In the midst of the current debt crisis, a conventional theme of the mainstream media has been that of inter-generational conflict. First, the current generation of senior citizens, as recipients of Social Security and Medicare, is charged with consuming resources that should be spent on the young. Second, baby boomers are charged with squandering the ample resources bequeathed to them by their parents, and passing our national debt to their children and grandchildren. For some critics, money for education is wasted on teachers and their union contracts, not to mention lackluster students.
From a perspective that emphasizes the ever-increasing wealth of this country and its dispensation over time, these claims are largely baseless. Given this enormous wealth, fundamental problems including the national debt can be understood in terms of the distribution of that wealth and income, and the shortfall of taxes that are currently being paid, especially by corporations and the wealthy. The grain of truth that remains from debunking these criticisms reflects an expensive for-profit healthcare system, not Medicare per se.
The federal Bureau of Economic Analysis uses 2005 “chained” dollars to generate apples-to-apples comparisons of our national and individual wealth over time. In these equivalent terms, our per capita gross domestic product (GDP) has increased from less than $16,000 in 1960 to over $25,000 in 1980 to over $43,000 in 2010. These are steady and real increases in goods and services produced per every resident by all American workers. One can think of each individual’s $43,000+ as divided into portions that represent collective expenditures, from personal consumption to education to healthcare to the military.
During the past half-century, the percentage of GDP spent on all forms of public education (including college) at all levels of government increased from 3.9% in 1960 to 6.7% in 2010, according to usgovernmentspending.com. During that same period, according to the Congressional Budget Office, combined spending on Social Security and Medicare increased from 2.1% to 8.3% of GDP. Thus total public expenditures on the old and the young in these significant areas increased from 6% to 15% of GDP over 50 years.
In light of increased real per capita GDP, it’s clear that these increases on fundamental services have been well affordable. In 1960, $934 of per capita GDP (in 2005 dollars) was spent on public education and Social Security (Medicare did not yet exist). After this expense, $14,710 per capita was left for everything else. In 1980, $2940 was spent on education, Social Security, and Medicare, with $22,690 remaining. Last year, the analogous figures were $6,369 and $36,148.
Thus while over the past 50 years the percentage of GDP publicly spent on “dependents” in these major ways has nearly tripled, to 15%, the amount of gains in real wealth left over per individual increased by over $21,000, or 150%. That is primarily due, of course, to technological innovation and steady increases in the productivity of the labor force.
It would not take even a quarter of that $21,000 gain to balance the federal budget, much less to balance state budgets. The problem is that for four decades, this increase has accrued disproportionately to the top 20% of earners, many of whom in turn poor mouth the country as a whole while demanding lower taxes.
Thus three well-documented economic realities contribute to the current “debt crisis.” First, long-term stagnant incomes for the vast majority of the population have decreased their contribution to federal income. Second, lowered and evaded taxes on the (increasingly) wealthy and corporations have decreased tax progressivity and halved the corporate contribution to federal income. Finally, the recession resulting from the housing bubble delivered an acute blow to both GDP growth and tax collection at all levels.
None of this has anything to do with intergenerational expenditure issues, the health problems of the elderly, the profligate character of the boomers, or greedy teachers. If government spending raises issues?other than costs driven by a private healthcare system?than these issues relate to our trillion-dollar military and wars, and to the myriad social costs of the increased poverty that is generated by this unequal distribution of wealth.
A more equitable, fairly-taxed, and compassionate society can well afford the public costs of needs and rights that are inherent in youth and age, especially when the alternatives are poverty, neglect, and ridiculous generational stereotypes based on the accidental timing of birth, life stages, and death.