With the regularity of Halley’s comet, but more frequent, the myth of the Greedy Geezer circles our orbit. The latest is the New York Times columnist Peter Coy and well-respected economist C. Eugene Steuerle and Glenn Kramon former editor of the New York Times implying a dollar taken away from the old go to the young.
The conclusion is wrong and misses the point.
There isn’t any generational conflict, the issue is sky-high inequality of wealth, income, and lifespan. The point is class, not age.
Weak Political Will To Boost Children’s Needs and Retirement Security
The political and social forces that created shamefully high child poverty rates are the same that cause sky-high elder poverty rates — not enough political will to raise incomes of the bottom and middle class. American child poverty rates are lower than elder poverty rates – 21.3 percent compared to 23.1 percent. In other nations the political will is stronger; poverty rates in other rich OECD nations are under 10 percent.
The intergenerational-conflict myth is weaponized to cut Social Security and Medicare and make people work longer. The intergenerational – conflict myth intones that politicians who cut spending on the old raise spending on the rich.
I agree with Steuerle and Kramon that “the young have been losing out for some time.” But so have most of workers. The do – it yourself retirement system dominated by voluntary pension plans and eroding Social Security (because retirement ages increased during the Reagan years) works best for those at the top. Seventy-seven percent of the over $279 billion in retirement tax breaks, according to an Economic Innovation Group report, go to the wealthiest 20% of Americans. My recent work with co-authors Siavash Radpour and Jessica Fordon show only the top 10 percent of Americans have enjoyed wealth increases over the last 40 years.
The Old Don’t Eat The Young: Poor Understanding of Public Budgeting
And comparing spending on the old with spending on the young is catawampus.
Spending on the old includes inflated medical prices and spending on the young is dramatically undercounted because of unpaid care work. Just because the United States spends many times more for a knee replacement than Germany and we don’t provide universal pre-K doesn’t mean spending on the old is at the expense of kids.
Public finance don’t work that way. There is no empirical evidence that pensions systems transfer funds from the young to the old.
Evidence from 63 nations shows that spending for both young and old populations increase together, parts of society ally to pay for social insurance and education. A 10 percent increase in spending on education spending is correlated with a 7.3 percent increase in spending on pensions.
Economist Axel Boersch-Supan examined 16 countries finding a nation’s generosity towards the elderly does not reduce the share of total social expenditures for programs targeting youth. In an older study American economists Bommier, Lee, Miller and Zuber find comparing U.S. education spending to Social Security and Medicare that young people have higher returns on their taxes than older cohorts.
Pension and education spending go together as a result of political solidarity among workers and families.
Policies To Address Inequality In Elder Income Security
When President Franklin D. Roosevelt signed Social Security into law in 1935 things were bad. Most men never retired, they just died on the job. Average life expectancy was lower but the average improvement hides the harsh reality that most of the recent increase in longevity went to the top 50% of the income distribution, and most of that to white men at the very top of the social economic spectrum. The rich live longer and healthier.
At the same time those in the bottom two-thirds of the socio-economic spectrum work longer and longer. White women have about 19 years of retirement; black men about 12 – there is no evidence that significant numbers of people will be retired for as a third of their adult lives. And the idea that some elders get benefits when they don’t – so-called need – it is a red herring. Social Security is insurance, lots of rich people get reimbursed for car repairs through their care insurance, even though they could pay out of pocket.
The recent New York Times lifting up advocates for pension and Medicare cuts and working longer ignores the rising inequalities in health, wealth, and longevity; the often-detrimental health effects of working longer; the high risk of job loss and involuntary retirement at older ages; and the low wages and poor working conditions of many of the jobs available to older workers.
And class conflict is entirely ignored. Employers clearly benefit from the end of retirement – they want a cheap desperate supply of older labor. Older academics and others in privileged jobs also aren’t hurt by working longer.
Policy To-dos: To sustain the Social Security and Medicare taxes must be increased — with the wealthy paying a fair share and health care costs have to come down. Tax breaks for retirement accounts should go to ordinary workers by passing the newly introduced Retirement Savings for Americans Act (RSAA).
Policy Do-nots: Do not cut benefits- by raising the retirement age. I agree with Steuerle, Medicare could be the first payer for older workers and employers wouldn’t have to pay such high premium for them. I also agree we need a strong minimum benefit could essentially eliminate poverty among the elderly.
Voices From Regular Retirees
I don’t need to close with my own words. “Been around the block” writes “When your job involves taking meetings and lecturing to others you have no idea about the strain that comes from most jobs. I worked as a nurse for 46 years, and at age 67 I fully retired.… Those who espouse the elimination of Social Security and Medicare and working into one’s 70’s should all work for 30-40 years at a physically and mentally strenuous job and then decide. All the problems with funding can be completely eliminated if the cap was raised. The only reason this hasn’t been done is political, not financial.
[i] The academic interest started with a neutral piece of academic work Julia Lynch’s Age in the Welfare State is a highly referenced quantitative study that provides a ratio of social spending on the elderly compared to social spending on children.[i] Her straightforward statistic allows us to compare nations through a specific lens, that is, to compare welfare states for the “age-weighted” social spending in each of them. The lens implies a theory of the welfare state.
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