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.