America’s Gerontocracy

One fact that has become increasingly evident in the Great Recession’s wake is the disproportionate influence exerted upon economic policy by those aged 65 years or older. This group is far more economically secure than most other Americans — according to a recent Pew Research Center study, the gap between the average net worth of those 65 and over and those under the age of 35 is increasing.

Of course, it’s hardly surprising that older people have accumulated more assets and paid down more debt than their chronological juniors. What’s striking, however, is the growth of the gap between 1984 and 2009. In 1984, the typical household headed by a 35-or-younger adult had a net worth of $11,521, compared with $120,457 for those headed by someone 65 or older. Twenty-five years later, the average younger household’s net worth had shrunk to just $3,662, while older households’ had increased to $170,494 (all these numbers are calculated in 2010 dollars).

There are many reasons for these changes, including the progressive casualization of attitudes to debt over the past 30 years to the fact that the vast majority of the over-65 demographic was not as negatively impacted by the housing market’s collapse. They did see much of their home equity disappear, but the relative decline in home-equity worth was far greater for younger groups.

But another factor that makes older Americans’ economic position even more secure than that of younger generations is the disproportionate sway exerted by older folks on politics, much of which is directed to maintaining the entitlement status quo. From the narrow standpoint of their own economic self-interest, why should older people vote for the type of entitlement reform that is indispensible if America is to get its public-debt problem under control? Many of this quite numerous demographic will ask, why should they have to scrimp after having paid into Social Security all their working lives?

Members of the supercommittee charged with finding $1.2 trillion to cut from the deficit surely know that proposals such as raising the retirement age are bound to encounter enormous opposition from AARP-like groups — especially the ones dominated by those baby boomers who are now retiring and whose entire lives have reflected an après moi, le déluge mentality. Supercommittee members are also no doubt conscious that older people — many of whom are already very unhappy about Obamacare’s forthcoming changes to Medicare — have an alarming habit of turning out to vote in far greater numbers than their children and grandchildren.

If Europe’s experience in entitlement reform is any guide to go by, it may well be that the only politically-safe way to secure any meaningful welfare reform in these conditions is to effectively buy off older voters by exempting their particular arrangements from any change. That’s the strategy that was adopted by Spain’s government this year when implementing pension and health-care reforms. It’s also the position held by most of the present crop of GOP presidential candidates when they are questioned about how they would address the problem.

In terms of electoral calculations, such approaches make sense inasmuch as they would secure some change while simultaneously placating the grey vote. They still represent a raw deal for younger folks who, however willing they might be to contribute to older Americans’ retirements, know they will paying into a Social Security system that promises them less and less in the way of retirement benefits, at a time when they are already struggling to maintain (let alone build up) their net household worth. So much for intergenerational solidarity.

The article first appeared on National Review Online.

Dr. Samuel Gregg is Director of Research at the Acton Institute in Grand Rapids, Michigan. He is the author of Economic Thinking for the Theologically Minded (University Press of America, 2001) and On Ordered Liberty: A Treatise on the Free Society and Challenging the Modern World: Karol Wojtyla/John Paul II and the Development of Catholic Social Teaching.

(This article is a product of the Acton Institute —
www.acton.org, 161 Ottawa NW, Suite 301, Grand Rapids, MI 49503 — and is reprinted with permission.)
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  • Theodore Kobernick

    A MOST UNWORTHY EFFORT! If this essay were turned in as a freshman paper, the professor would return it because of its unsupported assertions, and use of “statistics” which come nowhere near warranting its conclusions. This is propaganda, directed toward the unworthy goal of reducing social security payments.

    Begin with the title of this propaganda piece: “America’s Gerontocracy.” There is such a word as gerontocracy. It means “Government by old people; a governing body consisting of old people.” The term applies where there is government by elders. The very word “Senate” means a body of older persons. If Gregg wanted to argue that we have a gerontocracy here, he could have cited the Supreme Court. But what he maintains is that the nation is governed by households with a net worth of $170,494. What a joke! What a bad joke, what a dirty joke!

    Ironically, the top two executives in Gregg’s Acton Institute, a non-profit organization, are each paid about $160,000 ANNUALLY! In other words, they are paid each year almost as much as the entire accumulated net worth of a household headed by a 65-year old.

    But Gregg’s polemic needs to be examined on whatever merits it might or might not have. Gregg’s first sentence claims that it is “increasingly evident in the Great Recession’s wake is the disproportionate influence exerted upon economic policy by those aged 65 years or older.” But if it is so evident, why does Gregg not offer at least a single shred of evidence in support?

    What does the average net worth mean? Does it mean that if we look at ten households, whose combined net worth adds up to $1,704,940, will each of those households will have a net worth of $170,494? Of course not! It could mean that one household has a net worth of $1,500,000 and that the other nine each have a net worth of $22,771. Unless the actual distribution of these net worths is explained, the supposed statistic is well-nigh meaningless! In fact, my hypothetical situation is more likely than Gregg’s: is it evenly remotely possible that Gregg is unaware that the disparity between the net worth of the wealthy, and the net worth of the rest of us has never been greater than now?

    Continuing to explore Gregg’s statistics, he says that older persons retained more of their home equity than younger persons. Suppose that Gregg’s older couple have $100,000 equity in their dwelling. That leaves them less than $71,000 which may be banked or otherwise invested. If they can get five percent interest, this $71,000 will provide them with the princely sum of $3,550 annually. Whoopee!

    Of course the numbers can only suggest the true situation. Each household needs to be considered individually. For example, my wife and I together receive about $18,000 annually in social security, and have no pensions. How much money do we need to have invested to provide us with enough income to live on? To us, it is not at all evident that the government, in order to survive, needs to reduce our social security benefits. Perhaps the government needs to reduce its own size. Maybe it needs to quit starting wars. Before you give ANY credence to Gregg, please work out the numbers that apply to you or to older members of your family. See for yourself.

    In any case, at least one more glaring absurdity appears in Gregg’s propaganda. He says that in twenty-five years, the average elderly net worth has INCREASED by 41%. When we take into account inflation, is seems more likely that our purchasing power has actually DECREASED, by a lot.

    In closing, I see that Dr. Samuel Gregg is not a freshman, but has a PhD. Accordingly, his grade is F-

  • noelfitz

    When I read Dr Gregg’s post I thought it was sound and corresponded with the Irish position, where wealth is cantered among the elderly. There are many reasons, particularly the old vote. Many young people here are in poverty because they bought houses at the top of the market and now are in negative equity. Also the costs of raising a family are huge for younger people.

    But then I read Theodore’s article and found him convincing. He is one of the most sound contributors here.

    However I am intrigued by the Acton Institute, as Lord Acton does not seem the type of model CL would like. He disagreed with big government in state and church, and thus was anti-Rome and (perhaps) sympathetic to modernist views. However the Church wisely did not pick a fight with him. He strongly disagreed with the idea of papal infallibility and was a staunch liberal.

  • goral

    All economics is personal just as all politics is local. People vote their feelings more than their sensibilities.

    While the article and the Institute have their shortfalls, the main point is accurate, seniors do, overwhelmingly, vote to maintain the status quo. All very understandable, leave well enough alone.

    The apres guerre generation is most responsible for the growth of the Great Society programs and the parallel growth in gov’t.
    The buses and chartered planes going to gambling casinos all over the world are disproportionately populated by these gray panthers with carryons of cold cash.
    Again, why would they want change? even of the chump variety?

    I think the assertion of leaving them out of decision making is at least good for their progeny, if not for them personally.
    Something must be done to not just curb entitlements but to roll them back.
    Do it by discipline or bankruptcy, either way it’s coming.