Early in the first Reagan administration Americans saved 12% of their income; household debt as a percentage of GDP was 63%. In 1980, the oldest Baby Boomers turned 34. They entered their prime earnings and spending years. This is when something went haywire with our great country. Deficit spending became fashionable for government, corporations and individuals. As we now know, Dick Cheney’s advice about deficits (i.e. that they don’t matter) was about as good as his belief that you can fire a shotgun in any direction without implications. The Boomer generation has freely made choices over the last quarter-century that has brought us to the brink of a second Great Depression.

During the current Bush administration, Americans’ savings rate actually went below zero, while household debt as a percentage of GDP soared above 130%. These figures prove the apparent prosperity of the last 25 years was an illusion.

What “essentials” do the Boomers invest all this borrowed money in every year? The US Census bureau provides the answers:



The priorities of our Boomer-led society are clearly born out in the above figures. We spend more on restaurants than on charity. We spend as much on big-screen TVs and stereos as we do on education. This may explain why 37 million (12.5%) of all Americans live in poverty, and our high-school students trail the students of 25 other countries (including Latvia) in science and math knowledge.

The $160 billion spent on gambling is indicative of the get-rich-quick attitude of the Boomer generation. Even worse, households with incomes under $13,000 spend, on average, $645 a year on lottery tickets, about 9% of all their income. Our government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit.

What the data proves is that Boomers love to shop and eat, whether they have the money to do so or not. The top 100 retailers in the US have 250,000 stores, generating $1.7 trillion of sales last year. How could America function without 31,000 McDonald’s (MCD), 35,000 KFCs, Taco Bells, & Pizza Huts (YUM), 15,000 Starbucks (SBUX), 7,000 Wal-Marts (WMT), 2,000 Home Depots (HD), 4,000 K-Marts/Sears (SHLD), and 8,000 Blockbusters (BBI)?

There are 91,000 shopping centers in the United States. The advertising industry spends $275 billion per year to convince you to spend money you don’t have on things you don’t need.

Based on the recent actions of our government and corporate leaders, we seem to lack any ethics at all. It’s immoral for the Boomer generation to run up $53 trillion in unfunded future liabilities in Social Security, Medicare and Medicaid to leave as our gift to future generations while we live it up today. Optimists like to point out that Europe and Japan have much worse unfunded liability problems than the US. That’s like taking pride in being the best-looking horse at the glue factory. In the end, we’ll all still be glue.

The 25-year Boomer borrowing and spending binge is coming to an end, and the hangover is sure to be murder. The Case-Shiller housing data shows that the 20 largest cities have experienced a 20% decline in price from their peaks. The futures index predicts a further 10% to 15% loss in value.