Harold Fey was for many years editor of The Christian Century.
This article appeared in The Christian Century, December 14, 1988, pp. 1153-1155. Copyright by The Christian Century Foundation; used by permission. Current articles and subscription information can be found at www.christiancentury.org. This article prepared for Religion Online by Ted & Winnie Brock.
It is not right for the elderly to take resources for themselves in a way that discriminates against their grandchildren.
Inequities in the distribution of what have come to be called "entitlements" need to receive more attention in American society. The disproportion of public funds paid to the elderly as over against payments and services to children is a scandal, but almost nobody is scandalized. A look at the facts and a little speculation concerning the consequences of the disparity are in order.
In the discussion that follows, my indebtedness to Philip Longman’s Born to Pay: The New Politics of Aging in America (Houghton Mifflin, 1987) is substantial. Longman identifies the key fact by quoting a 1977 study by economists Spencer Spengler and Robert Clark: "Expenditures for the elderly at all levels of government exceed the amount spent on children, age seventeen and under, including the total amount spent on public education, by more than three to one." Noting that "the disparity is much larger today," Longman states that "Social Security pensions and Medicare pensions have become much more generous while welfare and educational programs for the young have been cut. " He adds: "At the federal level, the disproportion is about ten to one. "
Public apathy explains the inadequate emphasis that the presidential candidates gave to education in the recent campaign. Neither candidate acknowledged that the U.S. is falling behind other industrial democracies because our educational standards have slumped, particularly in mathematics and science. Our nation is suffering and will suffer more from our comparative neglect of our children. Neither the public nor the government takes seriously the findings of several national commissions which have deplored this neglect of the younger generation.
Reasons for the disparate treatment of the old and the young include the simple fact that elders vote and children do not. Entitlements for the elderly have become the sacred cow of American politics. Officeholders and candidates threaten entitlements at their peril. One of the most powerful lobbies in Washington is run by the 29-million-member American Association of Retired Persons—which Newsweek recently described as "the big gray money machine."
According to Newsweek, the AARP net earnings in 1987 were $32 million, tax free, on total revenues of $232 million. The AARP’s biggest earnings come from selling health insurance for the Prudential Insurance Company. The organization keeps 4 percent of the premiums, and last year its income from that source alone was $67 million. It also sells automobile insurance for Allstate and promotes travel. Expenses include $70 million for publicity, which covers the cost of producing Modern Maturity magazine. With a circulation of 16 million, the monthly ranks next to among top-selling magazines. A monthly newsletter is also published for AARP members.
The AARP keeps a wary eye on those who think the organization should pay taxes on its profits. So far it has succeeded, with the help of Representative Claude Pepper (D., Fla.) and others, in evading Internal Revenue Service taxes. It would be interesting to know why Newsweek did not mention the organization’s extensive lobbing activity in Washington. It would seem that such activity on the part of the second-largest organization in the United States (the largest being the Roman Catholic Church) would be worthy of some scrutiny.
Another reason for the disproportionate public expenditure on the elderly is the population’s greater longevity. Says Longman: "In 1900 only four percent of Americans had managed to reach the age of sixty-five or older.... In recent years life expectancy among the elderly has been increasing faster than any other age group. " A recent pension fund bulletin states that "in 1950 among those who reached sixty-five and older only one in eight could expect to reach their ninetieth birthday. Today one in four Americans who have reached the age of sixty-five will live to see their ninetieth birthday. In fact, the group of Americans eighty and over is growing five times faster than the rest of the population...In about two decades this segment of the population will double in size."
A hundred years ago when Chancellor Bismarck in Germany established the first social security system, he set the retirement age at 65 because only a small minority reached that age. When President Franklin Roosevelt created the U.S. Social Security System 53 years ago, the median life expectancy was 63.7 years. So it was not expected that the number of people claiming pensions would be large. But now the over-65 contingent is 12 percent of the population and is growing rapidly. The pressure on legislators to keep up the so-called entitlements has become a powerful political force.
A third reason for the skewing of our national financial priorities lies in the peculiar nature of the Social Security System. As of now, workers are taxed 7.15 percent of their salaries, and their employers pay an equal amount. The total of the two halves of this tax is soon to reach 15 percent. The income from it is divided into three funds: 70 percent goes to the Old Age and Survivors Insurance Fund, 20 percent into Medicare and Hospital Assistance and 10 percent into a fund for disabled workers of any age. In 1983 the expenditure on senior citizens over 65 was $217 billion, or about $7,700 per claimant. Wages under $2,000 are not subject to taxes. (People earning over $45,000 are taxed 7.5 percent of their income.) In 1983 monthly checks went out to 34.2 million persons.
What happens to the money collected each year on the payroll tax? According to Philip Rowland, under current law the Social Security Administration must spend the entire sum within the year it is collected. First, the millions of claimants receive their entitlements. All money in excess of their claims must be turned over to the U.S. Treasury. Says Rowland: "The Treasury in turn uses the funds either to reduce the government’s current deficits or to finance the government debt." To recompense the Social Security administration, the Treasury issues long-term government bonds in the amount it borrows. These bonds, which draw interest, are being held by the Social Security administration until they come due in the 21st century. At that time, where will the government find money to redeem its bonds, which in effect are promissory notes? It must be provided by the taxpayers of that distant day—by the children of the babyboomers. So the discrimination in entitlements now imposed on the young will be imposed on them in another form when they become taxpayers.
"Any funds Social Security lends to the Treasury are supposed to be returned with interest," Rowland points out. Even at a low rate of interest, the obligation will double when it accumulates over many years. According to Rowland, it is future taxpayers who will be liable for the IOU’s, "come what may." If Social Security does not receive back the money it lends, along with the agreed interest, the Old Age, Medicare and disability funds will go broke that much sooner. An article in the September 29 issue of the Los Angeles Times predicts that "although tax revenue from workers will continue to exceed payments to retirees until 2030, that will change radically as the baby-boom hordes begin to reach retirement age." The article also notes that the Social Security administration will collect $262 billion in taxes in 1988 from workers and their employers. It will spend $222 billion for entitlements; "the remaining $40 billion will go into a special bond issue legally isolated from other government programs."
American society has enough problems without adding a struggle between generations, but such a struggle will come unless we recognize and deal with what is happening. Whereas 3.2 persons’ payroll taxes now support each elderly pensioner, the decline in the birthrate ensures that for every pensioner only three or perhaps two persons will be paying into Social Security in the years when today’s workers arrive at the age to collect their pensions. While the wage level may continue to rise, that is not at all certain.
Wages depend in the last analysis upon productivity, and productivity depends upon the education and training of the producer. Educational standards in the U.S. have been falling. Many high school graduates cannot read or write at the level needed in an economy dominated by high technology. A situation in which fewer and more poorly educated wage earners are called upon to support a larger number of elderly nonproducers is clearly in prospect. Future taxpayers can carry the load only if they are equipped with a higher level of education. And if we are to have more sophisticated workers, a larger proportion of the nation’s resources must be devoted to improving education.
It also means that the moral question involved in the present inequity must be faced. It is simply not right for today’s elderly to appropriate for themselves resources and prerogatives in a way that discriminates against their own children and grandchildren. It is not right for the young to be born into a situation in which they will be taxed to support their elders at a higher standard of living than they can possibly have when they reach retirement age.
The importance of equal treatment of the young has been raised by several educational and financial groups. In 1981 the National Commission on Excellence in Education was appointed by Secretary of Education T. H. Bell. Eighteen eminent persons studied the problem and reported in 1985 that "our nation is at risk." The commission did not mince words:
Our once unchallenged pre-eminence in commerce, industry, science and technical innovation is being overtaken by competitors throughout the world. . . . The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a nation and a people. What was unimaginable a generation ago has begun to occur—others are matching and surpassing our educational attainments. . . . We have done it to ourselves—squandered the gains made after Sputnik, dismantled our educational support systems.
The tone of grave concern runs throughout the report, yet its impact on our government has been negligible.
This commission, which included the president of Yale University, teachers and officials of leading educational organizations, did not regard our situation as hopeless:
We do not believe that public commitment to excellence in educational reform must be made at the expense of a strong public commitment to the equitable treatment of our diverse population. The twin goals of equity and high-quality scholarship have profound and practical meaning for our economy and society, and we cannot permit one to yield to the other in principle or in practice. To do so would deprive young people of their chance to live and learn according to their aspirations and abilities. It also would lead to an accommodation to mediocrity in our society or to the creation of an undemocratic elitism.
The commission’s conclusion made one point of special relevance to the elderly: "The search for solutions for our educational problems must also include commitment to life-long learning." The dynamic nature of modern society requires nothing less. The report notes that education must prepare the 1.5 million young people who graduate each year from some level of schooling to join their elders in continuous striving for new attainments. This applies to the "seventy-five per cent of the work force now employed [who] will still be working in 2000 A.D. All will need further education and retraining if we as a nation are to achieve and prosper. The goal is a learning society—learning more as the world itself changes."
Commitment to lifelong learning does not exclude the elderly. The old dream of retirement as a period of purposeless drifting or obsessive pursuit of little white golf balls is giving way to more creative energy. After they retire, businesspeople often help younger people to start businesses or to solve problems. Ministers volunteer to serve churches or social organizations. Some lawyers serve as reconcilers or arbitrators to keep disputes out of court. Colleges and universities find many older people in classes. Women are often more successful than men in making constructive use of their time, which may help explain why they generally live longer than men. With so many women joining the work force, the wide spectrum of volunteer organizations is increasingly dependent on older citizens for service as well as support.
Commitment to lifelong learning exists, but it could be stronger among the elderly—and it will be stronger when we elderly discover and employ better ways to share our resources and power with the children of America. We know how to use political processes for our own advantage. Now we must learn how to use political power to bring equal advantages to our children’s children. The Social Security Act should be amended to include provisions for children’s health and welfare. A cutback in Social Security’s cost-of-living adjustment would save $5 to $10 billion a year, says Roger Strauss, cochair of a bipartisan commission seeking ways to reduce the national budget deficit. Stopping Social Security payments to the rich would save more. Raising the retirement age would also help. Such steps would free funds which could be used to lift the level of excellence in the education of the young, thereby restoring balance and establishing equity. Reordering priorities would only begin with Social Security. For us, the aged, the question is: Do we care enough to share?