Screw the Young

I am 30 years old, well educated, launched in my chosen profession, with everything to look forward to in life. So why do I feel as if I'm the latest downtrodden minority, somebody whose future was brokered away even before he was born?

I know what you're thinking: Not another whiny Xer bleating his generational complaint. I'm neither bored nor purposeless nor unambitious; I'm no slacker. And yet the more I look into it, the more I'm convinced that I'm being screwed by a big generational conspiracy. So hear me out, before I spill my story to Oliver Stone.

My status crystallized for me one morning last fall. First, the newspaper reported that Social Security will be dead broke by the year 2029. By subtracting my birth year, 1965, from 2029, I realized that the year the geezer dole goes belly-up I'll be 64, ready to feed at the entitlement trough myself.

This shouldn't have come as a big surprise. According to a 1994 poll, nearly twice as many of my fellow Xers believe in UFOs as believe they'll ever get a dime from Social Security. But vague pessimism is one thing. It's overwhelming to have that pessimism confirmed over your morning coffee, when the government itself announces that America's retirement fund is scheduled to dry up on the eve of your golden years.

I was soon stumbling upon evidence of intergenerational inequity all over the place. My favorite horrifying stat is that back when my grandpa started paying Social Security taxes, the most he could be forced to fork over each year was 60 bucks (335 in today's dollars). A self-employed 25-year-old can pay $8500 a year. And the money doesn't always go to the needy. In 1990, for instance, nearly $8 billion in Social Security benefits went to people earning more than $100,000 annually. Meanwhile, the average 30-year-old man makes about a third less in real dollars today than his counterpart did before the oil shocks of 1973, so his payroll deductions hurt that much more.

Looking for someone to share my outrage, I came across mention of a defunct (continued on page 150) Screw the young (continued from page 105) organization called Americans for Generational Equity. I tracked down its former director, Paul Hewitt, who now heads the National Taxpayers Union Foundation. Hewitt neatly put the figures into perspective: "Basically," he said, "Social Security and Medicare have become regressive programs. We tax hamburger flippers to pay the greens fees of retired doctors." (Speaking of Medicare: It's expected to run out of money in 2002.)

Not surprisingly, the further I got into this stuff, the louder the drumbeats of generational war became--and they weren't just pounding between my own temples. They were mostly flying through my phone lines in the form of data bits and bytes.

Being a member of my generation carries various responsibilities, computer literacy among them. No baby buster is complete without a modem and a connection to the Infobahn. That's why I was shocked to find the American Association of Retired Persons with its own nook on America Online.

AARP, as all our elected servants know, is the largest and most powerful political lobby in Washington. It claims to represent the interests of more than 33 million Americans past the age of 50--a rather liberal definition of retired, I'd say. This number terrifies Congress. After all, AARP members vote; my generation doesn't. Take the 1990 elections (please): 60.3 percent of eligible voters 65 years or older cast ballots, compared to 22 percent of those from 21 to 24.

And it's not just a matter of stuffed ballot boxes, there are all those stuffed bank accounts, too. In his 1990 book, Age Wave, Ken Dychtwald points out that "Americans over 50 now have a combined annual personal income of more than $800 billion and control 70 percent of the total net worth of U.S. households--nearly $7 trillion in wealth."

As if all that money and power weren't enough, here they are invading my generation's online preserve. Who are these sneaky AARP people targeting, anyway? Click on the AARP icon, and the first image that flashes on the screen is a red, white and blue logo and the slogan, "Bringing lifetimes of experiences and leadership to serve all generations."

Explore a bit more, though, and it becomes clear that the younger generations aren't buying AARP's brand of service. Subscribers can post notes to one another in the AARP message center, and there, inside a folder marked "20s, 30s & 40s Generation," are the opening volleys of an intergenerational skirmish.

One blast reads, in part: "Well, AARP, you're big, you're powerful and now you're here in what I think you'll find to be quite a new experience. You see, in cyberspace, age doesn't matter. So speaking as a younger, non-PAC affiliated, well-educated man, one who doesn't see any governmental pacts in his future. I welcome you to the future. Are you sure you're ready to hear from it?"

The floodgates thus breached, a few impressively informed boomers and Xers then laid out the antigranny case: At our expense, current retirees are getting several times what they paid into Social Security. At the same time, student grant and loan programs are being cut. Young people are subsidizing health care for the elderly, the job market is in the tank and who knows how many of us will ever be able to afford to buy a house. Meanwhile, those generous payments to old-timers are helping to fuel the national debt ($5 trillion and counting), which will come out of our hides, one way or another. And the fear-mongering, vote-mongering, behemoth AARP is the evil agent of this inequity. "Young people beware," one correspondent warned his peers. "This organization wants Congress to tax the hell out of you. Don't be fooled! It has only one agenda, and that's to rob from the young and give to the old."

To their credit, the oldsters weren't taking this back talk without issuing a few knuckle raps themselves. As one AARP member responded, "The ground you walk on and the air you breathe is because we old guys fought and died in wars to keep you in the freedom and $$$ that let you learn how to use that computer. You owe us. Be thankful that you can repay us for giving you life."

Another old-timer wrote, "I will be means-tested when you pick up my share of taxes for your kids' school. I don't have any kids in school. Why should I pay for you, sonny?" The response: "Your argument is so worn out it annoys me. Simply put, you give me back the 15.3 percent of my income that your Social Security costs me and you can quit paying taxes for schools. I'd come out way ahead. Our schools are very cheap compared with Social Security welfare programs."

Next, for a couple of days I trolled the alt.society.generation-x newsgroup, waiting for some generational enmity to sprout unbidden, and, sure enough, it did. The spark this time was a school-tax vote in Illinois, where a cadre of blue-hairs was apparently rallying to kill the tax and send local tykes off to underfunded schools. "Excuse me?!" reads the first post. "They're getting Social Security money from our blood and they won't even stomach a modest increase for education?" This note spawned two dozen like-minded responses.

Note the tenor of these posts. Generation X is not angry just about the likelihood that Social Security won't exist when we retire. That, after all, is a foregone conclusion. We're pissed that we're cutting into muscle and bone to make these absurd payments, which often go directly to people who can hardly claim to need them, and oh, by the way, the well runs dry in 2029. What galls us is the 15.3 percent of every paycheck that's poured into an unfair, unhealthy system. (Half of that tax comes from the employer, but economists agree that the money ultimately comes out of our wages.)

Of course, Social Security is hardly the only instrument of this reverse-Robin Hood act. Take health care. From the beginning of last year's doomed reform campaign, lobbies for the elderly played coy with their ardent suitors in the White House. Finally, these politicians watered down their universal coverage proposals and offered some plums for their older constituents, already the best-insured age group in America. So much for cost containment.

Actually, it's a wonder the AARP and its ilk didn't rush to support Clinton's plan from the beginning. After all, its provision for flat community rating--in which the healthy young lay out for the sickly old--not only would have made it possible, as intended, for those with pre-existing conditions to get coverage, but also probably would have substantially lowered premiums for everyone over 55--all at the expense of the young.

On April Fools' Day in 1993, a community-rating law went into effect in New York State. Soon the premiums paid by some young people nearly tripled, while their parents' rates tended to fall. "I have an uncle who's 63 years old and overweight who smokes and has had heart surgery. His health insurance premiums were cut in half," says Richard Thau, executive director of Third Millennium, a Gen X advocacy group. "I didn't speak to my cousins about it, but my guess is that their insurance went through the roof to subsidize him."

The young are also taking a beating in student loans. "When you say you're not going to touch entitlements, Social Security, veterans' benefits or defense, there are few areas left where you can save money and still try to balance the budget," says Bill Cotter, the president of Colby College in Waterville, Maine. "So education gets cut."

In 1950, 46 percent of all college costs were paid by the federal government. Today it's about 11 percent. The difference has been made up by the family--primarily the student--in the form of loans. Today's college freshmen will graduate with an average loan burden of $14,000 apiece, never mind what they might accrue if they foolishly decide to go to grad school. Meanwhile, Newt Gingrich's Contract With America would kill the in-college interest subsidy on those loans--the interest accrued while a student is in school would be added to the loan at graduation. The average undergrad would see his or her burden jump by almost $3000, while a six-year doctoral student could see $33,000 tacked on to an already over-whelming $68,000 debt.

"Students will be coming out with such huge loan burdens that they won't be able to buy a car or a house, and they won't have the option of taking low-income social service jobs," Cotter says. "We're skewing the social pressures on these students. And at the same time, because we cannot restrain our consumption on Social Security and such things, we're also telling them, 'Pay for your own college--and by the way, would you mind supporting me and the national debt that I ran up while you were in college?' It's a terrible intergenerational burden shift."

The difficulty here is that when you search for a villain, you wind up staring at granny and pops. I don't look forward to the seething silences around the Thanksgiving dinner table after I've burst my cork and accused my grand-parents of selling my shot at the American dream to pay for another gambling binge on some phony riverboat.

Besides, my grandparents don't gamble. And while they're not eating cans of cat chow in a barren apartment, or shivering under a moth-eaten blanket in the street, I don't get the sense that they're living it up on my hard-earned Social Security contributions, either. But who else am I going to vent my anger on?

A look at how Social Security managed to find itself in such a sorry state gives a good indication of the forces at work here. Back in 1935, when the program was enacted, part of the idea was to get lingering old-timers off the employment rolls, thus opening slots for the out-of-work young adults littering the streets. Under the circumstances, there wasn't the lag time necessary to have the system operate like a private pension, in which everybody gradually pays in, and the money is invested and grows before anybody gets a chance to take anything out. (Besides, with Uncle Sam using our money to buy huge chunks of GM and IBM, we'd soon have to be called the United Socialist States of America.) Social Security became what actuaries call a pay-as-you-go system and what police call a Ponzi scheme.

The idea of a Ponzi (or pyramid) scheme is that the original investors' profits will be paid with money coming in from new investors. Nothing is invested outside the pyramid; the money simply changes hands. This is exactly the way Social Security works: My money goes directly into some retired golfer's pocket, with about one percent going for administrative overhead. The only way to keep such a system afloat is to recruit more and more suckers at the lower levels, which is just what those World War Two GIs did when they began procreating the baby boom generation.

As those of us who have grown up in its shadow are by now painfully aware, the boomer generation is just too big. If you diagrammed the great national Ponzi scheme, it would look more like a barrel than the more optimal pyramid. By the time the boomers start retiring, in about 2011, it will have morphed into a mushroom. Add to that the effects of life-prolonging medical technology and you can appreciate how top-heavy the system is becoming. When Social Security was enacted, there were more than 40 workers chipping in for every retiree. Today there are three. By 2030 there will be two (hence the empty coffers in 2029).

Under the right circumstances, a Ponzi scheme of the sort the government runs could have continued to fund itself even with stagnant population growth. All that would be necessary would be for our economy to continue to grow at a fevered pace (it hasn't), and for politicians to restrain their vote-grubbing pandering (they haven't).

The big blow came in 1972, when politicians began to fight over who could give the GI generation the bigger present. Wilbur Mills, the then chairman of the House Ways and Means Committee, decided to run for the Democratic presidential nomination and began to suck up to the elderly by proposing a 20 percent across-the-board hike in Social Security benefits. Not to be outdone, President Nixon engaged Mills in a bidding war. The resulting legislation bestowed the 20 percent increase plus 100 percent cost-of-living adjustments, indexed annually. (And, as it turned out, indexed generously: Social Security increases soon galloped well past the inflation rate, and if you'll remember, in the Seventies, inflation was inflation.)

Then the oil shocks hit, the economy slowed to a crawl, and it became clear how precipitate these decisions had been. But it still took the heel-draggers in Congress ten years to rein in the Colas. The intervening years were good ones for new Social Security recipients. The most extreme example: The fortunate 1981 retiree, leaving the work-force at the height of the benefit run-up, had by 1992 received all the money he had paid into the program and everything his boss had paid in for him, plus the interest he would have received on those contributions if he'd invested them elsewhere. He'd also received all of the income taxes he had ever paid--plus interest on them. And he still, actuarially, had three more years to live (and his wife had five more after that).

"There are cohorts of Americans now who will have contributed nothing to the cost of running the government in their entire lives," NTU's Paul Hewitt says. "It's a sad commentary on the current generation's legacy."

By 1984, Social Security was at the point of being unable to send out its next batch of checks when a bipartisan committee, its back to the wall, figured a way to keep the system solvent. For a while. Predictably, not one young voice was asked to testify before that congressional committee. Current beneficiaries contributed by taking a paltry six-month delay in cost-of-living adjustments. The bulk of the burden was to be borne by the young. As Hewitt acknowledges, "Politicians compromised by raising taxes and cutting benefits, and they raised your taxes and cut your benefits and you were compromised."

Of course, it soon became apparent that the grand compromise hadn't exactly left the system in long-term balance, so last year it was Senator Bob Kerrey's turn to mount the white hobby-horse of reform. The Nebraska Democrat strong-armed President Clinton into forming the Bipartisan Commission on Entitlement and Tax Reform, whose findings ruined my breakfast last fall. When Kerrey and vice-chair John Danforth, the Republican senator from Missouri, unveiled their proposals for change, it turned out to be the same old story: Most of their bold suggestions--raising the retirement age to 70, slowing the growth of benefits for midwage and upper-wage workers--weren't scheduled to take place until at least the year 2000, and even then they would be phased in slowly. There would be almost no sacrifice by anyone older than 55.

After that plan went down in flames, despite this sop to the gray voting bloc and its congressional protectors, I talked with Phil Longman, a former Americans for Generational Equity staffer, who in 1987 wrote the generational politics book Born to Pay. He was still disappointed about the Kerrey proposal. "It's ridiculous," he said. "We're not going to get anywhere unless we make changes now. Why in the world would you say to a population that's affluent--we're talking about people who make more than $100,000 a year without working--'You're exempt from any kind of sacrifice'? I don't get the logic."

Still, groups such as AARP continue to nurture among senior citizens a sense of outraged entitlement. Last fall, Third Millennium's Richard Thau flew to San Francisco to testify before a government panel that was considering whether to boost the benefits for so-called notch babies, a group of retirees who had the bad fortune to be born a bit too late to enjoy the full fruits of the Social Security benefit run-up of the Seventies. Instead of getting outrageously generous monthly checks, they merely get exceedingly generous monthly checks. And boy, are they steamed.

"Being at that conference was like watching Cocoon while on acid," Thau says. "Imagine a long, narrow hotel room full of chairs, with seniors lined up an hour before the conference started just to get a good seat. It was 150 senior citizens absolutely bonkers about everything I said. At one point a guy stood up in the middle of a speech and shouted, 'I don't care about the future! I just want my money!"' The panel, in an extraordinary burst of reason, declined to give it to him.

Fat chance, though, that such reason will prevail on the bigger issues. As we saw when Newt Gingrich swept into power and immediately declared Social Security sacrosanct, neither party can resist the seductions of the AARP vote.

Eventually, though, something has to give. If nothing is done soon, it's likely to be the national psyche. You think the taxpayers resent layabouts on the dole today? Wait until 2010, when the drain on national resources really kicks into gear and it becomes clear who's really getting government money, how much of it there is, and how powerless we the people are to do anything about it. "A democracy starts to unravel when it's in denial," says Jon Cowan, a leader of the baby-bust advocacy group Lead or Leave. "The glue that holds it together is that we tell the truth about our problems and face them squarely. Politicians are in denial. Young people aren't." Empires have fallen because of far smaller internal contradictions.

And next year, the slide toward the abyss is likely to just get steeper. In 1996 the first baby boomers turn 50. That's when they become eligible for membership in AARP.