Generation Debt: Our Children will Hate Us

by Darwin on January 24, 2009

Historians like to classify generations of Americans from different time periods in rather large buckets, painting an entire generation with the brush of genius or triumph based on the challenges of their time.  There’s the generation of Americans who grew up in the Depression era, known for their ability to persevere and succeed in the most trying of financial times.  Then, there’s “The Greatest Generation”, who were drawn into the largest war the world has ever seen and with the help of global allies, bested the largest forces of evil and destruction the world had ever seen.  Of course, this same “Greatest Generation” is sometimes criticized for being the generation that for the most part, did not contribute anything to Social Security, yet reaped its benefits in retirement.  At the same time, hoards of senior citizens flock to local board meetings to vote down school budgets and are a true force for frugality and self-preservation.  But are they?  Is it reasonable to expect that taxes, health care expenses and educational costs should grow at 2-3 times inflation while municipalities and states still run a deficit?  The successes in World War II and the unarguable fact that they literally saved the world tends to win out in a chorus of few critics.

What About Our Generation?

How will historians view our generation?  By all accounts, our generation was set up for total success.  The following phenomena occurred during the few past decades that should have catapulted America even further onto the pinnacle of the world state and set up future generations for success and frankly, complete domination in virtually every measurable aspect of success:

  • The advancement of the internet into a full-fledged force for business, free speech, innovation and productivity.  Virtually all early gains from the internet from global investment in venture capital, to patents and inventions, to new business startups, resided in the United States.  We saw our equities markets rally to the point of “irrational exuberance”.
  • The decline and fall of the world last formidable force of evil in the world: The collapse of the Soviet Union, rendered a mere cold war relic.  The Russian military had fallen into such shambles that they could barely pay or feed their soldiers.  Russia moved from an equally formidable war power to a hobbled has-been on the global stage.  America outspent them in the cold war.  The genetically engineered biological weapons and nuclear arsenals uncovered following their collapse was bone-chilling.
  • Globalization turned the world upside-down. American multinationals were now able to sell their wares to billions upon billions of consumers that were once unreachable.  Low skill, low paying jobs shifted from the shores of America to other countries that were willing to work that Americans were no longer willing to given other opportunities for higher paying, higher skilled roles as well as a shift to an Intellectual Property/Knowledge economy.  This was the theory of comparative advantage put to its test.
  • Our universities continued to be unparalleled in terms of quality output, ROI and any other measure to the point that the best and the brightest the world over sought to gain entries into our universities.

Future Generations; Our Children…Will Hate Us

What did we do with all these accoutrements?  These gifts our generation was blessed with?  We squandered probably the best opportunity any generation has ever been presented with.  Just during the past decade, we’ve seen our country decline in virtually every category of import, with no end to the decline in sight.

  • From a diplomatic standpoint, we initially recovered from a horrific attack on our shores and gained new allies and sympathy to some degree from countries that were initially indifferent or misaligned with our interests.  Within 3 years, we completely obliterated any goodwill that remained in the world and drove an invasion of Iraq in a moderately stable region, forcing it into complete chaos.  We “misunderestimated” what we were doing there, went in light trying to save a dime, misread what the true experts were telling our leaders about cultural, regional and religious factors that they couldn’t comprehend, and along the way, we’ve again created a generation of noble and well-meaning soldiers who fought a war that the country and the world wasn’t totally behind.  This takes a toll on a population of soldiers, one that we haven’t yet begun to understand.
  • Iran and North Korea became emboldened by our folly in Iraq and Russia reemerged on the global stage, wielding enough power with their natural gas supplies and oil revenues to threaten US interests, intimidate allies and once again command respect.
  • We continued to spend like there was no tomorrow.  Individual, national and local debt soared to heights that were unsustainable.  We did this without blinking.  By all measures, some sort of reversion to the mean should have been forced to occur, but no, we continued to spend unabated.
  • We lulled ourselves into the belief that home prices could continue upward forever at a rate several times the rate of inflation (even though the long term trend going back to the 1800s shows that home prices appreciate roughly in line with inflation).
  • In the heat of euphoria and sheer greed, politicians pandered to constituents calling for more lax lending regulations so everyone could own a home, even though we’ve subsequently learned that perhaps not everyone is capable, responsible enough or otherwise, to actually own a home. 
  • Lenders readily complied, going so far as to award massive mortgages to people with no discernable income or personal holdings.  The jobless and risk-taking masses could waltz into a lender and walk out with a $500,000 waterfront condo in Miami ready for the flip the very same day.  Wall street, in turn created exotic instruments that not even they ultimately understood to “diversify risk” and peddled them to investors the world wide while collecting exorbitant fees on their misunderstood and poorly conceptualized products.
  • Our country’s financial institutions exported our toxic waste mortgage assets to virtually every global financial institution on earth due to our perceived credibility.  We have inexorably damaged our credibility on the world stage forever.
  • In order to bail ourselves out, our leaders passed bailout after bailout in frenzied fashion, all the while, paying million dollar retention bonuses to retain the same inept bankers that got us into this mess and rewarding the mortgage brokers with new business on reworking mortgages and refinancing deals – the same ones that falsified records and sold irresponsible loans to people that didn’t have the capacity to understand what they were getting into.  The ill-conceived TARP is losing value at an alarming rate.
  • States, municipalities, pension funds, virtually every organization charged with maintaining a budget, went into the red and started requesting their bailout.  How could the same state that was the epicenter of the internet boom, the biotech boom (and Hollywood?!)  and all its benefits be bankrupt less than a decade later?  How could states take a windfall tobacco settlement and shamelessly squander it on other spending programs, debt and other unintended destinations?
  • We elected a president on a platform of tax increases and spending restraint and “change” from the prior regime that is already pushing the next round of giveaways in the form of tax breaks that, as we’ve seen before, pretty much end up paying down debt or going into savings.

What Have We Done?

We have saddled future generations of Americans with our debts that they will be unable to pay.  Few will be able to pay their own way through college like earlier generations could.  They will have to work longer and harder than prior generations for a lower standard of living that what we enjoyed.  Our standing on the world stage has been tarnished.

Believe it or not, I’m an optimist.  Perhaps the recent economic turmoil has been a wakeup call.  Perhaps the boom-bust cycle that we continue to set ourselves up for will not be so bad next time because we’ve finally learned what happens when self-serving politicians focused solely on what it takes to win the next election is combined with unbridled human greed and instant gratification.  Can we get ourselves out of this?  Anything’s possible.  We’ve managed to overcome substantial challenges in prior generations.  I’d like to think that by the time I retire, that generation of children has a decent shot a college and a steady job without the assistance of generational wealth.  I’d like to think that the world sees America as a force for good again.  I’d like to think we turn this around.

For, if we don’t, our children will hate us.

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{ 12 comments… read them below or add one }

1 Funny about Money January 30, 2009 at 6:05 pm

LOL! If that’s the case, then your generation will know how Baby Boomers feel when our kids and grandkids blame us for all the troubles of the world.

It would be easy to head that off, though: improve the school system. See to it that your children learn history (REALLY learn it), be sure they can read and understand what they read, demand that they read literature (REAL literature, not YA schlock), and expect them to learn to think logically. It won’t be easy — we certainly failed at it. But it can be done.

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2 Studenomics February 3, 2009 at 2:11 am

Interesting take on the whole issue. Hopefully are children and grand children will have a better view of us.

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3 Matt SF February 4, 2009 at 1:08 pm

Well said, and 3 words say it best… Sad But True.

We Americans love to label someone as the culprit, and those who over consumed and didn’t stick around to repay the national debts will be negatively remembered.

Although the statement about the Greatest Generation not paying into Social Security is arguable. They were the ones that really paid into the system since they built it up right? Maybe my facts are wrong, and Social Security was an opt in policy in it’s infancy (FDR’s mother didn’t believe in it), but I was under the impression they were the core target of FDR since they were young and had the jobs to fund the account.

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4 88free February 22, 2009 at 10:41 am

What about generation borned in 70s, 80s ?

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5 xinmart February 22, 2009 at 10:54 am

Maybe technology can lead us out of this mess.

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6 Darwin February 22, 2009 at 2:24 pm

Are you referring to whether those generations will resent prior generations or whether our children will also blame them? I’m from the 70s generation and feel that while somewhat young and a new homeowner myself, our generation is certainly partially to blame for everything from the housing speculation and living above household means to not challenging and voicing disgust over our politicians’ continued lack of any foresight or restraint on spending/debt that they’re saddling future generations with.

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7 Bret February 3, 2010 at 6:43 pm

Darwin,

This is a thought-provoking post.

But, I’m going to have to disagree with your assesment here.

As a middle-aged guy (age 45, end of the baby boomers), what I have seen is our generation has worked really, really, hard not only for our families and for ourselves, but for the betterment of our country and the entire world. Our generation learned math and science in school and we invented most of the tehnologies the newer generations take for granted. We worked our own way through college and then funded our children’s education, while often taking care of the previous generation in their retirement.

As for the debt left to our children, I am going to have to blame that on our Government. We have contributed more in taxes than any other generation in the history of our nation. And, all of that hard-earned tax money was squandered away by a corrupt government that has rigged the system to favor incumbents. The fact that some people may have lived above their means is not relevant to the next generation, since that debt isn’t passed on to them. They will certainly inherit more from us than we did from our parents.

So, if the future generations want to look back at us as selfish and and short-sighted, I say let them. Let them see if they can measure up to our contributions in their own endeavors. Are they going to revolutionize medicine, travel and energy? Or, are they going to sit around whining about the mess they inherited? Because, the way I see it, they don’t seem to have it so bad.

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Gary W Reply:

@Bret,
Don’t blame the unconscionable and totally unjustified trillion-dollar tax cuts, by which Republican presidents created this mountain of debt, on future generations. Your generation elected the monsters.

Google David Stockman. He was the Gipper’s Axman, and he now says he is sorry. Poor guy ran around all the pundits and the pols trying to tell them we need $500B a year more revenue – reversing himself.

Don’t worry, daddy-O, you will get yours back. Medicl science will make sure you die of some horrific disease like Reagan.

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Bret @ Hope to Prosper Reply:

@Gary W,

Gary,

Really? You are going to try to blame the deficit on President Reagan? So, Bush and Obama had nothing to do with it? And Congress didn’t appropriate the money?

I didn’t blame anything on future generations. I simply said they are going to have to step up to solve these problems, like we did in our generation.

Then, you are going to wish that I die a horrible death. Man, I feel sorry for you in more ways than one.

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8 fred February 19, 2010 at 10:43 pm

Is this a generational issue? As for the last comment, if your generation is so wonderful, why don’t you make a wonderful sacrifice to our nation by refusing to accept any social security benefits. I’m guessing here, but I bet the answer is some form of “no way, I paid my share and now I want mine.” And that, in a nutshell, is the problem with our nation, and a particular generation that loves itself more than it loves the well-being of this country. Unfortunately, that generation holds much of the power in business, industry, and government. For now. Change will come, but we’ll need to wait out the extinction of the selfish ones, who, I promise, will eventually die out notwithstanding their never ending quest to recapture their youth.

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9 Bret @ Hope to Prosper February 22, 2010 at 12:54 pm

@Fred,

Unfortunately, most of our generation will desperately need their Social Security benefits to survive. I’m hoping I won’t have to depend on them, but I could always get sick. And, I suspect people with high retirement incomes won’t get as much SS in the future. They have to cut back somewhere.

But, to call someone selfish because they want the benefits they paid for their entire working life is pretty disingenuous. You are asking so much and offering so little. What do you intend to sacrifice for the benefit of our country? What are you doing to fix the problems?

Waiting for the selfish old people to die off doesn’t sound like much of a plan to fix Social Security. It’s going to be up to your generation, not ours. You had better think of something besides blaming the people who funded the system.

Talk is cheap. Blame is free. Action is priceless.

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10 Money hints April 11, 2010 at 1:31 am

It is up to us to get out of this mess. We know it wont be obama that is going to do it. He is only leading us in the other direction.

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11 Aury (Thunderdrake) May 24, 2010 at 10:33 pm

I can think of a lot of solutions that could perhaps turn this chilling yet incredibly true statement and picture for the better.

…I cannot say for the corruption we have in our political cabinets.

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12 Jack February 3, 2012 at 8:51 pm

Dear Mom and Dad,

To **** the both of you.

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