Boomer and bust economics

The ever-reliable Bryan Appleyard had an excellent piece on the economics of the ageing baby boom in this week's Sunday Times magazine. Appleyard -- a boomer himself, as am I -- argues that the self-indulgent lifestyle of the baby boom cohort has ensured that the boomers' children will be much poorer than their parents.

In essence, the boomers' refusal to live within their means, and their willingness to take on debt, has distorted the property market, keeping the young off the "property ladder". Worse, many boomers see their home as their pension plan. They intend to borrow against it in order to keep consuming into their dotage. As a result, the benefits of the higher value of the property will be lost to their offspring, who will inherit their parents' debt along with the house. To complete the misery of the younger generation, the boomers' life expectancy continues to increase, placing an even greater burden on a dwindling working population.

I agree with most of this, although I think Appleyard might have acknowledged that the boomers are not the first generation to figure out the joys of leaving the bills for someone else to pay. Governments have been doing this for centuries, most often in order to fight wars. However, the example the boomers are following is much more recent. After the war, the boomers' parents, dubbing themselves the Greatest Generation and looking for a reward for winning the war, started paying themselves state pensions that they had never contributed to. Once public pensions were put on a pay-as-you-go basis, in the UK and elsewhere, the die was largely cast. Add in open-ended spending commitments like the NHS or its equivalents elsewhere, and you start to see why the cost of Government has spiralled over the past half century.

But at least the Golden Generation, for the most part, passed its assets unencumbered to its children, the boomers. It's my generation that wants it both ways, yelping in pain at any attempts to control the cost of social programmes, unwilling to pay the taxes to fund them properly, and determined to squeeze all of the juice out of our own assets, rather than providing for the next generation.

Appleyard thinks the young are certain to fight back, and cites one or two examples (a banner at a French rally: "we won't pay your debt"). He acknowledges that a few politicians are at least attempting to focus attention on the issue but, since the old (i.e. the boomers) will both outnumber the young in the years to come, and outvote them at election time, it isn't easy to visualise a happy ending. I find this distressing, as I have never believed that the young owe much to the old: if you reach 60 and you don't have a pot to pee in, that's probably not your kids' fault.

The US economist Lester Thurow used to say that the job of government was "to represent the future to the present". Does that sound like any government you know? Thought not.