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Talk by Stanley Druckenmiller and Geoffrey Canada delivered at Bowdoin College on May 7, 2013.
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Generational TheftMay 7, 2013
Geoffrey CanadaStan Druckenmiller
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“We are a nation of takers” – Nicholas Eberstadt
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The level of generosity to the elderly has almost doubled in the last 40 years, unsustainable
Source: CBO and social security data.
Benefit per oldster / GDP per capita
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The young’s consumption is up by 38% in 30 years, while the old’s consumption is up by 164%!
Source: Gokhale, Kotlikoff, Sabelhaus, 1996.
Average consumption by age group
Young
Old
Young
Old
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Poverty rate for the elderly have collapsed, not so for children
National Health Spending across Countries
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Fertility rates have gone down dramatically
Fertility rate = 3.7% in 1950s ; Fertility rate = 2.06 in 2011
Source: National Center for Health Statistics
2013Baby boom +65 years
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Life expectancy has gone up sharply
US life expectancy by gender, 1900 – 2006
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The entitlement’s problem is just beginning
Source: CBO, 2012.
Federal spending by entitlement’s program
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Dependency ratio is just starting to fall• By 2030, there will be HALF the amount of young to support the old
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What is the fastest growing age population?
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The true “fiscal gap”If taxes rates and the level of generosity in entitlements
programs remain the same, we have a massive problem ahead. Either tax rates rise or generosity falls. There is no alternative.
Source: Kotlikoff, 2012
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The cost of waiting is enormous
Source: Kotlikoff, 2012
The increase in all federal taxes and expenditures needed to cover fiscal gap today is much lower than in 40 years
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Raising taxes on the rich is not the solution
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Lower capital gains and dividends is a direct transfer from young to old
New worth by age of household head in 2007
Source: Survey of Consumer Finance
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2011 U.S. defense spending exceeded the 13 next highest defense budgets combined
Source: Stockholm International Peace Research Institute, SIPRI Military Expenditure Database.Note: Dollar figures are in billions of 2011 constant U.S. dollars.
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The biased growth of the welfare state
US consumption by age (ratio to labor income ages 30-49)
Source: US national Transfer Accounts, Lee, Donehower and Miller, 2011.
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Despite spending twice the average country, health outcomes are bad
National Health Spending across Countries
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Generational TheftMay 7, 2013
Geoffrey CanadaStan Druckenmiller
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An additional problem of inefficiency
Source: CBO, 2012.
National Health Spending across Countries
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Aging has come with more consumption and less investment
