In economic terms, the old are ‘eating’ the young

Bloomberg opines that the economic divide between human generations is skewed in favor of the old – and it’s getting worse.

A significant proportion of recent economic growth has relied on borrowed money — today standing at a dizzying 325 percent of global gross domestic product. Debt allows society to accelerate consumption, as borrowings are used to purchase something today against the promise of future repayment. Unfunded entitlements to social services, health care and pensions increase those liabilities. The bill for these commitments will soon become unsustainable, as demographic changes make it more difficult to meet.

. . .

The prevailing approach to dealing with these problems exacerbates generational tensions. The central strategy is “kicking the can down the road” or “extend and pretend,” avoiding crucial decisions that would reduce current living standards, eschewing necessary sacrifices, and deferring problems with associated costs into the future.

Rather than reducing high borrowing levels, policy makers use financial engineering, such as quantitative easing and ultra-low or negative interest rates, to maintain them, hoping that a return to growth and just the right amount of inflation will lead to a recovery and allow the debt to be reduced.

. . .

In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

. . .

A final revealing measure is the concept of lifetime net tax benefit, which measures the benefits received over a person’s life by calculating the difference between all taxes paid and all the government transfers that he or she has received and will receive. A 2010 study from the International Monetary Fund found that in the U.S. the lifetime tax burden was positive (tax paid was less than benefits received) for all age cohorts above 18 years, with the largest benefit accruing to those over age 50. But the figure for future generations is negative (benefits received will be less than taxes paid), meaning they’ll have to meet the obligations of their elders.

. . .

As in Francisco Goya’s famous painting, “Saturn Devouring His Son,” today, the old are eating their children.

There’s more at the link.

This is a potentially explosive problem.  It’s bad enough in the First World, where the Baby Boomers and their older children are now retiring en masse, and consuming all the resources they’ve built up during their lifetimes (not to mention drawing Social Security or the equivalent as well, all paid for out of current taxation).  (I’m at the latter end of the Baby Boom period myself, but I’m not drawing down on anyone’s pension.  I rely on my writing to earn a living, so I don’t have to feel guilty about such things – thank heavens!)

However, in the Third World it’s far, far worse.  The hordes of Africans trying to get into the European Union by hook or by crook are economic migrants, not refugees.  They’re desperate to find somewhere – anywhere! – they can make a living, because there’s nothing for them in their countries of origin.  Those who make it across the Mediterranean find themselves competing for government support with the elderly and the poor who are already there – and they’re putting up a stiff fight for ‘their share’.  It’s already placing great fiscal pressure on the governments involved.  Only those who are determined to stop the refugee/migrant flood at their borders (e.g. Hungary) appear to have any chance of dealing with the problem successfully.

The USA is, of course, confronted by the same problem, stemming largely from South America.  President Obama appears to have turned a blind eye to it, even going so far as to encourage illegal aliens to cross our borders.  Thankfully, President Trump is trying to stop that – but there are already millions, perhaps tens of millions, of illegal aliens already here.  We have to kick them out to avoid their economic drain on our limited resources . . . but, because they have nothing left where they came from, many will do anything and everything they can to avoid being sent back.  They’re already clogging up the court system for years to come as they fight against deportation.  (Their hope, of course, is that if they drag things out long enough, a new President will take office, one more disposed to be sympathetic towards them.)

Even without Third World migration, we have enough of a problem paying for the needs of all Americans.  Inevitably, the older population will be forced to relinquish at least some of the benefits on which they’ve come to rely.  Social Security payments are already hobbled by being linked to a risibly small and inaccurate inflation rate (which we’ve discussed here before).  Real consumer prices are rising at an annual rate five to ten times higher than the official rate of inflation.  Therefore, seniors who rely on Social Security to fund their retirement are in for a shock.  Medical costs are also rising at a horrendous rate.  It’s virtually certain that older people, whose medical expenses are much higher per capita than those of younger folk, will have to do without more and more government-subsidized treatment.  If they can’t pay for it themselves, they’ll have to do without – and perhaps die without it, too.

I don’t have any solution to offer to this conundrum . . . unless it’s the young killing off the old out of sheer frustration – and since I’m rapidly approaching elder status myself, I don’t take much comfort from that!



  1. The old eating the young phenomena in Social Security is very a much a phenomena of the graduated payout.

    Basically, the lower the income you had during your working years the higher your Social Security payout in retirement. Not that it's ever really generous, but if someone who earned ~$30,000/year gets a payout of X dollars, someone who earned $60,000/year gets about 1.5 X after paying twice as much in, while someone who earned $120,000 gets about 1.5 times the payout as someone who earned $60,0000.

    BTW – somewhere around $60,000/year or a bit less is probably the break-even point vs putting the same amount per year into a reasonably diversified IRA or 401K.

    The system would probably remain solvent for a lot longer if they reduced the payout percentage for all groups to match to top end, or increased the minimum age to start receiving SS, but those are political non-starters – hence the pressure to increase the top bracket paying into the system.

  2. I should have said "payout percentage vs money paid in" – not to imply that Social Security recipients with a lower income during their working years get a large amount, just that it's a much higher amount vs the amount they paid in.

  3. Social Security would be a hell of a lot more solvent had congress not stolen every cent put in the trust lock box and replaced the cash with government bonds.
    And now that cash cow has died and started to rot as with the aging of the workforce and more retirees the cash flow has turned negative. So SS is now paying out more in benefits than it takes in with payroll withholding, so those government bonds have to be turned into cash to cover ongoing expenses.
    Perfect example of our government stealing from future generations.

  4. Peter,

    If you'll look at the US' Fertility Rate (number of lifetime offspring per woman),
    you'll know we *NEED* immigrants.

    But, *please*, folks who wish to be Americans of –for example– Mexican heritage
    rather than Mexicans-in-America or, worse, Mexicans who come to America to make a
    pile of money to take back to Mexico while avoiding such things as taxes on it.

    France (etc) had a similar problem and their solution of Islamists-in-France (etc)
    shows the need to carefully pick those who come.

    PS: Thanks for coming. 😉

  5. @Anonymous:

    Sorry, there's no such thing as Magic Dirt.

    And as far as NEED? No, we don't NEED immigrants. Look at the premise of why you say that; it's simply to continue a corrupt and destructive system. The only ones that NEED that are the "Net positives", just like a heroin addict NEEDS a fix.

    It's simply a matter of perspective.

    I may as well say that America NEEDS to offer asylum to all white South Africans, given today's news about the ANC.

    Actually, that's not a terrible idea, but I don't think they'll come.

  6. Uncle Lar, I believe you may be wrong in your claim.

    Although SS has had periods when it was reported independently (not part of the main federal budget), as far as I can tell the monies themselves have never been invested separately. Yes, it is normally invested in bonds (and makes up a sizable chunk of the federal debt). But it's been that way from the beginning – and although it might make sense to have at least part of the fund invested in the stock market, even the most aggressive retirement planner would be unlikely to totally abandon bond investments.

    What's killing it is a combination of demographics, longer lifespans, and a progressive payout system. We have fewer workers for each retiree than we did in the past. People live longer than expected. The payouts were structured so that the bottom 50-60% of retirees got a much higher payout for every dollar paid in.

    For a long time, we grew a surplus (invested in bonds, yes) because there were comparatively few retirees and they didn't live too long. As families averaged fewer children, and retirees lived longer, that surplus shrank. And because it was politically infeasible to reduce promised benefit levels or retirement ages, it's continued to shrink. But – for government program, anyway! – it's actually been pretty well handled administratively.

    It's political willpower that's at fault – a slight reduction in promised benefits, or an increase in the minimum retirement age, or an increase in the maximum capped income paid done a decade or two back would have kept it afloat for several decades more. But nobody wanted to take the heat to do it, so they kicked the can down the road. Now, by necessity, any action taken will hurt more. But it's not because the trust fund was stolen – it's because it's *always* been a Ponzi scheme, and nobody was willing to admit it.

  7. Javahead,

    SS has been acknowledged as a scam since FDR created it. He got taken to the USSC over it, and had to agree that it was just a tax. They weren't allowed to make it a separate investment system, although I don't think that was originally intended anyway.

    They knew back THEN that it was destined to fail, although it was expected to last a bit longer than it looks like it currently will. The collapse of the future birthrate was not anticipated, IIRC.

  8. Not so fast. OK agreed that the pension system is a Ponzi scheme that the Government raids as a ready source of cash BUT …

    take a look at this paper published by a New Zealand University:

    You will notice throughout that women consistently pay much less into the SS system while drawing out much more at all stages of their working life and continue to do so after retirement. I cannot imagine that a study conducted in any country in the Western world would be markedly different. If nothing else, look at Figure 2.2 on page 44 and A2.6 on page 46.

    Since the Government seems to foster the destruction of the family and support (both "morally" and financially) single parenthood, then it is obvious to me that having half the population paying in little but drawing out a lot could be a factor.

    As the majority of the working population have paid for their pensions and the Government have seriously mismanaged and lied about the way that they have used the monies while women have the same or greater entitlements than men for less contributions, then draw your own conclusions.

    Phil B

  9. @ VFM #7916

    Uhhh… Yes, we *do* need immigrants since we aren't by and large self-providing
    the next generation of Americans. That's what a Fertility Rate less than "2" means.

    Without them, "1.87" (2016 est) means we are imploding. With them, even the Social
    Security payers/takers ratio improves.

    Sorry 'bout the "Anonymous" — my sig got lost somewhere in the "let's see if what
    I wrote matches what I thought" step.

  10. "Inevitably, the older population will be forced to relinquish at least some of the benefits on which they've come to rely."

    Why should I give up anything that was forcibly taken from me, for my own benefit to be used when I got old, to allow some brat who will not work score some drugs or otherwise sit on his posterior? None of those brats are willing to help grandma shovel her walk when the snow falls or cut the grass in the summer. So why should I give one penny to the younger generation that will not work?

    Take away the $80,000 a year benefit to each adult immigrant and let them work. Take away the welfare. Take away the food stamps. Take away the schools where so much has been wasted. Let them work hard like we had to and like our fathers did to support our families.


  11. The thing that bothers me about this is that it's not that "the old are eating their children" it's that the elected officials are.

    This sort of talk, coming from what I assume is a younger writer(either Gen X or younger) is precisely the kind of talk that inflames what's looking like a "generational war" between the workers who are being forced to pay for those systems today and the people getting those benefits. If you haven't seen or gotten comments about "going hunting for boomers", well, you're the exception.

    Like others said, those of us who are retired now were legally required to pay that money. It's not like we had a choice other than the choice of saying "no" to the government in any context. That almost inevitably leads to a gun in your face. Don't believe me? Try not paying your taxes, federal, state and local.

    The problem is politicians. They're the ones who set up the system, and kept expanding it beyond reason. Why should people who never paid into Social Security get benefits? Why should people who worked a few years get disability for lifetime? As Denninger at The Market Ticker is fond of saying, it's mathematically impossible to keep expanding the system. The central banks expanding the money supply is inherently impossible. It has to end. The only question is how bad the collapse is when it does happen.

  12. I take issue with :

    " They're desperate to find somewhere – anywhere! – they can make a living, because there's nothing for them in their countries of origin. "

    They are on the whole ( with exceptions I am sure ) not looking for a place to make a living , they are economic and cultural leeches looking for a handout without assimilating to the cultural and moral values of the host society. They quite simply want welfare and a pool of idiots to support their " victim " status . So far over all this method and mindset is working rather well for them .

  13. @TGreen

    Those "immigrants" who you think are going to replace you and pay you your social security benefits are not going to. They'll replace your culture, your people, your language, your religion, etc.

    They're NOT like you. They will never BE like you. There is no magic dirt.

    You're fixated on a "replacement rate", and think that importing third worlders is going to get you to the same place as a european descended white Iowan farmboy would take you.

    You never challenged the ideas such as feminism, diversity, leftism, birth control, education, etc. that resulted in the low birth rate for the productive group of citizens that built Western Civilization in the first place. Instead you'd sacrifice the posterity of those of us who have chosen children, nationalism, Western Civilization, etc. for one more monthly SS check supposedly funded by the work of illegal aliens or the public support consuming refugee class.

    Not confronting the causes of disease and suggesting courses of treatment that kill the body to remove the cancer is the province of modern sickcare, not the political culture that wants Western Civilization to survive.

  14. @ VFM #7916

    Ah! You didn't read the whole of my first post.

    We agree that the recent all-comers/open borders policies lead exactly
    where you claim.

    I said we need to *pick* our immigrants like any sane country does, and
    get folks like our gracious host. Plenty of them in the world, and plenty
    of them eager to come and be *Americans*.

  15. @Tgreen

    Thanks for clarifying.

    "Picking" with a goal of replacing the original populations with like populations?


    I would hope that you have the Alt- fortitude to acknowledge that the pools of those populations in the world are also under siege in their own countries. Why come here to experience that?

    There is no safe immigration from populations dissimilar to the existing populations. I typically make exemptions for those who joined the military or sided with the US in conflict (Hmong sky soldiers, etc.) or are from similar populations.

    All others have to go back.

    For the native population, this means a dramatic reduction in population, with correspondingly massive reductions in:

    Housing prices, good prices, food prices, pollution of air and water, crime, drug use, educational failure, homelessness, child poverty, social assistance, joblessness, transportation pressures, energy use in electricity, oil, and natural gas, tax revenue, medical costs, government regulations, Deep State power and politics, etc.

    It means a homeland for everyone. Populations have to grow naturally, or else the consequences of diversity and proximity is war.

  16. As a gen Xer, I think a lot of the boomers who are pointing out that they paid into the system involuntarily and thus are entitled to the benefits are missing the point. I've always known that despite hitting the SS tax cap for many years, I'm never going to see a cent of that money. It's not that I am involuntarily being forced to fund a retirement program – I'm simply being taxed to fund yet another government income redistribution system. This one is simply based on age vs. income, number of children, disability status, etc.

    The same goes for the boomers. Regardless of the claims of the government, you simply paid a tax, you didn't make an investment. Despite the government having promised to pay to you that money, it's just another entitlement, and it's going to have to be cut back based on simple math. There is no trust fund – that money was all used to pay for other things we wanted from the government and replaced with bonds which have to be paid from current revenue whenever outgoing dollars exceed incoming dollars. That will happen more and more as the demographics change, and there are already vastly more dollars going out than dollars coming in for the general fund. When the cutbacks come, SS will be included. It has to be.

  17. Mike, SS is a tax and it is a government retirement plan forced upon us. However, it was only a tax for those without a pension plan. The military were not included because that retirement was withheld back pay not a pension. So the military did not pay SS tax until after the Korean War when reservists and guardsmen could voluntarily pay a portion of SS when they were not participating in their business pension plan — drill, extended active duty and such. That changed when LBJ needed cash to support his Great Society with the military having to pay for withheld back pay and SS.

    The SS administration admitted that it does pay benefits to illegal aliens in the USA and that the cost is huge. Healthy individuals collect SS even though they shouldn't. Dead people collect SS even though they are dead. Really, this isn't just tax we never expected to see any return on — it is straight up theft to pay illegals, healthy individuals, healthy individuals with made up problems that their doc certifies or for young people who won't work. That is the problem and it is a fundamental issue.

    So why can't some of the other entitlements or expenditures be cut instead of SS for us old guys? Because we're old. Why not cut benefits to crack head moms or to baby daddies who won't work? Why doesn't the government give a date for terminating SS? Because no one wants to give up on buying votes and the free cash that isn't watched closely.

    Since you don't expect to ever get any SS, when it does show up, send a check each month to Bayou and he can forward it to me.


  18. Hi Dave,

    All entitlements are going to have to be cut, not just SS. I'm simply pointing out that SS is just another entitlement, albeit one that people have a lot more justification for feeling entitled to than most since they have been promised all along that it would be there. I also don't actually expect SS to go away – I simply expect the benefits to be inflated into meaninglessness when the government turns on the printing presses in earnest to deal with the mismatch between revenue and outflow that will continue to get worse as demographics make their inexorable changes. That will let the politicians have the fig leaf of not defaulting on the letter of the law while defaulting on the spirit and intention. I also do expect to see increases in the SS tax cap, increases in retirement age, and cutbacks to the payout levels for those of us in our 30s and 40s, but inflation will do the real work.


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