Rupert Cornwell: Out of America

Are baby boomers worried? They should be

One of life's modestly depressing milestones is the moment you first find yourself living in a country with a leader younger than you. It happened for me in 1993 during my first stint in America for this newspaper, when Bill Clinton, six months my junior, became President.

When I went back to London in April 1997, it got even worse, in the shape of a ridiculously youthful Tony Blair - at 43, two years younger than Clinton when he was elected. My remaining illusions of vast promise about to be fulfilled were banished. Nor was there any escape when I returned to the US, now under the management of George W Bush. He too was younger than me.

I mention all this because last Thursday was Bush's 60th birthday. He, Clinton and I - as well as luminaries such as Sylvester Stallone, Diane Keaton and Donald Trump - are all 1946ers, in the vanguard of the mighty army of baby boomers who will hit the big Six-O during the next 18 years.

One way and another, Bush is quite a suitable representative of our generation. Baby boomers are said to have had it easy, and to feel entitled to the good life in a way their parents never did. Bush qualifies in spades on both counts.

You may not approve of how he got elected President, and still less of how he does the job. But you have to admire the self-discipline that has kept him off the booze these past two decades. Thanks to that, to mountain biking and to inordinate chopping of brush at his Texas ranch, he's probably fitter than most people half his age. And he seems to be handling this birthday pretty well. "Sixty's a lot younger than you think," Bush joked at the White House after talks with the Canadian Prime Minister on the big day.

Look at it another way, however, and this presidential birthday is the first sign of a mighty storm ahead. In a couple of years, Bush must step down. He'll be fine, what with a annual government pension of $183,500 (£100,000) and a host of other benefits under the 1958 Former Presidents Act.

Most of us won't be so fortunate. A financial time bomb is ticking under America, primed to explode when the baby boomers start to retire en masse: 78 million of them will turn 65 between 2011 and 2030, each set to receive more than $30,000 (£16,500) a year in state pension and medical benefits. If they do so, they will break the national bank. Over the next 30 years the likely future expenses of the government will exceed tax receipts by $63 trillion - or five years' output of the US economy.

To square the circle, income tax would have to rise by 70 per cent, or benefits paid under Social Security (the state pension scheme) and the Medicare health programme would have to be halved. That won't happen - but nor can the US, the biggest debtor on earth, continue for ever to borrow from foreigners and from its own citizens to keep up baby boomers' living standards. Which leaves the job to the printing presses of the US Mint and a surge in inflation.

When he introduced Social Security in the Great Depression, Franklin Roosevelt told his countrymen that it alone would not look after retirement needs, and they should see it as one leg of a three-legged stool. The two other legs being company pension schemes, and individual savings.

Today, all three legs are coming loose. Bush did have a stab last year at reforming Social Security - with a system of private savings accounts. But that was to touch the electric "third rail" of US politics. Bush did so, with the predictable result. The idea that was supposed to be his crowning domestic policy glory died ignominiously, the first disaster of an increasingly disastrous second term.

Company pensions fare little better. Faced with soaring costs and fierce foreign competition, US businesses see the once sacrosanct defined pension scheme as a fashion accessory to be ditched under a court-supervised bankruptcy reorganisation. Airlines and steel companies have done it, General Motors may follow. And the government corporation that is supposed to guarantee the pensions is itself all but bankrupt.

As for savings - forget it. For the first time ever, the net US savings rate went negative this year. Americans are eating into savings to finance their spending. Happy birthday, George; but for the rest of us the same age, there may not be too many more down the line.