It’s fascinating to me how sometimes the most random things inspire me to write. First of all, it has to be a topic which is interesting to me and secondly there has to well up in me a feeling that I would have something relevant to add to the conversation. So I was sitting with laptop in lap the other night and saw two articles – a John Mauldin article posted by my friend Bob Densic and a Forbes piece by Carol Frazier – back-to-back on my social media and thought it a sign. So go ahead and read them, I’ll wait patiently for your return.
Sobering enough? I thought they were. They paint a much different picture than the good tidings promoted by the current administration, but they aren’t as pessimistic as one may think aside from the means of solution to the perceived problem.
The paragraphs that finally inspired this piece came from Jack Kelly’s Forbes post:
Ironically, the younger generations may be in for a windfall in the future. As their Baby Boomer parents pass away, they stand to receive a large inheritance. It could be the largest wealth transfer in American history.
The catch is that if the market goes down appreciably or crashes, like in the 2008 financial crisis, the parents will sell their stocks at fire-sale prices and there won’t be much left over for their children. If all of the Boomers start selling their homes when they retire—which they are now doing in large numbers—to downsize their lifestyles, housing prices may collapse. This will also lessen the amount of money that could be transferred over to their kids.“Why Young Voters Are Embracing Bernie Sanders And Democratic Socialism,” Jack Kelly, Forbes, February 5, 2020.
From the sounds of these articles, the problem seems to be that those who are struggling are having issues with several different expenditures, number one being student loans but also the costs of rent and health insurance. So when Bernie Sanders, Elizabeth Warren, et. al. go out and pledge to wave a magic wand and eliminate two of those three expenses by forgiving student loans and “Medicare for All,” well, that’s an appeal which sounds mighty good to those who wrestle with these things each month.
I’m no Boomer, but I did live through a time when I was relatively fresh out of college, newly married with a five-year-old daughter by another father, and wished to pursue the American Dream of home ownership. The year was 1990, just 30 years ago. Of course, we didn’t have a large nest egg for a down payment but there were programs out these to assist those in our situation.
However, the bank told us no. They took one look at our credit and said, “work on paying this stuff off and come back in a year.” So we did. It meant we had to be more diligent with our finances but we pulled it off and a year later we bought our first house – which was a better one than the place we were denied.
Having said that, let me tell you about that house: it was nothing fancy to look at. The biggest criteria we had was to live in the high school district we believed would give our then-second grader the best possible educational outcome. So we were willing to settle for a three-bedroom, one-bath home on a 25′ x 120′ lot that was built in 1925, in a nice neighborhood of similar houses. We made it into the desired school district by five blocks.
It’s worth adding that, at the time, I was also paying off student loans. However, the rules for student loans were different back then, as were the rules for being a success: it was widely understood that success could be achieved in modest, incremental steps. The large house in the suburbs wasn’t out of play, but it was assumed to be your step to take after establishing equity in a starter house. You stepped your way up through newer and newer second-hand cars or bought the low-priced base model Ford or Chevy before you got to the car you really wanted out of the showroom. And while life for me has taken its share of unexpected twists and turns, the Michael at age 55 isn’t really all that far away from what the Michael at age 25 expected him to be – it’s just that the cast of characters has expanded and the stage has changed. Overall, I don’t have a ton of bells and whistles and I’m quite cool with that.
So consider this perspective of expectations as you read on with my analysis, and let’s go back to the blockquote. While my parents aren’t Boomers (they are part of the Silent Generation as they both are in their eighties as of next month) they do have a house and someday it will be passed on to my surviving brother and I (my other brother passed away nearly a decade ago.) Whether he decides it’s a fine place for him and his wife to relocate to (and buys me out) or if we just sell it and split the proceeds, yes, it may be a nice nest egg. Now I can’t speak for him, but as long as the house isn’t underwater (figuratively and/or literally) my wife and I will do just fine.
Naturally I realize not everyone is as fortunate as I am with regard to that potential windfall, but it’s worth pointing out that my parents weren’t (and still aren’t) bells and whistles types either. We had the modest two-bedroom, one-bath house until I was seven and it got to the point the second bedroom was just too small for kids nine, seven, and three to share. Yes, there were two cars in the driveway but oftentimes at least one of them was second-hand, and the rare family vacation was often a week at a rented cottage on one of Michigan’s many inland lakes. But we had food on the table and a roof over our head, culminating in their dream of a house on enough land to placate the ball-playing needs of three growing boys – five acres was plenty enough.
That’s how I was taught, and while I didn’t take those Depression-era lessons completely to heart, I remembered enough to be prudent at times when the chips were down as I made my way in life.
So let me return to Kelly for a moment:
A combination of crushing student loan debt, low-wage jobs and escalating home and rental costs has a huge impact on Millennials and Gen-Zers. If a person does not feel financially secure nor confident about their future, it’s natural to hold off making big commitments, such as getting married, purchasing their first home and having children. These things were once taken for granted by older generations. Now, it’s a hard-to-reach and nearly impossible dream for many people.“Why Young Voters Are Embracing Bernie Sanders And Democratic Socialism,” Jack Kelly, Forbes, February 5, 2020.
I think Kelly definitely overstates the “taken for granted” because older generations were taught that achieving those milestones took hard work, patience, and sacrifice.
No one is putting a gun to your head to take out student loans in order to afford college. There are several alternatives:
- Begin your college career at a more affordable state school or community college
- Attend part-time and work full-time
- Embark on a career that doesn’t require a college degree, such as a trade
- Join the armed forces and eventually attend on the GI Bill
Yes, this is a sacrifice in some respects – but perhaps it’s better to sacrifice now when the stakes are low than chain yourself to decades of debt.
When it comes to the other two aspects Kelly cites, getting married and having children, we’ve often found that the younger generation does this in the wrong order by having the kids first. Now while I remind you I keep a (pretty much) family-friendly, PG-rated shop here, I have to bend the rules for a moment for a reminder:
- Guys: think with the head on your shoulders, not the one between your legs.
- Ladies: you have the ultimate say in the matter, and I’m not talking about abortion as birth control. If you don’t want to have a child yet, then keep those legs together.
- I don’t care what brand of condom you use, if you’re on the Pill, or whatever method you may think will cheat the inevitable. It’s gonna fail. Remember, when it comes to birth control, only abstinence works 100 percent of the time it’s tried.
And let’s talk about high rent and health insurance costs. Has it ever occurred to our little snowflakes that perhaps part of the problem with high rent is the overhead a landlord has to deal with: taxes, upkeep, perhaps his own mortgage? A landlord also has to build in a little bit of cost for the possibility someone skips on their rent or trashes the place before they go. Yet if you can get something that may not be the newest thing in the hot development but otherwise fits your needs, that’s a little extra to save for a down payment.
Regarding health insurance, let’s just say that thanks to health insurance being mandated, there are a lot of greedy little tongues trying to lap up that manna from heaven called taxpayer money. Some of it comes from Medicare and Medicaid, and some of it comes from subsidies. Plus don’t forget that some medical payments come from dollars you weren’t taxed on. The system hasn’t been a free market in decades, which makes it way more expensive than it would be in a simple fee-for-service world. Indeed our system is broken but Medicare for All isn’t the fix for it.
I’m well past 1500 words of advice here, so I suppose it’s time to cut to the chase: the appeal of socialism is the desire to have reward without responsibility. Working to build up savings isn’t fun, and there is no shortage of people who will tell you that’s old-fashioned and the debt isn’t really that bad. Waiting for marriage to consummate a relationship is a sure ticket to being socially outcast in this day and age, but perhaps in thirty years you’ll find out your marriage is a strong one because you built it on the ground of waiting until you had the emotional part down to begin with the physical part. Now that you have a rock-solid family unit that was raised properly you can look back and laugh about it.
Perhaps I am the worst person ever to give all this advice, but in five and a half decades on this rock I’ve kind of figured out that maybe our parents and the values and morals instilled into them by previous generations were (by and large) right.
The path to socialism is the path to an epic fail. Don’t doubt me. If we’re dumb enough to set foot that way, I fear for this land I love.