The baby boomers are at it again, and this time it's the Super Fund they're twisting to their own advantage. I'm fed up living in the shadow of the spoilt generation

When I was born the World War II generation was running the country, looking to create a secure, egalitarian state worthy of the sacrifices made in the 1940s. Their vision realised was a state in which everybody had a stake, with a burgeoning middle class and shared prosperity. In the US, news anchor Tom Brokaw dubbed them The Greatest Generation.

Once I was in high school, the baby boomers (those born rougly between 1946 and 1964) took over and the Rogernomics revolution turned the country on its head, replacing security and equality with all the risks and returns of the free market. The rock n' roll generation got their way because by the 80s they had the numbers; Sir Robert Muldoon's mismanagement of the economy gave them the crisis.

Much good was done, and much ill. Amidst the vigorous scrubbing of our economy, chunks of our cradle to grave welfare was washed away with the bath water. The post-war generation which had grown hale and hearty on free healthcare and school milk, had become clever thanks to (all but) free education through to the end of university, and grew up in homes where their parents knew that liveable benefits were available should life ever turn agin them, unpicked the various safety nets. Much that was done was necessary, much wasn't.

It's an old – even tedious – argument. But as much as we like to think we've moved on, history keeps knocking incessant.

Barack Obama's presidency was meant to end the baby boomers' culture wars. With brilliant clarity, Andrew Sullivan picked it back in December 2007, when he called Obama's candidacy "transformational", and not because of anything to do with the candidate. Obama's potential to transform America was that "he could take America—finally—past the debilitating, self-perpetuating family quarrel of the baby boom generation that has long engulfed all of us";  the argument over race and religion, Vietnam and Roe v Wade. But the persistence of those arguments has been shown again with the shooting of abortion doctor George Tiller in Kansas over the weekend.

Here in New Zealand, the Key administration, led by a man with no stake in re-writing the history of the 1980s, offered us the opportunity to move beyond our past. But the old debate about the baby boomers' economic experiment was raised again last week by National's budget, and specifically the decision to postpone payments to the New Zealand Superannuation Fund.

While the government was diverting tax dollars into the Super Fund, the boomers were at least contributing something to their own pensions; investing now and looking forward to a return down the track. The rest of us would make up the difference, as has always been the case. Now, the government is to stop its annual $2 billion-odd contributions to the Fund. English has decided that saving for that certain rainy day is too hard. Conservative? Huh. He's just another baby boomer who has looked closely at the security of coming generations and decided it was dispensable

Without the government paying into a savings fund, the boomers are pushing the load of paying for their retirement onto Generation X and the generations following. Carried by their parents in childhood, they now expect to be carried by their children in their dotage (which thanks to that school milk, will probably be long).

Once again, the boomers are pulling up the drawbridge behind them. They hit pension age in the next two years, with Super still intact and Key promising to resign rather than engage in the debate about whether the entitlement rate should be raised or means-testing introduced. Over the next 15 or so years the entire generation will pass the 65 mark, and it's unlikely that any government will dare take them on.

Instead, some time around the mid-2020s, some poor future Prime Minister will be forced to grab the third rail and raise the age of entitlement. But what will the boomers care? Most will be into their 70s by then.

The tragedy is that by opting out of the Super Fund for as many as 11 years, Key and English have unpicked the political consensus around Super as surely as Sir Roger Douglas unpicked the safety nets of the welfare state in his prime. To patch the holes in the 2020s, New Zealanders will have to stump up more than $1 billion extra every year. But in truth the numbers aren't the worst of it. The bigger problem is that the political will to save is gone.

Just as Muldoon trashed Norman Kirk's Super scheme in 1975, so English and John Key (who was such a fan of Muldoon as a young man) have trashed Michael Cullen's work. History is ignored; the mistake is repeated and amplified.

Key's promise not to raise the age of entitlement from 65 or cut pensions is the height of cynicism. Of course he won't have to make the cuts himself, but by signing off last week's the budget he all but ensured that those cuts would be made. When that future PM is forced into that corner, he or she will have every right to curse this government.

What makes it even worse is that English, whilst hiding behind the recession to justify cutting a fund he never liked, has made a largely ideological decision.

The Treasury official who bravely leaked figures to TVNZ makes a strong case that the Super Fund could have helped pay for itself through the lean years. First, the government can borrow at an interest rate of 4.4 percent, rising to 6 percent in 2013. Treasury's projections suggests the Super Fund can expect an annualised return of 6.5 percent. If those numbers are accurate, a six year-old could predict a profit. Second, the Super Fund is one of the country's biggest taxpayers, expected to pay around $4.5 billion over the next 14 years. Without contributions, that tax take will shrivel.

But the government dismisses such dissension out of hand, pretending our existing Super scheme is safe without us having to save for it. I don't believe it. Sure, Super will survive, but it will be restricted. If I'm confident of anything after last week's budget, it's that if you're under 45 today, you won't be getting any Super until you're at least 67. (And it may well be means-tested. And between now and then you'll be paying more of your tax to pay for those boomer pensions).

I'm actually sympathetic to raising the age of entitlement, but that's not the point. The baby boomers had a chance to heft onto their own shoulders the responsibility of paying for a little more of their retirement. They could have stepped up. Instead, they again passed the buck. They said, 'Us? We want all the welfare our parents promised us, and you'll be paying. You? You're on your own'.

Yes, generational generalisations have their limitations and miss the contributions of many individuals and groups, but they are warranted nonetheless. And frankly I'm fed up with living with the baby boomers' baggage. They are a spoilt generation, who by weight of numbers have controlled politics in this country my entire life.

Sadly, yet another government has given into them and the rest of us will have to pay the price.

Comments (13)

by Greg Comfort on June 03, 2009
Greg Comfort

We've been told for years there will be a spike in the population age requiring the younger generations to support the older in a disproportionate way. I was under the impression the Cullen fund was designed to help reduce the impact of this problem. Dropping contributions for 11 years seems callous and unconnected to any reality (solid Treasury work ignored again).

It has amazed me how, in a time of reduced income across all sectors, how quickly our values and principles have gone out the door. Screw conservation, forget saving for retirement, drop the emphasis on providing a good public service to the country, and measure everything in terms of money, where you do get what you measure.

This government has no values that I can identify, other than the negatives ones of letting the self-serving, "every person for themselves" attitude drive everything. Already the rich are getting richer and the poor poorer. What a surprise.

Disclosure: I was born on the edge of the boomer generation in 1964, yet have never identified with them. I did benefit from the tail-end of cheap education, but believe people should still expect this from a country like New Zealand. I believe in investment for our future, not user-pays now, which includes everything from education, to retirement and state-ownership of utilities like power, water, transport, and telecoms. This government probably thinks I'm a communist! LOL.

by Claire Browning on June 03, 2009
Claire Browning

Tim - I don’t disagree with your analysis, or the need to have this debate, or the disingenuity of aspects of the government’s position. But when you say - The baby boomers had a chance to heft onto their own shoulders the responsibility of paying for a little more of their retirement - I do think it's important to be clear exactly how little.

If what follows is nonsense, I’d be grateful if someone would spell out - words of one syllable - why. But I found this, from Nine to Noon yesterday (around 10 mins in), pretty telling and it hasn't been widely reported I don't think. 

Matthew and Laila agreed - cost of super will rise from 3.5% of GDP currently, to around 6.6% at its peak at 2050. The Cullen fund, if contributions continued, would pay only 14% of that extra 3.1%.

I know it’s billions of dollars. But (setting aside the in principle question of whether it would be polite or moral whatever for baby boomers to contribute now while they can) does the size of that 14% extra benefit outweigh the risks and costs to everybody of borrowing to make it? Did the leaked Treasury analysis factor in all risks and costs? For example, if credit had been downgraded, the extra cost of that? Was there any attempt to assess the odds of what essentially would be a gamble?

It's not just baby boomers, either, by the way. By 2050, that'll be you and me ...

The Treasury official who bravely leaked figures to TVNZ ...

I do fundamentally disagree with this bit. Granted, scoop for Q&A and all that - and it certainly enlivened the interview. But if searching for an adjective, "inappropriate" might have been better - "cowardly" even. Resigning would be brave, and the better course for any official who finds themselves too fundmentally at odds with the government of the day to serve it. That's the price of (relative) job security and well above average rem: you give the Minister the advice, and when he disagrees, move on. If lobbying is where this person wants to be, they need to reassess career options.

by Robert Browning on June 03, 2009
Robert Browning

Tim,     I was very disappointed that you took the line that you did with your arguments.

Why should a thinking person direct their argument to a whole generation and not to the individuals that they are aggrieved by.

For the record: It was not that easy growing up in the shadow of the eminent Sir Kieth, and a good number of OUR generation are sick of hearing daily of "our hero's" since past. Life was not easier starting marriage on $63 a week and the first house cost $16,000.00.When the wheels only went at 65 miles per hour,top. When half the roads were gravel. When you wanted money and the bank told you to shove off.The lawyers would help you at a good fee.It felt like living in a second hand England and it probably was.

So life has changed and not all for the better. Get over it. I for one have never begrudged paying my taxes, although someone reminded me I slipped up once.

The good old days they were not. They were a lot better than had gone before.In your short life you may be able to say the same. So now I can afford a Latte and a fishing trip, and the monkey doesn't call the tune.

I inherited one desire, "to live a long life- and to be able to draw my pension."Do you really want to take that from me. I have not been to Hospital in my life, but have contributed.I have not drawn a cent of ACC.I have never been unemployed,WINZs do not know me.I never grumbled when the PAYE or GST bills came in.

Come on TIM, direct your arguements to the people that manage the affears of this country. Stop the generalizing and keep up the good work.

 

Respectfully

Robert B

 

 

 

by Claire Browning on June 04, 2009
Claire Browning

Hi Dad. 

I was thinking about you this morning ... can't believe you wrote all that, and forgot to take issue with Tim's romantic view of school milk! 

:-)

by Gordon Harcourt on June 04, 2009
Gordon Harcourt

C'mon Tim - borrowing to invest is dum.  OK not a lot dummer than Key promising the eligibility age won't rise, but still dum.  Loan repayments and interest can't be avoided.  Catastrophic investment losses can be.

by Claire Browning on June 04, 2009
Claire Browning

This is really worth a read: both original post from Keith Ng, and the comments thread.  Still reading; not sure yet who wins ...

by Peter Sim on June 04, 2009
Peter Sim

I used to respect Tim's writings but this is rubbish worthy of TV1. (Try 60 minutes, shock ,horror and indignation, forget rational thought.)

 

Sorry Tim you have lost the plot, like most kids have when they throw their toys out of the cot.

by Tim Watkin on June 05, 2009
Tim Watkin

Morning all,

Despite your complaints, I have to disagree with most (though not all) of your comments...

Claire: It may look small in percentage terms, but Super is going to cost us bucketloads. If we're looking for $37 billion around 2030, that's a lot of hip ops or teacher pay rises going begging. We need to prepare as best we can, not bury our heads. Everyone is keen on boiling it down to household comparisons - who would borrow to save? That makes no sense - nations do all sorts of things that households do, such as issue bonds and borrow and spend over the long-term. But if people want homespun wisdom, how about 'if you know a big bill is due, you start saving as much as you can'. Or, 'we save for our retirement, why shouldn't the government?'.

Robert: I take your point about glorifying the past. Well made, sir. But you say 'things change' as if we have no choice. Government policies change when governments make choices. I'm arguing that this is a bad one and that there's a prima facie case that there's a generational and political trend going on. Baby boomers have the numbers to win and lose elections, so politicians never ask them to make sacrifices. Thus, they've been spoiled. You say 'criticise those who run the country'. I thought I was! If I wasn't clear, my argument was that those running the country shuold stop pandering to the baby boomers out of political expediency and start thinking about the rest of us.

So I don't want to get over it, I want to argue on behalf of New Zealanders who don't have the same political heft.

And no, I don't want to take your pension away. I was defending it. Do you want to take mine away? And my son's? Because unless we save to get through the boomer retirement bubble, they're at risk.

Gordon: You're falling into a trap of political spin and misleading accountancy. 'Borrow to save'? It's all government money. Would it be better if we say we're using the existing tax take for Super and are borrowing to fund schools and hospitals? However you divide up the bill, it amounts to the same thing. What if we change the language (as in my point above to Claire) or say we're 'borrowing to invest'. Nations and businesses do that all the time. In reality it's a political choice, and we're giving away the tax take (as per my post), the benefits of borrowing at a low rate and the gains from buying at a trough in the stockmarket. If I'm dumb, so are Brian Fallow, Rod Oram and Vernon Small, and I'm happy to be in the company of such economic dunces!

Peter: Got an argument?

by Peter Sim on June 06, 2009
Peter Sim

How does one argue against a rant?

A whole generation voted for Bill English to pick on Tim Watkin?  Yeah right.  Excuse me while I reach for a beer.

I wonder who voted for the opposition parties in parliament? (No baby boomers?  Yeah right!).

All baby boomers voted for the national party?  Yeah right!

The budget package was put together by a democratically elected government.

If you disagree with the package that is fine.  Argue with the finance minister over the logic of his package.

DO NOT INDULGE IN CAMERON BENNET TYPE EMOTIONAL TABLOID NONSENSE..

by Peter Sim on June 06, 2009
Peter Sim

Sorry I forgot to add that I am too old to be baby boomer.

There is no self (conflicted) interest.

by Robert Browning on June 06, 2009
Robert Browning

Herewith the face of a spoilt and happy baby boomer (who didn't vote National).

PS Tim: I appreciated your response. For the most part we agree. Your thoughts would be appreciated about a solution. I have long since held the opinion that our future as a country relies heavily on our need (?) for a dramatic increase in our population.

R.

 

by Claire Browning on June 07, 2009
Claire Browning

You mean, "destroy the village in order to save it"? 

You couldn't have done a better job of proving Tim's point ... you won't be here, remember?  After the best part of a lifetime spent tooling around wild places, don't you dare wish on the rest of us what you wouldn't enjoy yourself. 

Can't believe you posted that photo - and yet somehow knew yesterday, in a train-wreck-slow-motion kind of way, that you would.  Not to put too fine a point on it, it makes you look a bit pissed.  Please, I beg you, take it down - I am not joking about this.

by Ryan Gray on June 24, 2009
Ryan Gray

Well I'm neither 'Baby Boomer' nor generation x. Born in '85, I've grown up in the society that the was scourged by the economic reformation experiment of the 80's.

I grew up with kid's whose parent were losing there jobs, and could see the social problems that are really only just beginning to escalate.

I've also seen a widening gap between the opinions of those who suffered during the 80s and those who came out unscathed.

I think the 'baby boomers' have a few allies. They come in my generation too, but at the same time I see some of their most fiercest enemies being created at the same time.

Some who grew up in the privileged homes of 'Baby Boomer parents' only know that life, and the life is good. Pure unbridled consumption!!!

Parents who were debt free, were able to push those gains onto their children. The ones that suffered during the 80s unfortunately didn't have those same benefits. Maori unemployment of course skyrocketed during 'rogernomics' and many of their youths' problem I think can be contributed to the disillusionment created by those policies.

Now 'Baby Boomer' enemy number one; South Auckland Youth Crime. There's nothing more dangerous than young people who don't think they have a future.

I was lucky. Although my family struggled we came out alright. I got to university, graduated, and although I am suffering with the recession. I have just enough work to get by. I don't however have a satisfying retirement to look forward to. I'll probably die before I get to the 'new new' retirement age. Catastrosphic environmental problems are also becoming more and more prevalent and that's not even taking global warming into consideration. Swam in a rural river in Canterbury lately?

I see in my friends an interesting trend, more than a swing to the left or right, it's a pure frustration at what we see in parliament. The things we care about are not being heard and we're pissed off about it. The old mans politics of Labour and National is not flying with us. The future is what we care about and because of this we are the biggest potential enemy of the 'Boomers', you will start dieing and we will start taking over, My only hope is that we are not as selfish as some media outlets portray us as.......

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