The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy

Blame Grandpa for the coming economic collapse? That’s not what Boston University economist Kotlikoff and investment strategist Burns do in this compelling and well-documented follow-up to The Coming Generational Storm. Instead, as politicians legislate more goodies while leaving the bill to future generations, they see us creating “a generational time bomb.” Demographic trends indicate that within half a century, the number of elderly in the industrialized world will for the first time outweigh the number of children. Moreover, these young people will likely pay more in taxes during their lifetimes than they will ever receive in benefits. Kotlikoff and Burns provide chilling examples of the almost inexorable growth in spending: Medicare Part D, which covers prescription drugs, began paying benefits in 2006, but its unfunded liabilities today are $16 trillion, nearly equal to the $18 trillion unfunded liabilities of Social Security. Meanwhile, our national profligancy—“saving nothing and investing next to nothing”—exacerbates the dismal outlook. The authors conclude by suggesting reforms to the banking system and offering investment advice, but their dour first section is what lingers in the mind. As they note, in 1983 the Greenspan Commission “fixed” Social Security, but nearly 20 years later, it’s in worse long-term fiscal shape today. The issues they raise provide timely intellectual fodder for this election year. (Apr.)