"The Clash of Generations"

John Mauldin of Mauldin Economics, http://www.mauldineconomics.com/, is one of the financial experts that I follow to gain perspective on global economic issues. Recently, Mr. Mauldin recommended his followers read a new book by Laurence J. Kotlikoff and Scott Burns, The Clash of Generations - Saving Ourselves, Our Kids, and Our Economy. I read the book while flying to and from Las Vegas on a recent vacation. Mr. Mauldin made an excellent recommendation.

The Clash of Generations is the first book I have read that correctly analyzes all the major issues and problems the US government and its citizens have created over the past 40 years. I have addressed many of the issues individually through my articles, blogs and tweets on www.thepurplemuse.com. However, the authors do a great job of linking the issues together and presenting the impact of current government policies on our citizens. The bottom line of the book is that The Greatest Generation and the Baby Boom Generation are taking and plan to take the future wealth of their grandchildren, children and future generations for current consumption and to maintain a standard of living they haven't earned. The current structure of Social Security, Medicare, Medicaid and other government programs aimed at maintaining living standards for the elderly simply don't work from a financial perspective. The old are being subsidized far too heavily to the detriment of younger generations. The authors do a great job of explaining how this situation has evolved over the years and the mathematics associated the financial problems we have created. It is all about financial math. Politicians from both parties have refused to deal with the continuous demands of the elderly to transfer wealth from younger generations to themselves. This is the primary reason for our current economic problems and the dim prospects for younger and future generations of Americans. The time has come for the younger generations to revolt against these government policies. The Occupy Wall Street crowd needs to redirect its energy against the real cause of its anger, the US government.

The authors make the case that the US is in the worst long term financial condition of any country in the world. I completely agree with their analysis. The authors make the point that the correct measurement of government fiscal health is the "fiscal gap". The authors calculate the US fiscal gap at $211T. Yes, $211 Trillion. Since we are failing to address the causes of the fiscal gap it continues to get materially worse every year. The authors believe $211T may be an underestimate. Our current national debt of $16T is negligible compared to the future deficits and debt expansion that are coming under current government policy and the demographics of the US population.

The authors make the case that I have been making for many years. The US government and the entitlement programs must be fundamentally restructured. The authors offer approaches to restructure the big problem areas. I agree with many of their suggested restructuring plans. However, I am open to different approaches to solving the problem as long as the government acknowledges the problem and restructures. You can read the details of their proposals at The Purple Plans, http://www.thepurpleplans.org/. Isn't it amazing that they chose to identify their approach with "Purple", just like this web site. Solutions paths are not being offered by our current political parties. We, the people, must continue our grass roots efforts to effect change in our country. We must take a long term perspective for the benefit of our children, grandchildren and future generations.

The book also includes general investment advice for those trying to protect their assets during this difficult economic times and the difficult times to come. I don't endorse any particular investment strategy. Each individual and family needs to review their own situation and make independent decisions on actions they should take.

I recommend that every parent and grandparent read The Clash of Generations. You need to spend some time thinking about what has happened over the past forty years. The authors are telling everyone the truth about the mess we have collectively created. The US government and its programs must be substantially restructured very soon. The totality of the problem continues to worsen every year. I also suggest young people read the book. Our adult children and grandchildren need to get angry. They need to push hard on their political leaders to restructure our government so they have a chance at a decent life.

I salute Laurence J. Kotlikoff and Scott Burns for giving all of us their book. It is a great public service. Please reward them for their efforts by purchasing their book and checking out http://www.thepurpleplans.org/. We need to get busy. The restructuring of the US government must begin this year.