WASHINGTON — President Obama unintentionally damaged his legacy the other day by urging an expansion of Social Security benefits and thereby reminding everyone (and particularly future historians) that he failed to deal with one of the largest issues facing the country: an aging society.
“It’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned,” he said in Elkhart, Indiana.
Actually, it isn’t.
Obama perpetuates the outdated myth that, by and large, the elderly are a poor, needy group. They deserve more financial help. The 65-and-over population exceeds 46 million. Some fit this description. Most do not.
Various statistics on income and wealth can be adduced to prove, depending on one’s political purpose, that the elderly are well-off or almost destitute. What’s more instructive is how the elderly view their own financial situation and how this compares with other age groups. The evidence is conclusive: The elderly do better.
The National Opinion Research Center at the University of Chicago conducts a respected opinion poll (the General Social Survey) that asks whether people are “satisfied,” “more or less satisfied” or “not at all satisfied” with their financial situation. In every year since 1973, the elderly have been the most satisfied by a wide margin.
It’s no contest. Other surveys are similar, says Andrew Biggs of the American Enterprise Institute. A recent Gallup poll asked, “Do you have enough money to live comfortably, or not?” Among retirees, 75 percent said “yes” compared with 67 percent of non-retirees.
There are two reasons for this.
• First, expenses in retirement are often lower than expected. It’s frequently said that retirees should have 80 percent of their preretirement income to maintain their lifestyles. A study by Peter Brady of the Investment Company Institute suggests that 60 percent may be adequate. Many costs (work expenses, mortgage payments) disappear or drop sharply.
• Second, retirement incomes may be higher than reported by government statistics. According to Biggs, many withdrawals from IRAs or 401(k)s aren’t counted as income for largely technical reasons. The total, he says, may exceed $200 billion a year. That’s more than $4,300 for every American 65 and over.
What justifies increasing payments to an age group that is more satisfied financially than any other? This is what Bernie Sanders proposes with across-the-board Social Security hikes that would cost $1.2 trillion over a decade when fully phased in, estimates the Committee for a Responsible Federal Budget. Sanders would pay for this expansion with stiffer taxes on the upper middle class and wealthy.
Hillary Clinton and now Obama have jumped on the bandwagon, though they’ve been vague about precisely what benefits or taxes they’d expand. Donald Trump has pledged not to cut benefits.
If taxes are raised, there are more worthy uses for the added revenues than higher across-the-board Social Security benefits. The most worthy would be reduced budget deficits, which shift the costs for today’s government onto today’s youth in the form of higher debt, higher taxes and lower government services (squeezed by rising Social Security and Medicare spending, $1.6 trillion in 2016).
Generational fairness seems anathema to today’s “progressives.” Although there is a case for targeting Social Security increases to the poorest beneficiaries, this expansion ought to be financed with modest cuts in benefits for the wealthiest recipients. As important, the long-run costs of the programs ought to be reduced by higher eligibility ages and still-lower benefits at the top, all introduced gradually.
What’s missing in the skimpy discussion of these issues – it’s hardly a debate – is candor. Only the president can challenge outdated ideas. Obama didn’t do so. He has not used the “bully pulpit” to educate the public about the demands of an aging society: the pressures on government budgets; the need for Americans to work longer, accommodating greater life expectancy; the conflicts between generations.
None of this will escape historians. It will affect their verdict on the failure of Obama and congressional Republicans to reach a Grand Bargain on the budget, a failure reflecting both Republican resistance to higher taxes and Democrats’ unwillingness to make meaningful reductions in Social Security.
The historians will ask: Why didn’t we better prepare for a predictable future? Obama’s record does not provide a flattering answer.
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