June 23rd, 2011
04:00 PM ET

The American Association of Young Persons

By Michael McCarthy, The Globalist

In mid-June, the American Association of Retired Persons (AARP), one of the most powerful lobbies inWashington, signaled it would drop its opposition to cutting Social Security benefits for future retirees.

Although the AARP has since backpedaled somewhat, the move would represent nothing less than a seismic shift in the U.S. fiscal debate. The Wall Street Journal’s news pages deemed it “a move that could rock Washington's debate over how to revamp the nation's entitlement programs.”Third Way, a moderately liberalWashington think tank, called it a “watershed moment.”

The reaction to the move provides a striking reminder of how the U.S.government’s priorities are oriented heavily toward older Americans. In Paul Krugman’s memorable formulation, theU.S. government is essentially “a giant insurance company, mainly serving older people, that also has an army.”

Indeed, roughly half of federal spending goes to seniors. Outlays on major mandatory healthcare programs and Social Security, which overwhelmingly benefit the elderly, currently account for about 10% of the U.S. economy. The nonpartisan Congressional Budget Office (CBO) projects that rising healthcare costs and an aging population will cause this share to rise to 16% of GDP by 2035 (under current policies). To put this figure in perspective, total government spending (excluding interest payments on the debt) has averaged 18.5% of GDP over the past 40 years.

In other words, government spending on seniors will soon crowd out investment in everything else the government does — including education, infrastructure, national security, foreign aid, energy, the environment, law enforcement and research and development.

Read: U.S. Political "Short-Termism" and National Economic Strategy

The reason why older Americans receive a disproportionate share ofU.S.government spending is not hard to grasp: They are reliable voters. Consider that the voter turnout rate in 2008 for citizens 55 and older was 71%, compared with just 53% for citizens aged 18-34 (and 0% for those under 18, who of course are ineligible to vote). As such, the voices of seniors are heard loudly and clearly on Capitol Hill — and their demands are amplified by powerful lobbying groups like the AARP.

The American Association of Young Persons

Now imagine there were an American Association of Young Persons with as much influence as the American Association of Retired Persons — and the government took the needs ofAmerica’s youth as seriously as it takes the needs of seniors.

It is certain there would be a much greater emphasis on forward-looking investments in education and job opportunities for the young — investments that would increase the human capital of America’s youth, thereby enhancing the productivity of the U.S. economy and boosting the country’s global competitiveness.

For example, it is likely that the unemployment rate for Americans aged 16 to 24 would be far lower than the historically high 19.1% reached in July 2010. Perhaps there would be a program similar to the New Deal-era Works Progress Administration (WPA) that would provide jobs for young Americans repairing infrastructure, retrofitting public buildings to be more environmentally friendly and constructing new roads, bridges and public buildings. Not only would this immediately reduce the overall unemployment rate, it would pay economic dividends for decades, much as the WPA did in the decades following the Great Depression.

In addition, the federal government would devote more than a paltry 2.9% of its budget to education. In particular, there would be a much greater emphasis on ensuring that students are equipped for the global job market. As it currently stands, the United States’ 15-year-olds rank only 25th among their peers in 34 developed countries in math, and 17th in science. If the U.S. political system valued the country’s youth as much as it does seniors, preparing students for college and for the math- and science-intensive jobs of the future would be among the government’s foremost priorities.

Read: How to Solve the U.S. Debt Problem by Doing Nothing

It is also likely that the current crisis in higher education, which stems from tuition increases that vastly outpace overall inflation, wouldn’t exist. Today, the average graduate with a bachelor’s degree holds student debt of over $27,000 — compared to about $9,000 in 1993. Increasingly, the prospect of taking on tens of thousands of dollars of student loan debt in an uncertain economy is preventing many young Americans from attending college and receiving the skills and knowledge they need to compete in the global economy. If the young had more political clout, this problem would likely be alleviated by increased government spending on financial aid and assistance to state universities.

Toward a more equal society

In addition to enhancing the United States’ long-term economic prospects by making the country more globally competitive, such forward-looking investments in education would help resolve one of the country’s most intractable challenges: income inequality.

As it stands today, income disparities in the United States are greater than at any time since the Great Depression, with the top 1% of earners taking in more than 20% of personal income. Compounding the problem is that the United States has less social mobility than most other wealthy countries.

Read: Why Washington Has Given Up on the Unemployed

However, it is widely acknowledged that education is among the best ways to reduce income inequality. In particular, the OECD has found that higher enrollment in early childhood education, increasing the social mix of students within schools and increased investment in government-supported loan and grant systems can all help promote social mobility — thereby decreasing income inequality.

Looking to the future

In short, if an American Association of Young Persons had as much clout as the American Association of Retired Persons, government spending would be focused on smart, youth-oriented objectives that in the end would benefit all Americans.

However, this is not to say that the United States should forsake its retirees. Rather, it highlights the fact that healthcare costs, the main driver of future deficits, must be gradually reigned in through smart and humane reforms. Toward this end, the cost-control mechanisms in President Obama’s healthcare overhaul, which the CBO projects will reduce deficits by over $1 trillion between 2020 and 2030, are a solid first step. It also makes clear the need for additional tax revenues through raising taxes (particularly on the wealthy), closing tax loopholes and reducing tax expenditures.

Read: Fiscal Keynesianism for the Upper Classes

In addition to helping to reduce the country’s debt, such reforms would allow the nation to pursue a youth-centered agenda that would help solve two of the country’s most intractable problems: a stagnant, increasingly uncompetitive economy and worsening income inequality.

The views expressed in this article are solely those of Michael McCarthy. Read more at The Globalist.

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Topics: United States • Youth

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soundoff (7 Responses)
  1. j. von hettlingen

    The young people are the pillars of every society, therefore their wellbeing is the likelihood of a bright future, that benefits also to old people. Before the enforcement of the Social Security Act 1935, old people were expected to rely on their siblings or savings. The baby-boom generation had been taught by their parents to squirrel. Now the baby-boomers reach retirement age and many of them are big consumers. It's nice to see them reaping what they had sown and enjoying the social transfers. Yet it's equally important and vital for the government to invest in young people. A good education would enable them to earn a living, pay taxes and secure their welfare system,

    June 23, 2011 at 6:05 pm | Reply
  2. Michelle G

    When I was in middle school (I'm 26 now), we watched "Channel One" news everyday and I remember them having a story about how social security would run out before my generation was old enough to collect it. Maybe because of that, I've always assumed in the back of my mind that my generation would not get Social security. Don't know if others my age think the same, but I'm just saying that if the government came out and said that social security was going away, it wouldn't really change things for me because I've always assumed it would.

    June 23, 2011 at 8:52 pm | Reply
  3. fernace

    Why should American citizens have to form associations to be noticed & be taken seriously by our government? The real reason AARP is heard is because they are overwhelmingly well to do & vote for the GOP. All citizens who pay taxes should expect to get Social Security when they get older. It's usually not enough to retire on, but every little bit helps. If our gov't is disproportionately focusing on the AARP crowd, because they have "clout", no wonder our country is in dire straits & education seems like an afterthought. That really needs to change, & young people are the 1's to do it!

    June 23, 2011 at 9:39 pm | Reply
    • OldPeopleWhoVoteGOP

      Are idiots and don't have a clue that the GOP wants them dead.

      June 24, 2011 at 12:34 pm | Reply
  4. james2

    Paul Krugman wrote an excellent article in August of last year about the conflicting existential ideologies that influence how people view Social Security (here: http://krugman.blogs.nytimes.com/2010/08/13/social-security-finances/). Basically it comes down to two parts. One view is that Social Security is a dedicated trust fund which is supported by a dedicated tax for a specific purpose. The other view is that it is part of the overall federal budget and its revenue can therefore be used for other things (like buying government bonds to finance military spending). If you really want to know what is going to "crowd out investment in everything else the government does", you only need to look to our military budget, which dwarfs the military spending of every other country combined. Our spending on scientific research, education, and infrastructure did not dcrease because of Social Security crowding out investments. It shrank because George Bush slashed spending in an effort to fund the Iraq War (funny how people seem to have forgotten that fact isn't it?). Would it not make much more sense to cut all of this absurd, wasteful, unnecessary, and quite frankly politically corrupt military spending before you decide to cut payments to the American people? Let's also not forget that those young people are goind to retire someday too, and I doubt they will be very happy to see that their future benefits will be cut.

    June 24, 2011 at 10:15 am | Reply
  5. GOPisGreedOverPeople

    Here's the GOP solution to everything: Turn the Old, Sick, Poor, Unemployed, and Gay people into slaves. Then whip them unitl they are Young, Healthy, Rich, Employed, and Straight. Or until they are dead. then turn them into Soylent Green to feed the military.

    June 24, 2011 at 12:36 pm | Reply
  6. Stuart

    This is interesting Free Prescription Drug card program. You can save 75% on all FDA approved drugs including scans, imaging, lab test, and even pet meds. You can print the card right from this site http://www.discountfordrugs.com/

    AARP's card only saves you 30%!

    June 27, 2011 at 2:17 pm | Reply

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