Generational Theft May 7, 2013

Geoffrey Canada Stan Druckenmiller

We are a nation of takers Nicholas Eberstadt

The level of generosity to the elderly has almost doubled in the last 40 years, unsustainable
Benefit per oldster / GDP per capita

Source: CBO and social security data.

The youngs consumption is up by 38% in 30 years, while the olds consumption is up by 164%!
Average consumption by age group
Old Young

Young Old

Source: Gokhale, Kotlikoff, Sabelhaus, 1996.

Poverty rate for the elderly have collapsed, not so for children
National Health Spending across Countries

Fertility rates have gone down dramatically

Fertility rate = 3.7% in 1950s ; Fertility rate = 2.06 in 2011
Baby boom +65 years

2013

Source: National Center for Health Statistics

Life expectancy has gone up sharply

US life expectancy by gender, 1900 2006

The entitlements problem is just beginning

Federal spending by entitlements program

Source: CBO, 2012.

Dependency ratio is just starting to fall

By 2030, there will be HALF the amount of young to support the old

What is the fastest growing age population?

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The true fiscal gap

If taxes rates and the level of generosity in entitlements programs remain the same, we have a massive problem ahead. Either tax rates rise or generosity falls. There is no alternative.

Source: Kotlikoff, 2012

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The cost of waiting is enormous

The increase in all federal taxes and expenditures needed to cover fiscal gap today is much lower than in 40 years

Source: Kotlikoff, 2012

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Raising taxes on the rich is not the solution

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Lower capital gains and dividends is a direct transfer from young to old
New worth by age of household head in 2007

Source: Survey of Consumer Finance

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2011 U.S. defense spending exceeded the 13 next highest defense budgets combined

Source: Stockholm International Peace Research Institute, SIPRI Military Expenditure Database. Note: Dollar figures are in billions of 2011 constant U.S. dollars.

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The biased growth of the welfare state

US consumption by age (ratio to labor income ages 30-49)

Source: US national Transfer Accounts, Lee, Donehower and Miller, 2011.

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Despite spending twice the average country, health outcomes are bad
National Health Spending across Countries

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Generational Theft May 7, 2013

Geoffrey Canada Stan Druckenmiller

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An additional problem of inefficiency

National Health Spending across Countries

Source: CBO, 2012.

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Aging has come with more consumption and less investment

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