Go ahead and resent boomers but for the right reasons

Much of the blame heaped on the older generation is for ruining the world with their neoliberal economics, refusal to vacate the houses they bought long ago on the cheap, destruction of the climate, accumulation of all the wealth, and so on.

A lot of this antipathy is unfounded, and none of these accusations is completely fair. Boomers faced higher mortgage rates, and maybe had to live in smaller houses in more rural areas than they would have liked. Much of the climate damage predates the boomer generation. And neoliberalism worked: Young people today have more wealth than their parents did at their age.

All this intergenerational resentment is not so much unjustified as misdirected. The younger generations have ample reason to be upset with the boomers — for getting bigger retirement benefits and leaving behind lots of debt, which threatens future prosperity.

But for some reason these issues do not elicit the same anger. There is no widely popular youth movement to cut spending or entitlements the way there are ones to freeze rent, build more housing, eliminate student debt or offer free child-care.

In fact, President Donald Trump is hailed in some quarters for his political savvy in abandoning entitlement reform. The president has even expanded retirement benefits, as many Democrats have called for; the budget law he signed last year cuts taxes on Social Security payments and gives seniors an extra deduction, both of which make the debt worse. And yet there were hardly any objections, from either party.

It is remarkable: As benefits to seniors are increased at its expense, a generation that feels it deserves more is mostly silent. Part of the explanation is that this isn't new; the value of old-age entitlements has increased over time relative to the taxes they pay for them.

It is not just in the U.S. In France and the UK, the income of seniors is also growing at a faster pace than it does for workers. In France, pensioners actually have higher incomes than working-age adults. Yet younger French citizens, who have many economic challenges and their own resentments, don't march in the streets in support of the government when it tries to cut retirement benefits.

Another possible explanation is that young people don't resent old-age benefits because they realize that they too (if they're fortunate) will be old one day. It's notable that the payroll taxes that fund entitlements in the U.S. are featured prominently on every pay stub. That makes it seem like a benefit they're paying for, and deserve, even if each generation gets more than it puts in.

There is also a cultural taboo against cutting benefits for the elderly, who are seen as more vulnerable. For years they had the highest poverty rates, though now they have the lowest. Even when there is a debt crisis, pensions are rarely cut.

Finally, there could be an ideological reason that young people are so reluctant to support entitlement cuts for the old. Young people today, especially among the more activist set, tend to skew left. Resentment of a boomer for owning a house they'd like to live in — a house he paid little for — is in a sense resentment of capitalism itself. Supporting cuts in Social Security, on the other hand, or even a reduction in increases, is to favor shrinking the welfare state.

The idea seems to be that the market economy produces a finite amount of resources that are unfairly allocated, while the welfare state can be expanded as needed. In fact, the opposite is true.

The government's spending ability is far more limited than the market's production capacity. The U.S. can't keep expanding benefits for each generation, especially as the population ages and interest rates increase. Much as the younger generations might want to, ignoring this problem will not make it go away.

(COMMENT, BELOW)

Allison Schrager, a Bloomberg columnist, is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.

Previously:
• Raiding your 401(k) to buy a house should be an option
• Americans are living in the worst of all tax worlds
• Think of college like you would a junk bond
• The economy needs a little bit of unfairness
• The pension revolution is better for savers
• Affordability isn't a hoax. It's not a crisis for most, either
• America gets retirement wrong. Can Vanguard fix that?
• The American middle class is shrinking, and that's OK
• Want to buy a home? It's OK to wait till you're 40
• Mamdani is benefiting from New York City's changing workforce
• How can an economy this good feel this bad?
• Why boomers have more money than everyone else
• Democratize private investment?
• Lab-grown diamonds are testing the power of markets
• Inflation ate your free lunch, but you're still better off
• Good debt? Bad debt? There's no such thing
• Megabills didn't break the economy before and won't now
• America's broken politics is breaking economics, too
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• The Biden administration's plans to double the tax rate on capital gains will prove costly to all Americans, not just the wealthy
• WARNING: Feel Good Now --- Pay Later: Stimulus is crammed with goodies but makes no economic sense
• The 'Stakeholder' Fallacy: Joe Biden's vision of capitalism is a recipe for failure