Letter: Address boomer effect
Thursday, October 18, 2012
Presidential debates create an event everyone can talk about, but who directly talks about a major factor in our social-economic-political situation, namely demographics? The next crisis: "Sponging boomers," according to The Economist. It is a forthright acknowledgement of the baby boomer effect, namely that the boomers provided an abundant labor force that was reinforced by a surge of women working outside of the home.
Their earnings drove the market for housing and equities and provided the government with abundant revenues which, compounded with borrowings, fueled price balloons, benefit increases and tax cuts while annual spending on infrastructure as a share of GDP dropped from more than 3 percent in the early 1960s to roughly 1 percent in 2007.
These gains were one-offs. Retirements will reverse the earlier labor-force surge, younger generations cannot benefit from more women working and additional tax cuts, and, as the boomers retire, their retirement expenses will be paid by liquidating assets, which will provide downward pressure on the markets, and by taxing the less numerous youth.
Neither candidate directly addressed the large elephant that is in the living room or helped the public to understand the dynamic that is in play.