Howard Gold’s No-Nonsense Investing: Boomers and upper-middle class to America: Don’t blame us for economy’s problems

0
84
views

It’s become received wisdom: Baby boomers have ruined America by spending all the wealth and leaving their children nothing but debt. And the upper-middle class has hogged all the opportunities and rolled up the drawbridge behind them.

It’s all laid out in recent books like “A Generation of Sociopaths” by Bruce Cannon Gibney and “Dream Hoarders” by Richard Reeves, and has provided rich fodder for columnists. “Over the past generation, members of the college-educated class have become amazingly good at making sure their children retain their privileged status,” wrote the nominally conservative David Brooks in The New York Times. “They have also become devastatingly good at making sure the children of other classes have limited chances to join their ranks.”

“Upper-middle-class Americans threaten to destroy everything that is best in our country. And I want them to stop,” the slightly more conservative Reihan Salam wrote in Slate.

The arguments are related. Baby boomers, born between 1946 and 1964 and raised by permissive parents, may have started out idealistic (spearheading the anti-Vietnam war movement) but quickly became selfish and greedy. They borrowed heavily, bought McMansions, and supported policies that kept their taxes low but bankrupted the country.

And the upper-middle class, which may comprise 30% of all Americans, passes on their professional and educational advantages to their children and shuts out others through their money, political clout, and support for NIMBY policies that keep poor people and minorities out of their neighborhoods and schools.

There’s some truth to both of these arguments, but they’re superficial and, to my mind, miss the real point of what’s gone wrong for so many Americans: Baby boomers like me flourished in a postwar meritocracy that favored the college educated. Over the past four decades, the economy has undergone a sea change and offers many fewer long-term opportunities to Americans coming of age now.

Meanwhile, the ultra-rich — especially the top 0.01%, never mind the top 1%, 10% or 20% — have used their wealth to bend political institutions to their interests. Exhibit A: last year’s Tax Cuts and Jobs Act, which slashed corporate tax rates to 21% and gave disproportionate tax relief to the top 1% and above, but screwed upper-middle class homeowners and taxpayers in blue states like New York and California. (Take that, “coastal elites”!)

Let’s look at the boomers first. It’s hard to generalize about a group that was 74 million strong as of 2016. Politically, they couldn’t be more divided: 44% of boomers leaned Democrat in 2017, and the same number leaned Republican, according to the Pew Research Center. (Succeeding generations tilt more Democratic.) That’s hardly a consensus for a “baby boomer policy agenda,” whatever that might be.

Nor is the baby-boom generation uniformly affluent. True, a huge 78% of them own homes (vs. just 41% of millennials, according to Realtor.com). Boomers had the good luck to form households when interest rates dropped in the 1980s and they benefited from a mortgage-interest deduction that has existed since the beginning of the federal tax code.

But nearly half of them aren’t on track to afford basic expenses in retirement. Maybe they were all crazy spendthrifts, or maybe many lost their jobs or homes in the Great Recession and never recovered. That’s why 90% of Americans take Social Security before their full retirement age: They desperately need the money.

Related: America’s middle class is slowly being ‘wiped out’

Also: This is what it really takes to become a 401(k) millionaire

True, some 10,000 Americans will turn 65 every day until 2029, threatening Social Security’s and Medicare’s solvency. And politicians have punted on this for fear of losing votes. But there are solutions, such as raising payroll taxes on high-earners. Should we blame the boomers just because they’re getting older? What do you want them to do? Drop dead?

Boomers who became the upper-middle class joined the workforce just as America was moving from an industrial to a service and information economy. At first that created opportunities for college-educated workers in business, law, Wall Street, and other professions. But as information technology developed and corporate America focused exclusively on shareholder value, more and more of those jobs were eliminated or moved overseas.

People with the skills to flourish in a technologically driven economy got outsized rewards, while everyone else fell behind.

As my former boss Steven Brill lays out in his new book,”Tailspin,” wealthy corporations and individuals worked with bought-and-paid-for politicians to advance their own narrow interests at the expense of everyone else. Meanwhile, people with the skills to flourish in a technologically driven economy got outsized rewards; everyone else fell behind. That, in a nutshell, is the root of the widening income and wealth inequality over the past 40 years.

When there’s such a premium for high skills and such a penalty to those who don’t have them, wouldn’t it be malpractice for upper-middle class parents not to give their kids enrichment, tutoring, test prep, and other things that could give them a leg up? Is that “protecting privilege” or providing insurance for their kids to succeed in an economy where humans are increasingly expendable?

Baby boomers and the upper-middle class have become easy scapegoats for problems that are much deeper. Blaming them may feel good, but it won’t solve those problems or make things better for everyone else.

Howard R. Gold is a MarketWatch columnist and founder and editor of  GoldenEgg Investing , which offers exclusive market commentary and simple, low-cost, low-risk retirement investing plans. Follow him on Twitter @howardrgold.