The Case of American Exceptionalism - Part 7

-Brian Proferes Member(MCG)

So far we have looked at the big picture and explored why economic growth has not sustained levels achieved in what is considered to be the most prosperous era. However we have not yet looked into many aspects of American society that have changed over the last half century and generated concerns. In this article I will give the reader some ideas to consider to help him or her develop opinions on the issue of American growth.

“The Baby Boomers have already ruined the economy and now they’re all gonna retire and take up all the social security funds!” - A lot of people

There seems to be an ongoing argument between millenials and Baby Boomers over seemingly everything. Some Baby boomers seem to assert the millenials are too entitled and don’t work hard enough while millennials counter by saying their lives are so much more difficult because the Boomers inherited the greatest economy in the nation’s history and drove it into the ground. Like every heated argument, there is a lot of inaccuracies and misguided thinking.

When it comes to social security and retirement funding in general, if you want to blame a generation then the Baby Boomers aren’t the one on which to take out your anger. The generation that existed when Social Security was enacted back in the 1930s never had to make any contributions (because when they worked the program didn’t exist) but were able to live of payments. Every other generation both paid taxes while working and proceeded to collect benefits when coming of age. So in a sense the Baby Boomers helped retirement funding because there were so many of them making contributions when they were of working age. From a psychological perspective, if the millenials were in the same position as the baby boomers, they probably would have lived similar lives. This is actually a broader life notion some people fail to grasp: If you were born with the exact same genetic makeup and in the exact environment of someone else, what is stopping you from living essentially the same life? It’s easy to look at someone who has a bad life and say “If I were them I would just work harder get out of it”, but if you born in their situation maybe you were never taught the value of working hard and would’ve found yourself in troublesome situations that would have resulted in you never developing the same mindset with which you criticize. So if you were born in the same position of a Baby Boomer, what would stop you from believing the economy would always be robust? You would not have had the hindsight you do now, so it’s not fair to say you would have done things differently with certainty. Nobody gets to choose the situation in which they are born, but they get to decide how they respond to the circumstances. Now I’m not completely backing the boomers, as we have discussed how some developments, such as the rise of conservatism in the 1980s that lead to low taxes and soaring salaries for the elite while everyone else saw stagnation, directly slowed economic growth.

Regarding the retirement savings crisis, the issue has valid points on both sides, and to keep things brief I will refer the reader to an article from the Wall Street Journal that does a nice job developing both sides of the argument:

https://www.wsj.com/articles/is-there-really-a-retirement-savings-crisis-1492999861

Let’s examine a few graphs; I will provide little commentary as this data can be interpreted however one wants. The first concerns overall satisfaction of the current state of the country (Source: Wall Street Journal) :

Now as much as ever, political strife seems to define how content US citizens claim to be. Our second graph shows the amount of schooling received by people born in a given year. For example, a person born in 1910 on average received a little less than 10 years of education in his or her life (Source: Wall Street Journal):

We should take a second to consider the stagnation that began for those born around 1950. We have discussed the fall in productivity that began in 1970, which would coincide with when those who were born in the periods of stagnant education growth entered the labor force. Is it possible that the productivity miracle from 1920 to 1970 was partially a result of people gaining great amounts of education for the first time, only to reach an inevitably ceiling? This isn’t equivalent to saying we are less smart today than we were back then (In fact we have more knowledge today than at any other point in history), but it makes us wonder if there are diminishing marginal returns to education received.

In the next, and final, article of this series we will look ahead to the future and consider the biggest obstacles to achieving our growth potential. I will also summarize all of the conclusions we have drawn throughout the 8 articles.