During the “New Deal” era of FDR and the developing of the vaunted social safety net, the phrase used to describe the choice to increase funding to the military, or raise spending on social programs was, “Guns vs Butter”.  Many people still use this phrase today, but in doing so they might actually be shortchanging the real choice that is before us – pills vs textbooks.

While military spending might go up or down a little each year depending on political tastes, the far greater pattern has been fuelled by a demographic shift and is causing a generational gap to become a generational tug-of-war.  The National Post published an article this weekend titled, “The great generational divide: Why young people don’t have it as bad as they think” by Fred Vettese, that vividly illustrated certain aspects of this problem.  Here are a few statistics in it that I found interesting:

“The poverty rate in Canada, using the Low Income Cut-Off (LICO) as a proxy, is just 5.2% for those age 65 and over versus 10.5% for the age group 18 to 64.”

“A study by TD Economics shows that tuition fees accounted for 36% of university revenue in 2005 versus only 13% in 1980.”

“Government funding has become less generous because spending is being crowded out by other priorities, in particular healthcare spending. As a country, we are allocating over one-third of our total healthcare spending on Canadians age 75 and over, even though that group represents only one sixteenth of our population.”

Tough Choices

The end result of these numbers leaves little doubt that an aging population that believes in the structure of democracy and has been described as the “bulge in the demographic snake” is slowly siphoning dollars to “their side of the equation”.  Of course, it’s never this simple.  Who among us really wants to make the choice between supporting the dreams and ambitions of young people who are on the verge of despair, and helping the elders of our society live full, healthy, and rewarding lives?  It’s an incredibly difficult choice, and one that has all kinds of far-reaching ramifications.  The ripples of this generational competition for dollars will be felt for decades afterwards – that much is guaranteed.  Just ask today’s graduates.

I have to admit to being pretty bias on this issue.  If I have to explain to one more Baby Boomer that they actually DID NOT pay into their Old Age Security and Guaranteed Income Supplement (unlike the CPP) I’m going to lose my mind.  It’s incredibly difficult to get multiple generations who all have large gaps in their financial literacy to fully grasp anything beyond, “Other people get money from the government, so I should get money from the government – and I’ve worked hard damn it,” or, “Why is the government taking money out of my pocket to give to them.”  These sort of sound bites are easily digestible and are used by both sides of the pills vs textbooks debate.  They accomplish their goal (to varying degrees) of riling up their supporters, but in doing so they actually push people away from truly discussing and understanding the tough choices that are  on the table, and choices that are only going to become more prevalent over the next couple of decades.

Trying to show a young adult that today’s low interest rates are an advantage we enjoy compared to past generations, or explaining to a person who just turned 65 that getting their income topped up out of tax coffers (under the OAS payment) when they make $69,000 a year is ludicrous, is mind-numbingly difficult.  This is why fully explaining the issues and forcing people to make logical decisions is so important and is a job made even more difficult when we just repeat endless talking points that barely scratch the surface of the difficult realities of the situation.

Butter Really Is Better

Today’s argument isn’t guns vs butter, it’s making sure that butter is spread evenly.  My prediction is that much more butter will be allocated to whichever side of the piece of toast has higher voter rates (don’t we all love democracy?).  That doesn’t exactly thrill me when I look around at the attitude of my generational cohort towards politics today.  I wouldn’t advise today’s youth to hold their breaths while waiting for this shift of tax dollars to reverse itself.  Parents and grandparents out there, if you want to do your children and grandchildren a favour, instead of buying that second property down in Arizona with Old Age Supplement Money , maybe throw a little into an RESP for them, because that will soon be all that allows young people to live anywhere near the life that you got to lead.  Trust me, they’ll remember your generosity when you’re living to 100 (due to excellent tax-payer funded medical care) in a retirement home or hospital bed somewhere and are hoping for visitors!

One interesting outcome I’m looking forward to following is how today’s young people will react when they are the ones on the precipice of retirement, or are comfortably ensconced in their golden years.  Will they remember the sacrifices they had to make, and seek to make life easier on the teenagers of 2050?  Or will they remember the escalating tuitions and lack of engagement with the political process, and instead seek to make up for lost time as they fight for their “right” to be taken care of by society?

About Kyle Prevost

Kyle Prevost is a business teacher and personal finance writer helping people save and invest over at MyUniversityMoney. com and YoungandThrifty.ca. His co-authored book, More Money for Beer and Textbooks, is available in book stores.