Declining Fiscal Democracy: Understanding the “Pig in the Python”

Published on
February 10th, 2020
Duration
31 minutes


Declining Fiscal Democracy: Understanding the “Pig in the Python”

The Expert View ·
Featuring C. Eugene "Gene" Steuerle

Published on: February 10th, 2020 • Duration: 31 minutes

C. Eugene "Gene" Steuerle, co-founder of Urban Brookings Tax Policy Center, has studied the intersection of demographics, the economy, and public policy for 30 years. He joins Real Vision to break down the demographic trends that have converged to create "a decline in fiscal democracy." Steuerle talks about the impact of the baby-boomer "pig in the python" and reveals how that phenomena has forced the government to focus spending on health care, social security, and interest payments. Finally, he explains why millennials will demand "generational democracy" and the potential political implications of the intergenerational conflict to come. Filmed on February 4, 2020 in Washington, D.C.

Comments

Transcript

  • TW
    Thomas W.
    20 February 2020 @ 23:26
    In his closing comments, the man conflates chaos with "anarchy." That's so like a Brookings / Urban Institute kinda guy who thinks the government is required and equipped to effectively deal with these issues when they have proven conclusively that they are not. Come on. They were largely responsible for CREATING the problem in the first place. Anarchy is the absence of government. We certainly do not suffer from that. Chaos is what we have now courtesy of the heavy hand, feeble mind, and crippled conscience of government. The bastards made promises they could never keep and never intended to keep, and now the kids are gonna get skewered. But hey, it's a few years down the road, so party on. And please, there will be no biting of the bullet in advance of the end game scenario. It just doesn't work like that.
  • HH
    HODL H.
    11 February 2020 @ 15:03
    As a millennial, I love spending my hard earned money on things that provide limited or no value to me longer term. Things such as Medicare, Social Security, Avocado Toast, Festival Tickets, Rent and so much more. I am just so so so grateful for the Boomers who blew three of the largest asset bubbles ever, continuing to blow one of them, so not to impair themselves and negatively impact their lifestyles into retirement. Thank you for all the debt and deficits you have given us, Boomers. #Blessed
    • JO
      JOHN O.
      12 February 2020 @ 00:57
      Hey Millennial, Boomer here. First of all, between me and my employer (first 25 years) and self employment tax (most recent 22 years) we have paid almost $1M into the Social Security and Medicare "Trust Funds". I'm sure the fiduciaries we send to Washington have treated this capital as they would their own and grown it at a reasonable rate. So you're not paying my Social Security, I've already paid it! Second, the first few bubbles of that past 50 years were caused by those slackers that holidayed in Europe, North Africa and the Pacific during the early to mid 1940’s. So blame them for having a 25 year party when they got home (those that did). The current bubble, as far as I can tell, is being driven by investors that don’t understand accounting and think earnings don’t matter as long as the next PE firm or IPO enthusiast or bond holder will keep pouring capital down the well. Can you spell TSLA, UBER or BYND?? And what’s up with Avocado Toast? That was NOT a Boomer invention. But I can’t disagree with your sentiment. We are all screwed. The only way out of here is feet first in a box. Cheers😉
    • BH
      Brian H.
      12 February 2020 @ 21:27
      Hey Millennial, Millennial here. Personally I can relate on not being a big fan of paying into the U.S government's prequel of Bernie Madoff's dream. However, along that same line of thinking why wouldn't a Boomer be entitled to get their share considering they have paid into the same ponzi scheme? Hard to argue with that in my opinion. The real problem is that everyone wants to blame everyone else. Ultimately the issue is going to fall on Millennial shoulders as the Boomers will be feet first in a box before us (no offense John O. ;-) ), unless we do the noble thing and kick the can down the road for our loving children (please pick up on the sarcasm). It's time for the smartest minds in this country (or elsewhere - suggestion box is open) to be asked to help find solutions to some of these problems that are presented in this series. As part of that, our most ineffective minds and people (Congress) need to be held accountable - please no political views - and get out of the way of true problem solving. The true solution probably lies somewhere in between with everyone getting smacked and bearing the brunt of it - sorry John O. we aren't going to let you go scot-free. And the biggest four letter word we are all going to agree on is FAIR, because we will all be in agreement that whatever a solution is, will not be FAIR to us. At least we'll be able to share a beer in agreement for a change. It's inevitable. Real Vision does an excellent job showing hard to argue with rationale behind why the expectation of trouble ahead for a vast group of people (either Boomer or Millennial or Gen-X). Unless you want to use irrational arguments of course. It's time to embrace the inevitability and start finding solutions.
    • JA
      John A.
      14 February 2020 @ 13:24
      Replying to John O., for perspective, my generation came between the boomers and the millennials. I am a financial advisor, specializing in 40k plans, and have been educating people of all generations in these plans for 30 years. I will note that we have been able to see this “pig in the python” problem for my whole career, and I have been telling plan participants about it for that long. I understand the $1M that you have contributed for social security, but you have never contributed for yourself. That program is a “pay as you go” system. You paid for those before you, with the expectation that those that come after you will pay for you. We now have 2 workers to,support each retiree, so the tax needs to be MUCH higher that the 7.65% (plus employer match) that we currently collect. Social security was designed as a safety net for the destitute for the last few months of their lives, not the 30 year vacation golfing in Florida that it has become. As the speaker relates, this has led us to almost 70% of government spending going to Medicare, Medicaid, Social Security, and interest on the debt. The federal reserve HAS been blowing bubbles to keep the ship afloat. If you revert earnings to the long-term mean, and revert P/E ratios to the mean, you get some ugly numbers. That base case reversion will spell the end of pensions and 401k plan balances. Allowing interest rates to rise to the “normal” 5-6% that we all knew and loved would mean the default of the U.S. on its debts. The Fed is doing what it needs to do to kick the can down the road. Crisis in 10 years is better than crisis today. The choice is between you and your 401k and pension balances, and millennials’ ability to Ford a house and invest in markets that are priced to provide them with returns. Where does this end? Hopefully, as another commenter wrote, with some agreement among us all. In the meantime, I’ll be working to protect myself from money printing, and not relying on government promises.
    • EK
      Edward K.
      14 February 2020 @ 16:22
      Have argued that as millennials rotate into positions of leadership (Neil Howe has said that Gen-X are politically agnostic) some of these benefits will be rolled back much to the chagrin of near future retirees. As an early boomer have to concur that was just the luck of birth. And yes benefits are tilted to much to older generations and not enough to younger ones but that will likely start to change this decade.
  • DH
    Daniel H.
    11 February 2020 @ 05:32
    Let's see: $6T on ME wars; $2T tax cuts for the rich; $2T banker bailouts. And he wants to reallocate "growth" (i.e., inflation) from the elderly to other pet items. Not a peep out of him about that $10T.
    • RB
      Richard B.
      11 February 2020 @ 13:11
      Quite correct. This is an arithmetic problem - known for years, really decades. Decisions made......and now consequences. Not a mistake; arithmetic is not a mistake.
    • DH
      Daniel H.
      13 February 2020 @ 03:04
      Arithmetic? Do you realize that the $6T of ME wars is off books?
  • wj
    wiktor j.
    11 February 2020 @ 12:48
    A little of a rosy picture he brings to the table. And Yet the last administration has put millions of potential US workers on food stamps, exported all the manufacturing jobs out, created a opioid epidemic, forced millions of US workers out of the unemployment system. Millennials are stuck on debt which means less money for retirement. So the talk of mobility and earnings from them is very rosy when they can even afford rent and sleep in their car. So solution to these problems are emigration. Emigration won’t solve the problem unless all the emigrants would be well educated and apply for high paying jobs on arrival. Unfortunately that’s not the case. Its not the case in Europe nor in the US. I think we will be going back to “Communism” where the government would be giving out food/Product stamps to all poor retirees. I lived through communism in Poland and it didn’t work. I think we need a totally different monetary system because this one is based on greed controlled by the banks and central banks.
    • JO
      JOHN O.
      12 February 2020 @ 01:11
      To be clear - the manufacturing jobs started moving out in the 1980's. Several factories in the area in which I grew up slowly died and were put to rest in the early 2000's. The US "Rust Belt" was so named after steel and heavy manufacturing dried up in the 80's and 90's. And much of it was technology not just the exporting of jobs. The last administration took over a train wreck just as it was about to hit a wall. If one cares about American jobs, stop shopping in Walmart and don't buy anything that says "Made in China". BTW, I think you mean immigration, with an "i". Emigration is what I am going to do if things continue to deteriorate. I hear Little Cayman still has a few lots for sale and the diving is great.
  • LP
    Lynn P.
    10 February 2020 @ 20:06
    His comment that spending decisions of government are "so permanent" struck me as perhaps the most useful and thought-provoking idea in the video. I doubt that it's a new idea, but its absence locks in (pre-spends) all the growth that may lie ahead. I'm not optimistic that such a sensible change will take place.
  • SW
    Scott W.
    10 February 2020 @ 17:32
    Some interesting points from a public/private systems guy, looking at stock flows and the "social contract", he of the belief that a central government solves things. Of course there are other views on how to "solve things", like drastically and fundamentally reducing the reach and scope of the federal government so that democratic wealth transfer becomes at the very least, a states issue. I suppose the unfolding is a function of how bad things get, but a dissolution of the US in some form or fashion is at least a possibility.
  • SJ
    Stefan J.
    10 February 2020 @ 16:57
    In half an hour of discussion about unfunded expenditures of trillions of dollars, the word "tax" is used 13 times and the word "interest" 4 times. The word "rate" in not mentioned once with regard to either. So much for expertise.
  • WG
    Wade G.
    10 February 2020 @ 16:25
    Worthwhile discussion, especially his observations related to "fiscal democracy" towards the end. Thanks.
  • JO
    Jonathan O.
    10 February 2020 @ 16:17
    If the growth of future social security is just adjustment for inflation cutting it by half would literally just be bailing out the boomers more then we have at the cost of another group which we've had far to much of already. Generally speaking 40 years from now even in a low inflation time would be at least double in today's nominal terms. If we cutting social security it should affect everyone across the board not just the groups currently paying in unless your also cutting the tax revenue being collected as well.
  • EO
    Elena O.
    10 February 2020 @ 12:24
    So seems US gov mostly spends on servicing liabilities.. That's not how growth can be sustained.
  • BF
    Bret F.
    10 February 2020 @ 11:08
    Sorta on this topic. Here in Indianapolis homelessness has gone up 2xs maybe 3xs. I actually talked to people collecting their Social Security and living in a tent . (because the cost of regular economy is to big) Drug addiction, people just scraping by. BUTT the generosity of people to give is outstanding. More than ever Food banks,clothes . Its winter now Shelters are full till spring) etc. But if recession or worse comes. That could all shut off. Crime is already at all time highs. What if the free economy goes away