Generational Theft Campus Tour — USC EDMonth Session

Summary

In spring and fall 2013, Druckenmiller and Geoffrey Canada took the generational-theft campaign on the road — NYU, Stanford, Berkeley, USC — presenting the entitlement ledger directly to students. This entry documents the USC EDMonth session of September 26, 2013, the only captioned video record of the tour: a slide-driven presentation of the fiscal math, with Canada on stage, delivered in the same hall where, a decade later, the $200 trillion update would be given.

The session is the tour's most visceral surviving document. Where the WSJ op-ed argued in print, the campus version argues in numbers: 11,000 new seniors on entitlement payrolls every day for twenty-two years, a $205 trillion fiscal gap, and a per-person transfer ledger — seniors $327,000 ahead, the unborn $420,000 behind — that makes "generational theft" concrete in a way no op-ed could.

Full Text

Machine transcript (auto-captions / ASR), punctuation lightly normalized; wording as transcribed. Recognition errors possible — see sources.yaml for provenance.

David Belasco:

the slide started so Stan can take us through what we're looking at. and Stan, I, I do want to thank you for not spending all the money on Graphics.

Stanley Druckenmiller:

okay, you got, you got the Berkeley one. and it's not my fault, it's your fault — I sent you the USC one. it's at September 26, Jeff Canada and Stand Rock Miller. so, okay, well, nice job, David.

David Belasco:

thank you, thank you. attention to detail — as an ex lawyer I just sunk. um, they're the, go to the, the stage is yours, please.

Stanley Druckenmiller:

touche, touche.

let, let's go to the first slide, please. the, the first thing I'd like to say, because I, I have a message for the students, which is: Jeff and I grew up in a time when not only were the assassinations and the other problems in our country he talked about occurring, there was something called the Vietnam War. and it was pretty clear, if you were in high school, that there was a real threat that in your very near future you going over in the rice patties getting bullet shot at you to, and possibly threatened with death. and because of that, the young people in the United States United started a movement, and we brought down a president — we brought down lynon Johnson. and really, I think if you look Bel the lines, we sent Mr Nixon on his way too, although he certainly helped himself, uh, in into, into that exit.

but I'm going to present some stuff to you tonight, and I really want you to listen carefully, because I think your generation faces a clear and present danger. it's not as obvious and, and a as it was with us, where we're facing possible death, but it's very, very serious. and instead of them blowing up your house overnight, your house may be eaten by termites. and it doesn't matter whether it blew up overnight or it took 15 or 20 years, because you still lose your house. and I am hoping to inform you tonight — I can't start a movement, that's up to you. I barely even know how to use Facebook — in fact, I'm not on it, if you're looking for me.

but let's just go through what's been going on, which really has been 40 Years of wealth transfer from the current elderly generation — from you to them, and from your future children to them. and it's about to get a whole lot worse because of the baby boom and the demographic Graphics: the share they've been taking from your generation, they're about to be a lot more of them taking it.

so this chart here is simply federal government out budget outlays, the percent going back, uh, many, many years, as you can see. and when Jeff and I were in high school, about 28% of federal outlays went to what we would call transfer payments or entitlements. that number, over the last 40 years, has gone to 68%. next slide, please.

so where has that money gone? um, well, it certainly hasn't gone to the young. on the blue line is children, um, age 15 and under, and in the red line is the elderly. and as you can see, the share of government spending going to the elderling has completely rocketed, um, since 1960. in fact, if you go back to 1960, about 20% of budget outlays were spent on children and the elderly; those numbers in total now are 50% on the elderly and 15% on children. and when you hear the kind of stuff Jeff was talking about earlier, that's frankly a tragedy. next slide, please.

Moderator:

here you go — you want to look here.

Stanley Druckenmiller:

okay. um, I like to look up there — it feels more real.

uh, these are, uh, us us poverty rates. and as you can see, back in the period I'm talking about, when we started out, the elderly were about — the poverty rate was about 30%. because of a lot of the government spending and other programs, the poverty rate for the elderly has come down to nine. and look, I think this is a magnificent accomplishment — I think it's one we should all be very, very proud of and very happy about. the problem is, look at what's happened to the poverty rate of children: it's actually risen from 20% to 23% over that period of time. so when you hear in the United States how we've cured poverty, and, and how all the progress we've made — it's only been made with the elderly. our children poverty rate is currently higher than it was 30 or 40 years ago. next slide, please.

and just to show you how unusual that is — Jeff talked about how he wanted to grow up in a fair America — look at where the USA stands among the top 35 countries in children's poverty rate: we are second. given the wealth we have, this is a disgrace. next chart, please.

so this is a little complicated, and if I was from USC I could probably explain it better, but for a guy from Bowden I'll see what I can doble. so the Y AIS is age and the xaxis is percentage of spending, which I'll get to in a minute. but let's go back to 196, and if, if you look at the chart: if, if those colored lines went up to one, 100% of a 45 year-old's average income in society would being spent. why are we using 45? because 45 is sort of the Nexus of what the American Workforce is, so to take their average income — that's a, that's a good representative level.

so if you go back to 1960, let's go to say The 40-Year-Old. The 40-Year-Old was spending about 65% of what an average 45-year-old made, and obviously saving the rest of it. um, however, a 90-year-old was spending about 50% of what the average 45y old made in 1960. okay, fast forward to today: The 40-Year-Old is still spending about 60% of what a 45y old makes; the 90-year-old, by the way, who is unemployed, is spending 140 % of what the 45-year-old makes. so back in 1960, a 45, a 40-year-old used to spend 40 or 50% more than a 90-year-old; now, a 90-year-old spends almost twice what a 40-year-old spends. this just shows you the huge shift in wealth and, obviously, the spending benefits that have gone to the elderly. and you can see where it's, where a lot of it's going, in pink and in yellow — that's public and private Health spending. you can't even five in the pink in 1960. next slide, please.

so there's a few consequences — there's a, there's a few reasons for this consequence — but this is, this is an astounding chart, and I think particularly every young person in the room should look at this very carefully. this is the change in net worth for certain age groups between 1983 and 2010. and it's pretty wild, because the average 30-year-old in 1983 is worth — was worth more than the average 30-year-old in 2010 is. think about that: over a 30-year period, the net worth for the 30- year-old of each period has actually dropped. now, I'm not going to, I'm not going to tell you that the 30-year-old today isn't better off — I mean, he's got iPad, he's got internet, there's a number of things — but his net worth has actually dropped, and my guess is that's never happened in the history of this country before.

now look at the 75-year-old: a 75-year-old in 1983, and take the 75-year old now — he's worth 150% more than the one in 1983 was. so over the same time period, the net worth of a 30-year-old has dropped while the net worth of a 75-year-old has more than doubled. so if you're not getting the picture, we've had a massive transfer of wealth — wealth and spending — toward the elderly the last 40 or 50 years. next slide, please.

now, basically, what I've shown you so far: imagine a pie, and the elderly used to eat this much of it, and now they're eating this much of it — and children and elderly used to eat about the same. well, the problem is, you're about to get a whole lot more eaters, um, eating the pie than there were, than there were previously. and the reason is demographics. when World War II ended, a lot of people came back to the United States and, I guess absence — you know what that does. um, there, there was a whole lot of something going on that was making babies for a while. and, and if you look at the next 20 years, the birth rate basically averaged about 3.0 women — I'm sorry — children per woman, and, and peaked in 1957 at 3.7. and that has dropped to two today. to put that in perspective, we have a 100 more — 100 million more people in America today than we had in 1957, but they were, they made more babies in 1957 than we'll make in 2013.

the consequence of this is pretty Dire from an economic sense, because 1947, you add 65 years, is 2012. for the next 22 thou — for the next 22 years, 11,000 seniors are going to be added to those entitlement payrolls every day — every day. in 2030 — I know we're in California, but how many of you have been to Florida? okay. in 2030, the average population in the United States is going to be older than the average population in Florida. now, kind of an ugly sight if you've been to Florida, you know — you know you see the strollers today; you're going to see walkers in 2030. they're going to be everywhere. next slide, please.

now here's why this is so ugly, if you look, because of the demographics I just described: over the next 30 Years, the 18 to 64 population is going to grow 177% — cuz you guys aren't doing your job and having babies, okay — but the 65 and over is going to grow 102%. and what does that mean economically? it means today, the working age population, there's 4.71 workers for every oldster that, that they're working to support in the entitlement system; in 2030 there's only going to be 2.4. so literally, the number of working people that are there to support the elderly is going to drop in half. next slide, please.

so here's the problem: in red you have outlays — and again, this is primarily driven by the entitlements and the demographic boom we just described — in blue you have revenues, and in blue is, is basically where tax rates have yielded in the last 40 years, and that's about 18% of revenues. as the red continues to climb, the gap between those continues to grow.

now, if I lent Jeff some money and he agreed he was going to pay me back at a future date, I think most people in the room would agree he has a debt. okay. well, in the United States we have something like a payroll tax — I'm sure some of you already paying it, but David, Jeff and I are paying it — and we're paying a payroll tax, which means we're giving it to the government, and when we're 65, they promise to start paying us that money back. well, you know how the government accounts for that? they don't call it a debt, they call it Revenue. so if you took those debts and put them on the government balance sheet — next slide, please.

the 17 trillion — it says 12, but that's not counting the money that the FED has bought from the treasury. so you have all these scaremongers running around talking about 17 trillion in debt. if you did the accounting that they do for any company in America — except for maybe Enron and Fanny and Freddy a few, a few few years ago — the debt today is not 17 trillion, it's 205 trillion. all I've done here is take that money that's off balance sheet, those payments that are promised to, to me, you and Jeff when, when we come of age, and put it on the balance sheet. and there in lies the problem. so that fiscal Gap is 205 trillion, and guess who's going to pay for that? next slide, please.

the young people. so this money that my generation has been getting, this transfer that's been going on for 30 or 40 years — I cited the number in the beginning — we are actually, because we've had this great lobbying arm called the AARP, we are actually going to be ahead of the game: we're going to get $327,000 more in benefits than we put in. but The Unborn — my great great, my great grandchildren — I'm not too worried about them, by the way — talking about mine, I'm worried about mine — they going to be okay — they're going to be net payers of 420,000. so when you hear President Obama say we got to do something fair and balanced and we don't want to do this on the back of seniors, how can they look you in this straight face when there's a $700,000 inequity between, um, today's seniors versus future seniors?

and in the meantime, the Republicans, on their side, they're talking about all these Great Cuts they're doing — they're not touching entitlements, and this is where the money is. I said earlier, they're cutting in Grants, they're cutting Head Start, they're cutting food stamps. the only thing that's not being touched is the only place there's any real money, which is entitlements. and I think you can see it's not exactly a fair picture. and when you say entitlements, you're talking about social security and Medicare and the largest obligations, and a bigger part of Medicaid than you would think. so that first slide, which was 67%, when you net out, um, Medicaid and unemployment benefits and like that, about 51% goes to the elderly.

so I've presented a pretty static picture and then a dynamic picture, but let's just look at 2013 and look 10 years forward, after they've already taken this big piece of pie. okay, so here's what's going to happen the next 10 years: in the CB budget endorsed by the administration, spending goes up a trillion dollar — okay, I'm okay with that. of the trillion dollar, 875 billion goes to Medicare, Medicaid and Social Security. how much do you think goes to Children? 6 billion — and that includes what they're going to get from Medicaid, because education spending is going down. so you net that out: 875 billion, when they've always been at the trough for 40 years, relative to children, and 6 billion in the next 10 years. this whole budget fight is a fraud — this is where the money is, not where you're hearing about in the newscasts. next chart, please.

so one of the things you'll hear out there is this debt bomb doesn't hit for 10 or 15 years. first of all, I don't even think you need to worry about a debt bomb to justify fixing this thing — it's just grossly unfair, as I've shown the, the inequity. but if you want to talk about why you need to act now as opposed to later — because there's plenty of pundits out there who say, wow, the problem really doesn't hit for 10 or 15 years, that's when the demographic storm get big enough, we get overwhelmed on the debt — it's not really true. that fiscal Gap I showed of 205 trillion, you could actually fix it — well, not really, but here's what you'd have to do to fix it: if, if you raise all taxes 55% — payroll, income, capital gains, dividends — raise them all 55%, the problem would go away, supposedly; the economy would probably tank and then you'd have another problem. or you could cut all spending 36% — all of it: President Obama's limousine, um, uh, military, transfer payments, everything — cut at 36%. but that's not why, why I've got this chart up here. what I've got up here is to show you: if you wait 30 years, you don't have to raise taxes 55% to solve the problem — you have to raise them 71.6%. and you wouldn't have to cut expenditures 36% — you'd have to cut them 44%. very simple: anybody here have a credit card, and you pay 18% on — if you wait three or 4 years, you pay more money than if you pay it now. that's exactly the analogy here. so this Gap is so big, the sooner we address it the better, and the later we address it the bigger the problem becomes. next slide, please.

this is the final slide I'm going to, I'm going to talk about, but this is probably the most heart-wrenching them all to me. the red line is the first chart I showed you — this is government outlays, um, payments to individuals, basically transfer payments. the blue line is Investments — Investments includes education, infrastructure and R&D by the government. now, I understand I'm at the only university in the United States that has a lot of Republicans in it, and I know a lot of Republicans aren't too high on government Investments. but the Blue Line — let me tell you what came of the Blue Line the last 40 or 50 years: under Eisenhower, the interstate highway system — pretty good deal when you think about the transportation, everything that goes across it. oh, there's another thing that came out of it: uh, GPS — anybody here use GPS? um, the internet — no, Al Gordon invented, but it was funded — all the R&D was funded by a government program — NIH grants, the human genon project. all these were government Investments. whether you like them or not, I think we can all agree: transfer payments to the elderly, who are already doing, as I showed you, awfully well — to cut out these kind of Investments, and the stuff we mentioned in Jeff's programs, is, is pretty, is a pretty tough deal.

David Belasco:

so, well done, Professor dren Miller. let —

=== PART 2: INTRODUCTIONS ===

Helen Yuan:

good evening. my name is helen — helen yuan — and i am the coordinator of usc end month. on behalf of program board and end month, it is my pleasure to welcome you here tonight.

edmont is a grassroots movement of college students to open dialogue about the state of education in the u.s. we hope to engage students about this topic through looking at the effects of policy, race and ethnicity, global technology and the arts.

our formal end month will be the first two weeks of march, but frankly, if jeffrey canada's happens to come to your campus in september, then september is end month. we are thrilled to welcome him and mr druckenmiller.

during our first two years of end month, we've showcased the work and solutions of leaders in educational reform, including wendy kopp of teach for america, john daisy from lausd, former mayor of los angeles, leaders of the charter movement and public school educators. from those discussions, we activate students to become change agents for educational reform. here's a message from one of our guests from this past ed month.

John Legend:

hello, jeff and stan. i am sorry i cannot be there to hang out with you all today and to honor the great work that you're doing, but i wanted to send you love and appreciation for everything you've done.

uh, i've been able to spend a lot of time with jeff, uh, over the years. we went around the country and talked about a movie called waiting for superman. we talked to countless crowds around the country and around the, around the world, telling them how important it is for our education system to be reformed. and i've personally seen the great work the harlem children's zone has done in new york city.

i'm so grateful, as a part-time new york resident and someone who's been there for about 13 years, to know that there's someone in, in my city who cares so much about the community and is doing so much to change education for the city, and then to spread that message around the world. so thank you for all the great work you're doing. keep up the great work, and let me know if you need anything else from me, because i'm always there to help.

Helen Yuan:

thanks to mr legend for coming to ed month and for being an advocate for educational awareness.

it is my pleasure to welcome and introduce our moderator and host for tonight, professor david belasco. he's been our partner and faculty advisor on edmond since the beginning and has helped bring many of the people i mentioned to usc.

professor belasco currently serves as the co-director for the lloyd greif center for entrepreneurial studies at usc, but many of you may know him from his class, the leap, which is among the largest and most popular at this university. if you haven't taken it, you should. please welcome professor david belasco.

David Belasco:

thank you, thank you. it's great to be here. thanks, helen — it's an honor and a blast to work with you and the other student leaders on edmonton. in just two years, you've built something very, very special and made a huge impact. what a great night to be at usc, huh? what a great night.

um, as alan said, my name is dave belasco. i'm the co-director of the grife center for entrepreneurial studies at usc's marshall school of business, and along with dean jim ellis and my co-director helena elirenko, it's our pleasure to welcome you to this important discussion on generational equity.

quick commercial for the gripe center: our mission is to train tomorrow's entrepreneurs, innovators and leaders by teaching them the skill set and the mindset to impact the world. we've been doing it since 1971, and just this past week, u.s news and world report ranked the gripe center as the number two entrepreneurial program in the country. tonight is part of our grand plan to extend entrepreneurship across campus, across los angeles and across all fields, including education. and if you try and tell me that what teachers do, and what jeffrey canada has done in harlem, is not entrepreneurship, you'll get a very, very big fight for me.

quick programming note for those at usc: our next event is here in bovard on october 14th, as we welcome usc graduate craig pollard and his college friend phil — warrell — will fraurel — will ferrell, coming on october 14th. be here, and bring your green hat. those who know, no.

all right, getting a little more serious: tonight's discussion is about the future of our country and the impact on college students and education. i looked at the, uh, the rsvps, and it is a who's who of education in los angeles. if i mention you, please stand and remain standing so we can see who's here, and hold your applause to the end. dean karen gallagher, the dean of usc's rossir school of education, please stand — dean gallagher. plead the house lights, please. um, faculty from usc, please stand. leaders from ucla, lmu, david dwyer from usc hybrid high, lydia jennings and everyone from teach for america, please stand. leaders from kipp, greendot, camino nuevo, valor, equitas — please, everyone who teaches or is in education, please stand, and let us show our appreciation for what you do.

and joining us at the reception, but he had to leave, is the, the superintendent of the second largest school district in the country. let's please say thank you to ellie — lausd superintendent john dacey. john.

all right, all right. don't worry, finance and business people, don't worry — we've got plenty for you too; it's not only education. let's start that with stanley druckenmiller, the retired chairman and founder of duquesne capital. mention his name to any hedge fund manager or private equity investor, and they speak in hushed, reverent tones — they almost whisper stanley druckenmiller. his, his vision and results over 30 years speak for themselves, but don't worry, we'll ask him how he did it. when he retired from duquesne capital in 2010, his firm managed in excess of 12 billion dollars. yes, he is on that list of that magazine as one of the wealthiest people in the united states, and he would be even higher on that list if he didn't donate and reinvest so much in others. his success is legendary, but so is his generosity.

and stan teamed up with jeffrey canada, champion of the harlem children's zone, which has had transformed the education and lives of thousands and thousands of people in harlem. his approach and results have been lauded by education reformers, parents, school districts, politicians — even oprah winfrey. president obama described the harlem children's zone as, quote, an all-encompassing, all hands on deck, anti-poverty effort that is literally saving a generation of children, unquote. it is awe-inspiring what they're doing.

i have been stalking — i mean chasing — and inviting jeffrey canada at usc for years. to get one of these gentlemen is rare; to get both of them is just plain lucky. they are outliers among outliers. this is a unique partnership and friendship: jeff is the ceo and stan is the chairman of the board of the harlem children's zone. they have done this together. let's take a look at jeff and stan's work at the harlem children's zone.

Narrator:

what had happened in central harlem was failure became the norm. the schools were lousy, the health care was lousy, gangs were prevalent, violence was all over, families were falling apart. you can't raise children in a community like that. people had been talking about things but not doing anything.

Geoffrey Canada:

i'm doing great. how about right here on 119th street: if we could fix this block, then we could fix the next block, then we could fix the next block. we promised parents: if your child stays with us, i guarantee you that child is going to graduate from college — failure is simply not an option. 60 to 70 to 80 to 97 blocks, which ends up being 10 000 children. we start with children from birth and stay with those children until they graduate.

Narrator:

if you really want to have an impact that is large, you'll get there going one step at a time. there is no act that is too small to make a difference. no matter what you want to do, members project from american express can help you take the first step. vote, volunteer or donate at takepart.com.

Key Themes

The session is generational theft in its most data-forward form — the op-ed's arithmetic rendered as slides for the generation that will pay it. The per-person transfer ledger is the endgame priced in dollars per life rather than basis points, and the decision to deliver it on campus is the framework's political economy enacted: the bill-payers get the briefing first.

Context & Significance

The 2013 tour — op-ed, NYU panel, and these campus sessions — opens the decade-long advocacy arc that runs to USC 2023. The continuity is striking: the 2013 session's $205 trillion fiscal gap is the 2023 address's $200 trillion present-value estimate, ten years older and closer. Note also that the 2023 USC address was, by Druckenmiller's own account, a return to this same tour — "I came here a little over 10 years ago... I was naive enough to think I could move the needle."

For the tour's other stops, see the NYU panel (no captioned video survives of the Stanford or Berkeley sessions).