Sooner or later, government benefits for older Americans will be trimmed, and most people will have to work longer or mix work and retirement. Fundamentally, we are victims of our success. Older Americans have never been healthier, wealthier or more independent than they are now. In 1948 nearly half of men older than 65 had jobs; by 1994 only 16 percent did. In the past quarter century the incomes of those older than 65 have risen faster than the incomes of those younger than 65. But the public costs of supporting the older population, mainly through social security and Medicare, are becoming oppressive. They now constitute a third of federal spending, and by the time the baby boom hits 65 in 2011, they will be unaffordable in their present form.
To call this the onset of generational politics is not to predict generational war, though one could happen. Clearly, today’s elderly receive a huge cross-generational subsidy. Their benefits are paid for by their children. This is, potentially, an immense political fault line. Payroll taxes–the main financing for social security and Medicare–already exceed income taxes for three quarters of families. But the matter is much more complicated than just mutual antagonism. The feelings across generational lines are more of frustration than of anger. In general, today’s retirees recognize that the anxieties of younger Americans about social security and Medicare are realistic. In general, baby-boom and Generation X workers know that today’s retirees depend critically on these programs.
Consider a recent survey of voters for the American Association of Retired Persons (AARP). In it, fully 55 percent worried that the country could no longer afford social security; 45 percent felt the same way about Medicare. And the willingness to cut had risen sharply since 1985 (from 14 to 32 percent for Medicare). Yet about 90 percent of the respondents rated the programs as essential for the elderly. Most Americans feel torn between accommodating existing expectations about retirement and adjusting to new economic and population pressures that are making those expectations unrealistic. The central question of generational politics is simple: will we trim programs for the elderly slowly and gracefully, or will we wait so long that the adjustments are abrupt and harsh?
The significance of the clash over Medicare is that it is finally flushing these conflicts out into the open. Until recently, mentioning “budget deficit” and “the elderly” in the same breath was considered political suicide. Now we are grudgingly conceding the need to overhaul these formerly sacrosanct programs. Prodded by Republicans, the Clinton administration has proposed its own Medicare-spending cuts. Ross Perot has published a new book urging Medicare reform, including higher copayments by beneficiaries to promote cost consciousness. Sens. Bob Kerrey and Alan Simpson have advanced a bipartisan plan to alter social security that would gradually raise the eligibility age for normal benefits to 70 by the year 2034. (Under present law, the eligibility age rises slowly to 66 in 2009 and to 67 in 2027; the Kerrey-Simpson plan would further increase retirement ages for almost everyone now younger than 50.)
All these proposals pose once off-limits questions. Who’s old enough for benefits? How much should the elderly pay for their retirement? What’s “fair” among generations? Medicare only emphasizes the difficulty of finding palatable, answers. Between 1996 and 2002 the Republicans would trim projected spending by $270 billion. As they say, this would simply slow Medicare’s annual growth from 10 percent to 6.4 percent. In 1994 it spent about $160 billion. Without changes, that’s projected to be $345 billion by 2002. Republicans would hold spending to $247 billion in 2002, up 54 percent from 1994. Surely, they say, that won’t ravage Medicare.
Well, say critics, it could. Liberal health economist Karen Davis of the Commonwealth Fund contends that such a slowdown can’t be achieved without “radical” measures. Every possible change is potentially controversial. The riskiest politically is raising the direct payments of recipients, through either higher premiums for Medicare doctors’ insurance or higher copayments for services. The monthly premium is already $46.10 and covers 31 percent of the cost of doctors’ insurance (Medicare Part B); the rest is paid from general government funds. Other changes could be equally controversial. Trying to push more Medicare beneficiaries into HMOs–through, for example, much higher copayments for “fee for service” Medicare–might backfire. Even the whiff of coercion that people might lose “free choice” of doctors helped doom President Clinton’s health reform in 1994.
In truth, no one has a guaranteed formula for controlling Medicare costs. Believers in “managed care”–relying on HMOs and other networks of doctors and hospitals–cite a recent survey by Foster Higgins, a consulting firm. The survey reported a 1.1 percent decline in private-employer health costs per worker in 1994; this dramatically reversed previous double-digit cost increases. The main reason for the change was a huge shift of workers to managed care. But even Foster Higgins isn’t confident that the savings represent anything more than a one-time gain. Managed care’s absolute costs may be lower than those of fee-for-service medicine, but annual rates of increase may be similar.
One reason health spending rises so stubbornly is a constant increase of new medical technologies and treatments. Each one effectively creates its own mini-Medicare program. Open-heart surgery was hardly known in the early 1970s. Then it exploded. Between 1976 and 1998 the number of bypass operations jumped from 12,000 annually to 260,000 (table, page 41). As procedures are perfected, more patients receive them. Between 1976 and 1986 the number of knee replacements rose 112 percent, from 54,210 to 114,659. No one wants to deny people the benefits of better, even if more expensive, medicine.
It is precisely because the issues are so fundamental–as fundamental as which operation you might get–that the first skirmishes of generational politics could end in stalemate this year. Perhaps Republicans will try to squeeze too much. Perhaps Democrats will disdain compromise in order to champion the elderly. But though generational issues can be deferred, they cannot ultimately be avoided. They are made inevitable by three trends:
In 1900 life expectancy was 47 at birth and, if you lived to age 65.77; in 1993 it was 76 at birth and 82 if you hit 65. Meanwhile, retirement ages have fallen. In 1993 about 52 percent of new social-security recipients took their benefits at 62; another 17 percent took them at 63 and 64.
In 1955 defense spending and veterans benefits accounted for almost 70 percent of federal outlays. By 1995 their share was 19 percent. In the same period social security and Medicare (which didn’t exist until 1965) went from 6 percent to 34 percent of the budget. Under present trends, their share would rise to 39 percent by 2005, projects the Congressional Budget Office.
Between 2010 and 2020, the older-than-65 population will rise by about a third; in the next decade, it will rise almost another third. Today, about one in eight Americans is older than 65; by 2030, the proportion is projected to be one in five. The older-than-85 population will rise even faster.
Together, these trends doom social security and Medicare in their present form. The required tax burdens would be horrendous. In 1993 Americans devoted about 7 percent of their national income (gross domestic product) to social security and Medicare. By 2030 that would almost double–to about 13 percent of GDP–to support existing programs, estimates economist Eugene Steuerle of the Urban Institute. Even after the baby boom retires, workers (the main taxpayers) will outnumber retirees. It’s doubtful they would tolerate such a huge increase. In today’s dollars, it would be about $420 billion annually. Cutting other government programs to avoid higher taxes seems equally implausible. Even eliminating all defense spending wouldn’t be enough. And borrowing the necessary amounts would mean deficits three to four times larger than today’s.
None of these possibilities looks politically or economically viable. As a nation, we face the daunting task of revising policies that seek to subsidize people at ever-younger ages. Government programs and their underlying assumptions haven’t kept pace with the changing status of older Americans. In 1935, and even in 1965, being old was almost taken as an automatic sign of economic and physical need. Private pensions and health insurance were meager. People who couldn’t earn their way were often thrown on the mercy of families or friends–or languished in poverty.
These stereotypes no longer fit. More older Americans than younger Americans say they’re comfortable financially. Only 11 percent of those older than 65 are dissatisfied with their financial well-being, compared with 27 percent of those between 25 and 64, reports the National Opinion Research Center. One reason is that many costs are typically gone: work expenses, child-rearing expenses and mortgage payments, to name just three. About three quarters of older Americans own their homes, often with no mortgage. Poverty rates for the old are lower than for the young; per capita incomes are almost as high.
The physical transformation of older age is as important as the economic. Drugs and surgery have alleviated many chronic conditions of aging, from cataracts (poor vision) to angina. Since 1987 regular exercise-jogging, working out–among those older than 55 has increased 45 percent, reports American Sports Data, a market-research firm. “When I was a kid, 40 was middle-aged, 50 was old and 60 was dead,” says ASD president Harvey Lauer. “Now, 65-year-old kids are taking care of 85-year-old parents, and a 53-year-old like me runs around a track.”
It is not that the elderly have suddenly become a fabulously wealthy and physically fit juggernaut plundering their offspring. Though the degenerative process has been delayed, it hasn’t been repealed. Nearly half of those older than 65 develop arthritis; people older than 85 are five times more likely than those between 65 and 69 to need help with shopping, money management and other daily activities. Nor are the elderly so rich that they don’t need social security or Medicare. It is precisely these programs that underpin their well-being. By itself, social security provides about 40 percent of income for Americans older than 65.
The point, more simply, is that “the elderly” aren’t the same cliched monolith that inspired social security and Medicare. Not everyone is impoverished or incapacitated. Abstractly, it’s easy to imagine how public programs could be revised. “If people are living longer, they should work longer,” says Dr. Robert Butler, the first head of the National Institute on Aging. “It’s good for society, and it’s also good for people.” According to Butler, numerous studies indicate that older people with structure in their lives–and jobs provide that–do better. They live longer and are healthier.
We could be edging away from “the golden years” toward the “amber years.” More older Americans would mix work and retirement, just as many students now mix work and schooling and many mothers mix jobs and parenting. In fact, polls indicate that many older Americans favor a less rigid division between work and retirement. Government benefits could also be trimmed for the more well-to-do-a recognition that being older is no longer synonymous with being “needy.”
The problem is not imagining a plausible and humane future; it is (as always) getting from here to there. Practical obstacles are huge. At present, not many companies have programs that allow workers to work less–or part time–as they age. Indeed, “downsizings” have prompted many firms to induce or force workers to retire earlier. And when older workers leave career jobs, they may lose health insurance before they’re eligible for Medicare. Between 1989 and 1993 the number of Americans between 45 and 64 without health insurance rose from 5.5 million to 6.9 million, reports the Employee Benefit Research Institute.
As Butler points out, higher retirement ages also wouldn’t be fair to people whose bodies have broken down and who simply can’t work any longer. To make later retirement ages more palatable, these anxieties–about health insurance and disability–might have to be relieved. But the larger political hurdle is making any changes to existing benefits. It is here that the generational strains emerge starkly. On the one hand, existing retirees tend to cling fiercely to all existing benefits. The mere hint of cuts can arouse moral indignation. People feel entitled: they “earned” their benefits (it’s said) through past “contributions” that were invested.
On the other hand, today’s workers are paying for benefits that many, if not most, of them probably won’t receive in their old age. The more they pay, the harder it is to save for their retirement. Worse, the more these issues are deferred, the harder it is to know what the rules will be when they do retire. What will a normal retirement age be? How generous will Medicare and social security be? Government programs not only set rules but also send signals to people about how they should prepare for the future. But the signals now are muddled.
Making them clearer will require breaking out of the cocoon of denial that historically separates programs for the elderly from the larger problems of the budget. The denial often rests on myths. It simply isn’t true that the “contributions” (via payroll taxes) of today’s retirees were invested and are now being returned; even if they had been invested, they wouldn’t in most cases cover today’s benefits. But they weren’t invested. Both social security and Medicare are pay-as-you-go programs; today’s taxpayers support today’s retirees. Between 1937 and 1993 social-security taxes for retirement and survivors benefits totaled nearly $3.9 trillion; about 85 percent of them had been paid out as benefits.
Even Republicans concede that their Medicare proposals–whatever they are–won’t come to grips with the larger questions posed by the aging of the baby boom. That’s understandable. All the pressures of an aging society are too immense and complicated to be settled in one, two or even three debates. They include (aside from social security and Medicare) pension policy, age discrimination and long-term care. The trouble is that if we can’t talk about modifying today’s benefits, we can’t tackle the bigger problem of modifying tomorrow’s. And the longer changes are put off, the harder and more jarring they will be.
What is really at stake in the struggle over Medicare is the character of generational politics. It is whether we can really break out of denial and deal civilly with the stresses of an aging society. For all the pitfalls–and opportunities for political grandstanding–the seeds of consensus exist, Almost no one advocates an abrupt withdrawal of benefits from today’s retirees; almost everyone senses that those benefits can’t last forever. Can we begin to change? If so, we will have made a huge leap into a less contentious 21st century. If not, watch out.
Expensive medical procedures for the elderly have skyrocketed. The rate per 10,000 elderly for three heart operations: Catheterization Bypass surgery Angioplasty 1976 15.2 5.3 – 1980 32.6 15.0 – 1986 94.7 42.9 7.1 1993 148.0 79.2 52.1
SOURCE: NATIONAL CENTER FOR HEALTH STATISTICS
Due to improvements in health care and quality of life, average life spans continue to grow.
YEARS OF LIFE MEN WOMEN 1900[a] 46.3 48.3 1950 65.6 71.1 1960 66.6 73.1 1970 67.1 74.7 1980 70.0 77.4 1990 71.8 78.8 1993[b] 72.1 78.9
a BASED ON 10 STATES AND THE DISTRICT OF COLUMBIA, AGE 65 DATA FROM 1990-1902 PERIOD.
b PROVISIONAL DATA, SOURCE: NATIONAL CENTER FOR HEALTH STATISTICS
Federal spending on the elderly has risen dramatically – and with an aging population, the cash flow will only increase.
Social Security and Medicare Defense Interest Other 1965 14% 43% 7% 36% 1995 18% 18% 15% 33% 2005 14% 14% 16% 31%
title: “Getting Serious” ShowToc: true date: “2022-12-12” author: “Linda Ash”
It’s a long way from the intense, tribal Kennedy campaign to the one Daley now runs: a sprawling enterprise that stretches from one end of the Democratic Party to the other. Gore’s campaign doesn’t have the feel of a band-of-brothers mission, but George W. Bush would be wise not to underestimate this franchise operation: a parliamentary-style campaign with a partywide agenda of proposals and the help of every power broker and personality in the book. Gore isn’t exactly incidental to his own campaign, but no one would mistake it for a cult.
In Campaign 2000 it’s the Republicans who are running Kennedy style, on Bush’s charisma and a circle of fiercely loyal family friends. As Bush mulled his veep choice last week, a crucial consideration was to find an utterly reliable team player. Even John McCain felt the need to publicly tout his new-found sense of loyalty toward the governor of Texas. Another name that surfaced late, Dick Cheney, was a better fit: a member of the tribe who had worked for Bush’s father as secretary of Defense.
In Gore’s Democratic world, personal loyalty is nice in theory. In the meantime everybody has his or her own reason for working hard. Hill Democrats think they can retake the House (if not the Senate) and are working so feverishly, and raising so much money, that their enthusiasm could boost Gore as well. Party insiders–and the lawyers, lobbyists and consultants who feed off them–are desperate to extend their West Wing run. Young Democrats in business, especially in the high-tech sector, want to participate in their own political IPO, and are flooding party coffers with cash. For the Daleys (the Old Man’s son Richie is now Chicago mayor), this is not about deep personal bonds, but about duty to the party. As Commerce secretary, Bill was looking to return to the private sector when Gore called. “I couldn’t say no,” he said with a shrug. “Gore’s a good guy. Besides, it’s better than day work.”
One person with an intense personal stake in Gore’s success is Bill Clinton, who would see his veep’s election as a form of vindication. The trick for Gore is to use the president only where he can be helpful. Clinton will continue to raise money and to campaign among the base, especially blacks and activist women. Daley is thought to be wary of using Clinton much beyond that–if for no other reason than that the president’s magnetic personality would obscure Gore. Insiders are all but hoping for a big budget showdown this fall, which would keep Clinton off the campaign trail and underscore Gore’s theme–that Democrats have become the fiscally prudent party.
Daley is the emblem of the new corporate approach, which in many ways isn’t much different from the old Chicago method: if you want the rewards (paved streets and plowed snow), you deliver the votes in your ward. The Gore-Democratic agenda, accordingly, is such “constituent service” writ large: prescription-drug benefits, local school construction, keeping Social Security and Medicare intact. “It’s not about charm; it’s about why our proposals are better than the other side’s,” Daley told NEWSWEEK. Dad couldn’t have said it better.
Daley presides over a team that is long on savvy but in some cases short on personal ties to Gore. Media guru Bob Shrum had not worked for Gore until this year. Mark Fabiani, recently installed as deputy campaign manager for communications, is a longtime pal of Shrum’s–not Gore’s. He moved his family from California to Nashville last month, but has already purchased his postelection ticket home.
Indeed, the new Nashville headquarters has more than the usual “rented” feel. Though it has its own version of the war room (“The Kitchen”), run by longtime Gore adviser Ron Klain, much of the real action will be elsewhere–at the party’s offices in Washington and in other races. Gore’s hope is that the party’s well-funded congressional campaigns, stressing similar themes to his own, will help. So could the popularity of individual Democrats in key races. In Missouri, for example, Gov. Mel Carnahan should run strongly. In Georgia, the death of GOP Sen. Paul Coverdell gives the Democrats a chance to put a proven vote getter on the ballot.
It’s a new twist on the rising-tide theory: this time, the tide is lifting one big boat. There’s evidence that it is working: Gore is now virtually tied with Bush in the polls. One of the masterminds of the “coordinated campaign” is Rep. Patrick Kennedy of Rhode Island, who stands to be a hero if the Democrats gain the six seats they need to retake the House. For his own election campaign in Rhode Island he’s used a savvy young political manager: Bill Daley’s son.
title: “Getting Serious” ShowToc: true date: “2022-12-13” author: “Susan Evert”
Some 6,700 miles away, a much larger group of protesters gathered in southern Brazil for a formal anti-Davos gathering, dubbed the World Social Forum. In Porto Alegre, 10,000 delegates and spectators attended lectures and workshops on the evils of globalization and how to bridge the growing chasm between rich and poor. The forum was more peaceful than angry, with protesters lugging backpacks and sleeping bags, handing out pamphlets and arguing about socialism. Just to the north, 18 busloads of demonstrators stormed a farm owned by the American giant Monsanto to protest the company’s experimentation with genetically modified foods. They camped out in the fields and, before a bank of TV cameras, ripped soybeans out of the ground. French activist Jose Bove (following story), in town for the gathering, proclaimed the act “one more blow in the urgent fight against multinational corporations.”
Neither protest was in danger of becoming “another Seattle.” But the Brazilian outcry shows not only that resentment of “the global economy” is growing but that it has gained new outposts. Indeed, the world has changed dramatically since the World Trade Organization’s Seattle summit at the end of 1999. Back then the gurus of globalization were preaching their mantra of free trade, free markets and ever larger corporate mergers. Soaring markets seemed to prove them right; there was much talk of permanent, painless growth.
But the collapse of the WTO talks in Seattle amid violent protests showed things weren’t so simple. Then came the Nasdaq crash, followed by the slowdown of the U.S. economy. Countries all over the world worried that the downturn in the world’s largest economy would soon spread. Crises like Kosovo and Chechnya–combined with more fears of global warming and Europe’s mad-cow-disease panic–only exacerbated the sinking feeling that the markets couldn’t solve it all. How much the protests contributed to the changes is debatable, but the world has a very different agenda today.
There are few places where this shifting ground is more apparent than Davos. A few years ago, alpha executives compared the size of their mergers. This year, under the conference title “Bridging the Digital Divide,” those same leaders are discussing problems like poverty, disease and climate change. At the opening plenary last Thursday, ministers from Brazil, India and Thailand gave 600 VIPs an earful on the industrialized world’s sins: from agricultural subsidies that hurt poor farmers to IMF diktats that dry up badly needed credit. Forum organizer Klaus Schwab says he wants the power elite to spend more time thinking about how to improve the state of the world. “Business has to make a special effort to establish a world where everybody can live a dignified existence,” he told the delegates last week.
Schwab’s ambition is noble. But when 1,000 CEOs worry about the state of the world, they’re going to think about the state of their businesses first. Topic A, therefore, was what Federal Reserve chairman Alan Greenspan last week called the “very dramatic slowdown” in the American economy. “Everyone gets hurt when the 800-pound gorilla on the block slows down,” warned Princeton economist Alan Blinder. Already, American imports from the rest of the world have dropped far below their highs last fall, threatening to spread the slowdown. At Davos on Saturday, IMF deputy chief Stanley Fisher reduced his estimate for global growth this year, from 4.2 to 3.5 percent. In the real world that could mean many millions of jobs lost globally.
There were plenty of nongovernmental organizations on hand to help keep the forum on message. The Geneva-based World Wildlife Fund was one of a growing number that accepted invitations to work inside the Davos meeting to lobby for their cause. “Some of the protesters outside are demonstrating for very good reasons, but to my mind it’s much more effective to work within,” said WWF chairman Claude Martin, a first-time attendee. At a workshop on climate change, Martin and other environmentalists met with executives from British Petroleum and other fossil-fuel producers to hammer out a common agenda against global warming. Philip Jennings, head of the Switzerland-based Union Network International, sent many of his rank and file to Seattle in 1999 to protest the WTO. But in Davos he’s inside, lobbying for labor standards and networking with other NGOs.
Skeptics say Davos’s uplifting speeches may mollify the public, but that the same old corporate dealmaking still goes on behind closed doors. “Right now I’m just a token voice giving an alternative view on a panel full of CEOs,” says Martin Khor, head of the Third World Network, a developing-world lobby based in Malaysia. “They’ll say one thing here and then go home and lobby for the opposite.” Still, Davos is starting to produce more than soaring rhetoric. This year the organizers launched two new indices to monitor countries’ records on corruption and the environment.The health minister of Rwanda announced last week that his country had clinched a deal with Western pharmaceutical companies to get discounted AIDS drugs. And one of the most noticeable developments at Davos is the growing spotlight on philanthropy. This year, Bill Gates–who donated $750 million for a child-vaccination program last year–gave another $100 million for research on an AIDS vaccine.
Still, Davos’s critics are not so easily won over. Third World Network’s Khor believes issues like trade and financial markets are too important to be discussed in a closed corporate club. “For people in the developing world, decisions made here can mean life or death, not just whether there’ll be a hard or soft landing,” he says. “These negotiations should take place in a public institution like the U.N.” Peter Bosshard, an activist who helped organize a counterconference in Davos last week, says WEF members include some of the world’s worst corporate offenders when it comes to supporting military regimes or suppressing indigenous people. One of the masked militants who made it to Davos put it more bluntly: “The people at the WEF are capitalists, and I hate capitalism.”
Opponents like that make tough negotiating partners. But despite the water cannons, they’re not going away. In the end, it may be more constructive for the decision makers and their critics–in Davos and elsewhere–to sit down and try to hammer out an agenda both sides can live with. The sooner they getto work, the better.
