On "baby-boomers"...

My wife Liz often blames the woes of the world on the Baby Boomer generation, and I typically balk at the thought. I don't like blanket generalizations and stereotypes, as a matter of course, but with Ryan's post, I'm forced to ask:

Can we blame this on the Baby Boomers? Are the troubles facing us now the result of a mindset that grew from the generation that brought us "hippies" and "free love", the resistance to the Vietnam war, the Equal Rights cause?

The current Administration's cause of "bigger government to fix bigger problems" is not a new position, as we all know. The New Deal held much the same position, as did the FDR/Truman years during the War. Johnson's "Great Society" saw the expansion of government grow nearly 20% in less than four years.

The difference is in the goals the government is trying to reach, I think.

Without starting the beef about the New Deal again, I maintain that the "goal" of the New Deal was to fix the effects of the 1929 crash and to prevent it from repeating again in the future. Prior to 1933, the US had experienced a "depression" every seven to nine years since its formation, and the worst of these lasted for 22 years. Imagine that... 22 years of nothing but negative growth in the national economy. Sort of makes you wonder what kept us going, doesn't it? Since 1933, there hasn't been even ONE depression, and no recession has lasted more than 3 years.

The means by which the New Deal worked to prevent depressions can be argued another time, but I feel the results speak for themselves... there hasn't been one since. What we HAVE had are market contractions/collapses that have surpassed the scope of the 1929 crash, without the impact on our society that the '29 Crash had. In 2000, 22% of all the wealth in the nation evaporated when the "tech bubble" collapsed and took the Nasdaq down to single-digit numbers, yet most people see that as a "bookend" to the boom that was the late 90s... not as the end of an era that we equate the '29 Crash as.

I'm not making another defense of the New Deal here... honestly, I'm not. I'm looking for the means by which America "boomed" in the past, and what drove that boom.

Post-war, the first real "boom" was seen to begin in 1949. GDP was on the rise, new home sales were going through the roof with returning soldiers and sailors and growing new families (the start of the "baby boom") and new business success was at an all-time high, while established "blue chip" companies were making record profits. This was a real, post-war BOOM... and it all happened during a time when the White House was advocating (and getting) a top marginal tax rate of more than 91% (source HERE). That's right... 91% tax rates for top earners during the Ike/Nixon years, a rate that didn't get reduced until Johnson was in office in 1964 (and then it only went down to 77%). Compare that to today's current top rate of 35%, and you begin to see my point (I hope).

We can't simply blame the lack of "boom" times now on the prospect or reality of higher tax rates as a result of Obama's liberal policies... the revenue generated by the 35% rate now is far greater (proportionately) than that earned in the Eisenhower years with it's 91% rate. Yes, the population has more than doubled since 1953, but the number of top earners in this country has risen by more than 7 times.

I'm trying to show that the troubles we see today are NOT the result of the "baby boomers", and if I were going to point the finger of blame on any one generation (and I'm not comfortable doing that), I would point to MY generation: the generation that brought us "yuppies" and iconic cultural faces like Alex P. Keaton. MY generation is the one that has come to expect instant gratification of wants and desires with no thought to consequences or cost. My generation is the one that indulged in the sub-prime housing boom, in the "200% return and sell" dividends market, in the 0% financing auto loan decade, and in the "who needs retirement options when my market funds are growing 18% annually?" trend that saw the end of such employment giants as Enron, GM, WorldCom, etc. AND all of their profit sharing retirement funds.

I still maintain that a lower tax rate during tough economic times is a great way to improve an economy (in other words, I still think Keynes was right)... but history PROVES that booms can and do happen when rates are higher, too.

If you ask me, I'd say a better indicator of what drives a "boom" is the prime interest rate. Right now, in the hopes of getting more people to borrow money, the Fed has set the prime interest rate at less than 1%. In 1988, as Reagan left office, the rate was more than 9%. If borrowing money cost money, then people would only borrow what they could afford to pay back... common sense, in my opinion. Allowing people to borrow more than they can afford by artificially lowering the cost to borrow is (in my opinion) the greatest failing of the Federal government in its attempts to "fix" what is broken with our economy. (source HERE)

In that view, I think Ryan is right. The government is responding to society's call for a simple solution. They see America longing for the days when we could borrow money in an unending cycle of revolving credit that never need be paid back, and do what they can to provide that environment... but it is exactly that environment that is killing the economy. However, I can't simply blame that on the "baby boomers". The "age of entitlement" is well and truly here, I agree... but if I had to blame a generation, I'd blame mine, not my parent's.

Now, I can't deny that the loudest, most vocal voices amongst the liberals probably are Baby Boomers, and undoubtedly recall and revisit their youthful memories of "fighting the Man" and opposing the "war mongers" in Washington. Jesse Jackson, Nancy Pelosi, Murtha, et al are good examples of past "rebels" fighting the system of their youth in today's world. I see them as very prominent anachronisms, not as the driving forces behind our liberal-leaning political machine. What is prompting America to look to government solutions to individual crisis? The people that grew up in a world of instant gratification and assurances of wealth without risk.

That's MY generation, people... not my folks.