Plundering the Young
By Robert J. Samuelson
Our policies toward the elderly rest on outdated assumptions. When Congress created Social Security in 1935, life expectancy was 62 years, and the 65-and-over population was tiny. At Medicare's birth in 1965, life expectancy was 70 years. The assumptions were that the elderly, defined as anyone 65 and over, were automatically decrepit and dependent. The decent thing (it was thought) was to protect them against impoverishment.
But the underlying assumptions no longer hold. Life expectancy is now 76 -- and climbing. Glenn's exploit is exceptional only for its visibility. We read every day of older Americans doing things that are more exacting: running marathons, climbing mountains. People not only live longer; they are healthier. The infirmities that ultimately afflict us all either occur later or are more treatable than ever. Yet, age 65 still survives in politics and popular culture as the threshold of "elderly."
In popular culture, it is bound to crumble. Feats like Glenn's hasten the process. As older members of the baby boom approach 60 (they are now in their early fifties), they will insist on their own vitality and relevance. They will invent new labels -- some, no doubt, absurd and pretentious -- for their latest life stage. But in politics, change is less certain though no less necessary.
A recent report by the Congressional Budget Office ("Long-term Budgetary Pressures and Policy Options") shows why. In 1997 Social Security cost 4 percent of national income (gross domestic product), Medicare 3 percent and Medicaid one percent. (Medicare is federal health insurance for the elderly; Medicaid covers much nursing home care.) That's 8 percent of GDP. Under present policies, CBO projects that to rise to 13 percent of GDP by 2020, a 63 percent increase. Social Security hits 6 percent of GDP, Medicare 5 percent and Medicaid 2 percent.
There are only a few ways to cope: Pay for the higher benefits by raising taxes; lower other spending; run big budget deficits; or reduce the benefits by making programs less generous. In practice, we may do all four. But the hardest -- and most essential -- is to reduce future benefits.
We need to redraft the generational compact. Social Security, Medicare and Medicaid are pay-as-you-go programs. Workers support retirees. According to the CBO, the average person between 65 and 79 receives $12,000 in federal benefits (mainly Social Security and Medicare) and pays $4,800 in taxes; meanwhile, the average person between 20 and 64 pays $8,100 in taxes and receives $1,500 in direct federal benefits. To pay future benefits entirely by taxes would mean huge increases for workers.
This is neither defensible nor desirable. These immense intergenerational transfers require some justification, and the truth is that the moral claims of the old on the young -- through government programs -- have lost much of their original power. Two arguments are standard.
First, the old cannot cope for themselves; therefore, a caring society tries to ensure them some minimum standard of living. This may still be true, but it is no longer true at age 65 and surely not at age 62 (when the average person leaves the labor force).
Second, the old could not plan for their retirements because they did not know how long they would live. This was more true in the 1950s and 1960s -- when life expectancy rose unexpectedly -- than today. A prudent person now plans for a long retirement. This argument applies only to those who live much longer than average.
Return now to Glenn. Since his ascent, we've heard much gushy rhetoric about making better use of the "talents and energy of the elderly." Well, the best use of their talents would be to have more of them work longer. They need to pay for more of their own retirements. Put crudely, they need not become a social burden at a relatively tender age.
In practice, early retirement has to become harder. Social Security's eligibility age needs to be raised (the age for full benefits is now scheduled to reach 67 by the year 2027; it should go higher, probably to 70, and faster). The elderly should pay more of Medicare's costs through higher premiums and co-payments. And tax breaks for those over 65 -- including exempting part of Social Security from income taxes -- should be repealed. So should Social Security's earnings test, which penalizes people for working by reducing their benefits.
All this may seem harsh, even "anti-elderly." It isn't. I'm not suggesting that everyone work 60 hours a week until age 90. As people grow older, they may want to mix work and leisure through part-time, part-year or intermittent jobs. The U.S. economy excels at creating new types of jobs to fit people's social needs. And the economy will need more workers, because an aging America will have a small labor pool. In 1997 there were about five Americans between 20 and 64 for every American 65 and over; by 2030, that ratio is projected to fall below 3 to 1.
Nor am I arguing that changes in taxes and benefits be made abruptly. They should be phased in to give people ample warning. I am 52. Changes would apply mainly to the baby boom generation. They would prevent us from overtaxing our children. The longer changes are delayed, the harder they'll be and the more conflict we'll have. But delay is what we've done, in part because today's elderly resist any changes and politicians pander to them.
We need to reinvent retirement. This is not an accounting exercise. It should reflect a sense of collective responsibility and present social realities. Glenn's space voyage shows how those realities have altered. Our programs for the elderly support more and more people who are more and more independent for longer and longer periods. What started as a sensible concern for the old is evolving into a selfish plundering of the young.
© Copyright 1998 The Washington Post Company