The Generational Compact is Broken: Families and Markets Must Fix It
Something has gone wrong with American capitalism. Younger Americans know it, and they’re losing patience.
Peter Thiel saw the shift earlier than most. In a 2020 email circulated among Facebook executives, he warned that the growing attraction to socialism among young Americans wasn’t something to dismiss, but something to understand. “When 70% of Millennials say they are pro-socialist,” he wrote, “we need to do better than simply dismiss them…we should try and understand why.”
It was treated as a surprise. It shouldn’t have been. That question—why—has lingered far longer than the political class expected. In the wake of an avowed socialist taking control of America’s financial capital, Thiel doubled down last fall, telling the Free Press that capitalism, as currently structured, is not working for younger people because the old formula for success—education, work, homeownership—no longer reliably delivers.
For younger Americans, the breakdown has a name: Total Boomer Luxury Communism (TBLC). It describes a political economy that socializes security for the old—through Social Security, Medicare, and a latticework of tax advantages—while leaving younger generations to finance that system as they struggle to accumulate assets of their own.
It is precisely this imbalance that helps explain the appeal of collectivist alternatives. At its core, socialism attempts to do artificially what the family does naturally. It promises to pool risk and distribute opportunity more evenly. These are not alien impulses. Before these functions became political programs, they were embedded in families, communities, and voluntary institutions that built resilience and mobility from the ground up.
Student debt isn’t just a cost problem; it is what happens when one generation stops building for the next. In the absence of accumulated family resources, education is funded through liabilities rather than assets. The debt burden students carry today is partly a reflection of the failure to pre-fund the education of children across generations.
If the breakdown of the generational compact is ultimately a failure of intergenerational investment, the solution must also be intergenerational. It requires creating vehicles that allow families to build wealth for education over long time horizons, just as they do for retirement and health care.
That is the logic behind the Education 401(k).
Developed by the Goldwater Institute, the Education 401(k) lets families pre-fund the next generation the same way 401(k)s and HSAs pre-fund retirement and medical costs—through steady, tax-advantaged contributions that compound over decades. Workers and employers can contribute to portable accounts that grow over time and can be drawn on for tuition, tutoring, apprenticeships, vocational training, certifications, and other education costs—for the account holder or any member of their extended family.
Three features set it apart. First, unlike 529 plans or state education savings accounts, these accounts can open as soon as someone starts working, harnessing the full power of compounding years or decades before children are born. Second, the funds function as true family capital: a single account can support a child’s tutoring, a spouse’s trade certification, a parent’s return to school, or a grandchild’s lessons. Finally, it brings the country’s biggest historical strength—American capitalism—into education and daycare funding.
Like retirement and health savings accounts, the model aligns the incentives of workers and employers around long-term investment in human capital. Employers who contribute to an employee’s Education 401(k) are investing not just in workforce development but in family stability—a direct counterweight to the dislocating forces that have strained so many working families.
None of this invents a new burden. Private dollars already pour into American education—quietly, unevenly, and without much coordination. The Education 401(k) channels that spending into a structured, tax-advantaged system that works for everyone, not just those who can already afford to pay out of pocket.
In effect, the Education 401(k) incentivizes older generations to invest in younger generations again. For employers, the incentive is talent and loyalty. For parents and grandparents, the incentive is family formation and intergenerational transfer. For policymakers, the incentive is reducing the fiscal pressure that comes when human capital goes underdeveloped.
As the generational compact has broken down, it is hardly surprising that many turn to politicians promising an overhaul of the economy to rebuild it. That impulse is understandable, but it points in the wrong direction. What is required is not the replacement of capitalism, but the restoration of the mechanism that underwrote American prosperity: economic policies that encourage families to work hard, accumulate wealth, and carry it forward by investing in the next generation.
The wealthy have always understood that building and preserving family wealth means investing in their children. They have built estate planning, family offices, and generational trusts around it. What has been missing is a way for ordinary families to do the same.
The Education 401(k) begins to do this by turning education from a financial hurdle in the present into an investment planned long before the student is born.
Over time, the cultural emphasis on the lone striver—the individual pulling himself up by his own bootstraps—has obscured this reality. Policymakers increasingly treat the individual as the only actor in economic life, even as most Americans continue to organize their lives around the family.
The irony is hard to miss. By focusing on the individual, public policy has stripped away the financial tools families need to build wealth together, leaving physical proximity as one of the few resources families have left. The numbers prove it. Mobility has collapsed to levels not seen in half a century: just 11 percent of Americans changed addresses in 2024, down from roughly 20 percent in the 1960s. Family ties, childcare needs, elder care responsibilities, and the rising costs of relocation bind families together, driving a quiet but consequential shift. Nearly 60 million Americans now live in multigenerational households.
Public policy has moved in the opposite direction. Rather than reinforcing the family as an economic foundation, it has worked to replace it with something less sturdy. The result is a generational compact that has been hollowed out, leaving the state as the fallback for those who fall short.
The answer to socialism is not just to argue against its advocates in politics, but to rebuild a system that works—one that strengthens the family not at the expense of the individual, but as the foundation for upward mobility.
Thiel asked why capitalism wasn’t working for young people. The answer isn’t to abandon it—it’s to extend it. The Education 401(k) gives ordinary families the same tools wealthy ones have always used to build wealth across generations.
That’s not socialism. That’s capitalism doing what it was always supposed to do.
