I recently interviewed Wall Street Journal columnist Joseph Sternberg about his provocative new book, The Theft of a Decade: How the Baby Boomers Stole the Millennials’ Economic Future.
Since the 1980s, the Baby Boom generation has overseen America’s political agenda. However, Boomers will soon share their seat at the throne of public policy. The number of adult Millennials will reach 73 million this year, surpassing the number of Boomers for the first time.
Mr. Sternberg, born in 1982, is himself a Millennial. In the book, he draws on extensive research to deconstruct the economic hardships faced by his generation in the aftermath of the Great Recession. Even though their economic woes differ from those of their parents, he paints a picture to show the pain is real and will leave a lasting impression.
According to Mr. Sternberg, Millennials long to get ahead economically as their parents did at a similar age. They want to be able to buy a home, raise a family, and pay off student debt. Outside of those priorities, they are surprisingly open-minded with diverse opinions on many political issues.
Boomers’ policy interests are narrower. Mainly, they want to retire comfortably and receive benefits they’ve been promised for decades.
Can both generations get what they want? Not without serious compromises, and a better understanding of the history that got us here.
Here are highlights from my conversation with Joseph.
Michael Cannivet: What inspired you to write this book?
Joseph Sternberg: I wanted to know who was right. We have this weird phenomenon in generational discussions where Millennials and Baby Boomers talk past each other.
Millennials have a well-rehearsed list of complaints about things like the gig economy, a job market that’s never quite worked us, a housing market that’s malfunctioning, and the student debt burden.
But if you talk to Boomers about this stuff, they respond: What’s wrong with you kids? We graduated into the stagflation of the late-1970s. We had student debt. Times were difficult for us, too. You don’t know how good you have it with your smart phones, avocado toast, etc.
I was curious to get to the bottom of that debate.
Cannivet: Did you?
Sternberg: Yes, and I concluded my fellow Millennials are right—the economy has malfunctioned in a way it did not malfunction for the Boomers, as justified as some their own complaints might be. This is partly because the Great Recession was deeper and the aftermath lasted longer than anything since the Great Depression—so Millennials had to cope with a starker contraction and a much longer period of elevated unemployment than the Boomers did. And this is partly because by the time the Great Recession hit Millennials, the American economy had evolved in ways that would make it harder for younger people to cope. For instance, Millennials encountered higher unemployment and lower earnings just as some Boomers did, but for a longer time and against a backdrop of having borrowed significantly more for college on the misleading promise of higher wages.
Cannivet: You say for Millennials the current job market is essentially “the best of times and worst of times.” Can you explain why?
Sternberg: Sure, this speaks to one of these generation stereotypes that can be misleading in both directions.
On one hand, you have a stereotype that Millennials tend to be these impoverished gig workers, paying off an $80,000 English degree from Brown by working as a barista at Starbucks. That’s not a completely accurate picture.
The point I’m making is there are differences within the Millennial cohort. And many of those differences are a product of the economic malfunction that is the story I am telling in the book.
For instance, Millennials working in tech or green energy fields might be doing well because they happen to be the beneficiaries of Boomer policies that bolster those industries. At the same time, other Millennials are losing out because of Boomer policies that disadvantage other parts of the economy.
Cannivet: A challenge in writing a book like this is every generation has confirmation bias tendencies. I could see a Boomer who wants to argue some of these points saying:“The unemployment rate is 4%. What are you complaining about?”
Sternberg: That’s right.
I think it’s very misleading to look at just previous recessions. You have to look at the whole span of the cycle to truly understand why Millennials have had a hard time, and the role Boomer policies played in that.
One of the points I hammer in the book is it wasn’t just that the unemployment rate spiked in the middle of the Great Recession above 10%. It’s that it took so much longer to drift down to its current lows compared to previous cycles. That had an even more profound implication for Millennials than the severity of the recession itself.
Remember—those are the years where you had Millennials taking on debt for college, entering a tough job market, and then not being able to hop as quickly between jobs to move up the salary ladder.
Cannivet: You’re critical of monetary policy at several junctures. What role do you think that played in this recent recovery?
Sternberg: Boomers learned from the 1970s that inflation is the main problem to safeguard against. But what we’re discovering is it’s not a straight line from low rates to more investment, to productivity growth, to wage increases. In fact, I’ve been looking at some research lately that speaks to the point low rates may actually hurt productivity; Japan being a potential example.
Within the labor market, consider what type of companies benefit most from low rates. It tends to be big companies that can access bond markets to borrow, which tend to employ older employees on average. Smaller companies have often struggled to take out traditional bank loans in this environment, but those are the companies that disproportionately employ young people.
Monetary policy has profound distributional implications for your economy, going way beyond the creditors-versus-debtors issue we think about most often. People need to be aware of what those trade-offs are.
Cannivet: Fair to say you are in favor of deregulation and lower taxes as ways to boost productivity?
Sternberg: Sure, there’s a supply-sider element to this argument. There’s also one thing I want to modulate on the tax issue, though.
It’s true that in the 1980s tax cuts were important. But that’s kind of burned itself out now. American tax rates are already low compared to the rest of the developed world, especially after the 2017 tax reform.
There’s still a big discussion to be had beyond the marginal tax rates. That involves how bad incentives can get built into the tax code. Like incentives that favor the accumulation of debt over equity, which can have profound but subtle implications for the kinds of investments that get made and the kinds of jobs those investments create.
Cannivet: Speaking of debt, Bernie Sanders is a politician many Millennials are drawn to. What do you think of his proposal to wipe out college debt?
Sternberg: I find a lot of the debt forgiveness talk fascinating.
Bernie and Elizabeth Warren have come up with the most flamboyant debt forgiveness plans, and they will tell you they can pay for it by taxing the rich. With Bernie it’s a financial transaction tax. With Warren it’s a wealth tax.
The experience in Europe, though, is there’s never enough money among the rich to do that. The only way that has ever been available to Europeans to fund these entitlement programs is by taxing the middle class. That means a lot of Millennials just clawing their way into the middle class are going to discover: Oops, it turns out we’re responsible for paying these bills, too.
There’s a maddening aspect to this student loan forgiveness debate, which is these older politicians are trying to give gifts to Millennials with Millennials’ own money.
Cannivet: You write about how from the time of Alexander Hamilton onward, fiscal deficits were mostly viewed as an emergency measure reserved for things like wars. Why do Boomers view the idea of perpetual deficits so differently?
Sternberg: Anecdotally, I think there are two reasons for that.
The first reason, surprisingly enough, is the Boomers were not themselves responsible for this shift in how we think about the role of government. Remember it was their parents and grandparents who created Social Security in the 1930s, then Medicare and Medicaid as part of the Great Society. So the Boomers grew up assuming the government would naturally take on these social insurance functions.
While they did not create the problem, the Boomers didn’t help the situation when they expanded some of these programs—like the disastrous Medicare prescription drug benefit that came on in the early 2000s. Their main error was not reforming these programs, because it’s obvious the numbers don’t work.
The second reason I think Boomers don’t seem to understand what has happened here is because, to a surprising degree, they think they have actually paid for these programs.
Whenever I write about Social Security or Medicare having unfunded liabilities, I get angry mail from people telling me, “I paid payroll tax into that system, so these benefits belong to me.”
It’s enormously successful marketing on the part of the people who design the programs. They send out these misleading statements each year about what is in your Social Security account. It’s created an impression among Boomers they earned these benefits. They don’t understand that on average they will take significantly more out of these programs than they ever paid in during their working lives, and that the burden of making up the difference is going to fall on their children.
Cannivet: Does this all add up to an eventual generational clash on budgetary issues?
Sternberg: One of the headlines from the 2018 midterms was that Millennials are starting to get elected into important political positions. On the left, we have Alexandria Ocasio-Cortez in the House of Representatives. On the right, we have people like Wisconsin’s Mike Gallagher.
The oldest Millennials are older than most people think we are; we’re going to be pushing 40 soon. We’re at that point in our lifecycle where we’re getting more engaged in politics. And you ask yourself: If we’re getting elected to Congress, what is the greatest power Congress has? It’s the power of the purse.
And yet these Millennial lawmakers we are electing find themselves in a position where a huge share of federal spending each year is supposed to happen on autopilot. And more and more money will go on autopilot to fund programs that are going to benefit aging, retiring Baby Boomers. I think there’s a fairness issue to consider, because these entitlement programs are going to limit the ability for Millennials to implement our own policy priorities.
I personally think something like the Green New Deal is a terrible idea. The reality is I might lose that fight. It’s possible that Millennials, in their wisdom or otherwise, will decide at the ballot box that the Green New Deal is a priority. We still won’t be able to do it, though, if we haven’t done entitlement reform first. That’s necessary to free up the money for us to have the same kind of political choices the Boomers exercised when they were in office.
Cannivet: Do you think the ultimate solution will have to involve cutting benefits as part of a necessary compromise between the two generations?
Sternberg: It’s a discussion that’s going to have to happen. And I think the Boomers are in real danger of regretting all the opportunities that they missed to reform these entitlement programs on their terms.
There have been numerous discussions over the years about various ways one could tweak the programs. There were the Bush Era efforts to reform Social Security. And there’s been occasional talk about means testing benefits to avoid draining the coffers.
Boomers always shot those ideas down because they thought they had created an environment where everyone believed that entitlement reform was the political third rail, and that the generations after them would be equally afraid of touching it. Eventually, you run into a reality constraint where if Millennials can’t pay these bills, we won’t.
Cannivet: That’s a pretty simple way of framing it.
Sternberg: This is the story of several canaries in the coalmine I point to in the book, at the state and local level. Places like Detroit discovered that after you reach a point where you’re bankrupt and must make cuts somewhere, everything comes back on the table.
So, I do think Boomers are going to regret those missed opportunities. They’re going to realize that the options were not reform then or draw down all these benefits. The options were reform then on their terms, or reform at some point in the future on Millennials’ terms.
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