THE TYRANNY OF AMERICA'S OLD By clinging to an outsize share of governmental goodies, the elderly are unintentionally forcing the nation to shortchange its young. Herein some ways to solve the problem.
(FORTUNE Magazine) – IT IS ONE OF THE MOST crucial issues facing U.S. society. But hardly a politician will even talk about the subject, much less propose remedies for it. The problem? Simply put, America is spending too much on its elderly and too little on its young. Unless something changes, that gap will only widen -- with potentially devastating economic and social consequences. You don't believe it? Here are the facts. Washington, together with state and local governments, spent just over $11,000 in 1990 on every American over 65; they spent only $4,200 on each youngster under 18. Thirty years earlier those proportions were roughly reversed. With only 12% of the population, seniors now command 54% of federal social spending, mainly through Medicare and Social Security. Last year these two programs claimed 5.6% of GNP, a share that will approach 9% over the next 30 years. Result: In order to pay for the oldsters' Big Rest, other worthy causes, most critically investment in children, increasingly get pushed aside. Head Start, despite its impressive track record, is budgeted to reach only about one-quarter of the 3- and 4-year-olds who live below the poverty line. That means 1.5 million kids will not be able to start school ready to learn. Vaccination funds are so short that only half the 2-year-olds in Hartford and New Haven, Connecticut, have been inoculated against such diseases as measles, tetanus, and tuberculosis, a much smaller percentage than in Algeria or Uganda. Of the $110 billion to be spent this year on Medicaid, which provides health care for the poor of all ages, about 40% will go to those over 65. The taxes on wages that pay for Medicare and Social Security, moreover, leave less money in workers' hands for states and local governments to tap for schools. In almost half the local elections in New Jersey last year, voters rejected the school budgets. Holyoke, Massachusetts, laid off one-third of its teachers after the city's elderly whites refused to dig deeper to underwrite schools filled largely with Hispanic children. A work force cheated of protein when it is young won't have the muscle required when it matures to keep the economy rolling. That's especially worrisome since today's kids will one day have to feed and nurse an unparalleled army of oldsters -- the 76 million baby-boomers born between 1946 and 1964. This crowd begins to hit retirement age in 20 years. By then there will be just 28 workers around to support every ten pensioners on the golf course, down from 33 workers who share that burden today. Will the toilers simply refuse to pay the greens fees? They well might. If war between the generations does break out one day, Fort Sumter is likely to be a stretch of reclaimed desert northwest of Phoenix. On one side of a dry gulch misnamed the Agua Fria River lies Sun City, a glistening community of 46,000 retirees. No one under 19 is allowed to live there. On the other side is El Mirage, a dusty village of 6,000 or so farm workers. To lower its property taxes, Sun City withdrew a decade ago from the school district that instructs El Mirage's children. Meanwhile, the federal government continues to pluck $5.60 for Social Security checks and another $1.45 for Medicare from every $100 that the farm workers of El Mirage earn in the onion and cotton fields, plus a matching amount from their employers. Those dollars scamper over the Agua Fria to Sun City, where they support, among other things, gleaming Boswell Hospital. It dominates the cityscape like a cathedral over a medieval town, but El Mirage residents rarely use it, except in occasional emergencies. ''A woman delivered a baby here one night,'' recalls a Boswell volunteer. ''There wasn't a diaper in the whole place.'' How has a country that used to be accused of spoiling its kids become so recklessly generous with its declining generation and foolishly stingy with its rising one? Management consultant Peter Drucker, 82, blames geriatric avarice: ''We are the greediest class in human history.'' That charge is clearly unfair to many individual elderly. But it accurately characterizes the political stance adopted by Washington's powerful gray lobbies, which take the view that any age-related benefit, once granted, can never be taken away. And when the elderly speak, timorous politicians listen. They know that a high percentage of the old vote -- 50% more than those age 34 or less in the last presidential election. True, the programs for the old that now tyrannize Washington were originally launched to address real needs. '' 'Old,' 'poor,' 'frail,' and 'deserving' used to be synonymous,'' notes Robert Binstock, a gerontologist at Case Western Reserve Medical School. ''So when the New Deal created the old age welfare state, we exempted the elderly from screenings based on need.'' EVEN TODAY, plenty of old folk remain desperately poor, as defenders of the status quo are quick to point out. Etta Ruple, 77, resides in the Luxor Mobile Park, off U.S. Highway 41 in Sarasota County, Florida, and a long way from the opulence of the ancient Nile. On a recent afternoon she sat in her 12-by-30- foot trailer, aluminum crutches at her side as she indifferently munched a grilled cheese sandwich and Jell-O. ''If I were to die today, I wouldn't fight it,'' she says. A dozen hip operations have shortened one of her legs by six inches and left her in pain. Mrs. Ruple started working as a hairdresser at 14 and during an active business career owned in succession a couple of grocery stores and several cocktail lounges in the Midwest. Her husband, a tool-and-die maker, died shortly after they moved to Florida in 1968. She managed the mobile home park until her crumbling hip crippled her. ''We had some money when we came here, but when you're in the hospital as often as I've been, you go through it, even with Medicare,'' she says. She lives on a $600-a-month Social Security check, and for her the rise in the cost of a macaroni and cheese dinner from 99 cents to $1.39 over the past three months has been a significant economic event. But now the deserving elderly poor like Mrs. Ruple are a minority. The cure has worked. Since 1960 the number of seniors below the poverty line has shrunk from 35% to about 12.2%. That's slightly less than the 13.5% of the total population who qualify as poor -- and considerably less than the 20.6% of those under 18 who are poor.
THOSE WHO would continue to tie benefits to birthdays must also acknowledge the existence of places like Longboat Key, an island of graceful fairways and handsome homes off Sarasota's coast, and just a few miles away from Etta Ruple's trailer. ''There's no recession here,'' says Mayor James Brown, 70, a retired newspaper executive. Brown and his wife, Marjorie, sold their house in Ann Arbor, Michigan, for exactly the $65,000 they paid for their home in Longboat Key. They get along comfortably on a total income of just $29,000 a year. ''It's amazing how well you can live once you've put your three kids through college and have no mortgage,'' says Brown. ''These really are the golden years.'' On Longboat Key the major domestic issue is whether guests at the hotel have the same rights as homeowners in reserving tee-off times. Elderly dandies at the Posh Nosh restaurant banter about the delights of Hawaii in March. James P. Durante, 77, who lives in a $400,000 condominium in Longboat Key, resembles Etta Ruple of Luxor Mobile Homes only in age and a lifetime of hard work, in his case as a partner in the New York City law office of Fulbright & Jaworski. Like Mrs. Ruple, he pays just $380 a year for Medicare insurance. He's in pretty good health, so he doesn't use it often. Because he waited until he was 70 to retire, Durante receives an extra-large Social Security check of $1,700 a month. ''I'm overpaid tremendously,'' Durante maintains in a lively voice that retains the gravelly sound of his native Brooklyn. ''In a couple of years I got back everything I ever put into the system.'' Durante is not a selfish man. He and his wife, Joan, give away time and money to local theater groups, the symphony orchestra, and other good works. BUT A SYSTEM that continues to award windfall returns to the well-to-do cannot be sustained without placing a crushing burden on younger generations. Start with Medicare. General tax revenues and nominal premiums from the elderly pay doctors' bills. A 2.9% tax on workers' wages up to $130,000 covers hospital expenses. Even so, rapidly rising hospital costs are going to overwhelm Medicare by 1995. At that point Congress may have to notch up the payroll tax once again. Social Security's pension expenses will be manageable for a while longer. The combined employee and employer contribution of 11.2% of payroll (which is in addition to the 2.9% for Medicare) should generate some $290 billion this year. That's more than enough to mail out checks to Durante, Ruple, and 25 million others, pay for a 3.7% annual cost of living increase, and still generate a surplus of $60 billion in 1992 alone. In turn, the Social Security trust fund will lend this excess to the federal government to cover everything from interest payments on the national debt to crop supports and AIDS research. In exchange the Treasury gives Social Security IOUs, which some commentators continue to confuse with cash that tomorrow's old can live on. In reality these are merely more debts, accruing interest at 8% or more a year, which future taxpayers will have to make good on. From the beginning Social Security has operated as a pure transfer payment. This arrangement was painless as long as the ranks of the retired were thin. When Ida Fuller, the first beneficiary, left her job in 1940, she had paid a total of $22 in FICA taxes, matched by the Vermont law firm for which she was % a clerk. She lived long enough to collect $20,000. In Ida's days of leisure 42 workers toiled for every retiree. Skip ahead to 2030 when nearly all the boomers have quit their jobs. The ratio of workers to retirees will have sagged to 2.4 to 1, a staggering weight on both the employed and their employers. On average the 65-year-old retiring now will receive in his first year 42% of what he earned in his last year on the job. To bankroll pensions and hospital care at the current level after baby-boomers retire, tomorrow's workers may have to give up 12% of their salaries -- and employers will have to match that contribution. ''Employers are going to be forced to trim labor forces drastically,'' predicts Stephen Entin of the Institute for Research on the Economics of Taxation. ''This could cost the economy 15 million jobs.'' At best, those now under 30, the baby-busters, will get no more out of Social Security than the amount they contribute. That's a far cry from current retirees' deal, a shortchanging young people sense even without working through the numbers. Polls indicate that 70% of those under 30 believe that Social Security's treasury will be empty by the time their turn comes. Says Douglas Coupland, 30, author of Generation X, a novel about disaffected youth today: ''The last penny will be spent on a jewel-encrusted stereo system for Robin Williams's walker.'' What America needs now, before the cold war between the generations heats up, is a major rethinking of the social compact between the old, mid-lifers, and the young. Here are a few modest reforms that should protect people like Etta Ruple, deal justly with James Durante, and still ensure that the kids of El Mirage and other youngsters get a fair shake.
-- Encourage more links between the old and the young. Local real estate agents do not want to hear that Sun City, Arizona, and its nearby companion, Sun City West -- rows and rows of suburban ranch houses that sell for $50,000 up to $200,000 -- are ''retirement communities.'' No, no, they insist, these are ''active adult communities.'' They have a point. Though few of the residents still have paying jobs, most stay very busy enjoying the 18 golf courses, 64 bowling alleys, 79 pool tables, and ten arts and crafts workshops. Some even pick the palm-lined streets clean of trash. Hundreds volunteer at Boswell Hospital. Others join the Posse, a civilian patrol that keeps an eye out for crime and reports suspicious activity to the county sheriff's office. Still, these healthy, civic-minded folks could extend even more generosity beyond the white stone wall that surrounds their community. Those on the other side are inclined to see them as selfish and bullying. Tom Patterson, Republican leader of the Arizona Senate, points out that because such a large percentage of the elderly vote, the two Sun Cities dominate all three of the legislative districts they are part of. ''For them taxes are the No. 1, 2, and 3 issues,'' he says. The state ranked 34th in the nation in spending per school pupil in 1989. Elderly people on fixed incomes are understandably worried about rising expenses. But they have plenty of free time to give away. Troubled children in particular take readily to old mentors, maintains Ellyn Neises, a criminal justice specialist at the Clark Foundation in New York City. Middle-aged advisers seem to remind the kids of police and authoritarian parents. Some Sun City residents do volunteer. Roy Fritz, 76, an entomologist formerly with the Public Health Service, spends every afternoon at El Mirage Elementary, one of the institutions Sun City officially divorced when it voted itself out of the school district.
Fritz teaches math and reading to gifted students. ''The people who didn't do much in life and don't do much in retirement are those who pass away first,'' he says. Several dozen other Sun Citizens tutor at least a couple of times a week. Around the country thousands of elderly, people like Bennie Mohown, 67, of Hartford, who has worked with disabled and chronically ill children for the past three years, also extend a hand to the younger generation. El Mirage and schools like it could use many more volunteers. ''We're not looking for crossing guards,'' says superintendent Frank Galas, 51. ''The people of Sun City have a lot of talent: lawyers who could take over our legal work, computer specialists who could teach skills to our high school students. I want to make a deal with them. If they will teach our students during the day and find them jobs, I will keep these kids from robbing their homes at night.''
-- Delay the retirement age. By stipulating that people qualify for Medicare and full Social Security benefits at 65, Washington has made that the beginning of old age. But the biological clock tells a very different time. People who have been healthy most of their lives generally don't begin to decline rapidly until their late 70s. Only 1% of 65-year-olds suffer from Alzheimer's, for example, whereas at least 20% and perhaps as much as 40% of those over 85 suffer from the disease. Treating both age groups the same is like mothering teenagers as though they were toddlers. Already Congress has voted to shift the age of eligibility. Today's 35-year- olds will have to wait until they're 67 for full Social Security benefits. That's the right idea, but it doesn't go far enough. The payout should be structured to encourage people to stay on the job until they are 70. With more older workers paying into the system and fewer taking out, Social Security would be billions of dollars richer.
-- Slow Social Security increases. A dismayingly complex formula determines starting pay for the rookie retiree. Social Security not only computes his lifetime earnings but gives credit for growth in wages over his working years. Say he made $250 in January 1962. Wages have soared by a factor of five since then, so $1,250 goes into the equation for that month. But suppose the formula were based on price increases instead. Prices have only quadrupled since early 1962, so $1,000 instead of $1,250 would be the January 1962 entry. Assuming that wages in the future grow faster than prices, Social Security could save still more billions. Each new class of retirees would start off better than the previous year's but not by quite so much.
-- Tax wealthy retirees. Should Social Security checks be restricted to the needy and denied to society's successes? ''I'd scream breach of contract,'' says Durante of Longboat Key. Eventually the payouts may become such a burden on future workers that the benefits will have to be reserved for the poor. In preparation for that day, baby-boomers should start now to save more on their own and think of Social Security as fire insurance, collectible only if their nest eggs get fried. At the moment, means-testing Social Security is such political dynamite that no politician who hopes to stay in office dares to embrace it. The prudent course is to increase the income taxes of Durante and his cohort. Currently retired couples with a total income of less than $32,000 pay no tax on their Social Security checks. Those above that ceiling pay taxes on half of what they receive. The well-to-do ought to pay taxes on 85% of their Social Security income. (The exempt 15% represents roughly what recipients have paid into the system over the years.) Also, just as higher-paid employees at many corporations are required to foot more of the bill for their health insurance, the wealthy could afford to pay higher premiums and absorb bigger deductibles for Medicare. The Bush Administration reportedly will recommend in its next budget that annual premiums for those with incomes over $125,000 be lifted to about $1,200, more than triple what they now pay. Still, with Medicare's hospital fund headed into deficit by 1995, that's far too modest. Drop the ceiling to $50,000 and raise the premiums for the top earners even higher.
-- Consider rationing health care. Medical machinery and drugs developed to restore health are sometimes misused to drag life on. For example, a 90-year- old man with Alzheimer's disease so advanced that he doesn't know where he is much of the time suffered a heart attack and collapsed not long ago. Doctors at New York City's Bellevue Hospital revived him and suggested to his son that they could insert a pacemaker, a procedure that costs $16,000. But why? Won't he ever be allowed to die? Daniel Callahan, 61, director of the Hastings Center, a research institute that muses on medicine and ethics, points out a philosophical contradiction that is peculiarly American. ''We are taught that death gives meaning to life,'' Callahan observes. ''Yet our doctors refuse to acknowledge any disease as a legitimate cause of death.'' Europeans are more resigned to their mortality. British doctors decline to prescribe expensive kidney dialysis for patients over 50. Perhaps Medicare should put age limits on major surgery, such as $40,000 coronary bypasses, and exotic drug regimens, such as treatments for septic shock that run $3,000 a dose. Those who might want damn-the-cost-keep-me-alive intervention after the age of 75, say, would have to start buying insurance to cover the heroics in their 40s or 50s. Compared with other tyrannies that the U.S. has successfully bested, breaking the tyranny of the old seems relatively painless. Most of the reforms above would barely pinch today's elderly because they are intended to control future benefits. For their part, boomers who want to reserve a few decades on the fairway for the end of their lives can do so, if they are willing to sacrifice and start saving more. The real challenge: to reset attitudes and reapportion money so that today's children have the same chance for success and prosperity as the generations that have recently gone before them.
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