Battle between generations due to baby boomer debt legacy
economist.com
economist.com
Massive tax cuts for the rich, or investments in education?
Lax regulation of bank loans and credit card loans, or time-tested traditions of banking prudence?
Multi-million dollar payouts to health insurance CEOs (Cigna CEO David Cordani made the most, at $19.1 million, in 2011) or universal health care for all citizens?
A vast bureaucracy devoted to keeping entrepreneurs in their home countries, or the "Land of opportunity" offering a warm welcome for the worlds entrepreneurs?
There were many decisions made that lead the USA to its current situation. Anyone who argues that government debt is the sole issue, or even the main issue, has failed to pay attention.
"Seniors are mostly against immigration"
Most Seniors I've talked to are against allowing anybody to come into the country with little or no incentive to pay taxes. This is much different than being against immigration.
"Seniors were more in favor of the Iraq war then younger folks"
Can you provide proof of this?
"Unfortunately I think the baby boomers have had a hand in most of those issues or were too naive to know that they are problems."
Since we are generalizing here, I will thrown my 2 cents in. Some of the opinions I see are similar to a child not listening to their parent because they only see what's in front of them and don't have the life experience or the forethought to see what can and will happen. Many older folks have the life experience and wisdom.
Universal health care is a good example. Every time I see an article on here, Reddit, or anywhere else on the Internet, none of the proponents will talk about the negative effects of universal health care. They aren't even willing to discuss them. I've lived long enough to know that nothing in this world is perfect. If we can't talk about it honestly, I will never vote for it.
I know I'm not alone.
http://news.yahoo.com/poll-senior-citizens-league-77-seniors...
Apparently they're against the President's immigration reforms. Taxes is one issue of immigration. These people will be paying payroll taxes when working legally. Most Americans (especially older folks) would not do the work immigrants are coming to the US for.
Unfortunately I don't have polls for the Iraq war stuff. I just have examples I have encountered in my life.
As far as universal health care is concerned, it has been adopted by practically every first world country besides the US. Taiwan in the not too distant past offered universal health care and the main lesson they said they learned from the US was, not to them.
Older folks have an incentive to not have universal health care for everyone. They already have it or will have it soon. Giving it to everybody would decrease the quality of care for medicare. Most people that have looked into this issue have come to the conclusion that a single payer system works the best. There would need to be a lot of evidence to overcome the overwhelming evidence in favor of universal health care. Care to elaborate why the US shouldn't have it?
Not true. Imagine if all stocks had 250 P/E and are now coming back down to 10 P/E in one month. Who benefits?
Cheaper equity means higher yield, and higher yield means an easy route to wealth.
If you are young, don't let the reserve bank fool you into thinking rising prices is good. You have a whole life of investing in you. Would you celebrate every time, after you fill up a tank of petrol, the price of petrol goes up? That's ridiculous, and I encourage you to think the same for prices of investments.
Prices are kept high means when you buy the overpriced investments from other people, some of your wealth is being transferred to them.
The flaw in the analogy is that inflation isn't the price of petrol, it's the price of everything. Including wages. If in week 1 you make $1000 and spend $1000 and in week two all prices go up (including the price of your labor) so that you make $2000 and spend $2000, you don't actually care that the nominal price of commodities is increasing as long as they don't rise faster than your pay. And most investments work the same way: If you own a share of Ford and the Fed prints a trillion dollars, the nominal share price is going to go up the same as the price of anything else.
The people inflation hurts are those who have long-term agreements with fixed price terms. If you have a fixed-rate mortgage, you benefit from inflation, and the bank that owns the mortgage pays for it. If you have a ten year fixed-rate certificate of deposit, the bank benefits from inflation and the CD holder takes the beating.
But as a general rule, retirees will tend to be the ones who have CDs or fixed-rate annuities or the like, and the youth will be the ones to have student loans or owe large amounts of principal on a mortgage.
Or they'll be like me with barely $5000 invested in stocks - To get a comfortable retirement I'll probably need to invest at least $10,000 a year. However, if the price of investments rise faster than my wage, I'll need to spend more to purchase investments to produce the same absolute yield. The income from my investments would also be reduced (due to reduced yield). You can argue they are capital gains, but the "capital gains" would only be permanent if the company's assets or income was increased permanently.
What I am saying is the increase in price for investments resulting in lower yield without justification is not a good thing for buyers of said investments.
I have a $50,000 student debt owed to the government, whose interest is indexed to CPI. There is no point for me to pay off my loan early besides what the government requires me to do. So, I constantly invest my excess earnings.
You can't have inflation "in real terms" -- real means adjusted for inflation. What you're talking about is increases in the relative value of one thing over another, e.g. the price of gas or stock goes up while the price of labor stays the same. But that isn't caused by printing money, it's caused by Peak Oil and concentration of wealth.
>There is no point for me to pay off my loan early besides what the government requires me to do.
You mean other than the fact that the interest rate on the loan (even subsidized loans) is likely to be higher than the risk-adjusted return on most investments?
There are two primary reasons to invest new income instead of paying off money you've borrowed at interest. The first is that you have an investment opportunity (like your own business) which you're confident can produce a higher return on the investment than you're paying in interest on the loan. The second is that you anticipate a significant probability that you'll need to spend the money in the short to medium future, and the interest rate on re-borrowing the money you've paid back will be sufficiently higher than the rate you have on the existing loan to absorb the relative gains you'll make by not paying loan interest in the interim.
Don't let "low" interest rates fool you -- they're low compared to unsecured and unsubsidized loans, but they're still high compared to the ROI you get from investing in typical index funds.
http://super-economy.blogspot.com/2010/12/amazing-truth-abou...
http://super-economy.blogspot.com/2011/01/how-well-do-above-...
The factual statement is incorrect as to results of instruction, and the statement is well known to be incorrect by any widely traveled person who has studied the educational system in multiple countries, especially those who have made specific study of typical school textbooks and teaching methods in various countries.
Anyway, the links offered in support of your prima-facie false statement are not written by a person who is familiar with United States education and have been called out before here on Hacker News as crap links, contrary to
http://ycombinator.com/newsguidelines.html
"Essentially there are two rules here: don't post or upvote crap links, and don't be rude or dumb in comment threads."
AFTER EDIT: As I go out to take my son to his soccer practice, it occurs to me that the factual assumption in the grandparent comment needs examination as well. It IS a fact that schools are quite well funded in the United States compared to how they are funded in other countries. School funding in the United States is quite uneven from region to region, but in almost all regions is well above world averages, and some United States schools receive more dollars per pupil than schools nearly anywhere. So my statement about the RESULTS of schools in the United States should be interpreted as a statement that United States schools disappoint compared to what a large percentage of public funds are devoted to them. Many countries do better in that regard of efficiency. To the point of the submitted article, one fiscal overhang that older generations of school employees are leaving for younger generations of pupils and students is large pension obligations for those school employees, which are far from fully funded in most states, and are very lavish by worldwide standards.
SECOND EDIT: The ball is in your court this time, yummyfajitas. I invite the readers of HN to determine whether you have ever been a straight shooter on this issue any of the many times you have submitted that crap link. I'm not aware that you have done any of the travel or reading necessary to evaluate the statements in those links accurately. Let's ask lots of HN participants to take a close look at the actual evidence on education peformance per dollar expended in different countries and think carefully about how well the United States is really doing. (My user profile, which readers can view in my absence from this discussion, explains some of my basis for knowledge for why I say the United States school system does not do as well as it ought to do.)
[Edit, in response to your edit: I cited data. Do you dispute the data or not? Note that an argument from authority is not the same as a data-driven argument.]
It also shows the incredible increase in life-expectancy we have seen over the past century. Instead of dying off, the top of the chart just seems to grow upward.
Really, while there are arguments to be made for and against estate taxes, using it to correct a generational imbalance is incredibly silly.
Our (U.S.) tax code is absolutely horrible, but even with that revenue isn't the problem, spending is. I would say that politicians will ALWAYS spend every dime they have, but in reality they spend money they dont have. Awesome system we have.
your money is taxed once: when you receive it.
Until you receive it, it isn't your money, it's your parent's.
It's a tax on the one percent. The vast, vast majority of Americans will never be bothered by it.
An estimated 52 500 returns will pay estate taxes in 2013.
(52000 / 142823000) * 100 ~= 0.036
You're right. It's not a tax on the "one percent", it's a tax on the "one-third of one-percent"
http://www.census.gov/compendia/statab/cats/federal_govt_fin...
http://www.taxpolicycenter.org/briefing-book/key-elements/es...
I believe the tax only effects the money over $1,000,000, you can also gift $14k/year tax free to each individual. I would expect that you really would need to have something along the lines of 1.5million in hard assets to even have to do much in the lines of tax planning, and using irrevocable trusts I'm fairly certain you can avoid taxes to a much higher number than that.
Maybe i'm living outside of reality but i don't understand why we can't have a single flat sales tax. The more you spend the more you pay. For some reason people think that just because you make more means you should pay a higher %, ofc you should pay more, but a higher % is the complete definition of unfair.
I am by NO means wealthy lol, but if i had more money i know i would definitely be spending it lol.
People who come into wealth quickly seem to spend money quickly (athletes and lotto winners come to mind, hell even Willie Nelson went bankrupt at one point). People who earn wealth more slowly tend to end up investing their money and saving a larger percentage. If you make 300k/year, you could save 25% without blinking an eye, not so much if you earn 30k/year, especially if you have a dependent.
This doesn't mean it's a good idea, or a bad idea, but very progressive places have used them without the world ending. It's probably a good way to keep spending in check, because it makes it a lot harder to jack up someone else's taxes to pay for your stuff.
(And while they do tax their rich more than America taxes its rich, the shape of the slope is nowhere what you would imagine. It's very rare for any marginal rate to get over 50%.)
And some in favor of progressive taxation: - Letting the lowest earners keep their money can be cheaper than taking it and then giving it back through inefficient social services - Tax cuts on low earners translate to increased spending better than tax cuts on high earners
Regarding fairness, how is it fair that one person is born to wealthy parents and inherits $5 million while another inherits nothing, but unfair to set tax rates based on income?
Furthermore, this exemption can currently be used as a lifetime gift-tax exemption rather than an estate tax exemption, which allows large estates to transfer assets to heirs and use the extra years to undergo compound accumulation of assets instead of exposing a larger sum to estate taxes in the future.
When you're dead, you don't need money (unless you want to buy cryogeny contract, but you'll pay for it when you are living).
If you pass on this money to your family, 2 things happen : - you skew the odds in their favor. Other people who might be equally capable and intelligent won't be able to compete with them. that's a class society as in medieval europe, where wealth in inherited - you incentivize their laziness, and encourage them to destroy their life with this unearned money. you basically ensure they won't be able to grow from normal bad experiences. trust fund kids give a glowing example.
As much as I hate giving money to a government, I'd rather see my money there when I die that either or both of these 2 things happening. The alternative would be earmarking that money to debt reduction, so that at least it wouldn't be redistributed. That could be a good alternative.
The wealthy would respond to such a system by giving all their stuff to their kids before they die. It always amuses me when people prescribe magical tax plans in a static world as if people won't change their behavior. Despite thousands of changes in tax law over decades, the maximum level of revenue the government has been able to extract from the population has remained remarkably constant[1]
[1]http://www.heritage.org/federalbudget/current-tax-receipts
Some people will change their behavior and that's ok- because they'll be able to see with their own eyes, while they are still alive, the damage they'll do on their own family and maybe on society too.
That could induce other changes, such as them giving conferences to other people considering doing the same of the damages of 'unearned money'.
And even if only 1% could be shaved of the business and income tax, that'd be a move in the right direction - and sending a good message.
The idea is not so much increasing government revenue (I'd rather see it lowered to limit the waste) but reducing the damages caused by the whole idea of 'inheritance'.
Of course, as people have already pointed out they can just be given away before death. As long as it's not a sudden, unexpected death.
Then do it. There is no tax minimum; pay more on your taxes, make the US government the recipient of your assets in your will.
Also, if someone buys say an apartment complex, using depreciation for their tax benefit, then dies and leaves it to an heir, the heir generally receives a favorable tax benefit since the asset gets a step-up in cost basis, whereas if the original person sold the asset, they'd have to then pay the taxes from the profit and the depreciation they took over the years.
The tax code is already heavily weighted to favor the wealthy, allowing people to amass great wealth without having to contribute it back to society is very short-sighted. Earning money is fine, dying with it is a sin, as someone once said.
Its ridiculous, even beyond the ridiculous notion of taxing someone to die, how many times should YOUR money get taxed? Once? Twice? Three times? When does it stop?
Money is taxed almost every time it changes hands. This is entirely reasonable, and the way that the entire world works. If you only taxed each dollar once, after all, you'd have to figure out who the first owner of that dollar in its existence was, and make sure to only tax them.
The point of money is to flow, facilitating debts and trades. It's not supposed to have agency of its own, people are.
Besides, you can't take it with you into the next world. So why not confiscate your wealth when you're too dead to use it? Why not confiscate the ill-gotten gains of capitalists even before they die ;-)?
Our (U.S.) tax code is absolutely horrible, but even with that revenue isn't the problem, spending is. I would say that politicians will ALWAYS spend every dime they have, but in reality they spend money they dont have.
This theory sounds intelligent only by dint of sheer cynicism, and entirely fails to explain the Clinton budget surpluses.
Though i will ask you as far as Clintons budget surplus who was the ruling party in congress(the ones who make the decisions/changes) during this time?
Also what lead the the housing bubble that was the primary cause of the economic situation we are in right now? Clinton lowering mortgage interest rates and requires comes to mind(that and fannie mae and freddie mac). While he was praised for these two things and honestly they had good intentions. We all know what the road to hell is paved with so the saying goes.
So are trust fund transfers: http://en.wikipedia.org/wiki/Generation-skipping_transfer_ta...
It's not 100% trivial, but there is an entire industry devoted to helping people with this. That industry really shouldn't exist.
But the submitted article is correct that the older generations in the United States will have to rethink their attitude toward "entitlements" (transfer payments) even more if our children's generation is to have any prospect of continued economic growth. On my part, I'm happy to see my retirement age nudged up some more, and also for old-age benefits and other government benefits to take actual cuts (rather than merely decreases in their rate of increase over time) to make sure that they are funded on an actuarially sound basis. I vote like that, and I discuss the issue with my generation-mates in these terms. The older should be helping the younger, in general, not the other way around.
I think the key observation you're making is that baby boomers' parents will have had a better retirement than the baby boomers are likely to, because at the time their parents were retired, the boomers were in their prime working age and there were plenty of resources to care for the then-retirees.
The trouble is that the converse is happening and about to happen. And there isn't really anything anyone could have done about it, other than maybe for the boomers to have had more kids. All of the attempts to do it through economic hocus pocus are kind of missing the point. The social security trust fund is a piece of paper that says there is a social security trust fund. The bonds it redeems still have to be paid by the treasury in the year the money is spent. The same goes for private retirement savings -- when you cash in your stocks and buy nursing services, you take a productive worker out of the economy to provide nursing services when that person could otherwise have been a scientist or small business owner or the like.
The problem stems from the fact that the things retirees want are, as a general rule, less economically productive than the things working people want. Boomers having saved a substantial amount of money for retirement would actually make that problem worse because it means all the more resources under their control to be allocated to leisure and non-research medical care, rather than education and R&D and other such things that retirees have little personal incentive to demand.
The article's suggestion (inflation) is only a solution in the sense that it reduces the economic power of the retirees, meaning that they get less healthcare and the young get more education and infrastructure. But the tradeoff is still inevitable -- they're just pointing out a method of making it in a way that moves the slider away from retirees in the face of the strong political power of the AARP, by placing the decision in the hands of the federal reserve board which is not as easily influenced by lobby groups as elected officials.
It went up from 65 to 67 years. That isn't worth remarking upon, imho. Considering life expectancy, it probably went down as a percentage of expected lifetime.
https://en.wikipedia.org/wiki/Social_Security_%28United_Stat...