For years, pointing out the obvious was considered impolite: America's largest and most distorting transfer of wealth does not flow from the elites to the working class. It also does not appear as corporate welfare. It flows from the relatively young and poor to the relatively old and rich. It is the injustice that defines our tax regime, the biggest driver of our public debt, and the silent engine behind the unrest of millennials and Generation Z.
More than a decade ago, Nick Gillespie and me wrote an article in Reason magazine arguing that Social Security and Medicare had together become the great cause of generational inequality in the United States. We observed that older households were wealthier than ever, while young households still working to make ends meet had to shore themselves up even more.
We also warned about the threat to a true social safety net. Treating every senior, no matter how well-off, as a member of a protected class entitled to increasingly unaffordable benefits will end up destroying a system that progressives in particular hold dear.
At that time, “Occupy Wall Street” protesters were attacking “the 1%.” I offered the ironic suggestion May they also consider occupying AARP, the most powerful lobby defending the largest intergenerational wealth grab in American history.
As such, I really appreciated seeing Russ Greene, CEO of the Prime Mover Institute, join the fight and coin the term “Boomer Total Luxury Communism” in an important article in American Mind, an online publication. The name sounds like a joke, but math It is sound.
American heads of households under age 35 now have a median net worth of about $39,000 and a median net worth of more than $183,000. Those over 75 have a median net worth of approximately $335,000 and a median net worth of over $1.6 million. As a group, today's seniors are the richest we have ever been.
Many own their homes in markets that younger families cannot afford to enter. Seniors enjoy higher rates of stock ownership and have benefited greatly from decades of rising asset values. Meanwhile, younger Americans face rising housing costs, student loan debt, delays in starting families and a labor market marked by slower growth and higher federal debt.
Part of this reflects the accumulation of natural wealth over time, and there is nothing wrong with that. But why does the modern welfare state magnify the disparity? As Greene explains, “retired millionaires have become the largest recipients of government aid,” as Social Security can redistribute up to $60,000 a year to an individual and $117,000 to a household. “Meanwhile,” Greene notes, “Medicare programs pay for golf balls, green fees, social club memberships, horseback riding lessons and pet food.”
Younger Americans are also struggling for about 73 billion dollars in unfunded liabilities projected for the next 75 years, so now is the time to act. Some defenders of the status quo argue that higher taxes will solve the problem, but that it would again fall on younger workers to continue redistributing benefits to the same wealthy older people, worsening the generational imbalance. The problem is not lack of income; It is a benefit structure that ignores modern demographics, modern wealth patterns, and basic fairness. Paying less to seniors who don't need the money is the only fair reform for this dilemma.
Every time someone points out these facts, advocates reflexively respond: “But the seniors paid. They earned it.” No, not everything. Not in any meaningful actuarial sense.
We have known for decades that the system is tremendously unbalanced. As Andrew Biggs of the American Enterprise Institute writes, a typical retiree with average salary in the 2030s will receive 37% more in Social Security benefits than what they paid in taxes. Medicare is even more imbalanced: Seniors routinely receive three to five times the amount they contributed.
Some older Americans who oppose cutting benefits will respond that we should preserve the same system for younger generations. Sorry, but avoiding destitution in old age doesn't require a 25-year-old to fund the most regressive wealth transfer scheme in the developed world, especially when certain seniors use it to enjoy a 25-year vacation.
In the legal field, things are not as people think. As the Supreme Court made clear in Flemming v. Nestor 1960, Congress has the legal right to change Social Security benefits. The government can change the formula tomorrow.
Social insurance programs support a basic safety net, but what we have now is generational dispossession in slow motion.
Politicians continue to treat older people as an overwhelmingly fragile and impoverished group in order to oppose reform of the system. Fortunately, Americans of all ideological stripes are beginning to recognize the structure for what it is: one that requires punishing younger generations through taxes and debt so that their grandparents can receive many more benefits than they ever contributed or were originally promised.
Rugy Veronica He is a senior fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
