Wealth gap between young and old widens, but so does gap between richest and poorest in all age groups

Pew Research Center today released a study showing that the gap in wealth between households headed by those over 65 years of age and households headed by those under 35 has grown substantially since the beginning of the great recession. 

The older households now have 47 times more wealth than the younger households, double what the gap was in 2005 during the artificially good times produced by the real estate bubble.

For the most part, the news coverage laid the groundwork for a war between generations.  Take, for example the Associated Press story about the study—the version that most people will see.   

The first expert made a kind of declaration of generational war by saying: “It makes us wonder whether the extraordinary amount of resources we spend on retirees and their health care should be at least partially reallocated to those who are hurting worse than them,” said Harry Holzer, a labor economist and public policy professor at Georgetown University who called the magnitude of the wealth gap “striking.”

Striking, but not surprising, seeing that young people have had less time to save, we are in the midst of a recession that has shrunk entry-level jobs, young households tend to have expensive children and the young carry more debt than they used to carry, thanks to raging inflation in the cost of college.

More instructive than demonstrating what everyone with eyes can see—that our young people face a tough economic future—is the little reported finding in the Pew study that in all age groups, the rich have gotten richer and everyone else has lost ground. 

I’m sure most of our elected officials and the rich folk they represent would love for the public to think there’s a generational war. It’s a better sideshow than the proposed, and nonexistent, class war between public workers and others in the middle class because it involves more people. Both nonexistent wars keep our minds off the real class war: the one that the wealthy have been waging for 30 years against everyone else, the one that the Occupy Wall Streeters have now taken to the streets.  In this class war started 30 years ago by Ronald Reagan and his cronies, wealth has been transferred from the poor and middle class up the ladder to the wealthy through cutting government programs, shrinking unions, cutting taxes for the wealthy and outsourcing traditional government services to private for-profit companies.

The Pew study states that the young have had more of their government benefits stripped from them over the past 25 years than the elderly have. Yes, they should get those bennies back. College should be cheaper, and would be if states and the federal government supported education at the same level as they used to. All children should have access to quality healthcare.  There should be lower student-teacher ratios in classrooms.  Unemployment benefits should be extended, particularly now that more than 50% of all unemployed people have used up their benefits and receive nothing.

In short, we do need to spend more on our young people.

But not by cutting programs for the elderly because they’re not doing so well either.

The Pew study found that the net worth of the average household in which the head is more than 65 is $170,494. So including the value of their home, that’s all the average retired household has to live on, other than Social Security. Let’s say Mr. & Mrs. Average can invest all of it in a diversified portfolio  and they take out 4% a year, as financial planners typically recommend. That means that other than Social Security, they have another $6,820 they can live on every year. And you want to cut Social Security?

No, the answer is not to transfer wealth from old to young, but to transfer wealth from the ultra wealthy to everyone else. 

So to Professor Holzer and anyone else who proposes that we pit the young against the old in a battle for pie share, I respond that the pie is too small because the rich are not paying their fair share into the pot, and what we need to do is make the pot bigger by taxing the wealthy.

I’m not calling for a financial guillotine. Let’s just return to the spread of wealth that we had in 1979, before the class war started.

opedge

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