Teenagers and Tax Cuts
Every parent know that there are actually three certainties in this
world: death, taxes, and my teenager will do something stupid. It does
not matter how often or loudly teens are warned about the dangers of
drugs, alcohol and unprotected sex. They will inevitably and reliably
make some kind of dumb mistake ... like their parents before them, and
their parents before them. Explaining the 60's is an awkward thing at
the dinner table for a lot of Baby Boomers.
This is worth remembering as we face a barrage of electioneering on the benefits of tax cuts. Around 1980 a lot of Baby Boomers were going through a second kind of post adolescence: call it their economic teens. They were old enough to make some money, but still short on adult judgment. Which is precisely when Reagan offered up some instant gratification in the form of major tax cuts and the now famous trickle down theory - it turned out to be one of the great economic bong hits of all time.
The problem with trickle down theory: it is a great deal for people at the top of the economic food chain, and a lousy deal for everyone else. Cutting taxes gives the rich an increase in marginal income that produces a variety of huge long term and long lasting advantages. Their increased economic might helps them make their insular little worlds even more insular. What really trickles down to everybody else is a lot less opportunity over the long term.
Consider the impact of that poor economic decision making in 1980's on today's teenagers and their education. Little Muffy from the land of McMansions goes to a really good private high school (figure on $30k per year). She's college bound, so she gets tutored on the SAT and works with a pricey private college admissions consultant (figure another $10k per year). Muffy's folks can do this because the Reagan tax cuts allowed them to put $25k away every year since their darling daughter was born.
Those same 1980's tax cuts gave Joe, the neighborhood plumber, an extra $5k per year ... which he used on home improvements. Joe Jr., his son goes to the local public school, the one that Muffy fled, and hopes to be the first member of the family that goes to college. But Joe is jumping into an application game he doesn't understand, without any good coaching, and where he is badly out-muscled. He doesn't know it but his team is already behind by 50 on the scoreboard, late in the first quarter.
Joe, Jr. will go to college wherever his raw talent and drive will take him. With a bit of luck and lots of hard work he might land in a corporate training program with a starting salary of $50k. Of course, he will also have a mountain of student loans to pay-off.
Muffy is going to Harvard ... and getting an MBA from Wharton that will lead to a consulting job with a starting salary of $125k. And she starts that career debt free.
Some might call this a "structural disadvantage" and it highlights a bitter irony in this election season: It is John McCain - the rich conservative trying to sell us an across-the-baord tax cut - who has labeled education as "the civil rights issue of the 21st century."
Hmmmm, parents. Maybe this time, when the bong gets passed, we should "just say no."
This is worth remembering as we face a barrage of electioneering on the benefits of tax cuts. Around 1980 a lot of Baby Boomers were going through a second kind of post adolescence: call it their economic teens. They were old enough to make some money, but still short on adult judgment. Which is precisely when Reagan offered up some instant gratification in the form of major tax cuts and the now famous trickle down theory - it turned out to be one of the great economic bong hits of all time.
The problem with trickle down theory: it is a great deal for people at the top of the economic food chain, and a lousy deal for everyone else. Cutting taxes gives the rich an increase in marginal income that produces a variety of huge long term and long lasting advantages. Their increased economic might helps them make their insular little worlds even more insular. What really trickles down to everybody else is a lot less opportunity over the long term.
Consider the impact of that poor economic decision making in 1980's on today's teenagers and their education. Little Muffy from the land of McMansions goes to a really good private high school (figure on $30k per year). She's college bound, so she gets tutored on the SAT and works with a pricey private college admissions consultant (figure another $10k per year). Muffy's folks can do this because the Reagan tax cuts allowed them to put $25k away every year since their darling daughter was born.
Those same 1980's tax cuts gave Joe, the neighborhood plumber, an extra $5k per year ... which he used on home improvements. Joe Jr., his son goes to the local public school, the one that Muffy fled, and hopes to be the first member of the family that goes to college. But Joe is jumping into an application game he doesn't understand, without any good coaching, and where he is badly out-muscled. He doesn't know it but his team is already behind by 50 on the scoreboard, late in the first quarter.
Joe, Jr. will go to college wherever his raw talent and drive will take him. With a bit of luck and lots of hard work he might land in a corporate training program with a starting salary of $50k. Of course, he will also have a mountain of student loans to pay-off.
Muffy is going to Harvard ... and getting an MBA from Wharton that will lead to a consulting job with a starting salary of $125k. And she starts that career debt free.
Some might call this a "structural disadvantage" and it highlights a bitter irony in this election season: It is John McCain - the rich conservative trying to sell us an across-the-baord tax cut - who has labeled education as "the civil rights issue of the 21st century."
Hmmmm, parents. Maybe this time, when the bong gets passed, we should "just say no."
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Great post.
Over the next generation, the Baby Boomers are going to have one last chance at revising their place in history. A chance to outgrow the endless adolescence you write about. After Clinton & Bush, the two Boomer presidents, have both gone down in flames in different ways (Clinton with the personal problems, and Bush the ideological), Boomers have to ask themselves what they want their legacy to be.
Do they want to leave a country saddled with debt, with huge economic disparities, a weak currency, and a world that is cynical about the American idea?
Or will Boomers be willing to give back -- to support the tax increases that MUST come -- and the reform of Medicare and the Health Insurance system.
God willing, the adults will be in charge for the next little while, and sacrifices will need to be made at every level of society. I can only hope that the "Me" generation, those who have sacrificed so little, will grab their chance at redemption.
October 27, 2008 3:41 PM | Reply | Permalink