Economy in the ‘tweens
by Bernie Quigley
- for The Hill on 11/16/08
I happened to pass William Kristol, founder and editor of The Weekly Standard, on C Span over the weekend on way to a football game on a different station. He was commiserating with fellow conservative pundits at the Republican Governors Convention and said something which should be watched is the demographic of young people between 18 and 28 who tended to vote Democratic in this election. He said he has three kids in that range. I do as well. It came to mind Sunday morning reading Tom Friedman’s column in The New York Times. Our fiscal and political condition Friedman points out feels like a mess with no one in charge. He offers a solution which might be considered a manifesto: “Go shopping.”
“Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull us together as one nation and inspire and enable us to do the one thing we can and must do right now: Go shopping.”
Kristol suggested that his kids and mine could well change their political direction between 2008 and 2012. But there is a bigger problem here because if Friedman’s analysis is correct, the fate of our nation and perhaps the world is not linked to how this demographic group will vote in 2010 and 2012 but how it will shop between now and then.
They will not be buying washing machines or refrigerators. They will not be buying lawn mowers. They will not be buying houses and have no interest whatsoever in cars. They might like a new cell phone if they happen to drop the one they have in a lake. They need Ipods, possibly a Blackberry if they get a job. One of my kids paid several hundred dollars for a great bike – more than I paid for my truck. Another needs cash occasionally for shared gas costs to get to climbing ranges in Arizona or someplace. And they need laptops. Laptops are magic mirrors to kids; icons and talismans of a generation like cars were to the Fifties generation. Maybe the kids today will be calling for government bailouts of Mac and PC in 60 years. I have no idea where they get their clothes; find them or borrow them perhaps. They don’t care how they dress.
If we are waiting for these kids to jump start the economy it could take awhile. They have college bills to pay and graduate school and entry level jobs which don’t pay well. The best among them care about the work they will do rather than the pay and go to work at places like Teach for America.
To understand this situation economists might go back to the original texts; not Keynes or Adam Smith, but J.R.R. Tolkien, author of The Lord of the Rings. These young people, like the hobbits in the glade, are still in the ‘tweens; the age between childhood and adulthood which in neither the one nor the other. The ‘tween, says Tolkien, lasts until age 32. That is when people – adults – start buying stuff. It is still awhile away for these young ‘uns.
Economist Harry Dent, who uses generational demographics in his projections, makes the point that the spending issue is generational and most of the people who make up the fourth post-war generation demographic are still in high school and college. They will not start big deal spending for another 10 years.
As a war baby, I can attest to the ‘tweens theory. In 1978, when I was 32 I owned practically nothing. I’d spend my ‘tweens in military service, college and graduate school and had only just started by first real life job. I’d never dreamed of buying a house and lived more than an hour’s subway ride from my job in Manhattan. Then around 1980 I got married, bought a house, and all the stuff that goes in and around it – beds, furniture, washing machines, lawn mowers, etc. – then a new station wagon when the first baby came, then a new bigger one with the second one and a bigger house. From then until now there have been four kids and all their stuff, six houses in sequence, each one bigger than the last, a whole bunch of cars and trucks and everything imaginable on weekend trips to Lowe’s.
Now I am 62 and all spent out. All we need now is a small patch of woods in a southeastern corner of the Smokies and a retired yellow school bus to live in which I think I can get for about $800.
A new generation will have to do the spending now but they are still in the ‘tweens.
But Friedman says we must spend now and he may be right: “Obama can’t wait until Jan. 20 to weigh in on this. If we don’t stimulate the global economy fast enough and big enough, some of Obama’s inaugural balls might be held in soup kitchens.”
And this complicates the problem. The generational economic cycles alternate light and dark; they rise in light and descend to darkness. This year the descent starts. 40 million people were born within the same few months shortly after World War II. They have likewise already bought all their stuff. This year, the 62nd post-war year, they begin to tap into Social Security. Another 40 million are right behind us.
We will need Medicare and Medicaid and we expect it as a birthright. Medicaid grew 9.5% annually over the past 10 years and South Carolina Governor Mark Sanford says that's unsustainable. And if Congress opens the checkbook now for all these bailouts, there will be no reform.
“Already, our nation's unfunded liabilities total $52 trillion -- about $450,000 per household,” says Sanford. “There's something very strange about issuing debt to solve a problem caused by too much debt.”
It will invariably get stranger. I can reasonably expect to live another 25 years and so can most of the 40 million my exact age. And what we “spent in” to create the economy in the last 25 years we will tap out in the next.