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…only 41 percent of parents surveyed think that kids will have a better standard of living. It’s a major tectonic shift in our national belief system, but given the events of the past decade, it’s not that shocking.
Saturday, June 25, 2011
Parents pessimistic about their children's future
In the spirit of some comments here discussing the troubling trends of today's work environment, I posted on Cost of College about the concern parents are feeling for their children's economic future.
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21 comments:
My kids will almost certainly have to work harder than us to have the same standard of living, just as folks my age (tail end of Gen X) have generally had to work harder than our parents did to have the same standard of living.
There will the be the exceptions (the "dot com" millionaires we know and whatever the ca. 2030 equivalent is going to be). But it's not particularly likely that my kids will luck out & be in the right place at the right time. For every "dot com" success story among our acquaintances, there are at least 10 times the number who started at a similarly-promising dot com who wound up unemployed a couple of years later.
We lived in the Bay Area through the up and down of the dot com bubble, during which time my husband was always in software. We are on the front edge of Gen X, born during the post-boomer population dip. We had a few times that options were significant, but mostly are doing as well as my parents because we always saved aggressively and lived below our means. That let us weather the popping of the dot com bubble and the current recession pretty well.
When we started working, we noticed a lot of folks living paycheck to paycheck, despite making more money than we did (as I was in grad school). If you want to prepare your kids for the future, teach them to save and avoid debt. And hope that the coming inflation doesn't wipe out savings.
I'm not as optimistic as ChemProf. Savings is a sucker's game now.
The US has a real national debt, including unfunded liabilities RIGHT NOW, of something between 70 and 130 TRILLION DOLLARS.
The real reason our children will not be able afford our standard of living is because it was built on debt, not on real value. Not just personal debt from cashing out bubble real estate or running up credit cards. It was built on national debt by kicking the can of pensions and entitlements down the road for decades. Our children will have to pay that off. Inflation will HAVE to be part of the answer.
PS. From
http://www.nationalreview.com/exchequer/246159/our-debt-more-all-money-world
For perspective: At the time that 2008 article was written, the entire supply of money in the world (“broad money,” i.e., global M3, meaning cash, consumer-account deposits, checkable accounts, CDs, long-term deposits, travelers’ checks, money-market funds, the whole enchilada) was estimated to be just under $60 trillion. Which is to say: The optimistic view is that our outstanding obligations amount to more than all of the money in the world.
Global GDP in 2008? Also about $60 trillion. Meaning that the optimistic view is that our federal obligations outpace the entire annual economic output of human civilization.
"Our children will have to pay that [the US national debt] off."
Well, no, they won't *HAVE* to.
They very well may, but one option is for them to just walk away from it. It isn't like *they* borrowed the money. And I don't see that they have any moral obligation to pay it back.
The political fight to try to make them be on the hook for this will be nasty, but it isn't obvious to me that the relatively older folks (say, those my age and above) are going to be able to get taxes raised enough on the youngsters to make this all work out.
-Mark Roulo
I said nothing about them having a moral obligation, Mark. What we've done to our children is unconscionable, but that hasn't stopped it yet. But who else will be around to pay it for? We can take every dollar the boomers have and it won't cover it. Or are you suggesting they won't have to because the US will default? Or the whole thing will implode and we'll have a discontinuity?
I don't find those things completely outrageous anymore, but they'll still be paying for it, in that case, when the nation they are citizens of becomes unliveable. Slower, less radical forms of decline are still our children paying for it.
I am suggesting some combination of default and changing the terms of social security, medicare and government pensions.
-Mark Roulo
Inflation will HAVE to be part of the answer..
Inflation and "financial repression," right?
For the record, I've become a fan of stable 2% annual inflation -- mostly because of "sticky wages" (which I now have deep personal experience with, living in the state of NY) but also because of a 'feeling' that everything is better when the money is flowing.
If we're thinking about catastrophic futures, I'm wondering about how the very high rates of diabetes are going to affect the world.
I'm not sure whether funding treatment for millions of people with diabetes has to be overwhelming...though I'm not optimistic about costs. My mom needed a lot of expensive care.
On the other hand, I can easily imagine cures and treatments emerging.
There was a good article in the NY Times yesterday about the explosion in diabetes rates in the Third World.
I don't think the debt on its own is going to be the problem for our kids. I think that is just a bandwagon everyone is on right now. This country has paid down massive debts before, particularly the debt run up by the combination of the Depression and WWII. However, I think the double whammy of climate change and depleted oil reserves is going to make it very hard to climb out of the hole this time. I really worry about the world we are handing to our kids because I think climate change will cause massive economic dislocation at the same time that dwindling oil reserves constrains our ability to cope with it. I don't think I will be around to see this, but my kids and grandkids will.
"I don't think the debt on its own is going to be the problem for our kids."
It isn't the debt per-se. It is the additional resources that the elderly expect to consume.
Ignore money for a moment, and just focus on resource transfers.
Elderly retirees aren't producing goods/services/stuff that other people want (that's what it means to be retired ...), but they have been consuming more and more goods/services/stuff. This is why medicare costs have been rising for decades. And why social security now requires about 12% of a paycheck to balance workers with retirees versus ~2% years and years ago.
Additionally, government workers have been promised even more goods/services/stuff as they retire. These goods/services/stuff have to come from somewhere, and that somewhere is working folks.
The folks who will be in the workforce 10, 20, etc years in the future have been signed up to provide a *LOT* of goods/services/stuff to elderly retirees.
As things currently stand, I don't think that the future worker-bees will be able to do this without it hurting their own standard of living a lot. Because social-security/medicare/pensions as currently set up require a huge drain on those workers.
*This* is the problem. It will only get worse if/when interest rates go up, because then we have even *MORE* claims on the goods/services/stuff produced by these workers.
Paying off the debt isn't even in the cards right now, because the current curve is so bad in terms of additional claims. Before we can even think about paying off the debt, we (as a country) need to stop the claims on the working folks from accelerating.
-Mark Roulo
"Before we can even think about paying off the debt, we (as a country) need to stop the claims on the working folks from accelerating."
The only way to do this is to either keep more people in the ranks of the working folks, or tell grandma to go die. The idea that we can simply fix the problem by limiting benefits (as in the Ryan plan) won't work because the costs will be shifted to the retirees, yes, but much more importantly, to their children (those same working folks). Adult children will feel the need to help their parents out when they can't afford insurance or can't afford the nursing home (and remember that currently, nursing home care is largely paid for by Medicaid, not Medicare, that same program that is slated for big cuts under the Ryan plan).
The better approach is to keep people in the workforce longer, but we run into massive problems there too, not least of which is that companies don't want to hire older people because they increase insurance costs. In some sense, that is a cost shift onto employers instead of families or general citizens.
So, I guess we have to let grandma go off and die.
Grandma can help herself a little more than she is now. I don't about you, but my senior neighbors are pension(s)+SS and own multiple homes which generate a rental stream of income or a barter situation. Some have been busy selling the development rights to their acreage off to the town govt's. They are NOT poor in wealth although some look poor in terms of annual above the table income. They are experts at gaming the tax system as well as changing it to their benefit and shoving their costs off on to the working neighbors. Property taxes for seniors for ex are reduced significantly.
So, we have grandma who pays no taxes, has income, has wealth, likely been on pension w/medical since she was 40 vs grandchild who has 401K w/no medical in retirement, has no retirement income until SS at 69, is taxed on the 401K distrubtion in many states, isn't far enough along to accumulate wealth or high income, and has high taxes. I can't see that grandma is being told to go off and die. I think people are saying that some of that wealth should be used for grandma's health expenses and to pay her fair share of community services before the hat is passed again. That would be a large incentive for grandma to maintain a healthy weight and eat well. I also hear people saying that the grandpas that own companies really should be giving the employees the same bennies that they enjoy - pension, cola+ raises, health care in retirement...or take a cut of their own. These people are coming to be seen as hogs who are happy to starve younger others so they can party on.
'"Before we can even think about paying off the debt, we (as a country) need to stop the claims on the working folks from accelerating."
The only way to do this is to either keep more people in the ranks of the working folks, or tell grandma to go die.
...
So, I guess we have to let grandma go off and die.'
So, you agree with my analysis that we won't be paying down the debt unless we get retiree claims on working folks under control, you just don't expect to like how it plays out?
I'm not trying to put words in your mouth, but it does sound like you don't disagree with my analysis of current (and future projected with current law) resource allocation, you just don't seem to like that taking less money from working folks means less money to give to retirees.
Or do I misunderstand?
-Mark Roulo
Allison,
We probably disagree very little about the possible "unofficial taxes" on savings. Right now, there is definitely a risk that savings will be confiscated one way or another. I'd still argue, though, that teaching your kids to live below their means is valuable -- someone with no savings but little debt is still better off and can still have more options than someone with a massive debt load.
In a lot of ways, I think this is like the argument going on right now about the value of college. While there are certainly diminishing societal returns in sending more and more students to college, most parents still think it is worthwhile for THEIR kid to go to college (although this is also getting less clear, depending on the final debt load).
ChemProf,
It's a good point, and a more general one. We've reached a point in society where govt has distorted not just markets but societal cohesion and values so nearly all of the big choices have perverse incentives, and parents now can see that what's best for society is antithetical to what they would choose for their own children.
So even as the rallying cry is to stop the looting by public sector unions, parents are telling their kids to get a government job; even as the rallying cry is for others to stop freeloading and start paying their mortgage, they would support their kids getting a loan writedown for themselves. Likewise, getting married and having children is disincentivized now for men, even though society needs men to be socialized in that way to survive.
A society like this can't function for much longer. Parents still think it's worthwhile for their kid to get a college education because how else will you be able to game this system or rent seek some financial gain out of it? And they're right to think that.
Likewise, I look at the arguments above in this thread and see it as confirmation that nothing is going to be done to fix the course the country's on.
Teach them to live below their means. And to have no sense of entitlement, with an understanding that they will need to be willing to leave the country or have other big changes in their lifestyle to survive. Teach them no complacency, and hope that was better than teaching them "get a government job!"
Happily, throughout history, people have been convinced that theirs is the worst of times and that the time ahead is probably the most ruinous to ever be seen.
While I agree that we have big problems facing us (primarily climate change and resource depletion), I also don't see it as a problem if my children have to work as hard as we did and then live a similar lifestyle or even one that's not quite as nice.
While people say their parents had it easier, think about how often people went out to eat in the 60s and 70s, how often they bought clothes, how often they bought lots of things. Their lifestyles were certainly smaller, more around their homes and free time wasn't filled with paid activities as much as free/family/household work. Many lower middle class people lead lives that would seem highly extravagant to people only a generation or two ago.
I am on the savings/below means/no or little debt wagon. But that may just be because I can't get my head around spending money I don't have. Makes me stressed.
Jen,
Yes, there are always the sky-is-falling! people, but I'm with Heinlein:
"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as "bad luck.""
The folks who will be in the workforce 10, 20, etc years in the future have been signed up to provide a *LOT* of goods/services/stuff to elderly retirees.
"A LOT" being the operative term.
I am gobsmacked by the pensions being handed out here.
My tiny little school district's business manager is retiring this year at age 58, I believe. I've forgotten his exact pension figure; I think it's around $170K/year for the rest of his life, but it could be more. It coud be $180K; it could be $190. (Doesn't hit $200K; that I would remember.)
He and his wife have 100% free healthcare for life - no co-pay.
And he pays no New York state income taxes on his pension.
He's not alone, and his benefits are protected by the state constitution.
I'm having trouble seeing exactly how all of this money is going to be paid out to all of these people absent a roaring economy -- or even with a roaring economy. (And if we have a roaring economy again, our elected officials will make bigger, better, bolder pension/benefit promises.)
I'm hoping Cuomo will legislate a cap on superintendent salaries next year.
401K w/no medical in retirement, has no retirement income until SS at 69, is taxed on the 401K distribution in many states, isn't far enough along to accumulate wealth or high income, and has high taxes
There you go.
sheesh
why is my picture on every single comment?
i'm going to go de-picture myself on my blogger profile
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