Gillespie and de Rugy on Generational Warfare
By David Henderson
I get some of my best uninterrupted reading done on long flights and on a recent flight I read the latest issue of Reason magazine (August/September) cover to cover. It’s excellent. I found virtually every article valuable. The highlight was “Generational Warfare: Old-Age Entitlements vs. the Safety Net,” by Nick Gillespie and Veronique de Rugy.
One high point is the quotes from former President Lyndon Johnson, current Vice-President Joe Biden, and then-First Lady Hillary Clinton about how bad it is to support one’s parents.
“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.”
In other words, unless there’s an Easter Bunny, LBJ is saying, we’ll free you of your moral obligations by obligating strangers.
“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.”
And that would be terrible: Much better to force other children to step up.
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?”
And of course we can’t have difficult decisions about supporting our parents: it’s much better to make strangers’ lives more difficult.
In his March speech in Florida, Vice President Biden told stories of building a new house that included living quarters for his parents, who refused to move in. Biden explained that his parents and other seniors value their “independence” and “dignity” more than anything. His mother, he said, was representative of seniors in that she wanted to be able to pay her own way at check ups with her doctor. “She didn’t want to ask her kids.”
In Biden’s strange moral universe, his mom should be admired for wanting to get medical care on the dime of strangers rather than from her own family.
Another high point is the data. A few nuggets:
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.
One thing that has always bothered me, that started in the 1970s and early 1980s, was the language used to talk about Medicare and Social Security. In Washington, these programs are referred to as “mandatory.” They are no such thing, as Gillespie and de Rugy point out. Congress can change them at any time. Congress might be afraid of the heat they would take by changing the program but that doesn’t make it mandatory any more than farm subsidies, which Congress has been hesitant to change, are a mandatory program.
Not to be missed is a table, taken from Urban Institute economists C. Eugene Steuerle and Stephanie Rennane, that shows the Social Security and expected Medicare benefits and taxes for various age cohorts. (Gillespie and de Rugy don’t mention, but Steuerle and Rennane do, that the lifetime benefits and taxes are present values that are computed using a real interest rate of 2%.) Bottom line: the older you are, the better you do in present value terms. Social Security and Medicare are a huge wealth transfer from the young to the old. The people who really will pay through the nose are not in the Steuerle/Rennane table. They’re Generation X and younger.
One criticism: They write that Ronald Reagan, as president in the 1980s:
tweaked the system by increasing payroll taxes and slightly increasing the age at which benefits would kick in for people currently paying into the system. He left the benefits of current retirees untouched.
Actually, Reagan didn’t increase the age at all. Had the Social Security compromise gone forward as the Greenspan Commission proposed, there would have no increase in the age at which people receive Social Security and the system would today be in even worse shape. The person in Congress who would not stand for this was Democratic Representative Jake Pickle from Texas.
Patrick R. Sullivan, in a comment below, misses the point: The young are not paying to take care of their parents. They’re paying to take care of other people’s parents–and, by the way, of people who have never been parents.