Why our overemphasis on older Americans isn’t sustainable
Ric Edelman: It's Wednesday, November 15th. I'm now 65 years old. I get the senior discount at the movies, on busses, at restaurants. Why? Just because I'm 65. But I'm the one with money, not the 20 year old students I recently spoke to at Rowan University. I did a master class there a couple of weeks ago. Older Americans like me control national politics, and we consume a huge piece of the federal budget thanks to the spending on Social Security and Medicare. It's those 20 year old’s at Rowan. It's our kids and grandkids who are going to have to pay all these bills.
When FDR created Social Security back in 1935, there were not very many people who ever made it to age 65. And if you did well, you were probably broke because you didn't have a job at 65. That meant you didn't have an income and you likely didn't have much in savings. Old people were poor people, so they needed discounts to get into those movie theaters.
But that's not how it is today. Today we've got pensions. We have fully paid-for homes by the time we retire. We've got big 401(k) balances and we're in good health too. Maybe therefore still even working and still earning a paycheck. We don't need that movie theater discount just because we're 65. But our kids who are just out of school, who've got low salaries, big student loan debts; they're the ones who need those discounts.
When FDR created Social Security, you had to be 65 in order to get benefits, and you wouldn't get them for long because you had such a short life expectancy. But today, we've got a lower age than ever for you to be able to start getting Social Security 62, and we've increased your life expectancy, which means you're going to get those checks for longer. It doesn't make any sense. The system cannot support these huge payouts for so many years per person.
In 1960, the typical 65-year-old couple got benefits from Medicare and Social Security that were worth about $330,000. Now you adjust that for inflation, those benefits are worth $1.1 million. But the lifetime taxes that the typical couple pays for all those benefits is only $650 grand. Yeah, it's a hell of a deal for you and me, too good a deal for the government to keep offering. Since 1980, 80% of the growth in federal spending has gone to Social Security and Medicare. But the federal and state governments have been cutting back on funding for education and childcare. We're subsidizing older Americans at the expense of younger Americans.
How does this make any sense? How is any of this sustainable? I first warned you about 30 years ago about the coming age war in America. It's getting real now that the Social Security Trust Fund is going broke, and retirees are facing a 25% cut in benefits starting in eight years. The only way Congress can preserve the Social Security income for old people is to tax the young people. The age war is coming to a head and you need to be prepared for it.