SUMMARY
The United States spends 2.4 times as much on the elderly as on children, measured on a per capita basis, with the ratio rising to 7 to 1 if looking just at the federal budget. The tilt toward the elderly is stronger in the United States than in many other countries, although all OECD countries spend more, per capita, on the elderly than on children. Viewed from a life-cycle perspective, it is not unfair to spend more on the elderly than on children because all individuals progress from being children to working-age adults to elderly adults. However, our current system of public expenditures is unfair to younger generations, defined as birth cohorts rather than age groups: the vast and growing size of unfunded health and retirement benefits will require today’s children to bear a heavy tax burden when they grow up to be working-age adults. For our children’s sake, we should restrain growth in elderly benefits and pay our share of taxes.
This issue brief is drawn from a series of three working papers on spending on children and the elderly.
- The first, How Much Do We Spend on Children and the Elderly?, is descriptive in nature and provides estimates of public spending on children and the elderly, as well as information on private support for these two age groups.
- The second, A Comparative Perspective on Public Spending on Children, investigates whether the United States invests less in children than other rich countries and whether there is a common cross-national pattern of spending more on elderly than on children.
- The third, Public Spending on Children and the Elderly from a Life-Cycle Perspective, tackles a challenging question raised by the observed spending patterns in the earlier papers, namely: does it make sense for our country to be spending so much less on children than on the elderly? While such a question sometimes raises issues of intergenerational warfare, the paper addresses it through a life-cycle framework.
The issue brief summarizes the three papers, which provide further detail and references for the information.
The author of the series, Julia B. Isaacs, is the Child and Family Policy Fellow at the Brookings Institution. The papers benefited from the excellent research assistance of Emily Monea and the helpful comments of Isabel Sawhill and Ron Haskins.
Comments by Henry Aaron, Senior Fellow, Economic Studies
Children and The Elderly: Not Children or the Elderly
Julia Isaacs argues in the four papers referenced on this site that spending on the elderly is excessive and is crowding out spending on children. I hold that this contention is incorrect as a matter of fact and that 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.
Read Henry Aaron’s complete commentary »
Comments by Eugene Steuerle, Institute Fellow, Urban Institute
