Battle of the ages: Boomers vs. the young

We've just seen the first pitched battle in the next war -- The War Between the Generations. It will be a war that divides America in a way we haven't seen since the Civil War. Unlike the recent political battles between red states and blue, or the liberals vs. the conservatives, this battle will not be a matter of choice. It will draw its lines of distinction based on age -- and wallets.

I first wrote about this topic exactly six years ago in a column titled "Medicare Drain Heralds Generation Warfare." In it I pointed out the growing conflict between the generations -- the huge number of baby boomers who have been promised benefits in their retirement years -- and the smaller, but equally vocal generation that will be taxed to pay for those promises.

Students at California State University in Sacramento demonstrate against cuts to higher education.

Until now, the focus has been on the federal government, but now the battle has moved to the state, city, and local level. Unlike the federal government, states cannot simply "print" or create the money, or run budget deficits. So they're forced to raise taxes, or make spending cuts -- or both. The pain is starting to be felt.

The first pitched battle was staged last week -- at college campuses across the country. The younger generation -- college students, high school students, and some in grade school -- joined to protest the rising cost of college tuition, along with cuts in resources at all levels of public schools.

In Chicago, the public school district is cutting back some spring non-varsity sports and eliminating lacrosse and water polo and facing other funding decisions because of its budget crisis.

Across the nation, from New Jersey to California, after-school activities are being cut for lack of funding. That hits working parents hard, and creates a new generation of latch-key kids and at-risk children.

Students typically don't have a voice that can compete with the Medicare lobby. But in the last week, as part of the "March 4th Day of Action to Defend Public Education," demonstrations raged on campuses and in front of statehouses from Berkeley, Calif., to Tennessee to the University of Wisconsin-Milwaukee to the University of Texas in Austin, to Auburn in Alabama. The younger generation has found its voice.

The next battle will be fought over jobs. As the recovery develops, it will become apparent that there will be fewer opportunities for younger workers to get jobs, or move ahead in their career. That's because baby boomers are delaying retirement -- as I predicted in my latest book, The Savage Number.

Gone are plans for "early retirement" -- a concept that has been replaced by "hanging on as long as I can." Working longer gives boomers an opportunity to rebuild devastated 40l(k) plans and hope that they'll be able to sell their homes at a reasonable price, when they're ready to downsize into retirement communities.

But will younger workers have the income to purchase boomers' homes -- if they can't get boomers' jobs? A crunch is developing, a logjam at the top of the pyramid as boomers stubbornly refuse to give up their jobs.

It's not surprising that one reason the health care debate is stalled revolves around the critical issue of "saving money through cuts in Medicare reimbursements." The huge -- and active-voting -- boomer generation is about to demand that the contributions they've made into the system now be used to take care of them in their senior years, even though the cost will be greater than their payments.

Boomers grew up expecting the best of everything -- and getting it. Now they will turn viciously on anyone who suggests any form of rationing of health care -- whether by price, availability or cost. If the government cuts back on Medicare reimbursement to physicians, who in turn decide not to take on new Medicare patients, the impact will be felt at the polls.

Boomers grew up demanding and expecting. When they were young, schools expanded, even using mobile classrooms to give them an education. As they age, they will demand medical and custodial care, so we're likely to see the equivalent of those mobile classrooms in temporary nursing home facilities.

The cost of caring for the aging population of our country will pit seniors against the next generation of workers who will be taxed to pay for the benefits that boomers have been promised.

Pitting Grandma and Grandpa against their children and grandchildren is a cruel war.

There is only one way out: economic growth. Only if we have a growing economy do we stand a chance of making good on all our promises. That's the challenge we face -- not tomorrow, but now. And that's the Savage Truth.

Terry Savage is a registered investment adviser and a co-host of ''Monsters and Money in the Morning'' on WBBM-Channel 2 from 5 to 7 a.m. weekdays. Ask Terry a question on her blog at blogs.suntimes.com/savage.