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The Shallowest Generation
James Quinn, Wharton School of Bus.   

Written by the Senior Director of Strategic Planning, The Wharton School, University of Pennsylvania

Living the Good Life

The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people. Putting a yellow ribbon on the back of your $50,000 SUV is not sacrifice. Their claim to fame the last three decades has been living the good life profoundly beyond their means, to the point where they have virtually bankrupted our capitalist system.

Boomers can't blame anyone but Themselves

Baby Boomers have been occupying the White House for the last sixteen years. The majority of Congress consists of Baby Boomers. The CEOs and top executives of Wall Street firms are Baby Boomers. The media is dominated by Baby Boom executives and on-air stars. Boomers have no one to blame but themselves for the current predicament. Blaming Franklin Roosevelt or Lyndon Johnson for the country's dire situation is a cop out. Baby Boomers had the time, power, and ability to change our course. They have chosen to leave the heavy lifting to future generations in order to live the good life today.

Not All Boomers Corrupt

Of course, not all Baby Boomers are "shallow, greedy, and corrupt." Mostly Boomers with power and wealth fall into this category. There were 76 million Baby Boomers born between 1946 and 1963. They now make up 28% of the U.S. population. Their impact on America is undeniable. The defining events of their generation have been the Kennedy assassination, Vietnam, Kent State, Woodstock, the first man on the moon, and now the collapse of what has been decried as a U.S. Ponzi scheme financial system.

Rebels living in McMansions

Baby Boomers rebelled against their parents, protested the Vietnam War and the material world, and then settled down in 5,000 square foot cookie-cutter McMansions with perfectly manicured lawns in mall infested suburbia. They raised overscheduled spoiled children, moved up the corporate ladder by pushing paper rather than making things, lived above their means in order to keep up with their neighbors, bought whatever they wanted using debt, and never worried about the future. Over-optimism, unrealistic assumptions, selfishness and conspicuous consumption have been their defining characteristics.

High Net Worth

Boomers are currently in their prime earning and spending years. Every seven seconds another Baby Boomer turns 50 years old. The older Boomers had a fantastic run from 1989 through 2004. Median net worth for those between the ages of 55 and 59 rose 97 percent over 15 years to $249,700 in 2004. Median income rose 52 percent. During the same 15-year period, the younger generation between the ages of 35 and 39 saw their median net worth fall 28 percent to $48,940, and their median income dropped 10 percent.

Not Happy in Retirement

It is clear that all Baby Boomers are not created equal. Based on calculations made by the Federal Reserve, at least 50% of Boomers will not have a happy retirement. The bottom 30% will reach the age of 65 with net worth of less than $100,000. They will try to subsist in poverty, dependent upon Social Security and part-time Wal-Mart jobs until they die penniless. The top 30% will retire to lives of luxury and leisure. The middle 40% will muddle through with Social Security payments being the only thing keeping them from an old age in poverty.

Haves&Have Nots

The U.S. has become a society of "haves" and "have nots." It favors education, entrepreneurship, and creativity. Those benefitting from a good education will make dramatically more money than the uneducated laborers. The top 20% of households make 12.5 times the lowest 20% of households. This ratio was 7 to 1 in 1982. The top 1% of households make 20% of all the income in the U.S., the highest rate since 1928. This usage of debt by the poor has masked the gap between haves and have nots for the last 20 years.

Luxury Cars, Satellite T.V., iPhones

The number of luxury Mercedes, BMW, Cadillac and Lexus vehicles on the roads seems out of proportion to the number of wealthy people in our society. When you see an older gentleman wearing a suit driving one of these automobiles, you assume that he is a wealthy executive who has put in his time and rewarded himself with a luxury vehicle. But, most of these vehicles are being driven by Joe-the-Plumber types. When you drive through some of the more depressed areas of the inner-cities, you see people talking on their Apple iPhones, Direct TV satellite dishes attached to dilapidated row homes, and Cadillac Escalades and Mercedes parked on the mean streets.

Foolish? Lenders or those who lived by the Rules?

When you see "poor" people appearing to live a more luxurious life than yourself, the thought that should go through your head is: Which banks or finance companies were foolish enough to loan these people the money to live this lifestyle? These foolish financial institutions will never get their loans repaid.

What should bother the American people is that the Bush-Paulson-Pelosi Bailout of Stupid Banks will use your taxes to buy these bad loans from the foolish banks. So, who is the fool in this scenario? The "poor" person got to drive a Cadillac Escalade for a period of time, the foolish banks got bailed out, the bank CEOs took home $30 million, and you lived within your means and footed the bill for the reckless actions of others.

The Fools are…

It appears that the fools are the Americans who lived their lives according to the rules. The anger is building. The politicians running this country don't realize what true anger looks like. They are used to Americans being herded along like passive sheep.

Borrowers or Regulators to Blame?

Many Republican ideologues blame the current crisis on the people who took the subprime loans for home purchases. Many Democratic ideologues blame the crisis on the regulators. The ideologues are wrong, as usual.

If a poor person has no home, no vehicle, and no prospects, but then a bank tells them that they can buy a $300,000 home, drive a $55,000 Mercedes SUV, and live like people on TV; why wouldn't they say yes? What is the downside? If you have nothing and "The Man" offers you the American dream, you'd actually be foolish to say no. Now that they have lost the home in foreclosure and the repo man has taken the Mercedes, they are exactly where they were a few years ago with no home, no vehicle and no prospects.

Where were the Regulators?

The regulators were certainly asleep at the wheel. They did not enforce existing rules, foolishly waived leverage rules for the biggest investment banks, and believed that the banks would regulate themselves. They were wrong, but they never made a single loan. The commercial banks, investment banks, auto finance companies, and credit card companies made loans to people who could never pay them back in the search for short term profits.

Greedy Fees in Artificial Market

Wall Street executives created an artificial market for the loans in order to generate billions in fees so they could enrich themselves through stock options and obscene bonuses. They spent their false riches on $2 million NYC penthouses, $100,000 Porsche 911s, and $5 million beachfront estates in the Hamptons. Based on the estimated $2 trillion of losses that our U.S. banks have generated, the CEOs certainly deserved annual pay 500 times as high as the average worker. There is no way an "average" worker could possibly be talented enough to lose $2 trillion. You would need to be truly extraordinary to lose that much.

Grandchildren to Bail Out Foolish Lenders

The brutal necessary lesson that should have been learned is that if you loan money to people who can't pay you back, your bank will go bankrupt. The "poor" people who made a bad decision in buying homes and cars they couldn't afford have lost those homes and cars. The banks made a bad business decision in making those loans. The taxpayer was not involved in these business transactions. This is where Hank Paulson, Ben Bernanke and George Bush, formerly free market capitalists, decided to commit your grandchildren's money to bailing out the horribly run financial institutions.

Rewarding Bad Decisions&Behaviors

Your government has chosen to allow these banks off the hook for their bad business decisions at the expense of taxpayers. Rewarding bad decisions and bad behavior will lead to more bad decisions and more bad behavior. The government has made a dreadful decision that will haunt our country for generations. Now the Federal Reserve has lowered interest rates to 1% again. This is where this horrible nightmare started. The massive printing of currency throughout the world will ultimately lead to a hyperinflationary bust. The law of unintended consequences can be devastating.

Fashionable Deficit Spending

Early in the first Reagan administration, Americans saved 12% of their income while household debt as a percentage of GDP was 63%. In 1980, the oldest Baby Boomers turned 34. They entered their prime earnings and spending years. This is when something went haywire with our great country. Deficit spending became fashionable for government, corporations and individuals.

Deficits of Money, Morals&Brains

Dick "deficits don't matter" Cheney was probably in his glory as the country ran up deficits of money, morals, and brains. The Boomers and our government chose to borrow and spend their way to prosperity. As we now know, Mr. Cheney's advice about deficits not mattering was about as good as his belief that you can fire a shotgun in any direction without implications. The Boomer generation has freely made choices over the last quarter century that has brought us to the brink of a second Great Depression.

Prosperity an Illusion

During the current Bush administration, Americans' savings rate actually went below zero, while household debt as a percentage of GDP soared above 130%, a doubling in 25 years. These figures prove that the apparent prosperity of the last 25 years was an illusion. Beginning in 1982, Baby Boomers chose to take the easy road. Saving, investing and living within your means were cast aside as "Old School". Boomers were handed a better future through the blood, sweat and tears of the "Greatest Generation". Through their hubris, they've squandered that better future, the future of their children and imperiled our entire capitalist system.

Live-for-Today Boomers

Between 1989 and 2007, credit-card debt soared from $238 billion to $937 billion, a 300% increase. Household liabilities that are in delinquency or default totaled $775 billion at the end of June, according to CreditForecast.com data. This is equal to 7.5% of all U.S. household debt, up from 3% just two years ago. In the last five years, our live-for-today Boomers sucked over $3 trillion of equity out of their homes to fund their selfish lifestyles. At the end of June, there were 2.72 million mortgage loans in default at an annualized rate. For all of 2008, defaults will hit 3 million, up from approximately 1.5 million in 2007, and 1 million in 2006.

"Essentials" bought on Credit?

What "essentials" do the Boomers invest all this borrowed money in every year? The U.S. Census bureau provides the answers:

$200 billion on furniture, appliances ($1,900 per household annually)
$400 billion on vehicle purchases ($3,800 per household annually)
$425 billion at restaurants ($4,000 per household annually)
$9 billion at Starbucks ($85 per household annually)
$250 billion on clothing ($2,400 per household annually)
$100 billion on electronics ($950 per household annually)
$60 billion on lottery tickets ($600 per household annually)
$100 billion at gambling casinos ($950 per household annually)
$60 billion on alcohol ($600 per household annually)
$40 billion on smoking ($400 per household annually)
$32 billion on spectator sports ($300 per household annually)
$150 billion on entertainment ($1,400 per household annually)
$100 billion on education ($950 per household annually)
$300 billion to charity ($2,900 per household annually)

Spend more Eating Out than Giving to Charity

The priorities of our Boomer led society are clearly born out in the above figures. Americans spend more eating out than they give to charity. They spend as much on big screen TVs and stereos as they do on education.

U.S. Trails 25 Countries in Science&Math

This may explain why 37 million (12.5%) of all Americans live in poverty and our high school students trail the students of 25 other countries (including Latvia) in science and math knowledge. The U.S. school system processes dropouts who don't know the candidates for President, instead of intelligent, thoughtful, hard working, and driven young people.

Get Rich Quick Mentality

The $160 billion spent on gambling is indicative of the get rich quick without hard work attitude of the Boomer generation. Even worse, households with income under $13,000 spend, on average, $645 a year on lottery tickets, about 9 percent of all their income. Your government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit.

No Self Control, Morals, a Work Ethic or Savings

What the data proves is that Boomers love to shop and eat, whether they have the money or not. The top 100 retailers in the U.S. have 250,000 stores that generated $1.7 trillion of sales last year. How could America function without 31,000 McDonalds, 35,000 KFCs, Taco Bells,&Pizza Huts, 15,000 Starbucks, 7,000 Wal-Marts, 2,000 Home Depots, 4,000 K-Marts/Sears, and 8,000 Blockbusters? There are 91,000 shopping centers in the United States. The Advertising industry spends $275 billion per year to convince you to spend money you don't have for things you don't need. This generation lacks self control, morals, a work ethic, and savings ethic.

Immoral to Future Generations

It is immoral for the Boomer generation to run up $53 trillion in unfunded future liabilities in Social Security, Medicare and Medicaid to leave as a gift to future generations, while living it up today. Optimists like to point out that Europe and Japan have much worse unfunded liability problems than the U.S. That is like taking pride in being the best looking horse at the glue factory. In the end, we'll all still be glue.

Hangover will be Bad

The 25 year Boomer borrowing and spending binge is coming to an end. The hangover will be really bad. The Federal Reserve and Treasury are trying to keep the frat party going, but everyone is passed out on the floor.

Owe more than Homes are Worth

The Case Shiller housing data shows that the 20 largest cities have experienced an average 20% decline in price from their peaks. The futures index predicts a further 10% to 15% loss in value. There are 75 million owned homes in the U.S. One in six, or 12 million homeowners, owe more than the house is worth. With further expected losses, 20 million homeowners will eventually be underwater on their mortgage.

Failure side of true Capitalism

In California, where home price declines will be 40% to 50%, half the homeowners in the State will owe more than the house is worth. If you are one of these homeowners and can afford the mortgage payment, time will eventually bail you out. If you can't afford the mortgage payment, you should lose the house to someone who can make the payment. This is the failure side of the creative destruction that is true capitalism. If the government steps in to subsidize and eliminate failure, the system will ultimately collapse.

Credit Card Companies to Collapse Next

Part two of the great Boomer credit contraction will be the collapse of credit card companies who have mailed out 27 billion credit card offers in the last five years. They are now reaping what they have sown. As Boomers could no longer borrow from their homes, they switched to credit cards to make mortgage payments and car payments. That well is running dry. The losses to card companies will make the losses in 2000 to 2002 seem like good times. Losses in the first half of 2008 soared to $21 billion. Losses are expected to total $55 billion in the next year and a half.

Taxpayers to Fund more Failures

This brings us to the latest outrage perpetrated upon the U.S. citizens by Hank Paulson and his bailout of Wall Street. The credit card industry, which collects 23% interest and $12 billion in late fees from consumers, is lining up to get their piece of the $700 billion bank handout. Capital One has just received a $3.6 billion injection from the American taxpayer, one week after projecting that their write-offs will be $7.2 billion in the next twelve months. This will allow them to send another million offers to more people who shouldn't have a credit card. Why not? The taxpayer will pay if the losses are too high. Why aren't the pundits on CNBC outraged at this misuse of taxpayer money? Would the bankruptcy of Capital One hurt our country in any way?

A Nation of ex Champions

The Great American Empire has begun its long slow decline. It may take a few generations to reach its nadir, but the poor decisions already made and crucial decisions postponed in the last 25 years by the Boomer-dominated leadership has put the country on a path to a declining standard of living.

The U.S. is like a punch drunk ex-champion boxer who still thinks he has what it takes, but is living off his old press clippings. He lived the good life, got fat and didn't do the hard work required of a champion. A slew of young brash fighters are itching to take him down. It is just a matter of time. In our heyday during the 1950s, manufacturing accounted for 25% of GDP. In 1980 it was still 22% of GDP. Today it is 12% of GDP. By 2010 it will be under 10% of GDP.

Nation of Bureaucratic Paper Pushers

Our Government bureaucracy, which contributes nothing to the advancement of our society, now is a larger portion of GDP than manufacturing. Services such as banking, retail sales, transportation, and health care now account for two-thirds of the value of U.S. GDP.
We have become a nation of bureaucratic paper pushers.

Discovered cure for E.D.&built Bridges to Nowhere

Past U.S. generations invented the airplane; invented the automobile; discovered penicillin; and built the Interstate highway system. The Baby Boom generation has invented credit default swaps; mortgage backed securities; the fast food drive-thru window; discovered the cure for erectile dysfunction; and built bridges to nowhere.


David M. Walker, former Comptroller of the United States, at a recent Fiscal Wake Up Tour at the University of Pennsylvania, described what has been happening in this country for the last 25 years in one word - laggardship. The last six months have been a perfect example of laggardship. Our leaders have floundered from crisis to crisis, overreacting and blustering rather than leading.

True leaders are Proactive, not Reactive

True leaders are proactive, not reactive. After not addressing our energy policy for decades, as soon as oil reached $140 a barrel, Congress lurched into action so their constituents would think they were leading.

As our financial system has imploded, government "leaders" have flailed about with one rescue package after another and Congress looks for scapegoats. Meddling, tinkering, and non-enforcement of rules by Congress and other government bureaucracies caused the crisis that they are reacting to.

Character, Honest&Clear Vision

Government creates the problems and then assumes even more power over your lives with their ridiculous "solutions". No one in Washington has shown an ounce of leadership in decades. True leadership requires strength of character, clear vision to see the future as it is, the bravery to make unpopular decisions, and the honesty to tell the public the unvarnished truth based on the facts.

Collapsing our System

The facts are that we have a $10.5 trillion national debt; $53 trillion of unfunded liabilities; a military empire that has U.S. troops in 117 countries and has spent $700 billion on a pre-emptive war that has killed over 4,000 Americans; a $60 billion trade deficit; an annual budget deficit that will exceed $1 trillion in the next year; a crumbling infrastructure with 156,000 structurally deficient bridges; almost total dependence on foreign oil; and an educational system that is failing miserably. We can not fund guns, butter, banks and now car companies without collapsing our system.

Boomers must Rethink Priorities

Ultimately, it is up to the Baby Boom generation to change the country's course. The oldest Boomer is 62 years old and the youngest 45 years old. It is time for Boomers to take a hard look in the mirror and rethink their priorities. It is time to cast aside the $88,000 Range Rovers, $1,200 Jimmy Choo boots, $5,000 Rolex watches and daily double lattes at Starbucks. It is time to live within your means, distinguish between needs and wants, reduce debt, save 10% of your income, make sure your kids get a good education, not try and keep up with the Jones', show compassion for your fellow man, and not expect the government to solve all of your problems.


Contact Information:
James Quinn
Senior Director of Strategic Planning
The Wharton School
University of Pennsylvania
215-573-5404 phone
215-898-4179 fax

(Editor's note: some paragraph divisions&all capped subtitles and photos added by Remnant Report. Reprinted by permission from author).

If we have food and covering, with these we shall be content (1 Timothy 6:8).

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