The Parent Trap

Social Security "reform" is being touted as fiscal liberation for the young. What will young families do when it condemns them to care for their elders.

PRESIDENT BUSH IS SELLING his partial privatization plan for Social Security to young voters as a replacement for a system that "won't be there"—so it's said—when they retire. But in the tortured tales of financial crisis, the effects of his proposal on future family life haven't often been mentioned. They should be. For it is not too much to say that Bush's plan, if enacted, would impose a "family responsibility system" for elder care. And down the road, that would tear many American families to shreds.

Old age is a time of economic, physical, and psychological stress. People grow frail. They fall ill. They require medicine. They require care. They deplete their savings.

And while in the American family mythology of the "good old days" the burden of coping fell on a sturdy, middle-aged farmer or shopkeeper, in truth America's old were never well treated until Social Security came along. In great numbers, they died off, poor and alone, soon after they could no longer work. If elderly retirees were not a great burden on their families back then, it was because, in large part, they did not exist.

Franklin Roosevelt created Social Security in 1935, but for a generation benefits were low. Into the 1960s, almost one-third of the elderly lived below the poverty line. Then two things changed. The first was Lyndon Johnson's Medicare, in 1965, which lifted the capricious burden of health care costs for the aged. The other was the Social Security amendments of 1972, the result of a curious bidding war between Richard Nixon and Wilbur Mills (chair of the House Ways and Means Committee and a candidate for president) during the primaries. These amendments meant that, by the early 1980s, the poverty rate for seniors was below that of the rest of the population. By the end of the 1990s, it had fallen to just 10 percent.

The compound achievement of Roosevelt, Johnson, and Nixon had a rich benefit for families. America's elderly were no longer dependent on their adult children. This was especially terrific for seniors who did not have children. But it was also good for those who did—they were no longer obliged to come around, hat in hand, to their sons and daughters. And—a point often neglected—it was equally excellent for the offspring. They no longer faced the financial hazards of needy parents in old age, or the conflicts with siblings over who would pay for what.

Once the elderly were provided the means to enjoy long retirements, their life expectancies soared, and the proportion of the population living above the retirement age necessarily rose. When the government started picking up the medical bills, the health care industry also mushroomed, creating the cornucopia of services and treatments we have today. Thus, as Social Security lightened the burden on families, the total costs of care for the elderly shot up.

On whom did these costs fall? Answer: They were (and are) distributed over the entire working population by means of the payroll tax. The spread was not even. Those with incomes above the earnings cap paid a smaller share of income than those with lower earnings. Those with income from investments escaped contributing on that income. Still, everyone who worked did contribute. They did so whether or not they personally had living parents to support, whether or not their own parents were needy at any given time. The sharing out of the costs—one of the greatest national enterprises in history—made it possible for almost all of America's elderly to live long lives of modest comfort.

Social Security helped the family in two other important ways. It provided disability benefits for those who could no longer work, permitting them to keep their families intact. And for those who died young, it provided survivor's benefits that help a widowed parent raise her (or his) children. Today, about a third of Social Security benefits go to the disabled and to surviving spouses and their minor children. Of new beneficiaries, 20 percent are survivors, and more than 15 percent are disabled.


NOW COMES President Bush, with a proposal (the full details, as I write, are still undisclosed) to cut Social Security benefits and to establish, in partial compensation, a system of personal stock accounts into which payroll tax revenues could be funneled. This plan is being sold to young Americans as a way of making them "self-supporting." But the effect, in many cases, would be exactly the reverse. Under Bush's plan many of today's young working people, when they are old, will become financially dependent on their own kids.

Nobody would argue that those who currently depend on Social Security are rich—the average new recipient gets $895 a month. Bush's proposal would cut everyone's baseline benefits by decoupling them from average wage increases and linking them instead to cost-of-living increases, which are lower. Under present law, the elderly enjoy some of the wider economy's productivity gains; under Bush's proposal they would not, and baseline benefits would fall dramatically.

Bush claims that these cuts will be made up for by income generated by privatized Social Security accounts. But your return would have to beat 3 percent after inflation for you to come out ahead. Some might do so well, many would not; there is no guarantee that future stock returns will match past performance. On top of that, if private accounts permit investor choice, many will make bad or unlucky choices, and accounts will be depleted by fund managers' fees.

Even if the accounts don't permit choice, they will be subject to market timing. If the market tanks the day before you retire, you're screwed. This is not a minor consideration. As everyone has known since 1929, a market crash often precedes a recession—in which older workers especially are permanently displaced. Think of it as a double gift: First you lose your pension, then your job. Fun. Finally, private accounts can never provide for survivors whose parents die before accumulating a nest egg, or the disabled.

Bush's plan is a form of Russian roulette played with the lives, not of today's elderly, nor even those in late middle age, but of today's young Americans. Many of these future elderly will be thrown back on the mercy of their families. But the demographic realities have changed. The future elderly will live even longer than this generation, and their care will be more costly than ever before. There is no way in the world that their children will be able to support them, as Bush's family responsibility system would force many to do. Who, even now, has an attic where a mother-in-law could go?

The most likely consequence is death. The survival rates of America's future elderly—today's working young—would drop. For those seniors who have no families to fall back on, life will simply become nastier, more brutish, and shorter. And what about those whose families exist, but can't or won't do enough? There will be many. Even well-meaning families—as most are—will suffer torments of conflict and guilt as they try to make hard choices between their parents and their children. Will they choose the past or the future? The cruelty of family life under this scheme is hard to fathom.

Why aren't young people focused on this? Why do they only hear about the supposed "financing crisis" of Social Security? The answer lies in the propaganda and misinformation spread by those who would profit from changes to the system—fund managers who want the commissions and insurance companies who want to reclaim the market that Social Security took away long ago. President Bush's proposal strives to serve these supporters (and preserve his tax cuts)—it's that simple.

As for the so-called dependency ratio—the number of retirees per worker, another key indicator of "crisis" for the scaremongers—it's irrelevant. Yes, dependency is rising, and yes, that means that the burden of elder care falls on fewer and fewer workers. But whatever the economic consequences, this is merely a demographic fact. It has nothing to do with Social Security. Dependency will rise whether Social Security is preserved, privatized, or even abolished. It will rise under all variations of the privatization scheme. Unless they really do die sooner, the elderly will not go away.

Therefore, income will have to be set aside to meet their needs. From any rational point of view, the only issues are how much must be set aside, and on whom will this burden fall? We can continue to share out the burden. In doing so, we recognize the reality that as the costs of caring for the elderly rise, a collective system is not only affordable, but is actually the only way we can provide decently for all.

Or we can pass the burden over to the most fragile, uncertain, uneven, at-risk institution in America today. That's the family, in case you haven't heard.