I’ve joked before that in the not-too-distant future we’ll be taxing my kids out the wahzoo to pay for Bill Gates’s (or Warren Buffett’s) free Viagra and Lipitor.
In his most recent piece on the subject, Kevin D. Williamson says we should call the benefits The Luckiest Generation got “The Great Deal.”
For the Silent Generation, the New Deal and Great Society programs redistributing money from the relatively poor young to the relatively wealthy old have been a resounding success — call it the Great Deal — but one that is ultimately unsustainable. Today’s young people already are seeing diminishing rates of return on Social Security, and, as the authors of the St. Louis Fed paper argue, it is likely that those going into retirement now and in the future will see less redistribution in their favor than did members of the Silent Generation.
What to make of this? The first is a point that legions of policymakers and politicians fail to — or simply refuse to — acknowledge, which is that the immediate postwar era was a unique period in our economic history shaped by the fact that most of the world’s surviving industrial capacity was located in the United States, while most of Europe and Asia were struggling to recover from the ravages of the war. The United States was responsible for about 60 percent of the world’s manufacturing output in those years and 61 percent of the economic output of what are now the OECD countries.
The second point is that it pays to live like a member of the Silent Generation, even if you have less in the way of resources to do so. Beyond date of birth, their income and wealth correlates strongly not only with obvious factors such as education but also with being married — and, interestingly enough, with having more than the average number of children. They are responsible investors with diversified holdings, relatively little debt, and sufficient cash on hand. They are (and have been) unlikely to have a car loan or credit-card debt that is large relative to their income or wealth.
The difference now is that if you want to be the beneficiary of a wealth transfer from the young to the old, it’s going to have to be from the young you to the old you via savings and investment, because the government of these United States already has indentured your future to pay for past indulgences.