

The next crisis

Sponging boomers


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The Plutocratic crony system in the West is now heavily loaded to look after the interests of the older pensioners at the expense of the young and educated yet largely unemployed piggy occupiers.


Fantastic article. This is exactly what's happening in United States and also most other populated countries.

Probably problem is more severe in US since their older generation spent their younger generation's wealth while in some other countries such as China and Japan the olders passed their asset and savings to younger generation by living frugal life. But, anyway and anywhere, the main economies are going to have much lower working participation rate and every human being will suffer from it..

WT Economist in reply to Fovanilla


That was true at one time in the U.S., with the Greatest Generation passing on assets (but also environmental damage). The question is, does affluence itself lead to a lack of concern for the future and those who will live in it?

In any event, younger generations in Japan are poorer too. China has worse environmental damage than the U.S. did in the 1940s. And both have worse demographics than the U.S.


Perhaps the first issue related to this problem is to discontinue the simplistic agglomeration of the group of people between the ages of this or that as a generation, where considering a financial and/or political analysis pertaining to their particular situation.

The baby boomer generation, particularly, whether as thought of as the 'me' generation, was always treated as being an amporphous mass of either labourers, consumers, or voters.

Realistically there is some significant discrepancy between what could be considered the 'leadership cohort' of the baby boom generation, and, the remainder of the baby boom population.

The qualification of the sponging by the 'leadership cohort' relative to the generation at large, would be an interesting distinguishing analysis.

It would be affirmative to see some 'churn' in the leadership cohort of the baby boom generation that reflects a more broad, normalistic perspective of the kind of maturity that could be hoped for by the other generations.

Particularly where as considering the potential for conflict between generations, the assumption that things will go smoothly for a generation that pursues its self interest at the expense of other generations is a tenuous proposition. As you note a 'battle'. But, perhaps this battle is most reasonably fought out amongst the baby boomers as opposed to between the generations.

deuxcrois in reply to this_Martin

Well said.
It is often cited that "The Boomers" will be unsupportable by 2060 - ignoring the factor that they will all be dead by that date. What is also ignored in the debate, is that each prior generation has built the existing infrastructure through its taxes. Succeeding generations are not taxed to pay for this (except that they fund pensions), but were these generations to be joining a private club, they would have to pay a "joining fee" to buy into that infrastructure. Buy shares in a successful company? Pay the premium that the stock demands over the initial share price.

Hollywood1969 in reply to deuxcrois

Expenditures, relative to GDP, to maintain investments in infrastructure have dropped considerably over the past 30 years. The NRC, for example, just issued a report detailing why the Army Corps of Engineers needs to divest itself from (deconstruct) many of its waterways projects that are currently substandard. In addition, the American Society of Civil Engineers issue a report on infrastructure every year. It short, it is crumbling. The "Baby Boomers" were given a palace by their parents and have handed down a shack to their kids.

Pacer in reply to deuxcrois

Yes, but since SS and doubly since Medicare the surplus payroll tax collections have been loaned to the government so that they can be spent in the current period. Not really saved in much of any sense. Who will repay the bonds as the entitlement programs run deficits and start drawing down? Future taxpayers--of which many will be workers in subsequent generations.

Meanwhile, there won't be payroll tax surpluses accumulating to provide backdoor low cost funding for future infrastructure needs.

But don't worry. The 2060 figure is fantasy. I've read 2035 in far more sources and even their underlying assumptions seem pretty optimistic (e.g. assuming all else stays the same...).


Splendid article. It is explicitly revealing a tremendous taxe rise or an inflation in the near future. Ha, one can't escape from the gravity!


The audacity of our government leaders referring to programs like Social Security and Medicare as 'entitlements' has really got to rile my fellow Boomers, First off, there is no other generation who has paid more into the system that promised security and medical coverage to us in our old age, This was a deal -- and an offer that we couldn't refuse, by the way. These programs are handouts and the fact that that Congress has played fast and loose with our funds (taking them to fund real losing propositions) over the years, should be a real outrage to older voters,

There has never been a tougher Presidential decision for us Boomer voters. Which candidate can we trust to restore and protect Social Security and Medicare for us when we are ready to collect? I'm afraid the answer is "none of the above" and the reality will be that we are left holding the bag. I do not think there is going to be any "sponging" by our generation,

WT Economist in reply to hRtTdzLY3U


They are you. They played fast and loose with the money for the future to give it to you in the past, because that is what you wanted. Now the money is gone. So now what? Sacrifice those under 55 only, while cutting taxes even more?

GH1618 in reply to hRtTdzLY3U

"Entitlement" is merely a term for an expected expenditure which is nondiscretionary, hence not on the table when looking for things to cut out of the budget. There is no reason to take offense at the term when it is used properly (nonpejoratively).

Hollywood1969 in reply to hRtTdzLY3U

Math (and charts) are hard to reconcile with the "you deserve it" lie someone has believed for 40 years. I would be willing to bet that you never voted for a candidate who promised (and delivered) fiscal constraint and pay-as-you-go. In a representative republic, we get to chose our leaders. The leaders you chose have squandered your savings on "goodies" you demanded they provide you. Time to grow up and take ownership of 4 decades or poor choices.

al hamilton

The founders instituded checks and balances into the system to bring balance. When we started the new society to protect everyone from everything no check was put in place because we borrow what ever it takes to pay the bill. Until we cap intitlements we continue over the debt cliff. I agree with the president that it is unpatriotic to leave such a debt to our children. We are facing the biggest predictable problem in history with the debt.


I'm 55 and was laid off my job of 30 years in 2010. The only job I was able to find pays less than half of my former job and has no benefits, despite the fact that I had an excellent work record and a Master's in my field. Of all my close friends, each have lost a job after age 50( as have many of their spouses/significant others). Some have not been able to find any work at all. Used up my sad little 401k, and my house is worth less than my mortgage. So, hey, I'm looking forward to all that awesome "sponging" my generation is supposed to be doing. When can I start?

WT Economist in reply to Chicagoland625

Sounds like you just finished.

The policies and practices that made younger generations worse off started at the bottom and worked their way up. In the early 60s, the older generations in charge at the time were worried about "how the other half lived." But starting in 1973 the average inflation adjusted wage for the bottom half started to fall.

The first recession to really hit college graduates, and cut their pay, was in the early 1990s. Before the latest recession, the talk was that only the one percent were getting ahead at everyone else's expense. So why are the affluent so mad at Obama? Because now we are down to the .01 percent getting better off.

Sorry fellow master's degree holders. If you were smart, and saw what was coming, you would have been living modestly off your current salary in the past and banking the windfall. But few Americans are that smart. When things go their way, they think they are special.

Chicagoland625 in reply to WT Economist

Lived modestly, raised 5 kids and put them all through college. Supported disabled spouse for past 25 years. Not special- just did my job and did it well.
Don't presume you understand a persons life without walking in their shoes.

teacup775 in reply to Chicagoland625

Ah yes, but "we" as a nation allowed the rise of a winner take all society. Inevitably, thats puts the majority on much more tenuous terms. The benefits of globalisation accrued to a very few, and the rest were left to and goaded into floating the difference with debt. So now you own an asset purchased at bubble prices, and a pitiful pension, gone. Oh and if the Republicans run things, you won't get to sponge, because none of it will be there. If the Democrats run things it will be much the same just with a smiley face.

Ideally you should have lived within your means... by which I mean you should have lived within half your income in your job of 30 years and put aside the other half for a rainy day (or when you could lose your job). Had you done that, you would have had the money today and not been saddened your "sad little 401k".

You are university educated, had a Master's... surely you are smart enough not to fall for false promises of unfettered growth!

For many of us in our generation (I am 40)... I realise I can't ever afford to retire. I am "re-skilling" myself continuously to stay relevant (it is like running on a treadmill moving quicker with every passing minute). I am ready to pick myself up every time I fall and work till the last day, until I drop since I don't really have a choice. That way I won't have to fund a retirement!

Well that's good and all if you own or work in your own company. Chances are that once you reach a certain age you will be replaced by two younger people (who added up cost half) and still have to depend on your savings...

Sorry, that is reality and will happen to almost everyone.

wzWPJL5U4a in reply to Chicagoland625

Still have a mortgage at 55 and minimal 401k means savings for the 30 odd years you worked were inadequate because you spent [enjoyed a life style] that cost more than you earned [were entitled to]. Why should future generations fund your irresponsibility?


Here is what this article misses: the boomers have been saving for years, as they were told to do. Now, through financial repression (putting interest rates artificially low for a long time) the USA is effectively taxing the boomers savings to finance the government debt. Over the last 100+ years T-bills have yielded about .5% above inflation on average. 10yr Treasuries have yielded about 2.5% above inflation. With the Fed targeting a zero fed funds rate and buying longer debt they are keeping both below the inflation rate. This reduces the interest rate payments of the USA and encourages to keep spending. Boomers have been paying for this for the last 3-4 years and will be into the future. in numbers, there are 76ml boomers in 53ml households with an average of $150k in their 401k's. With interest rates 2.5% below where they would normally be, that is an extra $200 billion per year of an effective tax on boomers. Sure some of this is in equities, but there is also a lot of savings outside of the 401k plans.

hRtTdzLY3U in reply to adp360

You are so right. My points here were related to the audacity of the author and our government officials around Boomers sponging or entitlements. We have paid more into the Social Security and Medicare systems than any other generation and this was not an option. What it was, was a promise to support us in our retirement years-- which many of us may never see, thanks to our investments being wiped out. And the college kids are wondering why they're not getting jobs. In part, it's the economic mess and the other part is the older workers who cannot afford to retire (like me).

WT Economist in reply to adp360

"The boomers have been saving for years."

Yes the regressive payroll tax was raised and the progressive personal income tax was cut in 1983, with the promise this would "save Social Security." Think of this as a large collective 401K.

Then those over 55 went out and BORROWED AGAINST the 401K to spend the money on other things. So now they have a large collective 401K balance, the savings you mention, and an even larger debt to the collective 401K.

Lots of people have done that individually. They have no individual retirement savings. But those over 55 expect those younger to pay the collective debt, as they cash in on their collective 401K balance.

The majority of those 55 to 80 have voted Republican at the national level for 30 years. They gave you tax cuts. They didn't say what the price would be. Few asked questions after 1984.

GH1618 in reply to WT Economist

These are just sweeping generalizations with nothing to support them. The conflict is not between generations, it is between the haves and the have-nots. The banker class has been fleecing the rest of the population for many generations, at every opportunity. The New Deal put them on the defensive for a time, but they have coming roaring back. Blame it on people my age (65) if you like, but the younger generations will have their turn. They will be taken in by glibertarian rhetoric and fleeced like their elders.

Richard Michael Abraham

"Ageing baby-boomers threaten to strangle economic growth"
What kind of propaganda is the Economist spewing these days to make such a controversial statement.
The World economy is dying because there's too much supply chasing too little demand.
World economies, many, have little time left.
Indeed, even the U.S. Economy is on the ropes.
When presidential or vice Presidential candidates tell you to "bet on the U.S." watch out. It just means they know it's coming to an end but they don't want you to know.
Economies cannot work when supply well exceeds demand. Demand continues to shrink because there's no jobs. Yes, World war III could have something to do with water or jobs or survival nationalism - currency manipulation.
The Economist should start putting out thought provoking articles and not the kind of stuff in this article. The World economies are crumbling and the Economist says "Ageing baby-boomers threaten to strangle economic growth." Not too cool!
Richard Michael Abraham
The REDI Foundation


Once a person turns 65 we should take away their right to vote

Bee Breeze in reply to guest-isjosam

Absolutely. They should turn themselves in at 65 for a gentle termination, thereby ridding their children of the obligation to care for them. Since you spoiled, selfish children of this privelige you attribute to us, I say just kill everyone at 65 to rid your entitled little fanny's of the parents who spoiled you rotton with their "good fortune" that YOU directly benefitted from. To hades with the social contract and the real reasons for the slow death of the economy. It's obviously allllll our fault and not by the steady growth in monetary transfers to the top 2% over the past 30 years while worker wages were flat. How old were the brats who created these financial instruments of world economic death? These kids are so narcissistic and entitled, with no interest in the good of our country and no allegiance to a civil society. Where should I report to in 11 years? This is the most hatemongering b.s. I've ever seen in the economist. I think it's time to dump you too.

teacup775 in reply to Bee Breeze

And who raised those brats, and let a winner take all dynamic rise? Which generation floated the last 30 years on debt and ate out the middle class?
If you're going to gripe about the generation you raised, then go argue in the mirror.


Ok probably not a good idea to pick a fight with the largest demographic group in the country but it is a fight that should be fought. There are two huge problems with the boomer generation and they have nothing to do with the fallacy of all of them being rich. One, they vote for and promote increased entitlement spending, i.e. prescription drug benefit from GW, while railing against deficit spending. That means either they are for raising taxes, which they are not, or they would like to cut benefits that largely benefit a younger demographic. The Boomer/GenXYZ war is inevitable and will probably be won by the boomers.
Second, for more than 30 years boomers have been voting continuously for lowering their taxes creating a unicorn system that will ultimately collapse on itself once all value has been efficiently extracted by the boomer bombers. I foresee some sort of grandfathering of entitlements ensuring that the entire generation is gaurunteed its benefits while all future generations are left with almost nothing.

The saddest part of all of this is what the generation has done is completely rational. They have maximized resources at a level never seen before for such a large group. But gen XYZ has already implemented its battle plan, we are moving home and extracting as much as possible from our parents in an organized top-secret offensive known as Operation Snooki. Yes that is right we are going to eat all of your food, run up tons of credit card debt so you can bail us out and consume as many drugs as possible so we can use your health benefits before you need them when you are older. You may have been the extractor generation but we are the parasite generation waiting to effortlessly steal your semi-hard earned assets with out even trying very hard at work or in school (school loans are another way for us to leech, forcing you to foot the bill for our 6 year degrees in Leisure Studies from Grand Canyon University, Ha! We just wanted an excuse to party while not getting nagged about getting a job.) and it is working.

I may not fit the desription but strip away the sarcastic over-statements and you will find that, sadly, reality may be closer to this than you think.

The younger generation(s) strike back by behaving like irresponsible young people? How novel. The older generation(s) in power will sure have their hands full, forced as they are to confront a set of behaviors they themselves have never known anything about.



That just shows you the POWER of compounded interest.

Remember, those aged 65 have probably put money into the system for 40 years.


And unless we can find an industry that pays people to play video games and yak on cell phones, their incomes probably won't rise "like those that enriched the boomers."

Remember, Social Security is based on a PAYROLL TAX.

Remember, today's under 25 group have on average more credit cards than the boomers at age 25. (And they don't have to face the draft.)

If they want to borrow, spend, not save, and defer payments and savings into the future...

That is the "rational choice" by the "rational man."


corinnexw in reply to hedgefundguy

And those of the under 25 generation, like myself, who are doing the right things (saving, not borrowing, making payments, holding a job, going to school) are still struggling. And still wont get the benefits that the older generations do. The system has become outdated.

The "rational choice" by the "rational man" of our generation doesn't get a voice heard because of the babyboomer generation voting against ways to improve our future.

Gary C in reply to corinnexw

At least with Social Security you (and all future generations) can get a similar benefit.

Assuming steady state population levels, 48 years working (age 22 to 70), 16 years collecting benefits and a 12.4% payroll/income contributions (6.2% from the employee and 6.2% from the employer on all income) the average person could expect to collect 37% of the average income (12.4% x 48/16)). Average (not median) income in the US is currently over $80,000. This would give a benefit of $30,000/year or $2500/month.

Since this is a percent of average income and not based on original contributions the amount will grow (or shrink) with the earnings of the working generation.

The key to this is collecting Social Security contributions from all income including captial gains and removing the wage cap.

corinnexw in reply to Gary C

I feel the numbers you are throwing out may still be a long shot. The idea behind this articles numbers--"Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes, an obligation 17 times larger than that likely to be left by those aged 25". With benefits like that continuing to flow to the older generations, with them paying so little in, there will be nothing left!

Gary C in reply to corinnexw

$333 billion is a lot of money. But about 3.5 million Americans will turn 65 this year. So $333 billion is about $100,000 per person.

Medicare is the elephant in the room. Health care is shooting up and current taxation isn't adequate for our medical spending. We need to focus on the cost curve. Just cutting Medicare will cost shift medical expenses and only lower the expenses if people stop getting care because they can't afford it.

The problem with the social security numbers I used is the assumptions. The $30,000 doesn't work with the current contribution limits. If you don't include income over $110,000/year and don't include investment income social securities sustainable payment rate is closer to $20,000/yr or $1700/month.

OneAegis in reply to Gary C

But you're not adjusting for inflation. A 25 year-old person today, using your numbers, would have a benefit of $12,306, annually, in today's dollars. That is only ~$1,100 above poverty level for a single person according to 2012 HHS poverty guidelines.


This article is patently unfair. First, don't lump all boomers together. As a 'late Boomer' born in the 60s, I did not lead this 'charmed' existence. I live my whole life right behind the giant BB bump. I worked in high school and college, graduated in 1982 (height of a recession) and spent some years getting estb in my profession. Like younger generations, I have no defined benefit pension - just my savings. Oh, and that chart is just stupid - if there are millions more in your age bracket of course the total expense is higher. What's the net expense per person? And the easy fix to this math problem? Increase immigration of skilled young workers!


As a generation X just at 49 years old, I think there seems a concerted efforts to have a generational war. The maths are due to birth rates and a post war boom, lucky for a lot of boomers. That said my father worked in Telcomms for 27 years, made redundant at 57. He formed a small company and made ends meet for a few years until retirement, some of his boomer friends in their 40's never worked full time again. They did though work self employment, contracts and employment agencies.
The solution is 101 economics:
1.Increase the % of the population in employment
(mother's of young children with child care, flexible pension and work for retired)
2. Increase the skills of the population
(more school reform, training tax cuts)
3. Workfare or training for unemployed after one year
(voluntary and green groups need "volunteers" pay the unemployed their transport and an allowance)
4. Get retired involved in as much volunteer work as we can, to mentor the younger longer term unemployed and to keep them both healthy and active.
5. Increase the retirement age, but better to make employment easier for retired with a less complex benefit systems.

As I am writing this in my lunch hour, the guy in charge of the section is back from his lunch time walk, he is 64. Graduated at 22 and has worked since then, he plans to work a few more years, I don't begrudge him his retirement. He organises the wooden boat festival that employs a fair few people and creates tourism dollars. His wife has been a teacher for 38 years, not teaching only while the children were young.

Capitalista 2010

You guys just keep whacking away at the "boomers" at every opportunity. Reminds me of the old guy at the family dinners who keeps repeating the same story.

Get a grip. I'm fairly certain that many of them paid a whole lot in taxes and worked pretty hard most of their lives, no?

Pacer in reply to Capitalista 2010

Right. Lots of money paid in taxes, but not a lot considering the favorable prevailing economic conditions and the fine conditions left by previous generation (minimal debt, lots of fresh infrastructure, war-torn industrial competitors). Much was squandered. But the benefits are still too costly for the smaller generations that follow to reasonably afford, particularly considering the comparatively worse condition of the country (enormous debts, formidible and rising competitors, tired infrastructure, historic immigration to absorb, etc).

yank508 in reply to Pacer

There were many lucky circumstances that were seized by political leaders; they promoted the idea that we could sustain this lifestyle indefinitely, and we bought it. Do you think we (the boomers) intentionally sold out our descendants to party like it was 1999?

Caelestis Venaltus in reply to yank508

So, although not intentionally, you admit that you sold us out??

Just kidding. My mother belongs to the baby boomer generation and is about to retire. She saved as much as she could, considering that she payed for both me and my sister's college and really invested in our future. Now that her formal "job" life is about to be over, the only thing I want for her is to be able to enjoy her old age in the best conditions possible.

I believe in one way or another, we the younger generation will have step up for our old folks. Even if we take away the benefits from the boomers, who do you think will have to pay when your father or your mother need health care or anything else? Yes, you the descendants (I include myself here). So I guess we will pay as a whole generation or individually => Yes, I don't think that many of us will let our parents die off like rats.

Boomers lived through the golden years of an unsustainable future without the knowledge that it was like that. We, the descendants have a bigger challenge. We have to create a new system in which our parents can have a dignified retirement and our children a bright future. I know it sounds like crap, but we have to live up to the challenge because if we don't we'll just hand out the problem to the next generation and everything will just become worse.

Just my thoughts..


What disturbs me far more than the boomer's legacy is the blatant ignorance and mentality of arm chair critics who rant comments about boomers based on no facts other than the ones concocted in prejudice. Boomers are not all rich, most are simply hard working people who have been saving all their lives and are not caught in the same worldwide monetary scarcity scam being fed by the rich and greedy corporatists and their governement cronies. The fact is 58% of retired workers are still deep in debt because many are forced to retire early, not because they want to retire but because their companies are forcing them out in order to report artificially constructed profits or again who decided to get rid of their employees by downsizing the company and exporting the jobs into the third world or using cheap prison labor. Hence, one has to be either a corporatist crony or be seriously out of the loop to not understand that it is not the boomers that are the problem but greedy corporatist policies that just can't get enough of them sugar crisps. The middle class should be a lot more united about about corporate greed instead of looking for bogeymen among the middle class boomers. Most middle class boomers are not standing in line all night to buy the latest expensive Iphone 5 which will become obsolete in the next couple of nanoseconds expect for the debt that they will incur by trying to follow their addiction to nanosecond technology. I would be a lot more worried about generation X,Y,Z that live like Lafontaine's fun and games no delayed gratification Circada complaining to the hard working ant when the winter of their lives arrives faster than they think.


What kills me is all the boomers, with over a million-plus in assets, comfortable retirements, and monthly residual incomes several times what social security pays out, get so defensive and mad when you suggest that they shouldn't get medicare/social security because of their wealth.

They act like starving children fighting over a sandwich when its really just someone taking a dime out of their suit pocket.

I know its not enough to save the system, but that mentality will ruin this country.

GH1618 in reply to terrestri

Social Security is not welfare, it is insurance. When someone suffers an loss due to fire or accident, insurance companies do not apply a means test, only a test whether the loss is covered.

GH1618 in reply to terrestri

And by the way, I don't know many boomers who are millionaires. The truly wealthy from my generation did not make most of their money through employment subject to Social Security taxes.


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