The U.S. Is Stealing From Millennials and Gen Z To Make Boomers Even Richer
Social insurance programs are compatible with a basic safety net. But what we have now is a slow-motion generational fleecing.
For years, pointing out the obvious was considered impolite: America's biggest, most distortionary transfer of wealth does not flow from elites to the working class. Nor does it show up as corporate welfare. It flows from the relatively young and poor to the relatively old and wealthy. It's the defining injustice of our fiscal regime, the largest driver of our government debt, and the quiet engine behind the malaise of Millennials and Gen Z.
More than a decade ago, Reason editor at large Nick Gillespie and I wrote a piece arguing that Social Security and Medicare had together become the great cause of America's generational inequity. We noted that senior households were wealthier than ever while young households still working to make ends meet had to prop them up further.
We also warned of the threat to a genuine social safety net. Treating every elderly person, no matter how well off, as a member of a protected class entitled to increasingly unaffordable benefits will eventually destroy a system that progressives in particular cherish.
Around that time, "Occupy Wall Street" protesters were railing against "the 1 percent." I offered the tongue-in-cheek suggestion that they also consider occupying the American Association of Retired Persons (AARP), the most powerful lobby defending the largest intergenerational wealth grab in American history.
As such, I greatly appreciated seeing Russ Greene, managing director of the Prime Mover Institute, join the fight and coin the term "Total Boomer Luxury Communism" in an important article over at the American Mind. The name sounds like a joke, but the math is sound.
American heads of households younger than 35 now have a median net worth of about $39,000 and an average net worth of more than $183,000. Those over 75 have a median net worth of roughly $335,000 and an average net worth exceeding $1.6 million. As a group, today's seniors are the wealthiest we've ever had.
Many own their homes outright in markets younger families cannot afford to enter. Seniors enjoy higher rates of stock ownership and have benefited enormously from decades of rising asset values. Meanwhile, younger Americans face soaring housing costs, student loan debt, delayed family formation, and a labor market shaped by slower growth and higher federal indebtedness.
Some of this reflects natural wealth accumulation over time, and there is nothing wrong with that. But why does the modern welfare state magnify the disparity? As Green explains, "retired millionaires have become the greatest recipients of government aid," as Social Security can redistribute up to $60,000 a year to an individual and $117,000 to a household. "Meanwhile," Green notes, "Medicare programs are paying for golf balls, greens fees, social club memberships, horseback riding lessons, and pet food."
Younger Americans are also on the hook for about $73 trillion in unfunded obligations projected over the next 75 years, making now the time to act. Some defenders of the status quo argue that higher taxes will fix the problem, but it would again fall on younger earners to continue redistributing benefits to the same affluent seniors, worsening the generational imbalance. The problem is not a lack of revenue; it's a benefit structure that ignores modern demographics, modern wealth patterns, and basic fairness. Paying less to seniors who don't need the money is the only fair reform to this dilemma.
Every time someone points these facts out, defenders respond reflexively: "But seniors paid in. They earned it." No, not all of it. Not in any meaningful, actuarial sense.
We've known for decades that the system is wildly unbalanced. As Andrew Biggs of the American Enterprise Institute points out, a typical average-wage retiree in the 2030s will receive 37 percent more in Social Security benefits than they paid in taxes. Medicare is even more lopsided: Seniors routinely receive three to five times the amount they contributed.
Some older Americans who oppose reducing benefits will respond that we need to preserve the same system for younger generations. I'm sorry, but avoiding destitution in old age does not require a 25-year-old to fund the most regressive wealth transfer scheme in the developed world—especially when certain seniors use it to enjoy 25 years of vacations.
On the legal front, things are not what people think. As the Supreme Court made clear in Flemming vs. Nestor (1960), Congress has a legal right to amend Social Security benefits. The government can change the formula tomorrow.
Social insurance programs are compatible with a basic safety net, but what we have now is a slow-motion generational fleecing.
Politicians continue to treat seniors as an overwhelmingly fragile and impoverished group in order to oppose reforming the system. Thankfully, Americans across ideological lines are beginning to recognize the structure for what it is: one that requires punishing younger generations through taxes and debt so that their grandparents can receive far more in benefits than they ever contributed or were originally promised.
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