Generation Greed’s Last Economic Orgy: Federal Reserve Z1 Debt Data for 2016, Rising Housing Prices, Census Bureau data on Worse Off Young Adults, Falling Life Expectancy, Etc.

The problem with socialism is that you eventually run out of other people’s money” – Margret Thatcher in 1976

The problem with capitalism is that given enough inequality, eventually businesses trying to sell things run out of other people’s money” — Larry Littlefield, 2016

For 35 years, generations of Americans born after 1957 or so have been paid less but sold more, with the difference covered first by more household members in the workforce, then by inadequate requirement savings, and then by soaring public and private debt. The richest and most entitled generations in U.S. history worked hard and were very creative, but they over-consumed what even they were able to produce and expected too many years in retirement with too little in savings, at the expense of the poorer generations that have followed them. With some members of those generations grabbing far more than the others. With too much money in too few hands, the whole world economy has become dependent on Americans spending more than they had. And since America finally started to go broke with millions retiring into poverty, the world economy has faced a global crisis of demand.

When you put all the trends together, as I have below, it adds to a shocking picture that puts every current debate in context. Today’s young adults paid less than Generation Greed was paid at the same age in 1975, and forced by government policy to pay more for housing. Life expectancy falling. Personal and federal debts once again soaring, all the mistakes of the 2000s being repeated. Topping it off, we now have Donald Trump as President. Does this mean that the U.S. is finally prepared to admit, face and tackle its problems? Or does it mean that the most over-privileged and entitled members of the most over-privileged and entitled generations in U.S. history are just grabbing more, in one last economy orgy before the final collapse?

I asked legendary football coach and Brooklyn native Vince Lombardi for his opinion.

I’ve written about the long-term trend in U.S. debt, and its implications, extensively over the past few years. So this post will be a brief update.   But it will include links to and summaries of a number of articles and reports released over the past 12 months that, taken together and arranged to tell a story, show just how bad things are. And how much worse off the generations to follow Generation Greed have been left, despite (in greater percentages) doing all the things they were supposed to do, were told to do, doing as older generations said not as they did. Staying in school, working harder, avoiding teenage pregnancy, not committing as many crimes, not getting divorced at the same rate, etc. Younger generations have been increasingly responsible, but are worse off because of the irresponsible – personally and socially – generations that preceded them. And it keeps going on, and getting worse.

I strongly suggest reading all the articles and reports linked after reading this post and my summaries of them. Because this isn’t just what I said or believe, but what has been observed. These aren’t “alternative facts,” they are facts under Omerta. First some of the data.

Total Debt

From 2015 to 2016 total U.S. debts (public and private), which had been below 160 percent of GDP for decades before the Generation Greed era, increased from 330.2 percent of GDP to 334.8 percent of GDP. That is, total debt increased by 4.5% of GDP in just one year. It remained below the record high of 366.7% of GDP in 2009, but only because the financial sector continues to deleverage.

TotalNonFinDebt

Excluding the debts financial companies owe to each other, total U.S. debts never actually fell significantly. And from 2015 to 2016 they soared by 5.1% of GDP. President Obama claimed that the strong economy last year, with more consumer spending, showed the U.S. economy was on the mend, but consumer spending didn’t increase because worker wages increased. The higher consumer spending was funded by more debt, which will lead to less consumer spending in the future, if and when the debts are repaid. This is the unsustainable economy we have had for 35 years, with Americans and America selling off more and more of their individual and our collective future to consume today. And today the economy is trying to climb out of the hole by digging it deeper.

While total non-financial U.S. debt was 5.1% higher as a percent of GDP in 2016 than in 2015, real (inflation-adjusted) GDP increased just 1.6%. All that increase in debt for so little economic growth. And this was not an aberration. In 2016, total non-financial debts were 17.0% higher as a percent of GDP than in 2008, but real GDP was just 12.4% higher. Blame Obama? OR Bush? In 2008, total non-financial debts were 48.7% higher as a percent of GDP than in 2000, but real GDP was just 18.1% higher. Get the picture?   This isn’t a Presidential policy, it is a social tsunami.

As I wrote here,

https://larrylittlefield.wordpress.com/2014/03/09/debt-and-inequality-go-together-rising-debt-is-the-cause-of-rising-inequality/

it wasn’t technology or automation or trade or immigrants that caused the rise in inequality over the past 40 years. It was soaring debts. Without those soaring debts to cover up the difference, U.S. businesses would either have had to pay U.S. workers more, or sell them less. The mega profits leading to mega executive pay would have gradually ebbed away due to rising wages, falling prices, or both. When I wrote that post I believed no one else had written about this, but it turns out someone had – back in 2008.

http://www.dailykos.com/story/2008/1/14/436037/-

Like the present day, the 1920s was an era of technological innovation (cars, radios, mass production), financial innovation (installment buying), and employer productivity.  It also almost exactly matched today’s disparity of wealth, as the benefits of worker productivity were hoarded by corporations and the wealthy.

Since workers didn’t have the money to buy what they were making…

credit was used in the purchases of up to 90% of major durable goods by the end of the 1920s.  Average purchases of major durable goods rose from 3.7% of disposable income between 1898 and 1916 to 7.2% between 1922 and 1929. Accompanying this rise in purchases of durables was a drop in the personal savings rate, from 6.4% of disposable income in the former period to 3.8% in the latter.

The 1920s were a great party, despite stagnant to falling income on the farm where half of all Americans still lived. But eventually, with more and more money going to pay debts for past purchases, there was no money left to pay for more purchases.

Weak spending depressed prices, which meant that many farmers, businesses, and nations couldn’t repay their debts. Rising bad debts prompted banks to restrict new loans and sell financial assets, usually bonds. Scarce credit led to less borrowing, less spending, lower prices, and more bankruptcies. Trade and investment spiraled downward.

While some politicians prefer alternative facts to realities about global warming, property insurance actuaries have no choice but to face those realities and base their business decisions on them. Similarly, while economists and politicians have spent 35 years denying or ignoring the fact that Generation Greed has left the generations to follow worse off, while also selling off its own future for the party of the past, those in marketing have analyzed the data and reached the right conclusions. It is in marketing articles in business publications that I have followed the decline in American income in the wake of Generation Greed, and that’s where you can read about it now.

http://www.bizjournals.com/bizjournals/news/2017/03/20/blame-store-closures-on-demographics-and.html

February’s 0.1 percent rise in retail sales figures was the smallest gain in six months. Electronics and appliance store sales declined by almost 3 percent while apparel sales also fell. This comes at a time when many retailers have announced store closures, and pundits often try to turn to e-commerce to explain these figures. However, the latest statistics from the Census Bureau show that e-commerce made up just 8.3 percent of total retail sales in the last quarter of 2016. E-commerce is not causing store closures and bankruptcies alone. But if it’s not, what is?

There are 83.1 million millennials who shop in a very different way to other generations. They are urban dwellers who tend to live in downtown apartments with limited storage. This is a lifestyle choice that values experience over possession – they’d rather live in the moment than invest in owning things. Retail purchases therefore tend to support lifestyle experiences and have clear delineations of what brings value to their lives.

As we will see it’s not just a “lifestyle choice” to live while spending less. They are poorer, and have no choice but to spend less.

Like millennials, boomers are doing more with less. According to an Insured Retirement Institute (IRI) survey approximately 35 million boomers lack any retirement savings today and cannot afford to retire. A quarter don’t plan to retire until age 70 or later and almost two-thirds are dissatisfied with their economic outlook. Lack of confidence about living comfortably throughout retirement has forced boomers to change their behaviors. Many recognize their lack of financial and retirement planning so they are limiting their current expenses. The youngest boomers know they need to tighten budgets and save now for their future; the same behavior as millennials, creating equally monumental impacts on retail expenditure.

Combined, millennials and baby boomers represent more than half of the U.S. population. Both groups have chosen, or been forced, to spend less and save more.

Or just spend less. Because according to the Federal Reserve Z1 data that is the subject of this post, total U.S. household debt is approaching the peak level of 2008.

http://www.upi.com/Top_News/US/2017/02/17/US-household-debt-near-record-levels-Federal-Reserve-report-says/3411487331520/

February’s 33-page “Quarterly Report of Household Debt and Credit” shows that every category of debt measured — including mortgages, credit cards, student loans and auto loans — saw an increase. The total increase of $460 billion in 2016 was the largest in a decade. Mortgage balances, now at $8.48 trillion, made up 67 percent of the household debt. At the current rate of growth, household debt is expected to break the 2008 record high, of $12.68 trillion, sometime in 2017. The year 20008 was marked by the start of a recession.

Here are two charts of annual data that show the trend. Mortgage defaults have reduced total mortgage debt, but other household debts have soared. And now, according to the most recent quarterly data, mortgage debts are increasing too.

ConsumerDebt

NonMortConsumerDebt

And while the average American is going deeper into debt to keep spending higher than it would otherwise be, their assets are not going up.

https://www.bloomberg.com/news/articles/2017-02-21/two-thirds-of-americans-aren-t-putting-money-in-their-401-k

Americans aren’t saving enough for retirement. True, this has been a refrain for longer than many can remember. But now some disturbing numbers show exactly how bad it’s gotten. Two-thirds of all Americans don’t contribute anything to a 401(k) or other retirement account available through their employer…

Only about a third of workers are saving in a 401(k) or similar tax-deferred retirement plan. Also, the gap is far wider than expected between the number of employers offering retirement plans, and the number of workers saving in them…

To reduce their own cost of living, the rich and unionized public employees and retirees have spent their money on businesses that offer a better deal by not providing pensions.

According to a Pew Charitable Trusts analysis of survey data released Feb. 15, only 10 percent of workers over age 22 have a traditional pension. Just 6 percent of millennials have a pension while 13 percent of baby boomers do.

But other workers did not reduce their own spending and increase their retirement savings to make up the difference. If that had, consumer spending would have been far lower in the past. Instead, that part of the global crisis of demand was shifted to the future, when less well off generations hit old age and retirement. A drastic reduction in U.S. spending power in retirement, as the richest generations start to pass on and poorer generations start to retire into poverty, will add to the crisis of low and falling demand. This is a demographic and economic inevitability due to 35 years of decisions that have already been made.

One reason Generation Greed saved less is that it moved on to more pleasing personal relationships when their existing families got stale, and that costs money.

http://squaredawayblog.bc.edu/squared-away/the-late-1950s-boomers-hit-by-divorce/

It’s old news that the many baby boomers who did not get married and stay married are worse off financially than those who did. Unfortunately, the financial damage to one segment of this generation has broken new ground.   Only 44 percent of “middle boomers” – those born in the late 1950s – have remained married to their original spouses, down from 52 percent of their parents’ generation. Middle boomers are also far more likely to have lived with partners without marrying, remained single all their lives, or even to have divorced twice.

The heart of a study is determining which of middle boomers’ choices were most likely to have led to financial distress when they reached their pre-retirement years.

About 11 percent of middle boomers had negative net worth by the time they were in their early 50s – more than double the share for the generation born during the Great Depression when they reached this age. Negative net worth means that middle boomers’ mortgages and other debts exceed the value of their assets; in this study, assets included everything from retirement plans and taxable bank accounts to primary and vacation homes.

While divorce is a reason why some people end up in debt and retiring into poverty, marriage can be a problem too, as marketers manipulate couples to get them to spend more. Remember this infamous commercial from the 2000s housing bubble, with a realtor pushing a young couple to overpay for a house?

Higher housing prices allow sellers, who tend to be older, to cash in more at the expense of younger buyers, who end up deeper in debt and poorer for the rest of their lives. Higher housing prices also benefit the financial industry, which holds the mortgages that require high selling prices to be paid off. Rising housing (and stock) prices are often portrayed as good for the economy, but they are actually good for some people at the expense of others. And yet the federal government has acted to force younger buyers to pay more for housing (and stocks and other assets) to benefit wealthier older generations.

For example, back when Generation Greed was buying their first houses, in order for a mortgage to be considered “conforming” and eligible to be securitized by the government-sponsored agencies Fannie Mae and Freddie Mac, the mortgage payment could be no more than 25 percent of “stable” household income and total debt payments could be no more than 30 percent. This standard kept the price of owner-occupied housing stable relative to people’s incomes. And now?

https://www.fanniemae.com/content/guide/selling/b3/6/02.html

For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix.   For loan casefiles underwritten through DU, DU determines the maximum allowable DTI ratio based on the overall risk assessment of the loan casefile. DU will apply a maximum allowable DTI of 45%, with flexibilities offered up to 50% for certain loan casefiles with strong compensating factors.

Does that make it easier for young people to buy homes? Hardly! It just uses their greater borrowing possibility to force them to bid against each other and drive up the price paid (and their own debts), to benefit the sellers! I was explaining this to my wife, and she finished my sentence for me, since this is so obvious. But she also said that those who enacted the rules probably falsely believed they were helping buyers. You have to know a lot about banking to understand that this would just make first time buyers pay more and thus become poorer and worse off, she said.

I disagree. As far as I’m concerned those who changed the rules knew exactly what they were doing. Trying to force younger generations, who are poorer, to pay older generations more for housing, to benefit older generations and mortgage holders. Because younger generations are poorer, they would have to pay less to have a debt to income ratio at the historic level. So the debt to income ratio was increased. And it has worked, as another housing bubble is inflating even in previously low-cost markets.

http://www.star-telegram.com/news/local/community/arlington/article144384164.html

Last week, Courtney’s struggle to find a new place to call home finally came to an end when she bought a 1,300-square-foot, pier-and-beam, wood-frame home near Arlington High School. But she only got to change the locks and call it hers after agreeing to pay $141,000 — $11,000 more than the asking price.

According to the most recent appraisal, the market value of the home is $117,108. Two years ago, its market value was only $58,800, making that a 100 percent increase, according to Tarrant Appraisal District records…

New appraisal notices being issued this month by the Tarrant Appraisal District reflect that market. Officials say the taxable value of homes went up an average of 5 percent to 8 percent, but that market values went up an average of about 10 percent. Dig deeper into the data and there are more startling statistics. The average market value for homes between $100,000 and $199,999 went up an average of 11 percent this year, and those selling for $200,000 to $300,000 saw a bump of 9 percent. Only when you get above $500,000 do increases moderate to a modest 6 percent.   It’s not hard to find neighborhoods in Tarrant County where the market value went up more than 10 percent.

“Try to find a new home at under $250,000 — there is no new supply, it doesn’t exist,” said David DeVries, a broker with Re/Max Pinnacle Group Realtors in Arlington. “There are a ton of people chasing the same thing. You’ll get 25 people bidding on one house. It is brutal and as a Realtor it is not a lot of fun.”

“It is going to make it tough for young people today who will either have to live way out or in a tertiary town or rent for a while and move up into home ownership when they can afford it.”

http://www.tennessean.com/story/news/2017/04/21/final-reappraisal-nashville-property-values-soar-record-37-percent/100704912/

Spurred by Nashville’s breakneck growth, Davidson County’s property values have soared by a record median 37 percent since 2013 under a reappraisal performed by the office of Davidson County Property Assessor Vivian Wilhoite.

http://www.westword.com/news/denvers-hot-housing-market-why-are-there-more-coming-soon-signs-8991932

Thanks to Denver’s red-hot real estate market, more and more people trying to buy a home in the metro area are finding themselves in bidding wars, resulting in offers that frequently blow past the property’s listed price. The incredible demand, as well as the speed with which purchases are being made, explains why some real estate agents have started putting up “Coming Soon” signs on houses before changing them to “For Sale.”

To put a statistic on it, albeit one from a dubious source, the median existing home sales price in the U.S. increased by 5.2% from 2015 to 2016.   Low interest rates and higher debt to income ratios have pushed prices for buyers to levels higher than the housing bubble peak in most areas, despite weak income growth. The increase was 6.5% in the South region and 7.8% in the West, and the increases are accelerating, as the 4Q15 to 4Q16 percent increases were larger.

https://www.nar.realtor/topics/metropolitan-median-area-prices-and-affordability

Without government policies to force them to pay more, poorer younger generations would be paying less. But older generations control the government and the financial sector holds the mortgages, and they won’t let that happen.

https://www.citylab.com/housing/2017/04/who-will-buy-baby-boomers-homes/522912/

Boomers—those born between 1946 and 1964—are a plentiful and relatively affluent lot; they’ve steered economic trends for decades. But as the oldest members of the generation amble into their 70s, housing analysts are wondering who will take up the mantle of remodeling—and home ownership—when they’re gone. Hopes are often pinned on the generation that last year overtook Boomers as the country’s largest: Millennials.

But Millennials are a big question mark. The generation, born between 1985 and 2004 according to Harvard’s Joint Center, has been slower to buy houses than previous ones, including the smaller Generation X. This isn’t from a lack of desire but of affordability, says Abbe Will, a co-author of the report. That could change. “The oldest Millennials will be approaching their mid-40s in another decade,” she says. “We’re looking at the next ten years to see what will happen. Will this group catch up? We don’t know.”

Older generations (or their heirs) will eventually have to sell, with a possible housing (and stock market?) crash in the mid- to late 2020s.

This has to do with people deciding to defer selling their homes, hoping to get a better price later than settling for a lower price now. “Home values in much of the country are still less than those before the Great Recession of 2007 to 2009,” he says. Prior to the recession, the typical homeowner would sell a house about every six years. “It was like clockwork,” says Nelson. “This drove a lot of planning and development projections.” “It’s not that Boomers are going to ‘age in place,’” says Nelson. “They’re going to be stuck in place.”

But they can still cash out that home equity, thanks to government policies that have re-inflated their appraised housing values. With government-backed loans that poorer, younger generations will have to pay back after they default.

https://www.washingtonpost.com/realestate/as-equity-rises-many-homeowners-use-refinancings-to-free-up-cash/2017/04/11/edf83d8e-1e19-11e7-a0a7-8b2a45e3dc84_story.html?utm_term=.acf9c96c9824

Cash-out refinancings, which were wildly popular during the housing boom years and which contributed to the severity of the crash, are on the rise again. National mortgage investor Freddie Mac reports that 45 percent of all home-loan refinancings in the final three months of last year involved cash-outs. That was the highest percentage since the end of 2008. Black Knight Financial Services, a mortgage technology and analytics firm, says homeowners pulled $31 billion from their equity holdings in the fourth quarter of 2016 — a jump of 50 percent over the same period the year before.

In a cash-out transaction, borrowers come away with a new mortgage that is larger than the one being replaced. The borrowers pocket the difference between the old balance and the new mortgage amount and can spend it on anything they choose. In a simplified example, you could refinance a loan with a $250,000 balance, replace it with a $300,000 mortgage and walk away with $50,000, not counting transaction costs.

To allow this party to resume, think about what younger generations are being saddled with. Bid the price of housing up until to become a homeowner you have to pay up to 45 percent of your income for debt. But you are also expected to save 20 percent of your income if you are younger, because you have “time to adjust” to Social Security and Medicare not being there for you. Meanwhile your state and local taxes are increasing, and your public services being cut, to pay for retroactively enriched and underfunded public employee pensions.

And their incomes are lower, as this recent Census Bureau report shows.

https://www.census.gov/content/dam/Census/library/publications/2017/demo/p20-579.pdf

Note Table 2, which compared those who were age 25 to 34 in 1975 (those born between 1941 and 1950, who came of age in the 1960s) with those who were age 25 to 34 in 2016 (those born between 1982 and 1991, who came of age in the past decade).

Today’s young adults are better educated, with 37.0% having a college degree or more compared with 22.8% for the Woodstock generation, and just 8.5% being high school dropouts compared with 17.6% back in 1975.   And today’s young adults are working harder, with 77.0% employed vs. 68.0% for the Woodstock Generation, and 57.3% employed full-time year-round compared with just 46.0%.

And yet despite this, when the Woodstock generation was in young adulthood they had a median personal income of $36,858 in today’s money, compared with just $34,837 for today’s 25 to 34 year olds, a decrease of 5.5%.   Poorer than today’s younger retirees and near retirees had been in young adulthood 40 years ago. People say Americans are upset about stagnating income and pay over the past decade. This isn’t stagnating, its falling, and it isn’t the past decade, it’s the past 40 years.

Worse, the two years are radically different, with 1975 the worst recession year of the 1970s, and 2016 about as good as it gets in the “new normal” younger generations are facing. If similar economically years were compared, today’s young adults would be found to be much more than 5.5% worse off than the young adults of 40 years ago.

The Bureau’s headline is that while men are becoming worse off, women have made economic progress, but that female progress is less than the decline of male incomes, leading to lower income for the average person and the average couple. Moreover, in 1975 women’s incomes were depressed by lower educational attainment and discrimination, so some of that “progress” was just catching up. And with most of the catching up done with, women’s earnings have also begun to fall over the past decade, as I showed here.

chart-5

Even as today’s young try to adjust to their diminished circumstances older generations, in control of the government, make it harder for them. For example young people try to save money by not buying cars, and have flocked to mass transit and bicycles. But even as transit ridership soared, transit service has been cut and is starting to collapse, all over the country, due to deferred maintenance and the cost of past debts and pensions. And now the Republicans want to slash federal transit funding to zero while continuing to spend on the cars that older generations prefer, and can afford.

http://usa.streetsblog.org/2017/04/03/the-gop-case-for-cutting-federal-transit-funding-isnt-principled-its-tribalism/

With Republicans controlling Washington, the Heritage Foundation’s dream of slashing federal funds for transit, but not highways, is dangerously close to becoming real policy. Trump’s budget outline calls for a system in which the feds don’t pay for transit expansion and instead “transit projects would be funded by the localities that use and benefit from these localized projects.” Meanwhile, the federal government would continue to cover at least 80 percent of the cost of many highway expansions.

The insistence that transit is a local priority while highways are a national concern has become an article of faith in the world of right-wing think tanks. But today highway spending mostly serves the same type of trips that Republicans purportedly believe are inappropriate for federal funding.

Therefore

The GOP Case for Cutting Federal Transit Funding Isn’t Principled — It’s Tribalism

That’s a Republican thing. But take a look at the age group of the local politicians and community board members in New York City who fight against improvements for the younger generations riding bicycles. It’s the same tribalism. Older generations who shifted burdens to younger generations also somehow believing they still have the right to make decisions for them. This is the same it’s my world and you are just living in it attitude that Generation Greed has exhibited since the “youth power” days of the 1960s.

While the Census Bureau report focused on young adults, moreover, things aren’t any better in the wake of Generation Greed at other points in life. The Woodstock Generation was at age 35 to 44 in 1985, and I’m willing to bet that their median personal income back then (adjusted for inflation) was higher than it is for those who are ages 35 to 44 today. The Woodstock Generation was age 45 to 54 in 1995, and I’m willing to bet that their median personal income back then (adjusted for inflation) was higher than it is for those who are ages 45 to 54 today. Those born between 1930 and 1940 were was well off or better, an those born between 1950 and 1957 were nearly was well off, but those born afterward have been poorer at each point in their lives.

The young may be poorer, but youth provides other advantages that can cover up economic and social disadvantages. The falling standard of living has really hit home for those in my generation that are approaching old age, and it will be as bad or worse for those to follow. I’ve been seeing data like this, showing each generation worse off than the one before at each phase of life, for decades. Economists and politicians, pandering to Generation Greed, have always dismissed it or tried to explain it away. But how can you explain away falling life expectancy and a rising death rate?

http://www.vox.com/science-and-health/2017/3/23/14988084/white-middle-class-dying-faster-explained-case-deaton

In 2015, a blockbuster study came to a surprising conclusion: Middle-aged white Americans are dying younger for the first time in decades, despite positive life expectancy trends in other wealthy countries and other segments of the US population.   The research, by Princeton University’s Anne Case and Angus Deaton, highlighted the links between economic struggles, suicides, and alcohol and drug overdoses. Since then, Case and Deaton have been working to more fully explain their findings.

They’ve now come to a compelling conclusion: It’s complicated. There’s no single reason for this disturbing increase in the mortality rate, but a toxic cocktail of factors.   In a new 60-page paper, “Mortality and morbidity in the 21st Century,” out in draft form in the Brookings Papers on Economic Activity Thursday, the researchers weave a narrative of “cumulative disadvantage” over a lifetime for white people ages 45 through 54, particularly those with low levels of education.

Along with worsening job prospects over the past several decades, this group has seen their chances of a stable marriage and family decline, along with their overall health. To manage their despair about the gap between their hopes and what’s come of their lives, they’ve often turned to drugs, alcohol, and suicide.

Meanwhile, gains in fighting heart disease have stalled, and rates of obesity and diabetes have ploddingly climbed.

The crisis is particularly acute among middle-aged whites. “The deaths of despair come from a long-standing process of cumulative disadvantage for those with less than a college degree,” Case and Deaton write. “The story is rooted in the labor market, but involves many aspects of life, including health in childhood, marriage, child rearing, and religion.”

In an interview, Deaton explained, “The cohort that entered the labor market in the ’70s on down, their jobs earnings and prospects are worse. That affected their marriage prospects. Marriages got screwed up. They had children out of wedlock. Their pain levels [are] going up.” All that contributes to the deaths of despair.

http://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair

Angus Deaton: Mortality rates have been going down forever. There’s been a huge increase in life expectancy and reduction in mortality over 100 years or more, and then for all of this to suddenly go into reverse [for whites ages 45 to 54], we thought it must be wrong. We spent weeks checking out numbers because we just couldn’t believe that this could have happened, or that if it had, someone else must have already noticed. It seems like we were right and that no one else had picked it up.

Deaton: We’re thinking of this in terms of something that’s been going on for a long time, something that’s emerged as the iceberg has risen out of the water. We think of this as part of the decline of the white working class. If you go back to the early ’70s when you had the so-called blue-collar aristocrats, those jobs have slowly crumbled away and many more men are finding themselves in a much more hostile labor market with lower wages, lower quality and less permanent jobs. That’s made it harder for them to get married. They don’t get to know their own kids. There’s a lot of social dysfunction building up over time. There’s a sense that these people have lost this sense of status and belonging. And these are classic preconditions for suicide.

Case: The rates of suicide are much higher among men [than women]. And drug overdoses and alcohol-related liver death are higher among men, too. But the [mortality] trends are identical for men and women with a high school degree or less. So we think of this as people, either quickly with a gun or slowly with drugs and alcohol, are killing themselves. Under that body count there’s a lot of social dysfunction that we think ultimately we may be able to pin to poor job prospects over the life course.

Case: There’s not a part of the country that has not been touched by this. We like to make the comparison between Nevada and Utah to look at the extent to which good health behaviors lead to longer life. Two-thirds of Utahans are Mormons. They don’t drink, they don’t smoke and they don’t drink tea or coffee. Two-thirds of Nevadans live in Las Vegas/Paradise, where there is a little more of everything, so the heart disease mortality rates are twice as high in Nevada as they are in Utah. But both states are [in the] top 10 for deaths of despair. Utah has had a terrifically hard time dealing with the opioid crisis, and suicide rates [are] going up as well. There’s a lot of surprise here in parts of the country that we weren’t really expecting to see.

The only states where life expectancy isn’t falling (yet)? New York, New Jersey, and California. Perhaps because these states are filling up with people from elsewhere, immigrants and young people from elsewhere in the country who still have some hope for their futures – if they can move away. That these states have not yet experienced the worst of it may be why this reality was so slow to hit the media, so hidden in American culture.

https://www.bloomberg.com/news/articles/2017-04-24/the-rich-are-living-longer-and-taking-more-from-taxpayers

Age 100 is now an imaginable goal for young people around the world with good health care. The average woman in Japan is already living to 87. Yet many Americans are dying younger and younger. Based on the latest year of data, the Society of Actuaries last fall dropped its life expectancy estimates for 65-year-olds in the U.S. by six months. The health of middle-aged non-Hispanic white Americans is deteriorating fastest.

The result of these trends, according to a new study, is a widening gap between wealthier and poorer Americans. The richest people in the U.S. aren’t just getting several years of extra life, they’re also reaping a financial reward for their longevity – courtesy of the U.S. taxpayer. These trends will be crucial as the new administration and Congress consider any changes to Social Security, Medicare, and other programs. Even tweaks to these programs, from the retirement age to benefit formulas, could affect the rich and poor very differently.

Life expectancy is also rising for older cohorts of richly pensioned public employees, adding to the need for higher state and local taxes and public service cuts for less well off taxpayers.

The results are stark. In 1980, a 50-year-old man in the wealthiest fifth of the income distribution could expect to live five years longer than a 50-year-old man in the lowest-income group. By 2010, the gap between them had jumped to 12.7 years. In other words, the poorest fifth of 50-year-old American men can now expect to live just past 76, six months shy of the previous generation. The richest 50-year-olds should make it almost to 89, seven years longer than their parents’ generation.

It is the richest and most entitled members of the richest and most entitled generations that control the federal government. All its assets and privileges would have been wiped out in a bonfire of bankruptcy in 2008 had not the federal government intervened by having its own debt soar to bail the better off out. Even as the average person has faced lower income, lower spending, and shorter lives.

DebtBySector

The total federal debt increased from 81.4% of GDP in 2015 to 84.6%            of GDP in 2016, an increase of 3.2% of GDP in just one year. This doesn’t even include all the contingent liabilities younger generations may have to pay, as older generations default on mortgages backed by federal guarantees and agencies such as the Pension Benefit Guarantee Corporation become insolvent. As for the economic future, what happens when more and more of the taxes future workers pay goes out of the country rather than being spent and creating jobs here?

https://www.bloomberg.com/news/articles/2017-04-09/a-foreign-threat-to-u-s-treasuries-that-dwarfs-fed-s-debt-hoard

Foreigners currently own 43 percent of the $13.9 trillion Treasury market. With the Trump administration’s pro-growth agenda likely to swell the public debt burden in coming years, they’ll be crucial in helping hold down long-term borrowing costs as the Fed raises interest rates.

Excluding the U.S., yields in developed nations average just 0.51 percent. About $6.8 trillion (or almost 30 percent) of the securities in the developed world are still stuck in negative territory, a legacy of quantitative easing as well as a reflection of how Europe and Japan still face stronger economic headwinds.

But there’s no denying yields have drifted higher since July, when the Brexit vote pushed investors into haven assets.

“There is an under-appreciation in U.S. financial markets of the very, very significant role that rest of the world has played,” said Slok. If overseas investors retreat, “the U.S. will be hit.”

Is anyone else old enough to remember the rationalization that we shouldn’t worry about soaring federal debts, because we “owe it all to ourselves?” I Googled the phrase to see if anyone would use it now that 35 years of imports in excess of exports have left the U.S. deep in debt to the rest of the world. And to my horror, the man peddling that lie today turns out to be economist and New York Times columnist Paul Krugman.

https://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/?_r=0

No, debt does not mean that we’re stealing from future generations. Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because as Fatas puts it, one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people.

The problem with private debt is that we have good reason to believe that in very wide-open financial systems people get irrationally exuberant, lending and borrowing to an extent that they eventually realize was excessive — and that there are huge negative externalities when everyone tries to deleverage at once. This is a very big problem, but it’s not about generalized excess consumption.

And the problems with public debt are also mainly about possible instability rather than “borrowing from our children”. The rhetoric of fiscal debates has been, for the most part, nonsense.

Krugman was arguing for more public debt because a Democrat, President Obama, was in office, and he wanted more liberal federal spending. And the Republicans were using the debt as a reason to cut non-entitlement spending. But most are predicting that Republicans will suddenly decide that debt is something “we all owe to ourselves” now that there is a Republican President and the increased debt would be caused by tax cuts, not spending increases. Would Krugman feel as positive about soaring federal debt under President Trump, as a result of another round of tax cuts for the wealthy?   We don’t have to guess. We know what he said in 2003, during the debate over the last batch of tax cuts for the wealthy under President Bush.

A result of the tax-cut crusade is that there is now a fundamental mismatch between the benefits Americans expect to receive from the government and the revenues government collects. This mismatch is already having profound effects at the state and local levels: teachers and policemen are being laid off and children are being denied health insurance.

The federal government can mask its problems for a while, by running huge budget deficits, but it, too, will eventually have to decide whether to cut services or raise taxes. And we are not talking about minor policy adjustments. If taxes stay as low as they are now, government as we know it cannot be maintained. In particular, Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor.

It is this older Krugman article that contains the truth. In 2003, When debts were soaring due to tax cuts for the wealthy, Krugman worried about Social Security and Medicare. But in 2016, despite a vastly higher existing federal debt as a share of GDP, he wasn’t worried about more debt. Perhaps because most of his generation is already in the programs, and if there are steep cuts in benefits in the future as a result of soaring interest payments on debts from the past, his generation will just exempt itself from the sacrifices. Because poorer younger generations have “time to adjust.”

And now round three of what Krugman described as the “tax cut con,” tax cuts that don’t cost anything because they “pay for themselves” in additional growth — despite the global crisis of demand, and aging population, increased inequality — and growing oligopoly.

http://www.economist.com/news/special-report/21707048-small-group-giant-companiessome-old-some-neware-once-again-dominating-global

The share of nominal GDP generated by the Fortune 100 biggest American companies rose from about 33% of GDP in 1994 to 46% in 2013, and the Fortune 100’s share of the revenues generated by the Fortune 500 went up from 57% to 63% over the same period. The number of listed companies in America nearly halved between 1997 and 2013, from 6,797 to 3,485, according to Gustavo Grullon of Rice University and two colleagues, reflecting the trend towards consolidation and growing size. Sales by the median listed public company are almost three times as big as they were 20 years ago. Profit margins have increased in direct proportion to the concentration of the market. Startups, meanwhile, have found it harder to get off the ground.

“New” big companies are becoming more like the corporations of yore. High-tech companies often give senior jobs to former Washington insiders and employ armies of lobbyists. Many modern superstar companies park their money in offshore hideaways and devote considerable efforts to keeping down their tax bills. Superstar companies tend to excel at everything they do—including squeezing as much as they can out of government while paying the lowest possible taxes.

They also prop up prices and keep down wages by reducing competition, and limit innovation, so economic growth has slowed. Non-financial business debt continues to soar as a percent of GDP, rising from 69.2% of GDP in 2015 to 71.5% of GDP in 2016, but monopolies and oligopolies cash cow the economy rather than innovate and invest. Rising debts have been used for mergers and buybacks, the latter of offset by stock grants to top executives. And giving companies and and the wealthy executives who control them tax breaks won’t change that.  Why invest when your customers are going broke?

https://www.bloomberg.com/politics/articles/2017-04-22/mnuchin-says-faster-growth-will-offset-cost-of-tax-overhaul

The Trump administration’s tax proposal may inflict a short-term hit to revenue but will cover the gap by boosting economic growth over the next decade, Treasury Secretary Steven Mnuchin said.

Obstacles to winning congressional approval of a sweeping tax-code rewrite loom large. The president last month failed to convince his own party to repeal and replace the 2010 Affordable Care Act, while Republicans and businesses are divided about House Speaker Paul Ryan’s border-adjustment tax proposal. The plan, which would boost revenue by taxing companies’ domestic sales and imports, will be left out of Trump’s proposal, a senior administration official said.

It was supposed to provide the revenues to offset the tax cuts, but now they’ll just repeat what proved to be lies after the Reagan tax cuts and Bush II tax cuts instead. The same lies three times, even after debt soared robbing younger generations of their tax dollars twice already! They don’t even feel the need to come up with new ones!

Administration officials for months have been meeting with business and Wall Street executives as well as lawmakers to craft the plan, though they have provided limited details.

The Treasury Department is analyzing static scoring, which looks at changes of policies based on the assumption of no growth impact, and dynamic scoring, where growth assumptions are included. “Under dynamic scoring, this will pay for itself. Under static scoring, there will be short-term issues,” Mnuchin said.

So all this deception, all these benefits for the rich the powerful that are somehow sold as costing nothing for anyone else, all these lies, come from the Republicans, the rich, the Tea Party, and Wall Street? Generation Greed Democrats and their backers, the public employee unions, would never tell a lie like this one to take more for themselves at the expense of the less well off generations to follow, would they?

Under the changes to the pension plan announced yesterday, there would be a six-month window within which teachers who agree to increase their pension contributions by 1.85 percent of their salaries, will be able to retire at age 55 with full pension benefits as long as they have 25 years of service.   Currently, most teachers need 30 years of service to retire with full pension benefits at age 55…Mr. Bloomberg said the changes would be “cost neutral” to the city for the first five years and would save ‘in the tens of millions of dollars’ in following years. City officials say that is partly because highly paid retirees will be replaced by younger, less costly teachers.

These teachers were originally promised retirement at age 62 after 30 years of work, but as part of the deal passed in 2008 they were able to retire without penalty – in some cases immediately without putting in an extra dime – at age 55 after 25 years of work.   With, in addition to years more of pension benefits, ten years of retiree health insurance at an estimated cost of $17,000 per year before Medicare picks up most of the tab, rather than three. How could Generation Greed make the claim that a deal like this “cost nothing” or saved money?

A bill offering thousands of additional city workers early retirement has been gaining support in the Legislature in recent weeks. New York City officials have protested, saying it would cost the city $200 million annually.

Not so, lawmakers countered. It won’t cost a cent, they said, pointing to the review of a highly credentialed actuary to prove it.

But what the legislators did not disclose, as they cited the expert analysis of the actuary, Jonathan Schwartz, was that Mr. Schwartz had not been paid by the state to conduct his analysis. His work was bankrolled by unions, including District Council 37, the umbrella group of municipal unions that drafted the early retirement bill, which is now moving through the Legislature.

Lawmakers have cited Mr. Schwartz’s analysis on hundreds of bills in recent years, with billions of dollars worth of potential costs. His projections were used to fulfill a legal requirement that every piece of legislation be accompanied by a “fiscal note” that examines its impact on spending. Mr. Schwartz’s consultant work for the unions was discovered during a review of Department of Labor documents by The New York Times this week.

Mr. Schwartz, a former city actuary, said that he routinely skewed his projections to favor the unions — he called his job “a step above voodoo” — and admitted that he had knowingly overreached on the pension bill by claiming that it cost nothing, either now or in future years. “I got a little bit carried away in my formulation,” he explained.

Lies and deceit, all to benefit the richest and most entitled generations in American history at the expense of the poorer generations to follow. That bitter partisan divide? It’s about the division of the spoils, and the passion of politics is nothing more than a search for rationalizations, someone else to blame for the consequences of 35 years of generational self-dealing by those who are pillaging our public and private institutions to this day.

http://www.economist.com/blogs/democracyinamerica/2017/04/not-going-gentle

In the aftermath of the 2016 presidential election, much blame was heaped on social media for fuelling partisan rancour. Even Mark Zuckerburg, the boss of Facebook, considered the idea that social media may have enabled the spread of “fake news” and helped exacerbate political polarisation. But recent analysis suggests that the part of the electorate that has become more polarised is not one commonly associated with social media platforms, but old people. And social media may provide a partial solution.

Social media use is concentrated amongst young people—around four out of five adults under the age of 40 used applications like Facebook and Twitter in 2012 compared to one in five of those above 65. The polarisation problem is concentrated amongst older voters. For adults under the age of 40, there is very little evidence of growing polarisation between 1996 and 2012 while there is a dramatic increase amongst those 75 and older. The polarisation amongst the old will have been skewed towards the right: 55% of voters above the age of 65 voted for Donald Trump compared to 31% of those aged 18 to 29.

Between 2010 and 2050, the proportion of America’s population that is over 65 will increase from 13% to 21%. That will leave the whole country looking like Florida does today. And it will have a dramatic impact on health-care costs, social security spending and economic performance. Population ageing is linked to lower labour productivity and labour force participation. Nicole Maestas, Kathleen J. Mullen and David Powell, writing for the National Bureau of Economis Research, estimate that America’s annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next because of it.

And yet, older voters are likely to stand in the way of bipartisan fixes to the economic problems that an aging population helps to exacerbate. For example, older people are among the groups most opposed to health-care reform…

If younger people are to ensure that the current generation of retirees doesn’t imperil their future, they need increased political clout. And here, much-vilified social media might provide part of the answer. Voter turnout among voters aged under 30 run as much as twenty percentage points below turnout for the over-60 age group. The internet can help close that gap. Michael Xenos of the University of Wisconsin-Madison with his colleagues Ariadne Vromen and Brian Loader studied social media use across Australia, Britain and America. In all three countries they found that social media use among young people is associated with greater political engagement. Perhaps, then, Facebook can help ensure that America is still great when millennials are retiring.

Not of they have a choice of Hillary Clinton or Donald Trump for President, and no choice at all in most other political offices.   And they aren’t likely to have much clout if they can be distracted from the reality of the generational inequities foisted on them by Generation Greed.

Look at that picture. Falling incomes. Falling life expectancy. A vastly diminished old age — for those who make it there. And the sneering contempt by the generations whose privileges line up with these and other privations. When will those born after 1957 or so come to a full understanding that they have been robbed by Generation Greed, and it will get worse until they stand up, shout them down, and kick them out of every leadership position in the last? When will the non-Greedy members of Generation Greed itself look in the mirror and stand up to their contemporaries on behalf of their own children?

Generation Greed is planning one more economic orgy, and is expecting to point the finger in a circle and quietly slip away as the consequences continue to come due. If it can’t be stopped, at the very least it shouldn’t be covered up. It should be called what it is. Theirs is a poisoned legacy, and its time people started saying so, so they are forced to hear it, and face it.

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