Rating: 
Summary: We should form grass-root organization to address the issue
Review: Somewhere in the near future, US and some other major developed countries such as Japan, Germany will experience a "generational storm". I am convinced that this storm will come, maybe less or more severe than the author predicted. I also know that our government will not act upon this until way too late.Although the book devotes a chapter to advise what readers can do to protect themselves, it is inadequate and too simplistic. My biggest concern is what we CAN do to protect ourselves or better, make a fortune out of the opportunity. I am looking for the answers. Many of us already have 401K, or IRA, and are still paying mortgages. For average people like us, we should form some grass-root organization to address the issue.
Rating: 
Summary: Scary- Good info. to know
Review: The author did a great job of making an important point, that we need to reform our Social Programs now or cause future generations much grief.
Some sections of the book were heavy on taxation and economics, probably a little more than the average layman would understand. Also, the book had a heavy leaning on economics. I am a finance guy, I am concerned with cash flows. A lot of the calculations these guys did were opportunity costs and non-cash flow items, so take it with a grain of salt.
The end product is a great warning with a decent measure of steps we can personally take to limit our exposure. There were several points throughout the book where I felt a little depressed for the future of our country, but I think that was their point.
Rating: 
Summary: good content marred by horrible attempts at humor
Review: The book has much information on an important subject, but its attempts to be cool and funny are just distracting rubbish. Two examples out of many -- in discussing Bill Clinton's economic record, off-hand references are made to Monica Lewinsky and Marc Rich. Bob Dole is first introduced as a Viagra salesman. What is this stuff doing in a book on public policy? The authors and the publisher should be ashamed of inserting such nonsense in an otherwise good book. I suggest skipping much of the prose and perusing the tables, or reading Kotlikoff's more scholarly work.
Rating:
Summary: Just a comment on the post below.
Review: The poster below is missing the point. The problem is that the trust fund does not bring in enough to payout the future benefits promissed. SS was built on the assumption that the average life span was much shorter than it is today. As the average life expectancy has increased faster than the retirement age, promissed benefits have increased but SS taxes have not increased to keep pace. Becasue of this the trust fund will become bankrupt.
Rating: 
Summary: Horror Story Without Foundation
Review: There is a huge market for books and articles that make the case for cutting back Social Security and Medicare. Major media outlets and publishers are anxious to give such pieces great prominence. Unfortunately, they care very little about the truth. There are some very simple facts that readers of this book would probably never recognize. 1) The vast majority of the projected increases in government entitlement spending over the next 40 years are attributable to rising per person health care costs, not the aging of the population. 2) If the U.S. proves unable to contain the costs in its health care system, the economic impact will be devastating, even if we eliminated Medicare and Medicaid tomorrow. 3)If the U.S. cannot fix its health care system, then it would be easy to curtail spending on Medicare and Medicaid by simply contracting out for these services to the countries that have managed to control costs and still enjoy longer life expectancies than the United States (see "Medicare Choice Plus: The Answer to the Long-Term Deficit Problem" on the website of the Center for Economic and Policy Research). 4) If the U.S. does control its health care costs, then the increase in government spending on entitlements for the elderly over the next 40 years will be smaller (measured as a share of GDP) than it was over the last 40 years. 5) In forty years, our children will on average enjoy a level of after-tax hourly compensation that is more than twice as high as we receive today. This is not attributable to their brilliance and hard work, but rather will be the result of the public and private capital stock that we have passed down to them, as well as the state of technical knowledge.. All of these are simple facts that every economist recognizes. It is remarkable that a book could be published on generation inequality and never address these issues. It is even more remarkable that anyone takes such a book seriously.
Rating: 
Summary: A mediocre treatment of an important issue
Review: There is no question that, as the authors note, our aging population plus the criminally irresponsible deficits being run by the President and Congress portend potential disaster ahead. But I was puzzled and disappointed by their unquestioning use of very long-term demographic projections, especially since at the same time they noted how far off the mark much shorter term budget projections have been.
The authors' unquestioning acceptance of seemingly extreme projections makes me doubt them on other matters. Example: They say the median age of the Japanese in 2050 will be 53. Think about that - the incredibly low birth rate and extreme increase in life-expectancy necessary to result in a median of 53 years old. And when they discuss U.S. population projections they spend almost no time on immigration. Yet gov't policy on that issue will have a huge impact on where we are in future decades - as it has had in recent years.
Finally, it is dishonest accounting to say that current Social Security recipients are paid by those still working. Folks may scoff at the idea of a Trust Fund, but the U.S. Treasury Dep't. does not. The Social Security surplus, which the gov't borrows from to fund current needs, is regarded by the Treasury as a debt, accruing interest, just the same as all other gov't debt obligations. So Social Security would be solvent for decades to come were it not for our politically corrupt leaders who refuse to balance budgets now. Despite the bizarre fears of Alan Greenspan just a couple of years ago that we might pay down the debt too fast (talk about wrong projections) we never even began to do so. We did not run a single real (i.e.non-Social Security) surplus in the late '90s or at any other time for many decades. See for yourself at the gov't's own website: www.publicdebt.treas.gov/opd/opdpenny.htm
Rating:
Summary: Very interesting and insightful, but uneven.
Review: This book covers an amazing amount of information related to the U.S. Government unfunded liabilities in just 8 chapters and 240 pages. The authors study in detail the demographics, economics, and fiscal policies that have lead to the current fiscal crisis. According to the authors the fiscal crisis has already occurred. If the U.S. Government's accounting reflected common standards applied to insurance companies, the U.S. Government would be deemed insolvent. This is because of our huge unfunded liabilities associated with mainly Medicare, but also Social Security. The book covers several parts, including:
1) Diagnostic of the fiscal crisis (demographic study),
2) Why certain (pseudo) redeeming factors will not alleviate the problem,
3) Why the U.S. will turn in a Banana Republic with hyperinflation,
4) Proposals to fix Social Security and Medicare and resolve our fiscal crisis,
5) An investment guide to protect one self if the fiscal crisis is ongoing. The authors' persuasiveness of their point of view is erratic from one topic to the next ranging from excellent to really bad. Their treatment of the first two topics: diagnostic and pseudo redeeming factors are outstanding. The demographics of our aging population represent a tsunami of fiscal costs that have not been provisioned for. Additionally, wave of immigration, improvement in technology, increase in labor productivity will not alleviate these costs. Immigrants cost as much in benefits as they pay in taxes. Technology has actually increased the intensity and the cost of health care. Also, Social Security benefits are fully indexed to inflation and labor productivity index. I give this section a 5 rating. The authors are convinced that the U.S. Government will be hell bent on decreasing its real unfunded liability by printing money that will result in hyperinflation. I think this is nonsense. The Federal Reserve which is politically independent is the body who controls the levers of the money supply and associated inflation. It will never cause a situation where hyperinflation will take root. We most probably will have real interest rate levels substantially higher than we do now. But, the risk is that such high real interest rate levels will choke economic growth and cause recession and deflation, not inflation as the authors suggest. I give this section a 1 rating. The authors proposals to fix Social Security and Medicare are excellent, as they make economic and political sense. They are talking of a very slow privatization phase in of Social Security, and a voucher system for Medicare so elderly would make economically informed decision when purchasing health care. I give this section a 5 rating. Their investment guide unfortunately is piss poor. I'd give this section a 1 rating, here is why. The authors recommend holding as your core investments inflation indexed bonds (either TIPS or I Bonds). However, these bonds give you very mediocre returns before tax. They give you terrible returns after tax. Over the long run, there is little chance you will protect your assets against inflation on an after tax basis with these instruments. They recommend international bonds as a hedge against the inevitable long term depreciation of the dollar [view of the authors]. However, that is unlikely. Per their own demographic study just about all developed countries have a much worse unfunded liability problem than we have. This is because their societies are aging more rapidly and their government benefits are more generous. If the dollar has to tank, you have to wonder against what? From a long term demographic perspective there are no clear candidates. Finally, the authors also recommend gold as an investment, especially through gold mining companies. I think only a gold bug could follow this recommendation. Gold has little merit as an investment. It's proclaimed inflation hedging benefits have melted away twenty years ago. If you are further interested in this subject, I also strongly recommend two excellent books by Robert Stowe England: "The Fiscal Challenge of an Aging Industrial World" and "Global Aging and Financial Markets." These books give you a better comparison between the U.S. and other developed countries' fiscal position. Regarding investments, I strongly recommend Burton G. Malkiel's "The Random Guide to Investing."
Rating:
Summary: A Must Read
Review: This book has my early vote for best economics/finance book of the year. At times your may find this deep reading because some of the concepts are new and unfamiliar to most, even though there is no math to contend with beyond A + B = C + D. But getting this clear explanation of the concept of inter-generational accounting is well worth the effort. I must say the authors demonstrate a tour de force here in terms of judgement about what they have chosen to cover, the quality of the writing, and the practical significance of their work. Not only do they delineate a problem of stark importance to all Americans, they go a long way in describing what may be the best chance of minimizing the damage to our country and to individual investors. And I personally rate their investing advice as both practical and right on the money. Who could reasonably ask for anything more?
One final thought - I would love to get George Bush and John Kerry to read this book - especially Chapter 6 on Effectively (with a capital E) reforming Medicare and Social Security. I will be surprised (and disappointed)if this book doesn't generate wide discussion of the enormity we all face.
Dr. Ron Chesler
Rating:
Summary: Let them eat cake
Review: This is about the "big whammy," as the authors term it, a $51-trillion debt that America has piled up that will come home to roost upon the heads of our children and grandchildren. They will not be pleased. The really scary thing about this story is that, although Kotlikoff and Burns wax hopeful near the end of the book, and indeed present a possible way out of the crisis, one gets the sense that they believe that there will be no remedial action and certainly no cure until the pain sets in, and then it will be too late. Personally I won't be around to experience any of this, but my grandsons will. According to the authors, my grandsons will be burdened with tax obligations of unprecedented weight and/or runaway inflation of the banana republic variety, or the collapse of the American economy as we know it. It's even possible that they'll have all three, probably in that order. The main culprits are Social Security, Medicare and Medicaid. Quite simply we are incurring transfer payment obligations to our elderly so enormous that the working population will not be able to pay for them. And the terrible thing is that our government knows this--there have been many studies--but has neither the will nor the desire to do anything about it. Call it the crisis of representative democracy. No one in Congress or in the White House has the guts to tell the American people that we are going bankrupt. Everybody seems to think that the future will take care of itself, or, at any rate, that's THEIR problem. Maybe some fabulous invention or technology will confer upon my grandsons enormous wealth and all the financial obligations will disappear like wisps of clouds on a sunny day. It is important to note that the present incumbent in the White House has greatly exacerbated the problem by recklessly cutting taxes while going on a wild spending spree so that his friends at Raytheon, Halliburton, Big Oil and Big Pharma will have full capitalization. As the authors note, politicians care almost exclusively about maintaining themselves in office. Consequently they are seldom able to address problems beyond the short horizon of the next election. In a larger sense, the crisis so vividly and exhaustively described in this strangely readable book isn't about economics at all. It is about demographics. With increasingly aging populations, thanks to modern sanitation, cradle to grave health care, plenty of food and safe water, etc., the highly developed countries now have to figure out who is going to pay for keeping the old folks alive and well. The authors present some solutions: make them work longer, print money so that inflation will dilute the financial obligations, massively tax the working generations, etc. What they do NOT propose is that the elderly be left to fend for themselves, nor do they suggest a modest proposal of the Jonathan Swift variety, say massive euthanasia. Instead they propose a 12% national sales tax. This would be on top of all the other taxes. Imagine in my state (California), where we already have an eight and a quarter percent sales tax, what it would be like adding over twenty percent to the cost of products and services. Guess what? This would put a damper on spending and would greatly increase black market traffic, and probably wouldn't work--which is why Republican think-tankers are scheming to "privatize" Social Security, Medicare and Medicaid, a venture that the authors rightly call "eliminating" Social Security, Medicare and Medicaid. Well, that's not going to happen. "I'm old and I vote," will say the AARP, and politicians will take notice. And no politician is going to vote for the authors' proposed 12% national sales tax. Read my lips. So what IS going to happen? Nobody knows. The problem is unprecedented in human history, because never before has the ratio of the old and retired to the young and working been so high. Historically when governments overspend, they reach for the printing press and flood the market with cheap money. This is what I predict will happened. The US, Japan, and Europe will all go massively under the flood of inflation and will, after horrendous suffering, reemerge to restructure their transfers so that all of the suggestions of the authors are put in place including later retirement, responsible taxation, controlled medical costs, and a more modest lifestyle for all. That is, if we don't have revolutions and a return to some sort of absolute state control. Some examples of the engaging prose spun out by Kotlikoff (who is an economist) and Burns (who is a journalist): (After documenting the progressive aging of our populations): "This will not be a phase. We will be older forever." (p. 36) Perhaps the most important truth in the book is this from page 83: [What is really happening is] a massive redistribution [of wealth] from young and future Americans to currently living adults. Our de facto generational policy has been to indulge the present at the expense of children living and unborn. This gives new meaning to "no taxation without representation." They really rub it in a few paragraphs later: [The AARP] has dropped the word "retired" to attract members in their 50s who aren't yet retired but have the same interest as current retirees: ripping off the next generation. The book ends with tips on how to protect yourself from the meltdown. Interesting enough, the most important tips are on how to stay healthy, since health is the most important capital one can have. But here's a nice economic tip from page 134: "The government is going to need the budgetary resources that only high inflation can provide. Hence, high inflation is going to occur. Indeed, it's likely to occur sooner than later." Gold mining stocks, anyone?
Rating:
Summary: Let them eat cake
Review: This is about the "big whammy," as the authors term it, a $51-trillion debt that America is piling up that will come home to roost upon the heads of our children and grandchildren. They will not be pleased.
The really scary thing about this story is that, although Kotlikoff and Burns wax hopeful near the end of the book, and indeed present a possible way out of the crisis, one gets the sense that they believe that there will be no remedial action and certainly no cure until the pain sets in, and then it will be too late.
Personally I won't be around to experience any of this, but my grandsons will. According to the authors, my grandsons will be burdened with tax obligations of unprecedented weight and/or runaway inflation of the banana republic variety, or the collapse of the American economy as we know it. It's even possible that they'll have all three, probably in that order.
The main culprits are Social Security, Medicare and Medicaid. Quite simply we are incurring transfer payment obligations to our elderly so enormous that the working population will not be able to pay for them. And the terrible thing is that our government knows this--there have been many studies--but has neither the will nor the desire to do anything about it. Call it the crisis of representative democracy. No one in Congress or in the White House has the guts to tell the American people that we are going bankrupt. Everybody seems to think that the future will take care of itself, or, at any rate, that's THEIR problem. Maybe some fabulous invention or technology will confer upon my grandsons enormous wealth and all the financial obligations will disappear like wisps of clouds on a sunny day.
It is important to note that the present incumbent in the White House has greatly exacerbated the problem by recklessly cutting taxes while going on a wild spending spree so that his friends at Raytheon, Halliburton, Big Oil and Big Pharma will have full capitalization. As the authors note, politicians care almost exclusively about maintaining themselves in office. Consequently they are seldom able to address problems beyond the short horizon of the next election.
In a larger sense, the crisis so vividly and exhaustively described in this strangely readable book isn't about economics at all. It is about demographics. With increasingly aging populations, thanks to modern sanitation, cradle to grave health care, plenty of food and safe water, etc., the highly developed countries now have to figure out who is going to pay for keeping the old folks alive and well. The authors present some solutions: make them work longer, print money so that inflation will dilute the financial obligations, massively tax the working generations, etc. What they do NOT propose is that the elderly be left to fend for themselves, nor do they suggest a modest proposal of the Jonathan Swift variety, say massive euthanasia. Instead they propose a 12% national sales tax. This would be on top of all the other taxes. Imagine in my state (California), where we already have an eight and a quarter percent sales tax, what it would be like adding over twenty percent to the cost of products and services. Guess what? This would put a damper on spending and would greatly increase black market traffic, and probably wouldn't work--which is why Republican think-tankers are scheming to "privatize" Social Security, Medicare and Medicaid, a venture that the authors rightly call "eliminating" Social Security, Medicare and Medicaid.
Well, that's not going to happen. "I'm old and I vote," will say the AARP, and politicians will take notice. And no politician is going to vote for the authors' proposed 12% national sales tax. Read my lips. So what IS going to happen?
Nobody knows. The problem is unprecedented in human history, because never before has the ratio of the old and retired to the young and working been so high.
Historically when governments overspend, they reach for the printing press and flood the market with cheap money. This is what I predict will happened. The US, Japan, and Europe will all go massively under the flood of inflation and will, after horrendous suffering, reemerge to restructure their transfers so that all of the suggestions of the authors are put in place including later retirement, responsible taxation, controlled medical costs, and a more modest lifestyle for all. That is, if we don't have revolutions and a return to some sort of absolute state control.
Some examples of the engaging prose spun out by Kotlikoff (who is an economist) and Burns (who is a journalist):
(After documenting the progressive aging of our populations): "This will not be a phase. We will be older forever." (p. 36)
Perhaps the most important truth in the book is this from page 83:
[What is really happening is] a massive redistribution [of wealth] from young and future Americans to currently living adults. Our de facto generational policy has been to indulge the present at the expense of children living and unborn. This gives new meaning to "no taxation without representation."
They really rub it in a few paragraphs later:
[The AARP] has dropped the word "retired" to attract members in their 50s who aren't yet retired but have the same interest as current retirees: ripping off the next generation.
The book ends with tips on how to protect yourself from the meltdown. Interesting enough, the most important tips are on how to stay healthy, since health is the most important capital one can have. But here's a nice economic tip from page 134: "The government is going to need the budgetary resources that only high inflation can provide. Hence, high inflation is going to occur. Indeed, it's likely to occur sooner than later."
Gold mining stocks, anyone?
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