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Is Uncle Sam Shortchanging Young Americans?


Cover Story

IS UNCLE SAM SHORTCHANGING YOUNG AMERICANS?

Until recently, hardly anyone analyzed government spending in terms of age. But the more experts look, the larger the inequities seem. Some 29% of federal outlays go to people 65 and older, according to the Congressional Budget Office (CBO), while children under 18 get 7%. Even after throwing in $200 billion a year in local public school funding, the U. S. spent $4,500 apiece on its 64 million children in 1990--vs. $11,300 each on 31 million elderly.

This hasn't happened entirely by design. In 1965, the elderly got just 16% of federal outlays, the CBO says. Then, after Congress indexed Social Security benefits to the cost of living in 1972, double-digit inflation drove the tab through the roof. And in the 1980s, medicare costs surged as medical inflation soared.

POORER KIDS. Still, there has been some favoritism at budget-cutting time. "In many cases, Congress quite consciously cut programs for children and young families more than those serving the elderly," says Robert Greenstein, director of the Center on Budget & Policy Priorities, a liberal research group in Washington. A case in point is welfare, 85% of whose recipients are children and women under 30. Grants for these people have fallen 40% behind inflation since 1970. And thanks to tightened eligibility, 58% of poor children receive welfare now, vs. 81% in 1973. The result is a discrepancy in who is getting lifted out of poverty. The child poverty rate--the share ofall children living in poor households--has jumped to nearly 20%, from 14.4% in 1973. Meantime, the poverty rate for the elderly has fallen, to 6.6% from 10.5%.

Young adults have lost out, too. It is well-documented that unemployment insurance covers a smaller share of jobless workers now than a decade ago. Mostly to blame are trends that reduce the ranks of eligible recipients, such as increased part-time work. Much of the burden falls on workers under 35--the group with the most part-timers. Only 18% of jobless workers this age collected unemployment in 1990, vs. 38% in 1979.

Now, pressure is rising to redress many of these imbalances. In June, the National Commission on Children, which Congress appointed in 1987, recommended a $1,000-per-child income-tax credit to help families with kids. It also wants mandated health coverage--supplied either by employers or the government--for the 8.3 million children and 430,000 pregnant women who annually lack medical insurance. The commission, headed by Senator John D. Rockefeller IV (D-W. Va.), pegged the cost of all this at up to $56 billion a year.

The options the commission pointed out include raising taxes or cutting spending on military or space programs. Even advocates for children are cautious about another obvious source: reserving Social Security for those who need it most. That would leave more for the poor. But if Social Security becomes just another poverty program, "the middle class would have no stake in it, which could be a recipe for political disaster," says Clifford Johnson, director of family support at the Children's Defense Fund.

SOAK THE SENIORS? A wiser idea politically may be to raise the tax on Social Security benefits. Two years ago, a Ford Foundation report suggested taxing benefits that exceed an individual's lifetime contribution. This would raise more than $25 billion a year. Even groups such as the American Association of Retired Persons don't rule out the idea. John Rother, AARP's legislative director, says it might go along to help children. "But only as part of an approach that involves contributions from everyone in society," he adds. "It can't be the responsibility of just one group, like seniors, who make up only 13% of the population."

Other sources of money could be more difficult to tap. Medicare has been reined in so much, for instance, that big new savings might involve health care rationing. "Maybe we will be forced to decide whether to give an extra dollar to better elderly health care or to a child to eat," says CBO analyst Paul Cullinan. Almost certainly not. But as the plight of young Americans becomes clearer, Congress may find that picking winners and losers among competing age groups will be an increasingly cutthroat business.Aaron Bernstein in New York


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