In 1964 a young Bob Dylan released “The Times They Are a-Changin’,” an anthem that defined what would shortly become known as “the generation gap.” With a mix of sympathy and sneer—“Come mothers and fathers / Throughout the land / And don’t criticize / What you can’t understand / Your sons and your daughters / Are beyond your command / Your old road is / Rapidly agin’ ”—Dylan described an unbridgeable gulf in values, styles, and aspirations between the rising baby boomers, born between 1946 and 1964, and their elders, who had managed to survive the depredations of the Great Depression, World War II, and the swiveling hips of Elvis Presley.
Flash forward half a century, and the boomers who once sang along with Dylan have become the reactionary elders, clinging to their power and perks at the literal expense of everyone younger. There’s a new generation gap opening up, one that threatens to tear apart the country every bit as much as past confrontations over war, free love, drugs, and sitar music. This fight is about old-age entitlements and whether the Me Generation will do what’s right for the country and stop sucking up more and more money from their children and grandchildren.
Social Security and Medicare, which provide retirement and health insurance benefits for senior Americans, generally without regard to need, are funded by taxes on the relatively meager wages of younger Americans who will never enjoy anything close to the same benefits. From any serious fiscal or moral viewpoint, and particularly for the sake of helping those truly in need, Social Security and Medicare should be ended.
The demographic math is irrefutable: Entitlements are killing the safety net. They should be replaced with social welfare programs that cover all citizens, regardless of age, but only those who are too poor or incapacitated to take care of themselves. Focusing on those truly in need instead of automatically shoveling out larger and larger amounts to well-off senior citizens is the best way to avert looming fiscal catastrophe and restore some morality to an indefensible system.
Gourmet Cat Food
The entitlement state, whatever its intentions and past successes, is like a starter home that has been expanded and renovated so many times that it has no architectural coherence or structural integrity. The country has grown much wealthier and much grayer since the starter home was built. Whether the Patient Protection and Affordable Care Act (a.k.a. ObamaCare) supersedes Medicare or simply adds to its costs, publicly funded spending on retirement and elder care will skyrocket as baby boomers start retiring en masse.
But why should we spend increasing amounts of money —as a proportion of GDP, in absolute dollars, or as a percentage of government spending—on a group of people simply because of their age? To hear elected officials and representatives of the American Association of Retired Persons (AARP) tell it, Social Security and Medicare are the only reasons older Americans don’t have to eat cat food or choose between prescription drugs and heating their homes.
“Without Social Security,” Vice President Joe Biden asserted to a Florida crowd in March, “nearly half of American seniors…would be struggling in poverty.” Biden was merely channeling Lyndon Johnson’s remarks at the original press event announcing the passage of Medicare. “No longer will older Americans be denied the healing miracle of modern medicine,” LBJ said as he handed former President Harry Truman the very first Medicare card (Truman had “planted the seeds of compassion” during his unsuccessful attempt while president to create nationalized health care).
Johnson was equally quick to pitch the benefits of entitlements to the younger generation, whose anger over Vietnam would stop him from running for re-election in 1968: “No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.” Getting kids off the hook remains an alleged selling point to this day. “Retirement is multigenerational,” Biden said in his speech. “It matters to your children if you have a decent retirement. Every one of you—it matters to your children. Because if you don’t, your children feel obliged to step up.”
In a 1999 address to the National Education Association’s Women’s Equality Summit, then-First Lady Hillary Clinton was even more explicit in celebrating her own generation’s freedom from the burdens of traditional caretaking responsibilities. “Were it not for Social Security, many of us would be supporting our parents,” intoned the author of It Takes a Village. “We would take them in; we would do what we needed to do to try to provide the resources they required to stay above poverty, to live as comfortably as we could afford. And that would cause a lot of difficult decisions in our lives, wouldn’t it?”
This rhetoric about entitlements freeing the young ignores the fact that they are hit with the cost of supporting their elders in every paycheck. Furthermore, when repurposing lines first uttered a half-century ago, today’s politicians are also ignoring some very good news: The oldest among us are in remarkably good shape compared to graybeards of previous generations.
Using consumption data, economists Bruce Meyer of the University of Chicago and James X. Sullivan of the University of Notre Dame have shown that people 65 and older have much lower poverty rates than most other demographic groups and that these rates have fallen sharply over the past 50 years. Writing for the New York Times website in November 2011, Meyer reminded us that “even over the past 10 years, those 65 and older with the lowest income are now living in bigger houses that are much more likely to be air conditioned and have appliances like a dishwasher and clothes dryer.” Eighty-three percent of elderly households own a home, and 86 percent own a car.
Seniors have more stuff and more wealth. According to 2010 combined data from 15 federal agencies on population trends, economics, and health issues, seniors’ average net worth as of 2007 had increased almost 80 percent during the previous 20 years. The same sort of improvement has not spread to all age groups. In fact, the data show that younger Americans are losing ground.
In 1984, reports the Pew Research Center, households headed by people 65 or older had 10 times the wealth of households headed by people under 35. By 2005—before the Great Recession hit—the gap had increased to 22 times, and by 2009 it was 47 times. In 2010, 11 percent of households headed by people 65 or older were officially under the poverty line. For households headed by someone under 35 years of age, the figure was 22 percent. The last time younger households were less likely to be poor than elderly ones was back in 1983. Conditions for older Americans have improved remarkably since Social Security and Medicare were established.
That older households are wealthier than younger ones is not surprising, and it is no cause for concern in itself. Elderly Americans have had a lifetime to amass savings and assets and to earn money from interest and investments. By the time they reach 65, most Americans also have lower living expenses. The kids are out of the house, and the house is more likely to be paid off (or to cost less due to inflation). In their new book The Clash of Generations, economists Lawrence Kotlikoff and Scott Burns show the cost of living for households of different sizes and ages varies dramatically. The cost of living for a married couple with children ages 6 to 17 is at least twice the cost for a retired couple. And these numbers underestimate the gap between retirees and married parents since they don’t include expenses such as saving for college, orthodontic treatment, and vacation time.