all basically the same thing.

    (I'm a mid 70's Xer, but tend to see things politically with the millies than with the Xers)

  • danielmc999

    Neil, I'm a 1984 Millenial, and I sure do care. The math simply does not work from multiple vantage points. We are seeing clear diminishing GDP returns on debt, as we need to take on more and more just to “get ahead” of the interest payments. Our interest rates do not incorporate any reasonable estimate of credit risk, but they will. Entitlements will lead to incremental deficits in the hundreds of billions by 2020. We are importing 66% of our oil consumption going into the Crisis, when even the DoE is starting to admit the reality of geological oil supply issues over the next 5 years.

    I simply cannot see us avoiding another major crisis before 2015. A lot of my friends believe this is just a typical post-War recession and recovery. A 2nd crisis will change that belief. We didn't store any acorns away in our tree after a nice big harvest, and now it's the Millenials who will have to run out in the midst of the frigid winter air to round up what scraps we can.

  • bria67xer

    I think I remember reading in the Fourth Turning that when the proverbial “crap hits the fan”, younger generations (Xers and Millennials) will be very UNWILLING to pay for the entitlements that will provide immediate benefits to senior generations simply b/c they will be fitting most of the bill and won't be seeing the rewards older generations will. That being said, I think we'll see disgruntledness. Xers are known for grumbling under their breath about stuff and not making much of a public scuttle. But, for the sake of their children, we may see them be more expressive. Millennials, however, for all their expressiveness still do tend to “follow the leader”. So I'm concerned that although they may not be happy about this, they will still follow after their elders under the pretense that “they ultimately know best.” Humpf, we Gen Xers KNOW better than that. Millennials don't….yet. I also tend to agree with the first poster in that Millennials will be the ones running around in the cold ” picking up the acorns” b/c older generations didn't think it was necessary to prepare for Winter. I think THAT will be the Millennial “wake up call” to the fact that older generations, particularly their parents', aren't all that smart.

  • Brian Rush

    Neil, I realize that this the issue that propelled you and Bill to start your generational research in the first place, but I agree with Scotths that it's easy to exaggerate in importance. Two things he pointed out in his response are particularly important: that most of the increase in entitlement spending has been from Medicare, and that productivity has grown much, much faster than wages. This suggests a two-point remedy which will essentially solve the problem without reducing entitlements so as to hurt people: control the runaway inflation of medical costs (thus saving money on Medicare), and act to narrow income gaps.

    The recently passed health care reform bill is a start on the first, but only a start; much more needs to be done. In particular, I would like to see the pharmaceuticals market in this country opened to foreign competition so as to drive prices into reasonable territory. Other countries — in fact, ALL advanced nations except the U.S. — provide universal health care without facing bankruptcy and there is absolutely no reason to believe we can't do the same here. So I don't share your pessimism about this new law, except that I consider it inadequate and believe that more needs to be done.

    As for the second, we need to raise taxes on the very wealthy. We need to do that for revenue reasons, but even more we need to do it to discourage profit taking and bubble-blowing and drive money back into productive investment. A top-bracket tax of 90% on incomes over a million dollars a year would be entirely appropriate. (Yes, I'm serious.) Of course, people would choose to limit their taxable incomes rather than pay this level of income tax, but that's the point. It would force the wealth to be more broadly shared, increase investment in productive ventures (which is tax deductible of course) and boost wages. This in turn would boost consumer demand and enhance GDP. There is no need for any “blistering productivity growth” (we've had that already), only for the fruits of same to be more broadly shared. The economy is seriously underperforming compared to what the productivity gains of the last few decades would properly generate.

    Aside from Medicare, there simply is no serious entitlement problem. We are facing a demographic bump in which our population will stabilize and, for a while, decline, and that will of course increase the retiree-to-worker ratio and the burden on working people to support their elders. (Please note, however, that that is NOT merely a government entitlements problem. It doesn't matter a fig whether a retiree's income is from Social Security or from private savings and investments, it's still consumption without production and so represents exactly the same problem either way. The only way that it could NOT be a problem is in the case of an elder who lives under a bridge and starves.) However, the increase in productivity over the past few decades is quite sufficient to absorb that relatively mild challenge, IF wages are increased across the board to what that productivity gain would justify. So that's where reforms need to be focused, not on cutting back on entitlements.

  • cgbyrd

    I'm a Millennial, born 1994, and in my Pre-AP World History class, we've had a lot of discussion about this. To my surprise, the majority of my class were very anti entitlement and advocated banning welfare. I would've thought it had something to do with my teacher's conservative leanings, however, the students frustrations seemed to have been formed from personal experience at work. One student talked about her experiences working at her dad's pharmacy where welfare recipients did not pay anything for their medications, while another's concerns were rooted in his experience with welfare recipients at the grocery store he works at. Most of these concerns were voiced when we had a substitute who supported welfare. The woman was probably shocked at our passionate opposition to the issue. One of the students in my class said that his sister was worthless to society because she was living off welfare, doing drugs, and having babies while she was at it. I was honestly shocked at how well informed and appalled my class was at this issue. I can only imagine the passion once our deficit falls through, another issue that my class was angry about. What makes a lot of students angry is that not only is our deficit so large, but that China owns it. China is seen as unfriendly to American interests, and a nation to be feared. All of these came as a surprise to me. I'm interested in politics and am angry about these issues, however, I didn't expect my fellow classmates to be.

   
© 2012 Lifecourse Associates Suffusion theme by Sayontan Sinha