The Clash of Generations, Saving Ourselves, Our Kids, and Our Economy by Laurence J. Kotlikoff and Scott Burns. MIT Press, 2012, 275 pp.
The Clash of Generations discusses the grave state of the US economy and its future as the federal government pours funding into Social Security, Medicare, Medicaid, and other programs primarily designed to provide for the older generation while funded by the younger ones. Laurence J. Kotlikoff is an economics professor at Boston University and a columnist for Bloomberg Media. Scott Burns is a nationally syndicated financial columnist as well as the cofounder and chief investment strategist of the online investment tool AssetBuilder.com.
The authors analyze the major US fiscal programs—particularly Social Security, Medicare, and Medicaid—against a rise in the elderly population and increase in their lifespan, bringing the reader to the conclusion that the country is in worse financial shape than Portugal, Ireland, Italy, Greece, or Spain (PIIGS). Using the $211 trillion fiscal gap—the present value of all future spending obligations net all future tax receipts—versus the $11 trillion economic debt (at the time the book was written) boldly illustrates this fact. Kotlikoff and Burns assert that focusing on the fiscal gap is a more accurate measure of our indebtedness, representing 14 times our gross domestic product, ultimately putting the United States in worse shape than Greece, the worst of the PIIGS countries.
Additionally, the nation’s saving and investment rates have all but disappeared. At its peak in the 1950s, the US saving rate reached
15 percent. In 2010, according to the best information available to the authors at the time, it was 0.1 percent.
Kotlikoff and Burns highlight the impact of this disastrous financial state by analyzing its effect on the younger generation.
Specifically, they focus on the decline in marriage, home purchases, and childbearing, all attributed to an uncertain financial future.
They also speculate that in the not so distant future, Americans may shift to a culture of emigration. All of these results have serious social implications for the country. Midway through the book, the authors introduce their “purple plans.” These seven plans present Kotlikoff’s and Burns’ road to economic recovery by revising key fiscal programs, including taxes, Social Security, healthcare, education, banking, government accountability, and energy.
As well thought out as they are, the authors do a disservice to their plans by neglecting to offer practical steps on how to implement them.
Clash of Generations would be a more comprehensive work if it gave advice on how to force the government to apply some or all of these solutions.
Overall, this is an excellent, insightful read. It provides the reader a comprehensive review of the country’s economic woes and highlights the danger of not resolving these problems. The authors are well qualified to formulate the discussion and have thoroughly researched their points.
Although well written and insightful, the book faces two challenges. First, the information, though only four years old, is dated. Kotlikoff and Burns reference the Affordable Care Act and its implications on the economy but do not cover the actual cost of the program. Potential readers ought to be prepared to research today’s financial figures. Additionally, most of the debt statistics are from 2010 and have significantly changed over six years.
The second issue concerns the book’s language. Being experienced economists, the authors write at an advanced level, requiring a foundational understanding of economics or the willingness to research its concepts. Kotlikoff and Burns could reach a much broader audience and strengthen their concepts by offering this work in a more commonly understood dialogue.
Clash of Generations offers good insight to anyone interested in the state of the US economy. Service members of all ranks and backgrounds will benefit from this read, gaining an understanding of US fiscal policy and how to improve it.
MSgt David A. Dunn, USAF