One fact that has become increasingly evident in the Great Recession’s wake is the disproportionate influence exerted upon economic policy by those aged 65 years or older. This group is far more economically secure than most other Americans — according to a recent Pew Research Center study, the gap between the average net worth of those 65 and over and those under the age of 35 is increasing.
Of course, it’s hardly surprising that older people have accumulated more assets and paid down more debt than their chronological juniors. What’s striking, however, is the growth of the gap between 1984 and 2009. In 1984, the typical household headed by a 35-or-younger adult had a net worth of $11,521, compared with $120,457 for those headed by someone 65 or older. Twenty-five years later, the average younger household’s net worth had shrunk to just $3,662, while older households’ had increased to $170,494 (all these numbers are calculated in 2010 dollars).
There are many reasons for these changes, including the progressive casualization of attitudes to debt over the past 30 years to the fact that the vast majority of the over-65 demographic was not as negatively impacted by the housing market’s collapse. They did see much of their home equity disappear, but the relative decline in home-equity worth was far greater for younger groups.
But another factor that makes older Americans’ economic position even more secure than that of younger generations is the disproportionate sway exerted by older folks on politics, much of which is directed to maintaining the entitlement status quo. From the narrow standpoint of their own economic self-interest, why should older people vote for the type of entitlement reform that is indispensible if America is to get its public-debt problem under control? Many of this quite numerous demographic will ask, why should they have to scrimp after having paid into Social Security all their working lives?
Members of the supercommittee charged with finding $1.2 trillion to cut from the deficit surely know that proposals such as raising the retirement age are bound to encounter enormous opposition from AARP-like groups — especially the ones dominated by those baby boomers who are now retiring and whose entire lives have reflected an après moi, le déluge mentality. Supercommittee members are also no doubt conscious that older people — many of whom are already very unhappy about Obamacare’s forthcoming changes to Medicare — have an alarming habit of turning out to vote in far greater numbers than their children and grandchildren.
If Europe’s experience in entitlement reform is any guide to go by, it may well be that the only politically-safe way to secure any meaningful welfare reform in these conditions is to effectively buy off older voters by exempting their particular arrangements from any change. That’s the strategy that was adopted by Spain’s government this year when implementing pension and health-care reforms. It’s also the position held by most of the present crop of GOP presidential candidates when they are questioned about how they would address the problem.
In terms of electoral calculations, such approaches make sense inasmuch as they would secure some change while simultaneously placating the grey vote. They still represent a raw deal for younger folks who, however willing they might be to contribute to older Americans’ retirements, know they will paying into a Social Security system that promises them less and less in the way of retirement benefits, at a time when they are already struggling to maintain (let alone build up) their net household worth. So much for intergenerational solidarity.
— Samuel Gregg is research sirector at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, Wilhelm Röpke’s Political Economy, and his 2012 forthcoming Becoming Europe: Economic Decline, Culture, and America’s Future.