ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

The Generation War Goes on Parade

Paul Taylor, a vice president at Pew and the author of a new book on generational conflict, took his generation war story to Parade Magazine this weekend. This magazine, which is distributed to millions of people with their Sunday paper, included a piece by Taylor that warned:

"By the time every boomer is collecting Social Security and Medicare, those two programs are projected to eat up about half our entire federal budget—and both the Social Security trust fund and one of Medicare’s two trust funds will be broke. That’s because the ratio of taxpayers to retirees will have fallen to its lowest level ever, about 2 to 1. (When Social Security first went into effect, the ratio was more than 20 to 1.) But renegotiating the social contract between the generations will be a tall order, because these days, young and old in America don’t look alike, act alike, or vote alike."

This comment is fundamentally misleading. First, the ratio of taxpayers to retirees at the time Social Security started has nothing to do with the time of day. Amazon had only a few thousand customers in the first months it was operating. So what?

When Social Security was first created its actuaries knew full well that life expectancies would increase and that the ratio of workers to retirees would decline, and they adjusted the program accordingly. This was done primarily through a series of tax increases that were scheduled decades in advance. In addition, the commission chaired by Alan Greenspan in 1983 increased the age at which workers qualify for full benefits from 65 to 67. This increase is phased in over the period from 2002 to 2022. It is remarkable that Taylor seems unaware of these facts.

While the program is still projected to face a shortfall over its 75-year planning horizon, close to half of this shortfall is attributable to the upward redistribution of income over the last three decades. This upward redistribution has worsened the finances of the program in two ways.

First, it increased the portion of wage income that went to workers who earned more than the wage cap. In 1983, when the Greenspan commission set the cap at its current level (which is indexed to average wages), only 10 percent of wage income was above the cap and escaped taxation. Now it is close the 18 percent of wage income.

Dean Baker / April 07, 2014