Ageing boomers are no longer spending

Economic growth

SHARE THIS STORY

US spend Apr17

FTThe Financial Times has kindly printed my letter below, suggesting that President Trump’s focus on tax cuts is misplaced, given the headwinds created for spending and economic growth by today’s ageing US BabyBoomers.

Sir, Gillian Tett provides an excellent analysis of the wishful thinking that seems to dominate US economic policy today (“Trump tested as hard economic data spell trouble”, April 21). The “sugar highs” she identifies in sentiment readings are probably as reliable as polling results in today’s febrile environment.

The underlying cause of both phenomena goes back to 2001, when the oldest baby boomers began to leave the “wealth creator” 25-54 cohort that drives consumer spending. As the Bureau of Labor Statistics confirmed again last week in its annual Consumer Expenditure Survey, spending nearly halves by the age of 75 versus the wealth creators’ peak of $70,000. Consumer spending is more than two-thirds of the economy, and so the vast size of the boomer generation made it inevitable that growth would then start to slow.

Unfortunately, policymakers failed to update their economic models to recognise the growing influence of demographics. Instead, they chose to assume that stimulus programmes, initially via the subprime experiment and then via quantitative easing, could replace this lost spending power. But they cannot print babies and the result has been a major increase in the debt burden, as growth and inflation failed to respond in the way predicted by their models.

It is therefore disappointing that President Donald Trump is hoping to launch a third wave of stimulus, this time via tax cuts. Today is not 1986, when the average boomer was 31 and President Ronald Reagan’s cuts reinforced his “Morning in America” campaign theme. The average boomer is now 62, and the US urgently needs new models and policies to reflect this critical fact.

Paul Hodges
Chairman,
International eChem

PREVIOUS POST

Oil market rebalancing myth looks close to its sell-by date

24/04/2017

The myth of oil market rebalancing has been a great money-maker for financial ma...

Learn more
NEXT POST

Debt, demographics set to destroy Trump's GDP growth dream

01/05/2017

Unsurprisingly, Friday’s US GDP report showed Q1 growth was just 0.7%, as ...

Learn more
More posts
Businesses face “biggest imposition of red tape in 50 years” as Brexit begins
03/01/2021

Most companies had closed when the new EU-UK Trade and Cooperation Agreement (TCA) was finally annou...

Read
Your A to Z Guide to the reality of Brexit after 31 December
29/11/2020

(Picture credit Shutterstock) A.  Article 50 of the Lisbon Treaty set out the rules for leaving ...

Read
Chemistry & the Economy webinar on Thursday
10/11/2020

Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard...

Read
Pandemic redraws the map
11/10/2020

  Companies have entered a new landscape where the coronavirus has accelerated major paradigm s...

Read
What will happen if President Trump loses the election?
04/10/2020

I spent from September 2015 onwards, during the last US Presidential election, trying to explain why...

Read
Covid fears risk a Great Depression and major social unrest
27/09/2020

Governments spent most of February/March ignoring my warnings here on the dangers posed by the Covid...

Read
The state of the global economy in 2020
13/09/2020

Last Wednesday, I gave the opening presentation for the ICIS PET Conference and looked at whether th...

Read
Reality dawns for business as No Deal Brexit approaches
06/09/2020

I warned before the June 2016 Brexit referendum that Brexit was all about politics, and Boris Johnso...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more