Children and the Elderly: Not Children or the Elderly

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

December 1, 2009

In “Spending on Children and the Elderly: An Issue Brief,” Julia Isaacs argues that spending on the elderly is excessive and is crowding out spending on children. This contention is incorrect as a matter of fact and it sets up an either/or contest that can only be destructive to the interests of both children and the elderly. At the same time, it remains true that the United States today leaves unexploited opportunities for investing in children that would yield large returns, boosting economic growth and reducing inequality.

The U.S. ratio of spending on different age groups provides little or no information about the fairness with which public policy treats different age groups. First, the ratio in the United States is not out of line with that in other developed nations. Second, most of the difference between spending between age groups is attributable to health care spending and pensions. Health care spending rises naturally with age, so that equally generous coverage will result in much larger spending on the old than on the young. Third, current retirees on the average have paid payroll taxes that, in present value terms, equal or exceed the value of the pensions they will eventually receive. Furthermore, the economic status of the elderly and of children differs little or not at all, based on poverty measures that take adequate account of out-of-pocket health care spending.

Pitting the interests of the elderly and disabled against those of children is politically short-sighted, because advocates of public outlays for children and for the elderly have long been – and should remain – allies against those who believe that the role of government should be limited to providing for defense and public safety, and little else. Advocates of a restricted role for government remain a sizable and influential group in American politics. In a nation of two-party politics, progress is based on building and sustaining coalitions.  If those who share the view that government should intervene actively to promote social welfare – for children, the disabled and poor, and the elderly – engage in fratricide, each of those groups will suffer.