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Generational Dynamics Web Log for 30-Aug-04
Alan Greenspan warns Baby Boomers not to count on Social Security and Medicare

Web Log - August, 2004

Alan Greenspan warns Baby Boomers not to count on Social Security and Medicare

Greenspan warned policy-makers to act soon to head off looming insolvencies in Medicare and Social Security that guarantee that Baby Boomers will not receive all the benefits that have been promised.

Medicare is in worse shape than Social Security because the cost of medical care has been increasing per patient, and there's no way to predict how much more expensive medical care for aging Boomers will be required.

In a speech Friday to the Federal Reserve Bank of Kansas City, Greenspan warned that the policy changes should be made quickly, in order to give Boomers a chance to change their habits and increase their savings rate.

In his words,

"As a nation, we owe it to our retirees to promise only the benefits that can be delivered. If we have promised more than our economy has the ability to deliver to retirees without unduly diminishing real income gains of workers, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels. If we delay, the adjustments could be abrupt and painful."

The reason that "the adjustments could be abrupt and painful" is shown by the following graph.

Total number of person age 65 or older, and age 85 or older

Total number of person age 65 or older, and age 85 or older

The number of people age 65 or older is increasing rapidly. When the Baby Boomers reach age 65 in 2010, the rate of increase will become much more rapid.

This is a problem which has been building for decades but, as Greenspan points out, neither George Bush nor John Kerry has been talking about it. They're too busy worrying about stuff that happened in the 1960s.

The problem is complicated by the number of people living alone.

Percentage of population age 65 and older living along, male and female

Percentage of population age 65 and older living along, male and female

As the above graph shows, the number of older people living alone has been high, which complicates the problem of providing medical care.

This whole issue has an interesting relation to Generational Dynamics.

The Baby Boomers are the generation born after World War II. Generation X, the people born during the American "awakening" of the 1960s and 70s, followed.

Following the generational paradigm, the people in the Boomer generation (the one born right after a crisis war) tend to be narcissistic, moralistic and arrogant. This is the elder generation today.

The people in Generation X (born during an awakening) follow right behind them. They are the pragmatic middle managers doing most of the work today. As children, they were heavily criticized, and they grew up to be alienated. Following the generational pattern, the arrogant Boomers have always treated the GenXers with contempt, and the alienated GenXers have returned the favor by despising the Boomers.

These are all generalities of course, and not true of all people in each of those generations. But these are overall characteristics of the people in these two generational archetypes throughout history.

This is going to be part of the crunch that America is already facing. The aging Boomers are going to have very heavy voting power, and they're going to force politicians to impose more taxes to pay for income and medical services for themselves. The GenXers are going to be forced to pay those taxes for people in a generation that they don't particularly like, and they're going to be very unhappy about it.

Many people may find this kind of analysis surprising, but there's nothing remarkable about all this. These generational relationships repeat throughout history. The last time it happened was in the 1930s, with the generations that grew up following the Civil War. At that time the situation was resolved because the nation had to unite to fight the Great Depression and then World War II.

Journalists and pundits have remarked that the 2004 Presidential election campaign is the nastiest in a long time. It's these generational issues that are causing the increasing nastiness. Things are going to get a lot nastier in the next few years. (30-Aug-04) Permanent Link
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Generational Dynamics Web Log for 30-Aug-04 Alan Greenspan warns Baby Boomers not to count on Social Security and Medicare

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Generational Dynamics Web Log for 30-Aug-04
Alan Greenspan warns Baby Boomers not to count on Social Security and Medicare