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Are Intergenerational Transfers Unjust?

August 4, 2011

Brian links to an article which laments the lack of youth rioting in America. It lists 8 main reasons as potential culprits, most of which in my opinion are quite weak (except #2) for why people would not fight for their rights.

Why should the young be protesting?
1. The economy sucks.
2. Older people are increasing their income at the expense of younger people.
3. Random crap no one cares about.

On one, the economy sucks for everyone, not just the young. It’s hard to be young now because it is hard for everyone now. That does not imply that political protest will help, unless you are protesting tight money or crappy bank regulation. That leaves #2.

Around 30% of the Federal budget goes to giving money to old people. Old people vote more, so it’s really no big surprise that they vote themselves money. Furthermore it seems very unlikely that Medicare will be around in 30 years, even if Social Security will probably still be there in a much weakened form. Simply the demographics are such that the ratio of workers to retirees will decrease, leaving more elderly being cared for by fewer workers. There is no financial ju jitsu that will prevent it. But knowing that a program can’t continue forever does not necessarily mean that it is wrong to continue it while you can.

Arguments against intergenerational transfers
The elderly are more wealthy than the young, so the transfer is regressive.
Government transfers in general are wrong, unless they can be justified by some exceptional need, such as a disability.
The young are being lied to. They are being told that they will get a benefit that they will not ever see, or see in a reduced form.

Arguments in favor of intergenerational transfers
The elderly are politically strong, and their strength justifies them in taking whatever they can.
Because of economic growth, the expected lifetime income of the elderly is much lower than that of the young. Even though right now they may be wealthier, by the time the current young are old, they will be wealthier still.
The elderly were told that they would get Social Security and other forms of transfers. It would be wrong to suddenly take something away that people have planned their lives around.

Since I’ve working at PBGC, I’ve become very sympathetic to the argument that you shouldn’t take away streams of income from people who would have few to no alternatives to replace them with. Simply put, an 80 year old is going to have a hell of a time going back to work. I would like to see government get out of the health care provision sector and Social Security checks become smaller and the same for everyone instead of based on your former income. However, any change should occur slowly so people have time to adjust their retirement savings.

2 Comments leave one →
  1. August 5, 2011 12:29 pm

    Not sure I like having that link attributed to me ;-). I found the article spurious at best (and very much like your analysis of it). It was the reddit discussion of the article that I found most interesting. Basically, people aren’t protesting because *their lives aren’t actually that bad* right now. People are protesting peacefully AND DIEING in places like Syria because their lives their are horrible. All that most young people in America have are First World Problems.

    • August 5, 2011 2:17 pm

      I fixed the linking a bit, and I tried not to focus too much on the original linked to article. I just don’t know how far the AARP will take the whole issue before the young start to vote against them as a block.

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