The next crisis
By The Economist
From The Economist
Published: October 17, 2012
The economic legacy left by the baby-boomers is leading to a battle between the generations.
Sep 29th 2012 | from the print edition
ANOTHER economic mess looms on the horizon—one with a great wrinkled visage. The struggle to digest the swollen generation of ageing baby-boomers threatens to strangle economic growth. As the nature and scale of the problem become clear, a showdown between the generations may be inevitable.
After the end of the second world war births surged across the rich world. Britain, Germany and Japan all enjoyed a baby boom, although it peaked in different years. America’s was most pronounced. By 1964 individuals born after the war accounted for 41% of the total population, forming a generation large enough to exert its own political and economic gravity.
These boomers have lived a charmed life, easily topping previous generations in income earned at every age. The sheer heft of the generation created a demographic dividend: a rise in labour supply, reinforced by a surge in the number of working women. Social change favoured it too. Households became smaller, populated with more earners and fewer children. And boomers enjoyed the distinction of being among the best-educated of American generations at a time when the return on education was soaring.
Yet these gains were one-offs. Retirements will reverse the earlier labour-force surge, and younger generations cannot benefit from more women working. There is room to raise educational levels, but it is harder and less lucrative to improve the lot of disadvantaged students than to establish a university degree as the norm for good ones, as was the case after the war. In short, boomer income growth relied on a number of one-off gains.
Young workers also cannot expect decades of rising asset prices like those that enriched the boomers. Zheng Liu and Mark Spiegel, economists at the Federal Reserve Bank of San Francisco, found in 2011 that movements in the price-earnings ratio of equities closely track changes in the ratio of middle-aged to old workers, meaning that the p/e ratio is likely to fall. Having lived through a spectacular bull market, boomers now sell off assets to finance retirement, putting pressure on equity prices and denying young workers an easy route to wealth. Boomers have weathered the economic crisis reasonably well. Thanks largely to the rapid recovery in stockmarkets, those aged between 53 and 58 saw a net decline in wealth of just 2.8% between 2006 and 2010.
More worrying is that this generation seems to be able to leverage its size into favourable policy. Governments slashed tax rates in the 1980s to revitalise lagging economies, just as boomers approached their prime earning years. The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort.
Boomers’ sponging may well outstrip that of younger generations as well. A study by the International Monetary Fund in 2011 compared the tax bills of a cohort’s members over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes (see chart), an obligation 17 times larger than that likely to be left by those aged 25.
Sadly, arithmetic leaves but a few ways out of the mess. Faster growth would help. But the debt left by the boomers adds to the drag of slower labour-force growth. Carmen Reinhart and Kenneth Rogoff, two Harvard economists, estimate that public debt above 90% of GDP can reduce average growth rates by more than 1%. Meanwhile, the boomer era has seen falling levels of public investment in America. Annual spending on infrastructure as a share of GDP dropped from more than 3% in the early 1960s to roughly 1% in 2007.
Austerity is another option, but the consolidation needed would be large. The IMF estimates that fixing America’s fiscal imbalance would require a 35% cut in all transfer payments and a 35% rise in all taxes—too big a pill for a creaky political system to swallow. Fiscal imbalances rise with the share of population over 65 and with partisan gridlock, according to other research by Mr Eschker. This is troubling news for America, where the over-65 share of the voting-age population will rise from 17% now to 26% in 2030.
That leaves a third possibility: inflation. Post-war inflation helped shrink America’s debt as a share of GDP by 35 percentage points (see article). More inflation might prove salutary for other reasons as well. Mr Rogoff has suggested that a few years of 5% price rises could have helped households reduce their debts faster. Other economists, including two members of the Federal Reserve’s policymaking committee, now argue that with interest rates near zero, the Fed should tolerate a higher rate of inflation to speed up recovery.
The generational divide makes this plan a hard sell. Younger workers are typically debtors, who benefit from inflation reducing real interest rates. Older cohorts with large savings dislike it for the same reason. A recent paper by the Federal Reserve Bank of St Louis suggests that as a country ages, its tolerance for inflation falls. Its authors theorise that a central bank could use inflation to achieve some generational redistribution. Yet pressure on the Fed to cease its expansionary actions has been intense, and led by a Republican Party increasingly driven by boomer preferences.
The political power of the boomers is formidable. But sooner or later, it cannot escape the maths.
from the print edition | Finance and economics
「世代對立」危機臨頭
2012-10-03 天下雜誌 507期 作者：經濟學人
美國嬰兒潮世代，佔盡資源、拖垮經濟、侵蝕年輕人的血汗錢。一場世代戰爭，隨時可能引爆。
工業國家中，老去的嬰兒潮世代，佔去大量資源，拖垮經濟成長，也留下巨大赤字。
二戰後出生的一代，可說享盡了榮華富貴，不論哪個年齡層，收入都超越前一代。
但嬰兒潮世代的收入成長，來自於許多只會出現一次的優勢。
快速成長的榮景不會再現。更令人擔憂的是，嬰兒潮這一代，又特別懂得支持對自己有利的政策。
八○年代，政府紛紛降低稅率，以挽救經濟頹勢，此時正是這一世代開始工作的年紀。一九八一年，美國家庭平均負擔稅率為一八％，到了二○一一年，只有約一一％。
但是，政府提供的福利卻沒少過。經濟學家估計，每個一九四五年出生的美國人，一生會獲得來自政府近二二○萬美元的資源挹注，比之前所有世代都多。
這一代人慢慢在侵蝕年輕人的血汗錢。
去年，IMF調查指出，所有六十五歲美國人，在二○一○年享受的各種社會福利總金額，居然比他們繳納的全部稅金，還多出三千三百億美元。
年輕世代再也沒有這種好康。現在，二十五歲世代享受到的，只有他們的十七分之一。
「養不起」的經濟炸彈
「養不起」的經濟難題，再不設法解決，恐怕即將引發世代戰爭。
解決方法之一，是加速經濟成長。但嬰兒潮世代留下來的一屁股債，大幅拖慢了勞動力成長。
公共建設也變得緩慢。從六○年代到○七年，美國公共建設支出，佔GDP比率從三％降至一％。
撙節支出，是另一個可能手段，但緊縮的程度將會超乎想像。
根據IMF估計，美國若要解決財政失衡的問題，移轉性支出必須減少三五％，並加稅三五％。以現在政府虛弱的體質來看，這根本是天方夜譚。
還有一個選項，叫做通貨膨脹。戰後的美國因為通膨，債務佔GDP的比率，縮減幅度達三五％。經濟學家指出，物價若能連續幾年每年上漲五％，可以幫助家庭在更短時間內償還債務。
也有聯準會幕僚建議，在利率接近零的當下，應該允許更大幅度通膨，以加速經濟復甦。
但不管老一代或年輕一代，都不喜歡通膨。
儘管聯準會的報告認為，通膨可以促進世代之間財富的重分配，但各界對於央行介入市場多所排斥，共和黨利益又為嬰兒潮世代所把持。享盡政治優勢的這一代，恐怕很快要嘗到苦果。（劉光瑩譯）
留言列表
高普考補充資料 (3)
