Occupy Wall Street protesters are right that some groups have more political power than others. However, they are mistaken to construe the lines only in stark economic terms (the 1 percent vs. the 99 percent.) There’s another war that pits one class against another and is fully the result of specific government policies: the systematic transfer of wealth from the relatively young (and poor) to the relatively old (and wealthy).
Using data from the Congressional Budget Office’s 2011 Long-Term Budget Outlook, the accompanying chart shows the annual share of the U.S. budget spent on programs benefiting senior citizens from 1970 to 2084.
The main programs catering to the elderly are Social Security, Medicare and to some extent Medicaid. Unlike the first two programs which required being at least 62 or older to be eligible, Medicaid was designed to help low-income families and people with certain disabilities. According to the Centers for Medicare & Medicaid Services in 2004, 28 percent of Medicaid spending went to those older than 65.
In 1970, spending on Social Security, Medicare, and Medicaid for seniors was one-fifth of the total annual federal budget (red, yellow, and green portion).
Spending for seniors has since grown to nearly 40 percent of the budget in 2010; this amounts to over twice the spending on defense or 8.9 percent of the country’s gross domestic product.
Other spending (blue portion), which includes a variety of other mandatory programs (such as federal civilian and military retirement, veteran’s programs and unemployment compensations), as well as discretionary programs, makes up a decreasing share of the budget in the future.
While official numbers suggest that 15.9 percent of the elderly live in poverty, these numbers do not reflect how the elderly have fared over the last decade or how their circumstances compare to those of other groups.
For instance, according to combined data from 15 federal agencies, older Americans are in remarkably good financial shape compared with those of previous generations.
Also, looking at consumption and income data to assess changes in living standards, University of Chicago’s Bruce Meyer and James Sullivan of the University of Notre Dame show that those 65 and older have much lower poverty rates than most other demographic groups and that these rates have fallen sharply over time.
Few groups have enjoyed as much improvement in living standards. Unfortunately, this progress is not reflected in Census poverty estimates.
Moreover, younger Americans are getting poorer, especially relative to the elderly. According to the Pew Research Center, “in 2009, the typical household headed by an adult 65 or older had $170,494 in net worth, compared with just $3,662 for the typical household headed by an adult younger than 35,” and “the current gap is by far the largest since the Census Bureau began collecting these data in 1984. Back then, the age-based wealth gap was 10:1. By 2009, it had ballooned to 47:1.”
Based on this data, I would like to suggest a better cause for OWS: End the growing subsidies from the younger and poorer Americans to seniors who have accumulated substantial assets through their lives.
Veronique de Rugy is a senior research fellow of the Mercatus Center at George Mason University.
