Generational investment and social insurance for the elderly: balancing the accounts.
In the United States, more than elsewhere, the policy debate surrounding the reform of social insurance programs for older people has come to be conducted primarily within a framework within which the interests of the elderly are portrayed as fundamentally competitive with those of younger age groups—that is to say, children and their parental workforce. Further, the wealth that underwrites these programs, it is argued, arises from exorbitant forced welfare transfers from the production of the current workforce, not to mention liens against future production, that will unfairly burden future generations; all this enforced by the putatively disproportionate political power of the elderly population. This has led many commentators to the discovery and/or prediction of generational conflict, if not "warfare." Exactly ten years ago in this journal one of us (Greene) wrote an editorial arguing that this is a fundamentally misguided way of thinking about this issue, and that if ever an analysis were done that considered the full scope of intergenerational transfers (not just the Federal budget and state Medicaid expenditures), and used the proper accounting period (a life-cycle investment and expenditure model), that the scales would likely balance in favor of younger cohorts. This essay can be seen as a further extension of that argument, with some supporting evidence presented. The generational-conflict framework, along with the equalization of poverty rates among the elderly and the general population in recent years that these pro