A new report on the wealth gap between young and old Americans adds another argument for trimming Medicare and Social Security spending as Congress attempts to control its runaway spending.
After rummaging through reams of federal data, the Pew Research Center documented an immense and growing financial disparity between citizens older than 65 and citizens younger than 35.
The most startling number in the study had to do with net worth: A typical household headed someone of retirement age now has 47 times the wealth than a household headed by someone 35 or younger. That’s apparently the largest gap ever. According to the center, it has doubled since 2005 and increased fivefold over the last 25 years.
That’s not the key issue, though. Older people in general are bound to possess more than younger people, who have only begun accumulating possessions and equity in their homes.
In fact, real estate alone is the chief factor in the net worth disparity: Americans who got into their first homes long before the housing bubble popped have seen their equity expand, while those who bought houses during the bubble have seen much of theirs evaporate.
The important gap lies elsewhere, in income and poverty. Since 1967, poverty in younger households has jumped from 12 percent to 22 percent. In older households, it has fallen from 33 percent to 11 percent.
Factor in the better off, and income has grown for both groups – but more steeply for older Americans. Since 1967, older households have more than doubled their incomes, while younger households have seen theirs increase by 27 percent.
Hurray for the elderly. It’s a good thing that they are more comfortable and that Social Security has succeeded in pulling so many out of poverty.
What isn’t a good thing is that poorer, younger households – many with children – are seeing some of their wages siphoned off unnecessarily to the elderly via Social Security and Medicare.
Social Security is the lesser problem; it is a simple, honest system of money-in and money-out. But its baseline benefits are partly indexed to wage inflation rather than the cost of living. Given that poorer, younger Americans are footing much of the bill, it’s hard to see why this sweetener should be built into Social Security checks.
Medicare is the big culprit – a siphon that leaks at every joint. It is rife with wasteful spending and lax accountability. It often pays for expensive procedures – such as colonoscopies and prostate cancer screening for people over 75 – that deliver little improvement in health and quality of life. Sometimes these procedures actually endanger patients.
A collective scream goes up any time Medicare and Social Security are mentioned as possible sources of savings. But federal deficits can’t be brought under control without tightening these entitlements. And in terms of simple fairness, it’s impossible to justify picking the pockets of the have-nots to perpetuate largess that the haves don’t really need.