For decades, the right wing has been warning that Social Security is on the verge of going broke and that old people are taking too large a share of the national income and wealth at the expense of the young. The grand old man of this fable was Peter G. Peterson, an investment-banker billionaire and former Nixon Cabinet official, who spent more than half a billion dollars of his fortune to create the Peter G. Peterson Foundation to propagate the myth.
One of Peterson’s most insidious tactics was to try to persuade the young that Social Security would not be there for them when they retired. Therefore, Congress should make it possible for younger people to take the money and run, by moving their Social Security taxes to fund private accounts (that would profit Peterson’s investment-banker chums).
Bill Clinton was on the verge of opening the door to this caper when the Lewinsky scandal intruded. House Democrats, who held their noses and stood by their randy president, warned Clinton not to mess with Social Security. Clinton backed off. (Thank you, Monica.)
By focusing on trumped-up generational conflict, Peterson and his billionaire allies could divert attention from the true divisions in America—divisions of class.
Lately, with Social Security heading for a deficit, we have been getting echoes of the same claims about the old doing too well at the expense of the young. The New York Times recently published a piece by Eugene Steuerle and co-author Glenn Kramon explaining how much richer the old are than the young (on average) and arguing that the remedy is for old people to work longer and to take less from Social Security.
Steuerle’s ID says that he co-founded the Urban-Brookings Tax Policy Center. That’s true as far as it goes, but he was the longtime vice president of the Peter G. Peterson Foundation and one of its prime propagandists.
The Times then doubled down on these arguments with a piece by regular columnist Peter Coy, praising the Steuerle article and adding some misleading data of his own. Coy provides charts from a number of sources, showing that consumption increases with age. He concludes that “postwar policy has taken from the young and given to the old.”
This is nonsense, but it is influential nonsense at a time when Congress will have to decide how to address the projected shortfalls in Social Security and Medicare, and House Speaker Mike Johnson wants to destroy both. For starters, one needs to look beneath the averages.
Coy’s two biggest categories showing excess consumption by the old are health care and owner-occupied housing. And yes, on average, the old have more housing wealth than the young; and not surprisingly, they consume a lot more medical care. (This is not exactly consumption in the usual pleasant sense. It is “consumption” that most people would prefer to avoid.)
But the core fallacy in these arguments is the use of averages. On average, the elderly are richer, but that average includes Warren Buffett and the guy bagging groceries at your local supermarket because he can’t afford to retire.
On average, older homeowners have benefited from the run-up in housing values, but older renters spend more and more of their incomes on housing.
On average, older Americans are living longer and working longer. But affluent Americans tend to live longer than poorer ones. And well-off professionals tend to work well past retirement age because they love their work, while poorer Americans work at crappy jobs because they need the income.
On average, older Americans have more savings, but with the eclipse of traditional retirement plans in favor of grossly inadequate 401(k)s, most people have saved far too little for decent retirement.
It should be clear that the averages miss the point. The real divisions among Americans are not between young and old, but between the rich and everyone else. If we raised taxes on the rich, there would be plenty of money to keep Social Security solvent indefinitely, without means-testing it, pushing back the retirement age, or otherwise fragmenting a universal system.
The postwar cohort of older Americans did get a windfall from the unearned increase in housing values. But the cure for that is to get serious about underwriting affordable housing for the young—and reforming the tax code so that we have more than token estate taxes to tax back some of that windfall to help the young get their foot in the door.
As for Medicare, and the “overconsumption” of health care by old folks, this is mainly the result of the world’s most inefficient health care system. Get rid of corporate medicine in favor of socialized medicine and the fiscal problem is solved.
Rich people have plenty of retirement savings, but most Americans don’t. As the indispensable Teresa Ghilarducci keeps pointing out, ever fewer people have adequate savings for retirement and 401(k)s are a miserable substitute for traditional pensions that are now getting ever rarer. Ghilarducci’s most recent column, in Forbes, no less, notes that the median retirement savings of Americans aged 55 to 64 is $185,000, enough for only a few years of retirement. That figure is just 2.3 times median income. By age 67, they need 11.1 times income in retirement savings to maintain decent living standards. And the poverty rate among the elderly has risen to 23%.
All this means that most elderly rely on Social Security for most of their income. But the average Social Security benefit is just $21,384, and for a low-earner it’s just $14,824. Try living on that.
Los Angeles Times columnist Michael Hiltzik, another essential critic of the generational-warfare propaganda, calculates that about one-third of 1% of all Social Security payouts go to millionaires. If this seems a problem, it’s far better to tax that money back via the progressive income tax than by fragmenting Social Security or turning it into a means-tested system.
The political logic of Social Security is simple. Everyone pays in, and everyone gets a retirement benefit back. In fact, the system is highly redistributive. Lower-income earners get a better “return” on their payroll taxes than affluent ones. But complicate it with explicit means testing, and the middle-class support for the system evaporates.
Social Security is our most universal, most socialistic, and most popularly loved government program. That doesn’t mean it is secure from attack, both from the corporate right and from well-meaning fiscal scolds who just don’t grasp its logic. It requires unrelenting defense and shoring up from its supporters.
Robert Kuttner is co-editor of The American Prospect (prospect.org) and professor at Brandeis University’s Heller School. Like him on facebook.com/RobertKuttner and/or follow him at twitter.com/rkuttner.
From The Progressive Populist, December 1, 2023
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