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January 13, 1998

Golden Years for Baby Boomers: America in the Next Century

by Konrad M. Kressley

This is the fourth installment in a series of articles about the future. Previous segments covered general concepts and theories of determining what lies ahead. We now turn our attention to prospects for America in the early decades of the third millennium. We will focus on the maturing Baby Boom generation, whose fate is inextricably tied to all other forecasts for that period.

America Grows Old

According to the Census Bureau, America's population growth is slowing down from year to year. At the end of the 20th century, our population is hovering at roughly 265 million, with a one percent growth rate each year. Immigration from abroad currently is the single largest source of additional people. This is in sharp contrast to earlier periods of our history, such as the colonial and frontier period, when population growth skyrocketed due to high birth rates and successive waves of immigrants. Actually, modest growth or stagnation of population size is common to most industrialized countries, while population continues to rise in the Third World. The populations of some countries in Northern Europe are actually declining at this time.

While the total U.S. population is stabilizing, dramatic changes are evolving in the age composition. Most notably, we are experiencing a "graying" of the population. Historians tell us that America was once a country of young people, and that the average life span in colonial times scarcely exceeded the mid-thirties. Only the lucky few could expect to reach the mid and late seventies, which represent today's average. The immigrants, too, were overwhelmingly young people, which further enhanced the nation's youthful image in the past.

The Baby Boomers

All long-term trends are marked by periodic deviations. The so-called Baby- Boom created a youth wave in the middle of the twentieth century and will magnify the proportion of elderly in the early part of the next century. Population experts trace the Baby Boom to the end of the Second World War when returning GIs entered the labor force and founded families with vigor. It was a time of incredible optimism and expansion in both human and economic terms. This period of high birth rates began in 1946 and continued until roughly 1964, when it is said the invention of birth-control pills allowed folks to put a brake on their rate of reproduction. Economic downturns and a more pessimistic outlook in subsequent decades explain why parents have chosen to bring fewer children into the world since then.

Even though the Baby Boom lasted less than two decades, those born during that period constitute roughly a third of the total U.S. population in the late nineties. Compared to the rest of the population, their collective life journey has been likened to a pig slowly inching through the digestive canal of a python, successively challenging all social and economic institutions along the way. At first, there was a crunch at hospital maternity wards, and then schools, colleges, the job market and housing felt the pressure. Their dominating influence shaped the youth and "yuppie" cultures. The first Boomers reached age 50, or mid life, in 1996. They will soon command the aging agenda as they prepare for retirement in 2010 through 2030.

Even though the Boomers grew up in a period of relative peace and prosperity, their sheer numbers created fierce competition in education and the job market, while driving up real estate prices once they reached nesting age. By the same token, as Boomers passed through successive stages of the life cycle, shortages turned into surpluses. The collapse of the real estate market in the late eighties is a case in point. Now, looking to the future, we can expect rising demand for retirement housing, elder care and, finally, the funeral industry as the Boomers take leave of this world in the 2030s.

While fortyish Boomers currently hold the center stage in terms of wealth, social and political power, the successor generations need to be considered as well. Folks in their twenties have been labeled "Baby Busters" and "Generation X." These Baby-Boom offspring face both advantages and hardships in the future. On one hand, competition in the education system is not quite so stiff; on the other hand, collectively they will be hard pressed to pay for the retirement benefits of the immense Boomer generation that preceded them. This issue of "dependency," which links the generations, will be discussed later. Suffice it to say here that some analysts predict a generational war over this issue early in the 21st century.

Using information currently available, forecasters have been able to create a fairly good picture of what the elderly Boomers will be like, and some of that picture is surprising. To begin with, the definition of "old age" will have changed. Sixty-five years constituted the average male life span during the thirties, and was arbitrarily chosen as the moment when a person became classified as elderly. It marked a person's exit from the work force and signaled eligibility for pensions, Social Security, tax relief, etc. While the magic number 65 still exists, life spans have advanced and will continue to do so. Currently, the number of the "old-old," those over 85, is growing rapidly, and centenarians are no longer rarities. The Census Bureau estimates that America will have approximately 100,000 individuals aged 100 and above by the year 2000, with a massive expansion of this age group in the decades to follow. Medical specialists on aging estimate that normal human life spans may well reach into the one-hundred-teens in the next century.

Collectively, the number of elderly in American society has been doubling every thirty years since 1900. Thus, in 1990 there were 20 elders for every 100 working age adults; in 2025 the proportion of elderly will rise to 32 per 100. Ultimately, the Baby Boomers will depart, and the percentage of young people will rise by the middle of the next century. There was some speculation that the Boomers' children would repeat the cycle, but the "echo" phenomenon is very faint. In the long term, demographers predict that people will be distributed almost equally across the age spectrum.

Of course, numbers don't tell the whole story. For one thing, the entire future population, including the elderly, will be much more diverse than their counterparts of today. We've always thought of America as a country dominated by people from North European stock, with a smattering of other races. While African-Americans constituted the largest minority group for most of our history, Hispanic and Asian immigrants are now quickly catching up. Considering their higher birth rates, the Census Bureau calculates that non-Hispanic Whites, today's majority, will constitute only half of the country's population by 2050. It has already happened in Hawaii and New Mexico, where no single group is in the majority. California, our most populous state, will be in the same situation around the year 2000. Visit Miami, San Francisco or San Antonio to get an impression of our population in the next century. Since the relation between ethnicity and socioeconomic status still persists, a disproportionate number of well-to-do elder whites will be juxtaposed with a growing number of relatively deprived young Hispanics and African Americans in the next century. The more pessimistic forecasters see the seeds of social conflict in this equation.

The future elderly also challenge other common preconceptions. It is true that people become increasingly frail and require care as the years advance. Yet, current evidence proves that physical decline can be delayed and that we can enjoy robust health and lead rich, fulfilling lives long beyond the dictates of conventional wisdom. Dr. Charles Longino, a noted gerontologist, exposed "Myths of Aging" by citing the Baby Boomers' healthier life styles: falling rates of cigarette smoking, reduced-fat diets, exercise programs, and environmental awareness have already cut into disease and disability rates.

Compared to those before them, the next generation of elderly will not only be healthier, but also much better educated and informed. When combined with their numbers, this capacity will give them unprecedented organizational and political clout to advance their agenda. Recent events in Florida politics offer an instructive leading indicator: Elder power has slowed spending programs for children, while a new state agency was created to represent the needs and concerns of older citizens.

Economic Prospects for Baby Boomers' Golden Years

America is a wealthy, powerful country and will no doubt remain so for a number of centuries. We have ample natural resources, bountiful arable land, high levels of technology and a dynamic population. Nevertheless, our economy has been slowing down. During the frontier period of the 1800s, economic growth rates, measured in GNP, exceeded 10 percent annually. Current rates hover around 2 percent, and only the most optimistic economists predict a return to the heady 4 percent rates of the booming 1960s. Eventual economic slowdown is a common feature of all mature industrial societies, where diminishing returns in productivity and saturation of capacities has taken place. Eventually the booming economies in the newly industrialized Pacific rim countries must follow the same pattern. Looking ahead, economic forecasters consider the interaction of several key factors that will shape our economy in the next century. One of these is the burden of personal and public debt accumulated in the latter half of the 20th century. Future obligations, particularly society's responsibility to support elder-care entitlements for numerous Baby Boomers, figure prominently here.

What dirty little secret is shared by an increasing number of our relatives, friends and neighbors? You guessed it: maxed-out credit cards and the prospect of dates with the bankruptcy court. Although folks have had credit problems since the invention of money, the current era is witnessing unprecedented levels of default. While it's easy to scold individuals for overspending, remember that the corporate world and our government share the same basic problem. Why? While mainstream economists predict declining future growth, our historical tradition still assumes that each generation will be more prosperous than its predecessors. A common theme in American family histories seems to be how the struggle and sacrifices of grandparents culminated in the prosperity of their descendants. This is the essence of the "American Dream." So how can we cope with the prospects of a less abundant future? In recent years, the answer was borrowing money to satisfy material expectations. Credit, after all, had made sense in an expanding economy when the means for repayment were just around the corner. Individuals, corporations and government operated under this philosophy.

The really big credit binge began sometime in the late sixties and early seventies. Banks and credit-card issuers learned that they could earn phenomenal profits on interest charges of unpaid balances, goading consumers to max out their credit line. The frightening increase in consumer debt is a familiar tale and need not be retold here. In the same way, the corporate merger and acquisition frenzy of the eighties was financed with borrowed money; the melt-down of the Savings and Loan industry turned out to be one of the most frightening examples of reckless borrowing and speculation in the annals of business history. Finally, there is government, the ultimate lender and borrower in our society. Its problem has not differed much from the consumer piling up credit card debt. We, the citizens, have had a voracious appetite for government benefits and services but are reluctant to pay the necessary taxes. Deficit spending has been the solution.

We now have budget deficits, which represent government's annual shortfall, plus a national debt, the sum of accumulated deficits. The deficit is measured in the billions and the debt in trillions, something like four trillion in the late nineties. Few folks can even imagine numbers of such magnitude. While the principal is staggering, annual interest obligations are sobering enough. In the late nineties, the annual interest bill hovered around $200 billion dollars a year, representing something like 15 percent of the federal budget. Symbolic gestures, such as amending the Constitution, will not balance the budget and make the problem go away. So what are the prospects for slaying this debt dragon?

The last balanced budget occurred in the mid-sixties. Since then, the "spending opportunities" have far outnumbered any savings. The Viet Nam war cost plenty; then came some of the most generous social entitlement programs in our history. Spending our way to prosperity with "supply side" economics tripled the national debt in the 1980s. This was followed by the Savings and Loan bailout. Future scenarios include a multi-billion-dollar cleanup of the nuclear industry and federal aid to a faltering pension guarantee system. Worst of all, the true size of the federal deficits is masked by huge Social Security surplus deposits, which is owed to retirees in the 21st century.

Obviously, excessive credit and government deficits are not viable answers to a prosperous future. So what avenues can we create? There are both optimistic and pessimistic scenarios. The optimists, many of whom make their home in official Washington, expect America to grow out of debt. They suppose that slightly higher rates of growth and a little more fiscal discipline will over time shrink the debt in proportion to the general economy. The pessimistic scenario, forecast by many conservative economists, projects declining growth rates, further debt accumulation and some eventual crisis. The old saying that we owe the national debt only to ourselves is not completely true. Many foreigners have also invested in traditionally stable U.S. government securities. Could we pay back all creditors if a crisis destroyed their faith in our financial health? The darkest, though least probable scenario, would involve repudiation of debts, as Latin American countries attempted in the eighties, or simply printing more money to wash out the obligations in a wave of hyper-inflation as was done by Germany in the twenties.

Lagging Investment

Mainstream economists agree that a lack of investment counts among the greatest problems associated with excessive indebtedness. Simply put, investment means saving part of one's current income to make productive improvements that result in greater future gains or benefits. At the individual level this might be job training, while industry might invest in new plants or machinery. It's a worthwhile sacrifice for the sake of future productivity.

Government sector investment takes the form of "infrastructure" improvements, which typically include utilities, roads, bridges and public facilities. Sadly enough, savings, which are the normal source of investments, dry up during periods of personal, corporate and public deficits. In other words, the money is needed for debt service. Meanwhile, we also have neglected investment in the public realm. Deteriorating roads and bridges are most visible, but the real future crisis may be in terms of human investment. Far too many people are not getting the knowledge and skills needed to become productive participants in the post-industrial society of the 21st century. Worse yet are the increasing proportions of deprived children growing up in the nation's urban and rural slums. Government statistics from the nineties indicate that one out of five American children existed below the official poverty level; in some communities the proportion has been much higher. Handicapped by inadequate nutrition, health care, adult supervision and education, these youngsters are growing up to become a burden rather than an asset to society. It is surely in our best interest to see that adequate human investments are made here.

The Political Agenda of the Next Century

While the foregoing forecasts are rooted in well-documented past and present developments, government policy is somewhat of a "wild card," twisting in the shifting political winds of the moment. Like everything else, we can be certain that the members of the Baby-Boom generation will determine the agenda for the next several decades. Paul Light, author of Baby Boomers, claims that this generation is hard to define politically, because boomers sport both Liberal and Conservative views. Here's a sample: most are fiscal conservatives and denounce expanding government's role. Boomers also favor an "opportunity society" that maximizes personal freedom and space, while observing tolerance for other peoples' values and lifestyles. On the other hand, members of this generation are also very security conscious. They are concerned about crime, the environment and, most of all, the future security of government entitlement programs such as Social Security and Medicare. If this sounds a little contradictory, it is.

In terms of domestic politics, the single hottest issue will be future entitlements for the elderly. We already know that in future decades the number of senior citizens and their needs will be greatly magnified. We also know that economic austerity lies ahead. What happens when these two trends meet in the political arena? Some astute forecasters warn that a clash between working and retired generations cannot be avoided. Those who reached retirement age in the latter part of the 20th century for the most part enjoyed a far more comfortable existence than prior generations of elderly. Increased Social Security benefits, Medicare, tax relief and a host of other government programs have helped them fend off destitution in their sunset years. Pockets of deprivation remain, typically among minorities and elderly women, but programs such as Supplementary Security Income and Medicaid provide a safety net.

Government benefit programs for the elderly have always occupied the moral high ground. According to opinion surveys, most Americans think of the elderly as deserving; poverty in old age is commonly linked to sacrifices and inequities in earlier years. Furthermore, senior-citizen entitlements also enjoy the support of vocal and well-organized interest groups. The American Association of Retired Persons (AARP), is one of the largest membership groups in America and richly deserves its title of "King Kong" of the lobbying groups in Washington. Can you imagine the AARP's influence as more and more Baby Boomers hit the membership rolls?

While many Boomers expect the same or even expanded benefits on their retirement, a few brave souls have warned that this is neither realistic nor desirable in the context of future economic and demographic projections. This backlash can be traced to a group of journalists, academics and political figures who united under the banner of AMERICANS FOR INTERGENERATIONAL EQUITY in the mid-eighties. Calling themselves a "Lobby for the Future," they argued that continuing high levels of social spending for the elderly would surely destroy the nation's fiscal integrity in the next century. Since then, members of Generation X, or Baby-Busters, have claimed this cause as their own. Their argument is that most elder benefits are based on age criteria alone, and tend to waste public funds where need may not exist. Why, for instance, should a retired millionaire receive free medical care, or a 68-year-old pay less taxes than a 30-year-old with the same income? Need, rather than age, should dictate who gets the breaks. At the same time, we should resist "fiscal child abuse" by investing more heavily in the needs of deprived children who will not become productive adults without active intervention.

The best possible resolution of this issue might be some form of intergenerational compact in which different age groups acknowledge their mutual dependence. Prosperous self-sufficient senior citizens are less of a burden to young family members, while healthy, well-educated youngsters have a greater capacity to help support older relatives in need. This mutually supportive family analogy should be applied to society as a whole.

Train Wreck Scenarios

Government is everyone's favorite whipping boy, yet we know that our elected officials do respond to the people who elected them. The problem, perhaps, is that different groups in society pull in different directions, while the Constitution's system of checks and balances tends to resist changes that do not enjoy the support of overwhelming majorities over time. "Democracy is a political system where angels elect devils," goes the old French proverb. In fact, our representatives survive in public office by avoiding hard choices and providing constituents with generous benefits while avoiding the bane of taxation, which constitutes political suicide. This is why Social Security has been called the "Third Rail" of American politics -- touch it and you're dead.

Nevertheless, the problem will not go away, but will become more intense as society's bills come due. The political mood of the nineties has been very nostalgic. Rather than dealing with problems of the present and future, Americans sought an escape to the past, when government was smaller and people took care of themselves. Many of us long for the serene small town America depicted by Norman Rockwell, and secretly wish that millions of urban slum dwellers might somehow be transformed into the Waltons, living simple, virtuous and self-sufficient lives in their bucolic rural paradise. But that is not to be. The virtues rooted in the social and economic systems of earlier epochs cannot be resurrected. Moreover, we tend to forget the dark side of our historical experience. Serious historians point out that life in early America was not always a picnic, but marked by plenty of violence, injustice and poverty. Colonial times were extremely harsh for ordinary people, and even the much idealized 1950s had more than a few dark spots. No, we can't turn back the clocks.

The ultimate and inevitable direction of future policies will follow the typical way our government has always operated. That is, playing for time until a true crisis or disaster appears inevitable. Politicians call this the "train wreck" scenario. At that point, compromises are made to save essential elements of the system. Implementation is typically stretched over a long time so that citizens will not be alarmed. In the case of elder entitlement programs such as Medicare and Social Security, the second and third decades of the next century will witness a gradual phaseout of most benefits for prosperous retirees, while maintaining a safety net for those who would be destitute without it.

The next installment in this series considers the fate of those who are still waiting for their "golden years." We'll consider work and career prospects in the 21st century Information Age.

The Harbinger, Mobile, AL