Over the past few decades I’ve seen a number of studies, generally produced for those in marketing trying to find someone who still had money they could sell to, showing that the inflation adjusted work earnings of ordinary Americans, at each phase of their life, has been falling generation by generation, starting at the back end of the baby boom and working its way up the educational and income scale. The peak earnings were had by those who came of age in the 1950s and 1960s, which is to say those who were born between the mid-1930s and mid-1950s, those whom I have referred to as “Generation Greed.” The same generations that, when running the country, have essentially bankrupted the U.S., while shifting the sacrifices to those who will follow.
The Federal Reserve Bank of St. Louis recently released yet another study showing the same thing, this one a highly technical multiple regression analysis that adjusts for education, whether or not one is a saver, and other demographic and social factors. It puts the start of falling income a little earlier, after those born in 1950, with the losses accelerating later.
The Fed’s main question for this analysis is the economic status of older Americans, and indeed since the young have other advantages the diminished status of younger generations will really hit home when they become old themselves. The diminished income and wealth of younger cohorts (based on birth year) at each point in the lifecycle is summarized starting on the bottom of page 26 and shown graphically in figures 29 and 30 on pages 73 and 74. But most people don’t like to look at graphs and think about multiple regression coefficients. They like to talk about celebrities. So I thought to myself, “which celebrity most exemplifies the direction of the country over the past 45 years or so?” And then it hit me.
Donald Trump was born in 1946, and was either among the first “Baby Boomers” or among the last of the post-“Greatest Generation” cohort that some have called the “Silent Generation,” depending on where you draw the line. After decades of sacrifice and toil, and the disasters of the Great Depression and World War II, the Silent Generation and early boomers inherited the most prosperous country in the world, and at each phase of their life they had, on average, much higher incomes than those who came before. Many of them also managed to accumulate more wealth that those who came before. And they received much greater public services and benefits than those who came before. All that might have been expected, given the history of the country. What was not expected is that these generations would be so much better off than the generations who came after, the benefits of improvements in information technology aside. (The typical Generation Greed response when I bring this up in blog discussions is “yeah but we didn’t have smartphones and Starbucks!”)
According to the St. Louis Fed “our regression results strongly support the hypothesis that rising levels of income and wealth holding constant demographic characteristics like educational attainment during the first several decades of the 20th century came to an end at some time around mid-century. One possible explanation is that the arrival of the Baby Boomers somehow disrupted the process of rising standards of living for given demographic characteristics. Another possibility is that the ends of the Great Depression and World War II were associated with social, political, and economic changes that favored generations born before the Baby Boomers. We only speculate on underlying causes here and leave deeper investigations for future research.”
OK, so there is no point in blaming anybody. Some generations were lucky and got a great deal. What I have a problem with is that collectively Generation Greed has topped off those advantages by looting our public and private institutions to get and even better deal than their higher incomes and wealth would have allowed. And left behind a huge overhang of public and private debts, underfunded and retroactively enhanced pensions, a depreciating infrastructure, and other burdens to younger generations, who are poorer, as I best summarized five years ago in the post linked below.
About the only thing they haven’t cashed out yet is America’s standing as the world’s reserve currency, and down in Washington they are working on cashing that one out too.
That is the generational inequity, and it increases with each passing day. At the federal level I generally associate the sell off of our country’s future, to make life easier for Generation Greed, with Republicans. Given that party’s advocacy of tax cuts when Generation Greed was in its prime earning years, higher federal senior benefits when Generation Greed reached old age, and (to assure the Chinese and Arabs that what was once the world’s greatest creditor nation and is now the world’s great debtor nation will pay them back) drastic cuts in old age benefits. Cuts for poorer younger generations only. Because they have “time to adjust.” The Paul Ryan plan, in other words. But generational inequities are bipartisan, with Democrats full partners in the “Screw the newbie, flee to Florida” cycle on public employee pensions. And with Paul Krugman now advocating much bigger federal debts today to help the economy, but acknowledging that eventually austerity will be needed because the debts will be higher. Eventually probably being after his entire generation, the 1960s yuppies, has qualified for Social Security and Medicare, and is grandfathered in. That is essentially the Paul Ryan plan, only with the discussion of the cutbacks for younger generations deferred to later, when it can be described as “due to circumstances beyond our control.”
While late boomers, Generation X, Generation Y, and Millennials are progressively less well off than those who went before were at the same age, will that turn around when they get old and their needs increase? The Federal Reserve doesn’t think so. “We cannot know for sure, but it appears unlikely to us that Baby Boomers—who are just now entering retirement in large numbers—will enjoy incomes and wealth for given demographic characteristics as favorable as that enjoyed by pre-boomers. First, the Baby Boomers already have significantly lower demographically-adjusted incomes and wealth, as we documented above. There is little time to make up these shortfalls, and even less reason to believe that social policies will be changed to assist them. Second, it appears more likely that redistribution toward older adults will be reduced, rather than increased to make up any putative shortfall.” Because the country will be left broke.
While the St. Louis Fed puts the start of falling incomes by generation at 1950, other more straightforward studies show that significant declines started some years later, after the first half of the baby boom. Matching up with 1973, the year the inflation-adjusted median work earnings of U.S. men peaked. Those born in 1955 were already 18 at the time. I think it is because the Fed’s multiple regression analysis adjusts for educational attainment, and the early boomers were so much better educated than the generations that preceded them. Higher educational attainment paid off – for a while. From what I read, the first to experience lower inflation-adjusted earnings were high school dropouts, followed by high school graduates starting in the early 1980s recession (the 1980s were the heydays of the hippies turned yuppies), college graduates starting in the early 1990s recessions, then everyone but the one percent. And now most of them too.
“As for cohorts born after the Baby Boomers, our evidence points to very little change from the trends experienced by the Baby Boomers. That is, we would not expect a significant increase in the level of income or wealth for a given set of demographic characteristics. Only the passage of time and the accumulation of more data will allow us to be more confident about our predictions.” The academic economists are hedging their bets, but I can see the future with full clarity. All I have to do is examine the minimum wage back when I was earning it as a teenager and my younger daughter’s wage (which was above the minimum) when she worked at a high-end frozen yogurt shop this summer. Or the terms of my student loans with the terms available for those who have to borrow today. Or my paid internship as an economist with the Port Authority with the unpaid internships going on for years young people today are faced with. And project that forward to where today’s twentysomethings will be at age 50, or age 70.
Yes some of that is the recession, but I came out in the labor force at a pretty lousy time too. It is a long-term structural trend. Like those in the second half of the baby boom, instead of Medicare and Social Security the generations coming after will also be lucky to get medical marijuana followed by legal assisted suicide. And that’s if the Democrats are in. The Republicans won’t even give us that. But the Republicans and Democrats do agree on something — not telling their children and grandchildren what their future is, with the expectation of pointing fingers in a circle when that future arrives, and then changing the subject to God, gays and guns. They may expect that “children are resilient” and have “time to adjust,” but by not leveling with people about where things are going they aren’t helping the adjustment. Because they want their own situation rationalized.
OK enough of these boring facts, what about Donald Trump? To understand why The Donald is THE man of his generation, start with the New York Times obituary of his father, Fred C. Trump. “Mr. Trump, like Sam LeFrak, another master builder, helped change the face of Brooklyn and Queens with thousands of homes for the middle class in plain but sturdy brick rental towers, clustered together in immaculately groomed parks. Although overshadowed in the news for the last two decades by his flamboyant son Donald, Mr. Trump, a self-made man, built more than 27,000 apartments and row houses in the neighborhoods of Coney Island, Bensonhurst, Sheepshead Bay, Flatbush, and Brighton Beach in Brooklyn and Flushing and Jamaica Estates in Queens.” Basically Fred Trump, who started his business as a teenager around the year 1900, got rich housing the middle class in the years after World War II.
“Mr. Trump did not believe in displays of wealth — with one exception. For decades, he insisted on a Cadillac, always navy blue, always gleaming, and always replaced every three years, its ‘FCT’ license plate announcing its owner wherever he went. He was a frugal man. According to his sons, he would routinely drive his Cadillac to one of his many construction sites after the day’s work was over. Wearing a natty suit — with his chiseled features and wide grin, he resembled a silent-film star — he would walk through the studs and across the plywood floors, picking up unused nails to hand back to his carpenters the next day.” He was also a family man who was married to the same woman his entire life. Donald Trump inherited some of his wealth, along with connections and business knowledge, from his father. He got started in the business in a project that he and his father did together. Just as Donald Trump inherited so much from parents, who started with far less and worked hard for every penny, so Donald Trump’s generation inherited the richest and most powerful nation in the world.
My then 21-year-old brother actually read Donald Trump’s 1987 autobiography, Trump: The Art of the Deal, and considered him a model at the time (he probably knows better now). He urged me to read it, and fortunately there is enough online as a teaser that I don’t have to buy a copy to get some quotes for this post. “The most important influence on me, growing up, was my father Fred Trump” The Donald wrote at the time. “I learned a lot from him” and his classic Horatio Alger story. “At the same time, I learned very early on that I didn’t want to be in the same business my father was in. He did very well building rent-controlled and rent-stabilized housing in Queens and Brooklyn, but it was a very hard way to make a buck. I wanted to try something grander, more glamorous and more exciting.”
As a child, The Donald benefitted from a strong family life, according to his autobiography, in a “very traditional family.” “Our family was always very close, and to this day they are my closest friends. My parents had no pretentions. My father still works out of a small, modest back office on Avenue Z in the Sheepshead Bay section of Brooklyn, in a building he put up in 1948. It simply never occurred to him to move.” Though they were rich, Fred Trump’s family did not live extravagantly. But The Donald was nonetheless such a brat that his parents had to send him to military school to straighten him out. Which I took as a warning to live even less extravagantly, for the benefit of my children.
In 1987, at the time the book was written, The Donald was riding high a number of big successes. These he attributed exclusively to his own genius, negotiating skills and hard work, not to his personal and generational advantages, a stock market bubble, and the largest commercial real estate bubble since the 1920s. Trump had parlayed those successes into more glamour – Atlantic City casinos, an airline bearing his name, a franchise in the new United States Football League, and the purchase of the former New York Central freight yards on he West Side of Manhattan, where a huge luxury development was planned. And by 1987 he had used his gift for self-promotion to become the celebrity and public figure he has been since. He even spoke of the family values he had inherited from his father, speaking of “The Rock” of his marriage to Ivana Trump and his dedication to his own children.
Those who get off on schadenfreude, and who know what happened next, might enjoy reading The Art of the Deal today, provided they could get it used so The Donald doesn’t make any more money off the purchase. His egomaniacal business empire collapsed under a sea of debt, leaving behind a bunch of stiffed creditors and nearly taking down a major bank. Virtually all that remained was his ego, his gift for self-promotion, and his extravagant lifestyle, which the creditors for some reason kept paying for. Which is pretty much the situation younger generations find themselves in today with regard to the country at large. As for his “rock” of a marriage and family, well, I don’t follow this stuff but it has been a few younger trophy wives since hasn’t it? Even if you don’t count Ivana, who battled him in a legendary divorce trial after she found out he was having in affair with a woman who would become Ms. Trump number two.
The Donald is right on the border of the generation that started off with family values intentions, but ended up getting divorced when the pill made younger and still good-looking alternatives available to men, and careers made an alternative income source available to women. And the generation that never really bothered with the pretense of family vs. sex to begin with. If Donald Trump isn’t The Man of His Generation, then the older Hugh Hefner (though technically a member of the so-called “Greatest Generation”) is.
To be fair, the late 1980s and early 1990s commercial real estate crash, which wiped out the Savings and Loan industry, also took down real estate moguls who were far more responsible than Donald Trump. The Reichmanns of Olympia and York, the builders of the World Financial Center in Manhattan and Canary Wharf in London, for example. It was in those dark days that, legend has it, The Donald stepped out of a limousine, was asked for money by a homeless person, and said that the homeless person was richer than he was – because the homeless person had nothing and owed nothing. Whereas Trump owed far more than he had.
And it was in those dark days that Donald Trump found out what he was really good at, better than his father, better than anyone. Living large while leaving behind a trail of bankrupt endeavors, losing investors, and small business bookkeepers and church treasurers who embezzle to cover their losses at casinos, the great economic hope of the past 20 years. Casinos that were sold as a government revenue bonanza when they were only allowed in a few places, but are going bankrupt, and seeking tax breaks and subsidies, now that they are ubiquitous. Ubiquitous now that New York State is the last domino to fall. The Donald knows debt and negotiating bankruptcy.
Along with that there is his gift for self-promotion and his illusion of easy affluence. His creditors felt compelled to leave The Donald with a small equity stake in the West Side development site and casinos, to keep his aura attached to the property. And in recent years he has had a television show to share his knowledge of what it takes to succeed in today’s America, by the standards of today’s America. Because he sets the standard. If he doesn’t know, who does? Perhaps the standard will change. When The Donald is gone, perhaps they’ll print his obituary and his father’s obituary side-by-side, and the judgment of who was the greater success will be different than it would be today.
In this context, the “Trump for President” rumors that pop up every four years make sense. As President The Donald would find a creative way to finesse our financial problems – by defaulting on the national debt and using his charm, skill and charisma to negotiate a workout with our creditors. Perhaps keeping the name “The United States” on the country for marketing purchases, but otherwise giving up all but a small percent of the equity. Of course he’d still need some revenues, and casinos seem to be tapped out. But since screwing the young, literally and figuratively, seems to be the American MO, why not legalize prostitution and let the government get a piece of it? If nothing else, The Donald stands for the free market and opportunities for attractive young women.
As President, The Donald’s ego would allow the U.S. to ignore our diminished circumstances and national standing. I’m sure he would strut across the world announcing “We’re number one!” and “Greatest Country in the World!” — while leaders and citizens of other countries rolled their eyes. Silvio Berlusconi comes to mind. To the point where even years later, when the all the bills have long since come due many times over, he would be well-remembered by aging television viewers eating their gruel in darkened, unheated rooms. Clutching their lottery tickets they would say “God bless Donald Trump. He made us feel like winners for a few more years.”
That’s the end of the post I planned to write. But just to hit me in the face with this concept, let me tell you what I just saw. I had just come back from playing paddleball in the Greenwood Playground, against the cracked wall and with a gate that the ball keeps going out of because some vandal ripped it down twice and it has only been put back up once. (According an e-mail from 311, as of September 30 my complaint about the gate is closed, because “The Department of Parks and Recreation has completed the requested work order and corrected the problem.”) I was tired, so I flipped on the TV for minute and the very end of “Religion and Ethics Newsweekly” happened to come on.
It seems that Billy Graham, America’s evangelist, is reaching the very end of his long life, and he released his last message to the country, stating that U.S. is in desperate need of a spiritual revival. As the TV show was ending, it showed a scene from what is likely Graham’s last birthday party, with everyone singing happy birthday. And sitting right next to Graham and singing along was, I kid you not, Donald Trump.
I don’t know what to say. Perhaps The Donald has changed. Perhaps this is Graham’s version of Jesus dining with the sinners and tax collectors, because they need the help the most. Or perhaps this just shows where the country is today, that Donald Trump is The man of his generation, and that he and Graham are first and foremost not a real estate executive and a preacher but celebrities, and that is what matters. Yes, that’s it.
If you are reading this Mr. Trump, in the spirit of Christian humility and generosity, thanks for all the laughs. (Since I never invested in any of your ventures I can laugh). Hearing you and about you for most of my adult life has been slightly less annoying that having to listen to your generation’s music my whole life, mixed in with occasional assertions about how cool and sexy they were and are and the fact that all of them were at Woodstock — except for the losers in Vietnam or in jail for protesting the war.