Hillarysworld

Sitting in America, it’s hard to grasp the importance of the British elections and the Greek riots. Nothing to do with us, right? Well, I’d pay attention to the drama playing out here. It may be coming to a theater near you.

The meta-story behind the British election, the Greek meltdown and our own Tea Party is this: Our parents were “The Greatest Generation,” and they earned that title by making enormous sacrifices and investments to build us a world of abundance. My generation, “The Baby Boomers,” turned out to be what the writer Kurt Andersen called “The Grasshopper Generation.” We’ve eaten through all that abundance like hungry locusts.

Now we and our kids together need to become “The Regeneration” — one that raises incomes anew but in a way that is financially and ecologically sustainable. It will take a big adjustment.

We baby boomers in America and Western Europe were raised to believe there really was a Tooth Fairy, whose magic would allow conservatives to cut taxes without cutting services and liberals to expand services without raising taxes. The Tooth Fairy did it by printing money, by bogus accounting and by deluding us into thinking that by borrowing from China or Germany, or against our rising home values, or by creating exotic financial instruments to trade with each other, we were actually creating wealth.

Greece, for instance, became the General Motors of countries. Like G.M.’s management, Greek politicians used the easy money and subsidies that came with European Union membership not to make themselves more competitive in a flat world, but more corrupt, less willing to collect taxes and uncompetitive. Under Greek law, anyone in certain “hazardous” jobs could retire with full pension at 50 for women and 55 for men — including hairdressers who use a lot of chemical dyes and shampoos. In Britain, everyone over 60 gets an annual allowance to pay heating bills and can ride any local bus for free. That’s really sweet — if you can afford it. But Britain, where 25 percent of the government’s budget is now borrowed, can’t anymore.

Britain and Greece are today’s poster children for the wrenching new post-Tooth Fairy politics, where baby boomers will have to accept deep cuts to their benefits and pensions today so their kids can have jobs and not be saddled with debts tomorrow. Otherwise, we’re headed for intergenerational conflict throughout the West.

Continues @ NY Times

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Sad but true. It is a rare day that I quote both Krugman and Friedman... but they are both seeing the situation clear.

I just sincerley hope this does not come down to VAT. We do not need that. Measures of austerity and serious belt-tightening by the government, and perhaps implementation of serious performance management for government workers (now that would be a real challenge) is necessary.

Baby boomers not only ate up, they also contributed heavily to the riches of the nation. The fact that most tend to forget is that wealth did get redistributed significantly during the stock market rise. And in the fall of the stock market, it got further redistributed for worse and most of the baby boomers lost their nest egg... and now many have lost their jobs.  The articles also forget the role that wars have played in building our red ink laden balance sheet.  A more realistic view of the situation would consider these factors and then arrive at a solution that goes to the root of these issues than slap across-the-board consumption tax. VAT would be a real nightmare on top of the current economy.

We also have the huge challenge of shifting gear from a consumption-driven economy to a savings and investment driven economy. Saving and investment is what our "Greatest Generation" did better that made them so great, and that is worth remembering every time we refer to them in contrast to what we as baby boomers have and have not done, and what may or may not need to happen to "correct" the situation.