It’s somewhat poetic that baby boomers will be hit the hardest

I’m not quite sure what to think about the $700B bailout failing yesterday in Congress and the huge drop on the stock market. Who knows what should have happened yesterday. I know I don’t.

One thing I do know is that the baby boomers have been spending spending spending thinking nothing of passing debt onto those of us who are younger and expecting us to pay for it. The generation below me, and to an extent my generation, doesn’t expect Social Security to be there for them when they retire. Why? Because the system has been mismanaged by the generation just older than mine – the baby boomers.

And that’s true of the economy in general. With the exception of Clinton who managed to balance the budget, baby boomers have been on a spending spree for decades. And even with Clinton the seeds of the dot com bust were sown during his administration.

I’m not saying my generation isn’t just as bad – hell, look at the excesses of the dot com era which were completely the responsibility of my generation and the generation below me. But the really big stuff is the fault of the baby boomers by and large – they were the ones who were driving the biggest institutions. The mess they’ve created is going to make the dot com bust look like child’s play.

While I feel for the baby boomers who have been responsible and have favored a more fiscally responsible government (not ones that supported starting wars that cost $10B/month, and were OK with playing fast and loose with mortgages people couldn’t afford long term), I think it’s completely fair that this economic downturn is going to hit baby boomers the hardest. Baby boomers are close to retirement age and their primary assets – their stock portfolios and homes – are dropping in value quickly. Their retirement prospects are looking pretty bleak right now.

Now, the more conservative of them will have conservative investments as well – I mean you’re completely irresponsible if you’re investing aggressively close to retirement age. So in a way this downturn is going to hit the people who were the most careless the hardest – which is completely fair IMHO.

Personally, I’d like to see the retirement age for Social Security be raised immediately – at least for white collar workers (I get the fact that blue collar workers in demanding jobs need a lower retirement age). Why do the people who screwed up the system get to benefit from it by retiring earlier than the generations after them who will have to deal with the mess they created?

You just can’t pass your debt on to other people indefinitely and expect to get away with it. Because the economy the baby boomers created wasn’t based on solid principles and assets with genuine value, their personal assets (stock portfolios and real estate) were unrealistically valued as well. Now we’re seeing a correction and IMO it’s good that the people who created this fake economy are suddenly confronted with the reality that what they created was largely smoke and mirrors.

I’m 40. I’ve got 30 years before I retire. Even if my assets are completely wiped out (which I doubt), I’m at a point in my life where I can completely recover financially before retirement. I’m sure I’ll be negatively affected by all of this, but I’m not going to be wiped out. I’m not wondering if I’ll be eating cat food at the age of 80.

But there are lessons to be learned here for my generation and the generations that follow… The primary one being to always carry a really good bullshit dectector. I mean with home prices rising way over median incomes, what did we expect? With 2-5 year adjustable mortgages that would likely go up to the point where people couldn’t afford them, what did we expect? And with deregulating money-hungry, do anything to get rich, Wall Street, what did we expect?

When 9/11 happened I was shocked that Americans didn’t understand that we sorta asked for it. You can’t bully other nations, disrespect their cultures, play a heavy hand in their internal politics and economies, and expect to get away with it. Well, we handled our own economy with the same recklessness, and this time we’ve clearly got no one but ourselves to blame for it…

What’s really sad is how we’ve coddled the extremely rich. The other day I saw Robert Reich mention that in 1980 the top 1% took home 8% of the nation’s income. Today they take home 20%. So all those billionaires who created this mess will most likely still be billionaires even if they have to sell a mansion or two. But when you have an election where it’s made clear that one candidate will cut taxes for the super rich and the other one will increase taxes on the super rich and the guy who will cut taxes on the super rich wins… Well, that means people sorta asked for it to be this way.

In the end I hope we get real with our economy. I understand that the entreprenurial, try anything approach has been the key to our success, but it needs to be tempered with realism. When other countries loan us money it has to be because our economy is solid, not just solid-looking. It’s time now to build back our economy – only on solid foundations this time. Let’s hope our leaders make the right decisions….


Well, my post was timely… It’s a few days later now and what do you know but Robert Reich (of all people) just did a blog post about how the downturn is affecting “early boomers” like himself. He talks about how people close to retirement are the first to get cut in a downturn ’cause they have high salaries. And he also mentions how their investments just took a huge nose dive. Curiously, he’s glad Social Security is there to help them.