A Generation of Sociopaths: How the Baby Boomers Betrayed America

by Bruce Cannon Gibney

The sociopathic consequences are made clear by the reallocation of financial burdens to everyone else: other payers of present-day taxes and future payers in the form of debt, piled up after decades of unrestrained spending not accompanied by corresponding tax collections.

Taxes started low and then rose substantially over the next thirty years. After World War II, the highest maximum rates reached 70–91 percent.

levels that prevailed under ur-Republicans Eisenhower and Nixon (both implicitly branded by Norquist as “socialists”)—the

Indeed, taxes are too low overall, insufficient to keep the government fully functioning or make essential investments for growth, at least not without major revisions to entitlement programs of which Boomers are and will continue to be the chief beneficiaries.

that means the history of Boomer tax policy is not so much a history of tax reduction as tax reallocation.

their dependence on magical thinking and moody hatred of rational argument, combined with the sheer complexity of the tax code, makes it difficult to engage with them on the subject.

The chief beneficiaries would be, of course, the Boomers—and the reason the estate tax cut could be safely delayed until 1987 (unlike reductions to the income tax, which had to be immediate) was that the Boomers’ parents still had a few years left in them.

Congress also raised payroll taxes—the only taxes to experience sustained increases during the Boomer ascendancy—to keep Social Security and Medicare solvent through Boomer retirements.

In their peak earning years and with retirement fast approaching, it was essential to lower income taxes and to cut capital gains taxes to fertilize stock portfolios that would soon be harvested.

There were two other disguised tax giveaways to the Boomers from the 1970s to the 2010s: property taxes and corporate taxes.

Effective corporate taxes rose briefly and sharply from 1979 to 1987 and then fell substantially.

As the Boomers joined the stock-owning classes in the mid-1980s, when most were in their thirties and forties, effective corporate taxes began to decline.

Returning to Grover Norquist, the purpose of the tax revolt was to starve the government of revenue so that it would shrink back to its size around the turn of the last century, making government small enough “to drown it in a bathtub.”

There has been a pronounced downward trend in tax burden on the middle class, especially relative to the rich and the poor, with taxes perking up slightly since 2013.

More precisely, most Americans pay less in federal taxes than they earn as a fraction of total income.

Because so much of government revenue after the 1980s is accounted for by levies for senior programs and distributed accordingly, and because those programs are not fully funded, the burden has been shifted away from the middle class and old and toward everyone else—i.e., away from the mainstream Boomers.

Answer four is that tax burdens were reallocated substantially, away from the Boomers toward almost everyone else—i.e., the Boomers paid less, and everyone else paid more, and this accounts for both the relative stability of the tax take over time,

The middle-class Boomers faced lower tax burdens during their prime earning years relative to the middle class of the 1940s–1970s and throughout, the middle class didn’t pay as much in federal taxes as it earned as a share of national income.

The nation has not, with (no) due respect to Greenspan, responded to lower taxes with fiscal restraint.

The government continues to spend at a fairly stable (and substantial) rate, and the resulting deficits...

CHAPTER NINE DEBT AND DEFICITS

The Treasury records that in 1835, the national debt had fallen to just $33,733.05, within spitting distance of zero.

That the United States has had an essentially perpetual debt without going off the rails shows that the mere existence of some national debt is neither unusual nor, absent other factors, does it pose an existential threat.

now stands at the highest sustained level save World War II, and, per the Congressional Budget Office (CBO), will without correction exceed even that exceptional threshold during the 2030s.5 The CBO is perhaps being too forgiving—the record will probably be broken noticeably earlier.

The United States presently borrows quite cheaply. Again, the debt is quite large and readily manageable only for reasons that may be transient.

Thomas Jefferson argued that passing on a debt to future generations (ahem) was immoral and that setting debt limits was a matter defined in generational terms.

Many of Jefferson’s letters focus on the immorality of passing on debt from one generation to another.

Once the market believed the monarchy couldn’t pay, creditors ceased to provide terms, taxpayers refused to remit, and the government, starved of funds, collapsed.

Meanwhile, Japan experienced no crisis despite having debt-to-GDP ratios significantly higher than pre-crisis Greece; China, too, had very high levels of aggregate debt and no crisis.

dysfunction was a twinned inability to generate tax revenue and to reform its overgenerous entitlement system—a situation well underway in the United States.

However, since 1980 the United States has been committed to a combination of stable-to-lower taxes and ever-higher spending, even as growth has decelerated, and this has led to much larger deficits and a growing national debt.

Total government debt has increased to levels not seen since World War II, and given projected deficits of ~3 percent indefinitely, will surpass those historic levels within two decades and perhaps considerably sooner than that.

The debt began really growing in the 1980s, substantially the product of tax cuts whose goal was to “starve the beast”—the beast being the government generally and its social welfare system in particular.

Moreover, Reagan hugely increased defense spending (feeding the beast) while endorsing the implausible Laffer Curve, which said that the tax cuts would pay for themselves (making the beast’s food free, presumably).

As a result, the United States now has its largest peacetime debt, one that it will grow substantially, gross and as a percentage of GDP, for the foreseeable future.

The vast expansion of state debt occurred during Boomer tenure (recall they have been resident in governor’s mansions for some time and controlled 86 percent of them in 2016).

Although total debt is substantial, its burden and sustainability are a function of interest rates, because in normal times, interest is the only component of debt the government is functionally called upon to pay.

After all, it is the bond market—the collection of all buyers, individuals, banks, other nations, etc.—that supplies money in the first place.

Vigilante justice is inflicted through higher interest rates, and this requires a quick refresher on bonds.

Faced with a bond-market revolt, the government ends up paying more to borrow until it rebalances its books more to the market’s taste.

Input: credibility. Output: effective interest rates. “Credibility” and “credit” have related etymologies and related effects.

perceived as somewhat safer/less dysfunctional than almost every other major economy,

This is partly why after 2008, despite a gigantic American financial crisis and ballooning deficits, the dollar rose and interest rates fell;

Basically, extraordinary circumstances allow the United States to borrow essentially for free, a situation that will almost certainly change over the very long term.

The problem with government debt comes from the fact that even though the debt is perpetual, the means of financing it are not.

a substantial chunk of the federal debt can come up for refinancing at new rates—think of it as an adjustable-rate mortgage with a potential balloon payment, and you can guess who will be responsible for the balloon part when the bond market decides it’s had enough.

A 2.5 percent gross increase in interest costs would almost double the annual budget deficit, and ceteris paribus, this could spark a vicious cycle where higher interest costs spawn larger deficits, greater concern about fiscal integrity, further rate increases, and so on.

A return to higher rates could happen relatively suddenly; the bond market is quirky and run by mercurial humans and, increasingly, by inscrutable machines whose processes aren’t necessarily transparent to their masters.

but they will rise—unless the United States remains mired in permanent stagnation, which will make the debt harder to service in other ways.

In ordinary times, the bond market has more power than the government; in extraordinary times, the government can exercise vastly more power than the bond market.