The Boomers Have Screwed Us

The Economist profiles the real welfare queens in our society: baby boomers.

Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes (see chart), an obligation 17 times larger than that likely to be left by those aged 25.

How did they manage to receive so much government support and yet pay so little in taxes? Good old fashioned power politics.

More worrying is that this generation seems to be able to leverage its size into favourable policy. Governments slashed tax rates in the 1980s to revitalise lagging economies, just as boomers approached their prime earning years. The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort.

The cognitive dissonance of older voters is stunning. The mentality of the elderly seems seems to be “Other people who get money from the government are simply moochers. The welfare they receive discourages work and keeps them down. My benefits (welfare in the form of social security, medicare, subsidized higher education, etc)  aren’t welfare at all. I earned them.”

They adopt a right wing mentality when it comes to “other people’s” benefits, advcating nebulous “spending cuts” but aggressively protect the welfare levels they themselves receive. When someone like a Paul Ryan points out the truth: that medicare and social security need restructuring because they are bankrupting America, they rail against that idea.

Restructuring welfare for the elderly is the single most important fiscal issue facing America right now. There just are not enough young people to subsidize these benefits in the form of taxes. Wages for those young people have been stagnant for 30 years, but the elderly have still demanded their yearly increases in welfare benefits, creating unsustainable deficits and debt, a trend in nearly all advanced countries.

Delivering welfare to the elderly without bankrupting the government or overtaxing working people is a challenge that our political system seems unable or unwilling to deal with. The Economist goes on to point out:

The generational divide makes this plan a hard sell. Younger workers are typically debtors, who benefit from inflation reducing real interest rates. Older cohorts with large savings dislike it for the same reason. A recent paper by the Federal Reserve Bank of St Louis suggests that as a country ages, its tolerance for inflation falls. Its authors theorise that a central bank could use inflation to achieve some generational redistribution. Yet pressure on the Fed to cease its expansionary actions has been intense, and led by a Republican Party increasingly driven by boomer preferences.

The political power of the boomers is formidable. But sooner or later, it cannot escape the maths.

This issue is not even left vs right at its core. Nearly everyone agrees restructuring must take place. The real challenge starts with getting seniors to acknowledge the truth: what they call “benefits” is really state welfare. They collect a government check, just like the “moochers” or “takers” they rail against. Once the boomers set aside their pride and realize they too are welfare queens, the real work can begin.

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8 Responses to The Boomers Have Screwed Us

  1. Pingback: Our Healthcare Problem IS Our Spending Problem | Reason and Politics

  2. Pingback: Blame American Voters For The Fiscal Cliff Debacle | Reason and Politics

  3. Social security was set up to handle the odd few people who lived far longer than most. The retirement age was set to 65 when the average lifespan for the American male was 57 or 58. Now the average is around 78 or so, retirement is 65. You’re right, it is a form of welfare, and it’s one the government forced upon us. We are compelled to pay into it, and we are required to withdraw a certain amount from our own retirement accounts (401k, 403b, etc) so that we can’t manage our own money. Once again, “government knows best”, at least according to the government. I cannot seriously think of a single thing that the gov’t has made better. Everything it touches is more expensive and not as efficient as the same thing done by the private sector.

    • Thanks for your comment. It concerns me that partial privatization is not on the table for Social Security. Switzerland’s state pension is partially privatized, which, like when their version of universal healthcare became a market based alternative to single payer, could be a model for us.

  4. Nativegrl77 says:

    thanks for stopping by…. I don’t agree at all with your choice of words … Welfare! People work, they pay into a program set up to be there when they get old …no question our social programs need to be brought into the 21st Century living but i wouldn’t talk bad about a Govt social program … you may need to use it some day

    • I don’t mean to refer to welfare as a negative. I simply feel that the idea that, “my government services are benefits while everyone else’s are welfare” is unnecessarily dividing our country. I will most assuredly accept my welfare when I am older in the form of Medicare are social security.

      It’s a semantic difference to be sure, but an important one.

      Thank you very much for the comment.

  5. Hank Krimmel says:

    Sure blame it on the old guys. I remember when the dollar had value. Now it is worth next to nothing. One percent own seventy percent of the wealth. This leaves very little for the rest of
    us. Corporations and big banks own Washington and the only thing Washington produces is war and wellfare. Answer me this; who voted for these people and why can’t we get rid of them? I’ll
    tell you why. The voting public is stupid, that’s why. We have what we deserve. The best
    government money can buy.

    • Thank you for your comment. First, I do not necessarily agree with everything I post here. My goal is to post interesting topics from around the web.

      That being said, there is no denying that boomers will receive far more in welfare benefits then they ever paid in taxes, all at the expense of younger generations. Older people vote far more than than the young. They have, over the years, voted themselves more and more benefits while at the same time voting for more tax cuts. Most recently, the Bush Administration passed the (in)famous Bush tax cuts while at the same time passing Medicare section D, a massive entitlement program surrounding prescription drugs for seniors.

      This trend cannot continue.

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