September 18, 2012

How to Resolve Our Fiscal Crisis: Don't Let Anyone 60 or Older Vote in this Election

I originally planned to title this post "Our Entitlements Make Me Richer and My Children Poorer." But I changed it after reading Bob Laszewski's excellent analysis of both parties' Medicare reform proposals, which I summarized last week. Here's how he began his piece:
Let me start by saying something that will likely surprise you. If I could be king for a day, I would prohibit anyone over the age of 60 from voting in this election. This election is really about the future and the big decisions on the table are about the long-term government spending and entitlement issues that should be made by younger voters who will have to pay for them and will benefit or suffer from them.
We have turned people over 65 -- like me -- into a politically protected class. Because we vote at much higher rates than younger workers, politicians of both parties are afraid to touch our Social Security and Medicare benefits. Those programs must be revised to reflect the longer life expectancy and greater wealth of today's retirees. We must lighten the burden on our children and grandchildren, whose taxes support those programs, and who cannot save enough to fund their own retirements.

It is a long-standing axiom in America that every generation will live more comfortably than the last. I always know I'd do better than my father. Why shouldn't I? Shortly after I was born in 1929, my father lost his job and struggled to survive the Great Depression of the 1930s. In contrast, I graduated from college and entered the workforce in the early 1950s as the postwar boom took off.

Most of my contemporaries agree that it will be exceedingly difficult for our children and grandchildren to do as well as we did. Even if the adverse effects of the Great Recession fade with time, the younger generations will be saddled with the costs of an aging population and the expense of infrastructure maintenance deferred this past decade because of several futile wars.

The optimism that always defined Americans is being replaced with anger, since so many young people no longer assume they'll be better off than their parents.

Newsweek recently referred to Millennials as the "screwed generation." Here's what some of them have to say:



The Lucky Generation
My generation, those born between 1925 and 1945, is wedged between the better known "Greatest Generation" that grew up during the Great Depression of the 1930s and won World War II... and the "Baby Boom Generation" born in the two decades following the end of the war in 1945. In an earlier post I suggested that my generation should be called the "Lucky Generation," since we didn't have to fight in WWII and started working during the "Golden Age" for the U.S. economy -- the post-war boom years of 1947 to 1977. Here are some other ways we were lucky:
  •  For most of our working years, our retirement security rested on a three-legged stool: 1) Social security; 2) an employer-provided  pension plan with guaranteed benefits; and 3) our own savings.  Toward the end of our careers, the second leg of that stool began to wobble, but we still benefited from it in the earlier years. 
  •  Most of us built up equity in our houses through the boom years when real estate prices only went up. The 2008 recession -- and the collapse of the real estate bubble -- did not hurt us the way it has younger home owners.
  •  Only  nine percent of Americans over 65 had incomes below the poverty line in 2010, according to the Census Bureau. By contrast, 13.7 percent of the general population was living in poverty.
  •  The median net worth of households headed by an adult 65 or older rose 42 percent in real terms between 1984 and 2009, to $170,404. During the same period, the median net worth of a household headed by an adult younger than 35 shrank 68 percent to $3,662, according to the Pew Charitable Trusts.
  •  Households headed by someone 75 or older had the highest net worth: $216,800.
The Younger Generations -- The Baby Boomers and the Millennials
Contrasted with my "Lucky Generation,"  here's what the younger generations face:
  •  Chances are, the young will pay for today's elderly without themselves receiving comparable support. The ratio of workers to retirees, 5-to-1 in 1960, fell to 3-to-1 in 2010. That ratio is projected to slip to nearly 2-to-1 by 2025.
  •  The traditional employer-sponsored retirement plans benefited people my age. (I took my benefits, based on my 40-year career with the same employer, in a lump-sum -- $800,000!) These plans have disappeared. Fewer than half of the nation's private sector workers have 401(k) plans, and more than a third of households have no retirement coverage during their work lives, according to the Center for Retirement Research at Boston College
  • The Baby Boomers nearing retirement (people 55 to 65) on average had just $54,000  in 401(k) plans in 2010 and only $120,000 in all retirement accounts. And we're asking these workers to pay taxes to fund my Social Security benefits!
  •  Today's workers don't have significant wealth in other assets to fall back on. Households in the 55-to-64 age bracket lost a third of their net worth between 2007 and 2010, leaving them with an average net worth of $179,000.
  • The Census Bureau just reported that last year the 60 percent of households earning between roughly $20,000 and $101,000, earned 46.6 percent of all income, compared with 1990 when they earned over 50 percent of the income.
Where Does That Leave Us?
Joseph Stiglitz, in his new book, The Price of Inequality, sums it up pretty well:
America's inequality is undermining its values and identity.... America has become a country not "with justice for all" but rather with favoritism for the rich [and elderly] and justice for those who can afford it.
He warns of a society governed by "rules of the game that weaken the bargaining strength of workers vis-a-vis capital." At present, he says "the dearth of jobs and the asymmetries in globalization have created competition for jobs in which workers have lost and the owners of capital have won." We are becoming a country "in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile the rest live in a world marked by insecurity, at best mediocre education, and in effect rationed health care."

Data just released shows inequality increasing and the trends moving toward Stiglitz's pessimistic vision of the future. Just last week the Census Bureau reported that income inequality increased by 1.6 percent during 2011, the biggest one-year increase in almost two decades. There's slim likelihood of change, no matter who wins the November election.

Living in Washington all these years, I've participated in marches for civil rights, women's rights, gay rights, anti-war protests, the "Million Man March," and others. Even with my back pains, I'd participate if young people were marching today to protest the inequality they are being subjected to by a government that taxes them to pay benefits to well-off seniors like me. But they aren't.

With our loss of optimism and belief in the American Dream, we seem to have lost our determination to fight for a fair deal for all. Instead, the zest for a fight seems to come from those who want to protect what they have and don't want to be taxed to help the less fortunate. Meanwhile, the Democrats, the party that fought for the New Deal and the Fair Deal, continue to find it politically rewarding to use demagoguery to attack the other party whenever it talks about revising entitlements.

Politicians of both parties assume that we seniors are greedy old geezers who will vote against anyone who proposes increasing our taxes or reducing our benefits. Are they right? What do you think?

3 comments:

BILL GRUEN said...

YOU HAVE THIS TOTALLY CORRECT. 61 YEAR OLD CPA AND FINANCIAL PLANNER. WE MUST SHRINK ENTITLEMENTS TO HAVE A FUTURE GENERATION COMMITTED TO THE COUNTRY.

Brian said...

Right on, John. Means testing would be a start. And can you imagine the hew and cry!

gleesonjohn said...

Thanks, Bill (and thanks for helping me to remain fiscally solvent!) -- John

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