THREE STARTLING FACTS of life in America in the mid-1980s -- none of them facts just 15 years ago -- describe a society whose generations are undergoing profound changes:
*America's elderly are now better off financially than the population as a whole;
*Children are now by a wide margin the nation's most impoverished age group;
*Young adults now have a harder time making ends meet and face a far stiffer tax burden than their parents did when they were the same age.
In the new America, the old are being enriched at the expense of the young, the present is being financed with tax money expropriated from the future and one of the legacies children appear to be inheriting from their parents is a diminished standard of living.
"We may be the first society in history of which it can be said that children are worse off than their parents," observed Sen. Daniel Patrick Moynihan (D-N.Y.), one of a small number of politicians beginning to call attention to matters of generational equity.
Moynihan excluded societies visited by cataclysms such as war or famine. He was speaking, rather, of a society that -- of its own free will, and in the normal order of business, and perhaps without realizing it -- has suspended the article of faith that says each generation ought to do better than the one before.
Government is the main agent of all these shifts. The 11 percent of the population that is over age 65 now receives 51 percent of all government expenditures for social services, from pensions to education.
It is not the sole agent, however. Economics, demographics and even social mores have played a powerful role, too.
For example, the high inflation, negative real wage growth and runaway housing costs of the past 15 years have worked varying degrees of hardship on all age groups, but none more than young adults. They aren't yet homeowners. Instead of riding the housing price escalator up, they're stuck on stationary ground, watching the cost of a first house climb out of reach. (The median price home takes a three times bigger slice out of the check of the median wage earner today than it did a generation ago.)
Similarly, the deterioration of the American nuclear family over the past decade and a half has left the elderly largely untouched, but has thrown millions of children into one-parent households -- and into a poverty the rest of the nation seems to fathom only dimly.
Where these trends have created generational losers, federal government policies have exacerbated them; where they have created needs, the federal government has retreated. Meantime, through Social Security alone, the federal government this year will transfer an unprecedented $200 billion in wealth from young to old.
By any accounting, Social Security has been the signal triumph of federal domestic policy in this century. It has built a floor of financial dignity beneath nearly everyone in this country over age 65 (nearly because pockets of poverty do remain, especially among elderly widows and the "old old"). Along the way, Social Security has become politically sacrosanct, not least because politicians have flavored it with words -- "contribution," "insurance" "trust fund," "earned right" -- intended to create the impression that it's something it isn't.
Social Security does indeed contain elements of social insurance, but in the main it is a straightforward tax-and-spend program -- a compulsory income transfer between generations. Viewed in its least equitable light, it is a vehicle for taxing even the poorest of the working young to give benefits to even the wealthiest of the retired elderly.
Critics find this aspect of the system troublesome, given the rearranged economic landscape. They also fret that Social Security cannot possibly provide for today's working-age population, once its members retire, at levels it is now providing for their parents.
A new debate about Social Security seems set to begin, with proposals running the gamut from means-testing to various forms of privatization. This debate has yet to receive a broad public airing, but as concerns about generational equity grow, many politicans believe it is only a matter of time.
"There is a sense out there that things are way out of whack," said Rep. George Miller (D-Calif.), a leading congressional advocate of programs for children. "We're not sorting out on the basis of need any more, but on the basis of who can visit political retribution."
These are hard issues for politicians to talk about. The mere act of parsing the population along generational lines rubs people the wrong way. Within families, after all, the generations don't compete for resources; they share and they nurture. (And if it doesn't always quite work out that way -- well, it's supposed to.)
Moreover, any generational analysis, no matter how diplomatically rendered, is likely in the present economic environment to make the elderly out to be the "heavies" of the piece -- not a career-enhancing formulation for any elected official.
The voting clout of the elderly is a famous political fact of life in Washington. No doubt it is one explanation for their continued "most-favored" status, even in the face of their new prosperity.
But Miller and some others think politicians have misread their elderly constituents. If they would would stop pandering to senior citizens, stop trying to score narrow partisan gains with scare tactics on Social Security, and instead call forth the spirit of sacrifice, "I'm sure the elderly would respond," Miller said.
Quietly, lobbyists for the elderly have been spreading a similar messsage in Congress for the past year. They are willing to live with some cuts in Social Security if they come in the context of an across-the-board attack on the deficit, says John Rother, chief lobbyist for the American Associaion of Retired Persons (AARP).
They have gotten precious few takers on Capitol Hill. Social Security was the first item exempted from the Gramm-Rudman-Hollings deficit-reduction measure enacted late last year. A few months earlier, Senate Republicans had tried to freeze Social Security cost-of-living allowances as part of an overall scheme to cut the deficit, but the political consensus for such a move simply does not exist. At least for the moment, the dynamic of modern interest-group politics has been turned on its head. The group says, "We'll give;" the government says, "No way."
"No one wants to be accused of granny bashing," said Sen. David Durenberger (R-Minn.), who has founded a group called Americans for Generation Equity. "These are risky issues to talk about."
On the other hand, some politicians also sense they may soon be at risk if they do not address them. The so-called "baby-boom" generation (those born between 1946 and 1964) now constitute nearly 45 percent of the voting population, and for them and their children, the notion of downward generational mobility is not some sort of economist's abstraction. It's a hard fact of everyday life.
These generational issues are best examined through a series of statistical snapshots:
*In 1970, an elderly person was more likely to be living in poverty than a child. Today, a child is nearly six times more likely to be poor than an elderly person.
*Nearly a fifth of all children today live in households that fall below the official poverty line. Some 12.4 percent of all the elderly are poor, but once the value of Medicare and other in-kind benefits are added to their incomes, the poverty rate among the elderly drops to less than 4 percent.
*Of all Americans living in poverty today, 40 percent are under age 18.
*Since 1970, Social Security benefits have increased by 46 percent in real terms, while wages and salaries -- the chief source of income for non-elderly adults and their dependent children -- have declined by seven percent after adjusting for inflation.
*In fiscal 1983, the 11 percent of the population that is elderly received 51 percent of all government spending -- federal, state and local -- on social welfare programs, according to the Social Security Administration. Of the $641.7 billion spent on these programs by all levels of government, $330.6 billion went to the elderly for social insurance (including Social Security and Medicare) and government pensions. The remainder went to the not-elderly, in the form of expenditures on public education, health programs, welfare, veterans programs, vocational rehabilitation, child nutrition and assorted other programs.
*The major forms of federal aid to children (education, Aid to Families with Dependent Children, health programs, food stamps, child nutrition programs) have been been cut in real terms over the past five years, while at the same time poverty among the young has more than doubled. In 1979, 72 percent of all poor children were enrolled in AFDC. By 1982, only 52 percent were.
*Today's Social Security beneficiary receives, on average, three dollars back for every one dollar that the individual and the employer contributed to the system, plus real interest. A typical young worker entering the labor force today, even under assumptions widely regarded as optimistic, will not get back even $1 for every $1 he or she and the employer put in, plus real interest.
There are two reasons. One is structural: Any pension system, public or private, always does best by the founding generation; they weren't in the workforce long enough to make full contributions. The other is demographic: The population is entering a longterm aging trend, and by the middle of next century there will be fewer than two workers per retiree, as opposed to today's ratio of 3.4 to 1.
*A young person now joining the labor force will have to pay $50,000 in taxes over the course of his or her working life in order to pay the interest on the deficits that have had been added to federal debt in the past five years alone. The vast bulk of that debt has been incurred to support current consumption rather than to invest in the sort of public infastructure projects that directly benefit future taxpayers. (Such projects have been declining steadily as a percentage of GNP in the past two decades).
Moreover, to the extent that the borrowing has been from foreign sources, the debt also constitutes a transfer of wealth from present and future taxpayers to the rest of the world, draining capital from this country that could finance future domestic growth.
*A majority of today's young and low income wage earners now pay more in Social Security payroll tax (FICA) than they do in federal income tax. The FICA tax is the nation's most regressive; it begins with the first dollar earned each year and is levied up to an annual cap of $42,000.
*The year a 37-year-old was born, his father was paying a maximum of $60 a year in Social Security tax. Starting this year, that 37-year-old will pay up to $3,003 annualy in FICA taxes. The year that same 37-year-old was born, Social Security benefits acounted for one percent of the annual federal budget. Today the payments account for 21 percent of the federal budget. This year, the maximum Social Security benefit for a worker turning 65 is $760 a month; it is $1,140 for a worker and dependent spouse.
*The year that same 37-year-old was born, the American family of median income paid 4.4 percent of its earnings to the federal government in income and payroll taxes. Today, it pays 18 percent.
*A median 30-year-old male head of household today is earning 10 percent less (in inflation-adjusted wages) than his median-waged father did when he was the same age. What's more, in the 1950s, the 30-year-old head of household needed to spend only 14 percent of his wages to pay off his mortgage on the median priced house; today's 30-year-old must spent 44 percent of his wages to live in the median-priced house.
*In part in response to this earnings and housing cost squeeze, the percentage of married women in the labor force has more than doubled in the past generation, and fertilty rates have been halved. In 1957, women bore an average of 3.7 children; today they bear 1.8 children. If fertility rates remain this low, today's generation of workers, once they retire, won't have enough adult-age children in the workforce to support the Social Security system as they have known it. Between the years 2000 and 2050, the workforce is projected to stay constant at 140 million workers, while the number of Social Security beneficiaries is projected to double, from 48 to 96 million. The entire nation will take on the demographic look of present-day Florida.
*Of the children who are being born, the families they are born into have undergone "an earthquake," in the words of University of Pennsylvania demographer Samuel Preston. In 1960, five percent of all infants in this country were born out of wedlock; today that figure is 18 percent. In 1960, 9 percent of all children lived in female-headed households, today the figure is 19.7 percent. Among blacks, the figures are more ominous still. In 1982, 55 percent of all births to black women were out of wedlock; 51 percent of all black children lived with only their mothers. The present social costs of this breakdown of the family order are huge, the future cost incalculable.
What to make of all this?
One place to begin is the question of whether it is even useful, as a exercise in public policy analysis, to measure the relative hard times of one generation against the relative prosperity of another.
Many -- and not just politicians -- believe it is not. The major national advocacy group for children, the Children's Defense Fund, has assiduously avoided any generational comparisons, arguing that funding for programs for the young should be increased not at the expense of the programs for the elderly but at the expense of military spending. The American Association of Retired Persons takes the same tack.
Eric Kingson, who is preparing a study of generational issues for the Gerontological Society, argues that the well being of the elderly contributes directly and indirectly to the well-being of all other generations.
Few would dispute his thesis. Working-age adults benefit, both by being relieved of the financial burden of caring for their elderly parents, and, in some instances, by being the direct recipients of parental largesse. Such private, intra-family income transfers are notoriously difficult to study, but the evidence is that they are episodic (the purchase of a first house, the onset of a debilitating illness), that they move across generations in both directions and that they are thoroughly means-tested -- that is, they move always in the direction of need.
The well-being of the elderly also impart psychic benefits to all age groups. Obviously, children want the best for their elderly parents. They also prefer not to have to live in the same house with them ("Dallas" and "Dynasty" nothwithstanding), and the feeling is mutual. Social Security is so popular in part because it has been the key to the financial and physical independence of aged parents, which suits everyone's lifestyle just fine.
It is popular, too, because everyone expects to be elderly, and nearly everyone has anxieties about it. (No one, on the other hand, expects to be young again -- an obivous point but one that oughtn't be forgotten). "Social Security has removed much of the fear of growing old," says Moynihan. "This is an extraordinary accomplishment of our society."
Indeed, young adults are more concerned than older adults are about the adequacy of current Social Security payments, according to a nationwide survey taken last summer by Yankelovich, Skelly and White, Inc. for the AARP.
By heavy margins, the survey shows young adults also think that Social Security taxes are either about right or too low (67 percent) and that they are fair (70 percent). They hold these views even though two-thirds of them lack confidence in the future of the system.
Clearly, then, Social Security is not a program that makes one age group feel victimized by another. Just past its 50th birthday, it enjoys enormous levels of popularity at all points along the age spectrum -- 87 percent of the respondents in the AARP survey were opposed to cutting Social Security benefits to reduce federal deficits; by comparison, only 30 percent opposed cuts in military spending for the same purpose.
Former commerce secretary Peter Peterson, a leading critic of the program, writes that "Social Security has become the defining link between citizen and state in modern America." Its exalted status explains (and is, in turn, propped up by) the lengths to which politicians of both parties have gone to stay on the "right" side of the issue. To wit:
*"A president should never say 'never.' But I'm going to violate the rule and say 'never.' I will never reduce Social Security benefits to people that are now getting them.
-- Ronald Reagan, presidential debate, Oct.10, 1984.
*LOS ANGELES, April 18 -- Democratic National Committee Chairman Paul G. Kirk Jr. said today the party should consider means tests for Social Security recipients, a freeze on payments and a limit on future benefits for wealthy recipients.
Later, he issued a total retraction, saying, "I was wrong."
*"Do you know where your Republican senators were at 2 a.m. on May 9, 1985? They were up to an old Republican trick -- assaulting Social Security."
-- Fundraising letter, Sen. Edward Kennedy.
The question now is whether politicians have become prisoners of their own rhetoric. Critics say Social Security cries out to be adjusted to fit the new economic landscape, but both parties have handcuffed themselves to their campaign promises and fundraising letters.
One set of proposed changes would place a lid on benefits to wealthy retirees and use the savings to ease the payroll-tax burden on the working poor. Among Democrats, several younger leaders, including at least one likely presidential candidate, Arizona Gov. Bruce Babbitt, advocate some form of means-testing along these lines. In a time of scarcity, he argues, government simply must be more selective about the targets of its largesse.
In 1983, acting on the recommendation of a bipartisan blue-ribbon panel, Congress took a partial step in that direction by making taxable half of the Social Security benefits of all recipients whose income exceeds $25,000 (roughly 15 percent of the elderly population). The same Congress, however, also increased the payroll tax on all workers, even the poorest.
The more traditional Democratic argument is that means-testing would be the death knell of Social Security. "Once Social Security begins to be seen as something that benefits one group more than another, it will surely begin to lose its overwhelming public support," says Moynihan, whose concern for the young does not lead him to conclude the nation must scale back its commitments to the elderly.
This debate may well become a dividing line among Democrats in the years ahead since Democrats are the only party with the political bona fides to talk openly about restructuring Social Security. Privately, many younger Democrats agree with the Babbitt side of the argument, but they wonder how they can turn their back on all the years of party orthodoxy. Meantime, no Democrat is anxious to give up the only sure-fire campaign issue their party has had since the dawn of the Reagan Era.
On the other hand, the long-term funding problems of the system eventually may force the issue. A. Haeworth Robertson, a former chief actuary for the Social Security Administration, recently estimated that, in order for today's young to receive retirement benefits at current real levels, the workforce in 2050 will have to surrender 41 percent of total payroll (employer and employee contribution combined) in Social Security taxes. He notes that it is "very questionable" the future workers would stand for such a burden.
The Social Security trustees make their own set of long range projections each year. In 1985, they concluded that only under the most pessimistic economic assumptions would Robertson's figure be accurate. The trustees' benchmark "intermediate" assumptions call for a 23 percent Social Security tax rate by 2050, and their "optimistic" assumption calls for a 14 percent rate (the same as it is now).
However, Robertson notes that if all the key variables that go into these forecasts are projected out for a half century on the basis of their performance over the past decade, the trustees' pessimistic assumption is, in fact, optimistic.
Even in a worst case, this funding crunch will not hit immediately. The 1983 amendments assure that Social Security will be running large surpluses between now and the turn of the century, in order to fund a portion of the baby-boomers' retirement. If history is a guide, Congress will not react until prodded by a crisis.
But other changes are already in progress that place Social Security on less stable political footing. When the program was enacted half a century ago, there was only a minuscule private pension system in this country. Today, nearly three-quarters of all workers are covered by some private pension plan. In addition, the federal government is encouraging individuals to save for their own retirement through a variety of tax-deferred mechanisisms -- IRAs, Keogh plans, 40lK plans.
The case against these plans is that they offer the greatest benefit to the wealthiest wage earners. But the tug of "privatization" is strong, and conservative social planners, seeing the growth of these alternative sources for retirement income, have been stepping up their calls for Social Security to be made voluntary. Recently Great Britain began to experiment with a form of privatization of its Social Security system (benefits to all current recipients are protected). A clamor for similar approaches in this country is likely to rise as more and more baby-boomers make their own calculations about the return they will be getting on their Social Security investment.
Social Security is not the only battleground where these generational issues come to a head.
Last year, as members of Congress vented their frustration over their inability to control the deficit, more and more began framing the issue in terms of generational equity.
Durenberger says the deficit "gets used against the young in two ways. First, it forces them to pay installments well into the future on yesterday's consumption, and next, it allows those of us in government to tell the young that we can't repair sewage systems, or take care of ground water problems, or invest in education, because the money isn't there."
Rep. John Porter (R-Ill.) calls the budget deficit an exercise in "fiscal child abuse."
Moynihan says any society that allows its young to grow up in poverty and broken homes "asks for, and gets, chaos."
Until recently, theirs have been lonely voices.
But the issues are compelling, and sooner or later, the politicians are bound to take heed. For any government that pinches the horizons of its young is treading on a civic article of faith: the idea that tomorrow will be better than yesterday.