Comment by JumpCrisscross
2 days ago
> Most of today is the result of stealing from the future, and that strategy is running out of steam
If you "calculate the net present value (NPV) of benefits received minus taxes paid for US generations born 1850 to 2090," you find "all generations 1950 to 2050 are net gainers, while many current elderly are losers" [1].
("There are two peaks in net benefits. The first peak was centered on the cohort born in 1908 which experienced the large windfall gains from the start-up of social security but missed much of the windfall losses from the expansion of public education funding. On net, the 1908 cohort received net transfers amounting to 5.7% of lifetime earnings. The second peak in net benefit is centered on the cohorts born in 1993-94 which experienced the positive benefits of the educational expansion funded by previous generations and which are projected to avoid the looming net costs of paying the social security and Medicare implicit debt. On net, these cohorts are forecast to receive net benefits amounting to 5.6% of lifetime earnings.
There are three sets of cohorts which experienced net losses through the transfer systems. Those born before 1880 experienced net losses due to the expansion of the public education system. Those born between 1930 and 1947 also experienced net losses. While these cohorts did receive large windfall gains associated with the start-up periods for Social Security and Medicare, these were more than offset by windfall losses from the expansion of the public education system. Cohorts born after 2060 are expected to incur increasingly large net losses via the public transfer systems as Social Security and Medicare overwhelm the gains through education.")
I would like to see an update, as this paper is ~15 years old. I also don't see it accounting for real estate costs outpacing wages, requiring younger cohorts to devote arguably unreasonable amounts of their current cashflows to housing. My statement does not scope solely to public transfer systems, but the economic system as a whole. Today wants returns, while issuing as much future obligation as possible (in various ways, debt instruments, higher future taxes, etc) for someone in the future to pay.
> don't see it accounting for real estate costs outpacing wages, requiring younger cohorts to devote arguably unreasonable amounts of their current cashflows to housing
"Millennials are now wealthier than previous generations were at their age" [1] on the back of home-price appreciation [2].
[1] https://www.wsj.com/personal-finance/millennials-personal-fi...
[2] https://www.stlouisfed.org/on-the-economy/2024/feb/millennia...
https://www.theguardian.com/us-news/2023/aug/17/millennial-h...
> By age 30, just 42% of millennials owned homes, compared to 48% of gen Xers and 51% of baby boomers, an analysis of government data by Apartment List found. This gap persists into their early 40s, with the oldest millennials still having a lower rate of ownership than previous generations when they were that age. ...
> But turbulent times may be ahead for millennials. Experts say that the window of improved affordability may have already closed.
> “They bought houses and they are active in the market,” said Lautz of the NAR, “just not at the rate that we should be seeing for this age category.” Housing affordability has declined steadily in 2023, according to the NAR, as has inventory, from 1.9m homes in June 2019 to 1m today. And this year, boomers are once again the largest group of homebuyers, often competing with millennials looking to buy their first home.
> The personal savings rate is now 4.3% compared to an unusually high rate of 33.8% in April 2020. And Experian expects student loan payments – on pause during the pandemic – to resume in October at more than $200 a month on average.
> Matt Kinghorn, a senior demographer at the Indiana Business Research Center at Indiana University, said the increase in home ownership among young adults over the last few years “could potentially be short-lived, driven by those really low mortgage interest rates and a surge in personal savings during the first year of the pandemic”.
https://www.pewresearch.org/short-reads/2024/10/25/a-look-at...
> One commonly used (though also criticized) benchmark for housing affordability is that no more than 30% of household income should go toward housing costs. Households that spend more than that are considered “cost burdened” by the U.S. Department of Housing and Urban Development.
> By that standard, 31.3% of American households were cost burdened in 2023, including 27.1% of households with a mortgage and 49.7% of households that rent, according to 1-year estimates from the Census Bureau’s American Community Survey (ACS). (Many more people own than rent: In the second quarter of 2024, 65.6% of occupied housing units were owned while 34.4% were rented, according to the most recent estimates from the Census Bureau’s Current Population Survey/Housing Vacancy Survey.)
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NPV of deferred payment being less than the equivalent payment is not sufficient to demonstrate savings. 1) you must know the market clearing rate of the up front payment. 2) This sidesteps the difference in payer.
$100 today and $100 is cheaper than $200 today, but not if the alternative is $101 today. Similarly, you might not agree is a good deal if I offer $100 today instead of $200 and leave you the $100 debt. Beneficiaries are not the same as the debt holders.
Lastly, deferred payment is a good deal if I invest the present savings. If I dont, the NPV calculation benefit calculation isn't applicable.