February 26, 2015

Screwed by Seniors

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

Remember Occupy Wall Street, when thousands across the country took to the streets, sleeping in tents to protest the ultra-rich 1 percent? The occupiers' frustration was real, but their ire was misdirected. They should have launched an Occupy the AARP movement instead.

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This article appears in the March edition of Reason Magazine

Remember Occupy Wall Street, when thousands across the country took to the streets, sleeping in tents to protest the ultra-rich 1 percent? The occupiers' frustration was real, but their ire was misdirected. They should have launched an Occupy the AARP movement instead.

Government policies that transfer cash from the relatively young and poor to the relatively old and wealthy are the real scandal. In 1970, Social and Medicare accounted for 20 percent of federal spending. They have since grown to 40 percent; by 2030, they will be more than half. And these numbers understate the level of federal spending for the elderly. According to the Centers for Medicare and Medicaid Services, some 28 percent of spending on Medicaid, a program designed to offer health care to families in poverty, goes to older Americans.

But these days, unlike in the era before Social Security and Medicare were created, most seniors are doing just fine, with various general indices of well-being all pointing to higher standards of living for the elderly. When Social Security was born in 1935, the average life expectancy was 65. Today, it's 78.8. In 1959, the U.S. Census Bureau found more than 30 percent of Americans 65 and older living below the poverty line. In 2013, the percentage had dropped to 9.5. According to a report by the Federal Interagency Forum on Aging-Related Statistics, the average net worth of Americans over the age of 65 increased by almost 80 percent between 1988 and 2008. Today's seniors are healthier, better educated, and richer than their predecessors.

Of course some seniors remain poor. But as the University of Chicago economist Bruce Meyer wrote in 2011, "Even over the past 10 years, those 65 and older with the lowest income are now living in bigger houses that are much more likely to be air conditioned and have appliances like a dishwasher and clothes dryer." And seniors aren't just doing well compared to previous generations; they're doing well relative to their younger counterparts.

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