Forty-Somethings Have It Tough In Italy ... They're Going to Have It Tough Here, Too ... We The People Need to Gut Up and Do the Right Thing Soon

American oldsters receive generous Social Security and health care benefits from government programs, and the forty-somethings and other working people are paying for them.

Of course, those forty-something working stiffs also have to provide for themselves and their children at the same time, too.

To put it bluntly, it's tough being a working forty-something in America these days.

And for where all this may be headed, let's review what's happening in Italy. First, the Italian unemployment rate announced today jumped from 11.3% in December to 11.7% in January. See Unemployment Worsens in Euro Zone.

Like most of Europe, things are really tough for Italians these days, and the unemployment rate is higher now than at anytime since 1992. But it's even worse than that for Italy's forty-something workers.

There are lots of people depending on the forty-somethings in Italy, and the working Italians don't like it one little bit. My guess is that Americans won't like it much either.

'Lost Generation Feels Italy's Fiscal Squeeze is subtitled 'Forty-Somethings Pay Price of Austerity in Higher Taxes, but Will Reap Lower Pension Benefits:'

"Forty-something Italians are facing austerity for the rest of their working lives—just as they have since becoming adults.

"We are the lost generation," says Andrea Bolla, the 46-year-old chief executive of energy provider Vivigas and the Valdo Prosecco winery near the northern city of Verona. He says he pays more taxes and receives fewer services while navigating more red tape than his father did while running the family businesses.

 "He always felt difficulties could be overcome," says Mr. Bolla, who has three daughters. "Now we're often just in a survivalist mentality.". . .

Since 1992, when Mr. Bolla and his cohort began working, public debt has climbed to 127% of gross domestic product in 2012 from 102% in 1992, despite two decades of tight budgets that crimped investment and led to lower wages and salaries.

Italians born in 1970, who are about 43 now, will pay 50% more in taxes as a percentage of their lifetime income than those born in 1952, according to research from the Bank of Italy and the University of Verona. The research also found they will receive half the pension benefits that Italy's 60-somethings are getting or are poised to get.

Sandwiched between two critical moments in Italian history, 40-somethings are eating the crusts. Over the past year, Europe's sovereign-debt storm has forced Rome to introduce emergency measures including an unpopular new property tax, a public-sector wage freeze and raising the retirement age to 68 from 65.

In 1992, when today's 40-somethings were entering the workforce, a budget and currency crisis, coupled with corruption trials that decimated the postwar political establishment, forced Italy to adopt draconian budget cuts—the bulk to funding for education and infrastructure, and a pension overhaul that shifted the bulk of cuts to those who will retire around 2030.

Today, the marginal income-tax rate on a typical €30,000 ($40,000) annual salary is 38%, up from 25% two decades ago. Retirement checks for those under 50, however, will be based on total contributions to the system, rather than workers' final salaries.

One result is that Italy's 40-year-olds have seen a bigger drop in their relative wealth since 1987 than any other group, while those over 50 have seen significant gains, according to the Bank of Italy. Incomes have followed the same trend. . . .

Italy is expected to run a primary budget surplus—meaning the state will take in more in taxes than it gives back as goods and services to residents—of 5% of GDP this year, the European Commission said on Friday, and should keep it at around that level to comply with the euro-zone's new fiscal compact.

Over the past two decades Italy has run €1.3 trillion in such surpluses, averaging 4% of GDP a year, says Giuseppe Alvaro, an economist in Rome and an expert on Italy's national accounts. Public debt has nonetheless risen—it is now €2 trillion—and the austerity must continue. Because much of today's working population has never benefited from excess public spending, "they may feel rather reluctant to give back what they never received," Mr. Alvaro says.

"It's as if we are running in a hamster wheel," says Mr. Di Bartolo, who has a 3-year-old daughter. His generation must now save more for their own future. While Italy's pension system is deemed highly sustainable over the long term, that is because it has pushed benefit cuts forward to those who will retire around 2030."

Summing Up

Italy is one huge mess. And its vote this past week didn't do anything to clear up the mess either -- not one little bit.

Someday soon that harsh truth will become evident to us in the U.S. as well.

If the oldsters are going to reap the rewards and the forty-somethings are the ones who will be paying the price, the forty-somethings aren't going to be very happy campers.

And in my view, they're right about that. It's not fair.

So why don't we all gut up now, discuss the troublesome developing U.S. financial fiasco openly and honestly, and then 'collectively' do what makes the most sense for all Americans, young, middle age and old as well?

That would be far better than pretending that the day of reckoning won't ever come. Because if we don't bite the bullet sometime soon, Italy is teaching us what lies ahead for us.

That's my take.

Thanks. Bob.