Fairness From The Elderly
INFLATION is resurgent. A recession looms. US forces are streaming into the Persian Gulf in preparation for what could be an enormously expensive war. Oil prices soar higher by the day. So too does the estimated cost of the savings-and-loan bailout - $500 billion in recent forecasts. The fiscal 1991 deficit could top $300 billion. And what are our elderly doing? They are warning Congress not to delay their scheduled benefit hikes. My, but how America's grandparents have become insulated from national life.
It was not always thus. During the 1940s pensioners aided the war and recovery efforts by allowing their Social Security benefits to decline by more than half. After the war, they tolerated exorbitant marginal tax rates in order to repay the nation's war debts. Even as our gross national product exploded in the postwar period, older Americans requested only a modest restoration of their benefits. They voted to channel most of this new wealth instead into generous education and homeownership subsidies for the young and unprecedented tax deductions for dependents.
Mind you, these were not the affluent, good-looking Centrum Silver seniors we know today. They were the gritty, street-wise contemporaries of Franklin Roosevelt and Harry Truman, who in midlife became the principal victims of the Great Depression. By 1949, nearly two-thirds languished below the poverty level as defined today. As a group, they never demanded much for themselves from government.
What a contrast these elders present to their now-aged children. The seniors of 1990, mainly at their own initiative, have become the pampered beneficiaries of the largest intergenerational transfer programs ever devised. Seventy-four percent of American households, and nine out of 10 wage-earners under 30, pay more to subsidize Social Security and Medicare than they do for everything else the federal government does. Spending on seniors this year will comprise 61 percent of domestic outlays, a share that is rising rapidly. Is it fair that 61 percent of every dollar the federal government spends on social programs goes to the richest 12 percent? Our whole system is tilting toward the elderly.
According to the Congressional Budget Office's March 1990 baseline budget projections, annual spending on old-age benefits will rise by $212 billion between 1990 and 1995. This growth accounts for 73 percent of the projected total increase in federal programmatic outlays over the next five years.
As a result of the extraordinary largesse showered upon today's elderly throughout their lives - from the WPA to the GI Bill, FHA, VA, Medicare, and the huge Social Security benefit increases of the 1970s - the current older generation enjoys a higher standard of living than any other in history. It is true that some seniors are genuinely needy. But with adjustments for in-kind benefits, their poverty rate is almost nonexistent; at a mere 2.1 percent, it is less than one-seventh that of preschool children. With more than $3 trillion in assets, their average household wealth and discretionary income is higher than that of any age group under 55. Poverty in America is much more likely to be found wearing diapers than a hearing aid.
To a compliant Congress, senior lobbies claim that their affluent constituents merely want back from Social Security what they paid in. They know better. Social Security taxes amounted to $30 per year, maximum, between 1937 and 1949, and topped out at only $468 (less than one-eighth of today's maximum) as recently as 1972. These contributions were never saved, but were used to pay meager benefits to an earlier demanding generation of elders.
The rate of return earned by today's retirees would make a loanshark blush. The average retiree gets back his or her payroll taxes, plus tax-free interest, four times over from Social Security, and 10 times over from Medicare.
Unfazed by these facts, the senior-citizen lobby has made old-age benefits the most sacrosanct spending in the budget. When it comes to cutting the deficit, aid to the poor, child health, roads, education, science, and the national defense all go first. Our massive subsidies to seniors aren't based on national interest or even income equity, but, rather, because senior citizens are more organized than the rest of us.
Now, as America faces what may be its greatest test since World War II, it would be nice if this generation of grandparents would help out. President Bush and the congressional leaders are trying to fashion a budget compromise, which the senior lobby, at least so far, has worked feverishly to subvert. If the agreement does not include curbs on the growth of old-age benefits, the savings will be few, and the economic outlook will quickly turn from bad to worse.
One would like to think that the upper middle class patriots who marched proudly in the last inaugural parade alongside George Bush's World War II bomber still have what it takes to bear their share of the national sacrifices that lie ahead. On their behalf, it must be said that they already have done much for America, from preserving our freedoms to building our postwar affluence. But perhaps they should begin to worry that their current course risks undermining these achievements.