Since the election, I've been trying to ponder the worldview of the twenty-somethings who voted for the re-election of Barack Obama. According to a nationwide exit poll conducted by Edison Research, the 18 to 29 cohort voted for Obama by 60% to 36%. Is there any possible theory that can make sense of this overwhelming support?
The obvious hypothesis is that the twenty-somethings accepted Obama's sales pitch. A fair summary of that pitch was: "free stuff." Prominent examples touted during the campaign included: stay on your parents' health care until you are 26; SNAP (food stamps) for all; extend unemployment insurance again and then again; continue a subsidy for student loan interest; add lots of subsidies for the uninsured under Obamacare. Sandra Fluke toured the country for the campaign stressing the importance of contraceptives available under health care plans without any deductible - that could save you $100 per year right there!
Meanwhile, did any twenty-somethings notice that on the current trajectory of public spending, the 18-29 cohort is completely screwed? Government debt, entitlement and insurance obligations are rapidly accumulating up to a crushing level, and Obama is doing absolutely nothing about it. Forget the fake $16 trillion cash in cash out basis debt -- soon to be at least $20 trillion after four more years of Obama -- that everyone cites. The twenty-somethings also must pay for their own $1 trillion of student loans, and the retirements (social security and Medicare) of the baby boom generation, and must discharge every other unaccounted-for insurance obligation the government has taken on (readers of this blog are familiar with the long list). Add those obligations to the bonded debt and the real number faced by the twenty-somethings is at least $100 trillion. Obama resists the very idea of touching any of these accumulating obligations.
Since there are about 60 million people in the 18-29 cohort, $100 trillion of total obligations comes to about $1.7 million apiece. Compared to this gigantic hole being dug for the twenty-somethings, the "free stuff" on offer in the campaign was completely insignificant. The $1.7 million per head is a fair approximation of the total lifetime earnings that one of these twenty-somethings can hope to achieve. And don't forget, the Federal government will still need to pay its ongoing expenses as well; and so will the states and local governments. It's not looking like there's going to be much left for food. Sorry! But you did save $100 on your contraceptives.
A letter to the editor of Barron's, making its way today around the internet, summarizes the intergenerational transfer that the twenty-somethings have signed on for with their votes for Obama:
This 50-something, white, conservative Republican wishes to thank America’s youth for sacrificing their financial futures and standard of living so that boomers, such as my wife and I, can look forward to a long and comfy retirement, which we could easily have afforded on our own. Now we have the youth as our guarantors and providers of a little something extra. . . .
Prior to Obama’s re-election, I believed that it was morally wrong for my generation to pass a crushing national debt on to the next one. . . . With the president’s electoral crushing of Mitt Romney [with overwhelming support from the 18-29 cohort], my overriding sense of morality and guilt have vanished. Thank you, kids!
So are the twenty-somethings just dumb -- selling their votes for $100 each while they get stuck with a per capita obligation of around $1.7 million? I like to believe that voters in the aggregate are not dumb, so I'm searching for an alternative theory. The best alternative theory that I have imagined to explain the votes of these young people is this: when you are in a Ponzi scheme, the best thing you can hope for is that it implodes as soon as possible. The longer it goes on, the more will be lost and the more destructive the final implosion will be. Perhaps Obama is just crazy (or incompetent) enough to blow this whole thing sky high in the next four years. This theory is not completely crazy. A prompt implosion of our existing entitlement Ponzi scheme would not be a bad result for the 18-29 cohort. They could stop paying for the entitlements now in return for the entitlements not being around for them when their turn comes. Probably very few of them expect the entitlements as currently configured to last another 30+ years anyway.
But that's attributing a level of cynicism and sophistication to the twenty-somethings that I don't believe they had in this vote. And is there a plausible scenario in which the United States has a prompt implosion that enables leaving the unsustainable obligations behind? Unfortunately, when a sovereign can pay its obligations in its own currency, history does not offer many examples of prompt and total implosion. (The best example may be Russia after the Soviet Union, and the restart from that implosion is not an example that is worthy of emulating.) The far more common scenario is protracted, slow, painful decline. Think Argentina -- from one of the richest countries in the world to lower middle class over 70 years, with multiple bouts of extreme but not quite hyper inflation along the way. Our future?
Conclusion: If I were 25 I would be shouting from the rooftops that this must end now! Are any of them going to wake up any time soon?