November 8 2011
The Occupy Wall Street demonstrations focused a lot of attention on this idea of the “99 percent” of the country that is being exploited by the top one percent. Much has been written on some of the falsies on which this mantra rests (such as that the top one percent already do shoulder much of the burden of paying for government). Hadley exposed the disconnected between OWS's agenda and the actual problems (government unfairly advantages the powerful—so let's expand government!). And the Wall Street Journal highlighted common ground that we should all be able to get behind: Let's get rid of all crony-capitalist government policies that enable powerful government officials to hand out money or favors to powerful businesses.
Yet I think that OWS has distracted from another underlying tension in our country, and one that will loom larger in the years to come. Government doesn't just unfairly favor some politically-connected industries over others (or over taxpayers), but much of the government today is designed to transfer money from the young to the old. How long is the younger generation going to stand for this, especially when they are doing worse than their grandparents are.
As Hadley wrote yesterday, talk about entitlement reform is really about today's workers—Millenials and Gen-Xers, who are paying into a system that will be completely dysfunctional by the time we reach retirement. And yet, anytime entitlement reform comes up, defenders of the unsustainable status quo trot out pictures of poor, old, decrypt seniors and claim that any changes to current law will leave them dying in the streets. As I write today in Townhall, the real question facing the country is whether our political system is so completely broken and frozen by this kind of pathetic politicking that we are doomed to never make changes to programs that we absolutely know threaten our economic future.
There are two interesting, relevant articles out today on this topic – one on the growing wealth gap between seniors and young Americas, and the other, on the growing number of Americans facing poverty. The first isn't really surprising—it makes sense for older people to have more wealth after a life time of work, and that the current economic crisis would hit younger workers hardest. Yet it's important information to keep in mind as we consider changes to government. Seniors are not uniformly poor. And in fact, many are quiet well off. We recognize that there is a great variability in most demographic groups, but for some reason in discussions about entitlement reform, we seem to take the term “senior” as a synonym for “someone who would be destitute absent government support.” Similarly, the second article reminds us that there are seniors—and other Americans—who are falling through the cracks of existing safety net.
In boom times, Americans might have felt that it was okay for government to provide a bunch of services and transfer payments wealthy seniors through entitlement programs. Today, we need to recognize that we can't afford to pay for everything for everyone and priorities need to be set.
Yes, I know that wealthy seniors paid into the program, and therefore deserve to get something out. Those in the first generation of these entitlement programs made out well (as the first entrants into a Ponzi scheme always do). Now now things are getting dicey. Someone is going to have to lose. It's not fair, but it's reality. And it's a reality that was created when the program was constructed. It's not the fault of today's messengers that they have to play a lousy hand that was dealt for them by those who constructed the Ponzi scheme in the first place.
The question now is do we make younger workers just cough up more and more in taxes so that wealthy seniors get every last penny that politicians promised them decades ago. Or do we make changes so that our entitlement programs are less generous for retirees who are wealthy?
I hope--and feel confident in fact--that proposed changes (such as moving toward a premium support program rather than today's completely dysfunctional fee-for-service Medicare system) will make the system work better and bring down costs across the board, making some of our choices less painful. But as we enter into what has to be a great debate about the future of our entitlement program, and what our country can actually afford, it seems important to set out that finite resources should support those who are actually in need, rather than augment the income of every already-wealthy 68-year-old.