Taking America To The Cleaners

...For during the postwar era, the greater share of the nation's capital has gone, not for rebuilding our industries or maintaining our public works, but for financing single-family home mortgages...

...The long-term mortgage, that happy instrument that later made possible the modern definition of what it means to be middleclass, was still unknown...

...Indeed, American life is filled with such entitlements, from free health care for all veterans over 65 to reduced bus fares for seniors...

...The debts the old have left are revealed ina federal budget deficit that requires $100 billion a year just to repay interest costs...

...All share one thing: eligibility is determined not by one’s need but by the date on one’s birth certificate...

...And the beauty of it all, at least forthe old, is that sofar the young havemuttered barelya word ofprotest...

...At the same time, the value of the nation’s productive facilities-its steel mills, oil wells, auto factories, and other job-producing enterprises-has merelydoubled...

...The left, having long embraced the notion that the political interests of the social security recipient are identical to those of the unemployed teenager, shares no less of the blame...

...New Jersey writer...

...they instead wanted money to pay their own bills...

...Contrary to a popular liberal assumption, “elderly” and “needy” are no longer synonymous...

...In enforcing their claim ofgenerational privilege, the elderly have also given us some unlikely heroes...

...Such Americansdeserve not only our understanding, but the public’s subsidy...

...If in frustration the young demand nothing less than the same reckless prosperity of their parents, the unjust debts of history will compound even further, passed from one generation to the next, until we are so heavily mortgaged the national decline we now fear will become both inevitable and irreversible...

...To the Streets...

...Had the same person managed to complete a career before becoming disabled, he could be receiving as much as $729 in social security...

...With this the young should have no quarrel...

...In 1965, for example, Congress estimated that the new medicare program would cost more than $8 billion by 1990...

...Pepper also happens to be a millionaire who accepts over $7,00Oa year in social security checks...

...The federal treasury will forego $2.4 billion to give everyone over 65 anadditionalincome taxdeduction, and another $500 million for special tax breaks when those over 55 sell their homes...

...Thus, the issuance of long-term public debt is a form of minority rule over time and must be limited...

...Through deficit financing, the young were being expected to paynot onlyfor theirown poor, but for their parents...

...The banks cooperated because they were guaranteed repayment by the Bank Board, which had a $125million credit line with the treasury...

...For the first time in American history, the federal government was using its credit to protect American homeowners from the hazards of the marketplace...

...The improvements made by the dead,” he reminded Jefferson, “form a debt against the living, who take benefit from them...

...There is much truth in this...

...The current social security system thus resembles not so much an insurance scheme as a pyramid game, in which those who arrive early get far more than they pay in...

...Suffice it to say that by” the older generation I refer to those who survived the Depression and World War I1 to then enjoy the longest sustained period of prosperity in American history...

...Few were then able, or willing, to ponder the full implications of the act...

...The Depression made this repayment schedule too onerous for many mortgage holders, but it was not their plight that sparked Hoover's concern so much as that of the nation's 12,000 savings and loans...

...In enforcing their claims of generational privilege, the old undermine the younger generation’s opportunity to enjoy the prosperity of itselders...

...Retirement truly was a terrifying prospect for many American workers...

...What so few are willing to acknowledge is that social security checks and tax breaks for the unneedy old ultimately deprive the very same people...

...Through an assortment of devicesand regulations designed to compel investment in home mortgages at the expense of other productive ventures, the nation managed to divert an increasing share of its available credit into single-family housing...

...Almost a third of the nation’s elderly single women, for example, try to eke out an existence on less than $4,000 a year-a circumstance made all the more desperate by the natural infirmities of old age and the loneliness that so often accompanies it...

...As in fraternity life, we often find it tolerable to submit to outrageous and unnecessary humiliation as long as we are convinced that we can thereby wreak a commensurateamount of misery on those who follow...

...As so often besets quieter generations, the young have been partly seduced by the ideologyof their immediate elders, inheriting from the era of Youth the notion that there is little to be found in politics save cause for alienation...

...in a social security system that will require several hundred billion dollars in the coming decade to stave off bankruptcy...

...Far more pernicious is the nature of this debt...

...Thus future generations will realize the fairness of at least some of the debts left them...

...Thusit wasappropriate that throughout American history the federal budget frequently and necessarily was in deficit, particularly after wars and financial panics...

...Toavoid that, a more fair division of both the necessary sacrifices and ensuing benefits of American life is required...

...All this raises the inevitable question ofjustice between generations...

...As Henry Kaufman, an economist for Salomon Brothers, has noted, since 1964 Americans have borrowed more than two dollars for consumption to every dollar of new wealth they apparently created...

...They had little enthusiasm for repossessing homes...

...This is because 70 percent of America’s elderly own their own homes-thereby insulating them against a major component of inflation, high housing costs...

...Lavishing money on useless weapons, as Democrats often note, does deprive the needy of food and shelter...

...The young also realize that if a similar plea on posterity’s behalf was urged on their parents, it went unheeded...

...130,000 of those households, according to the Current Population Survey of the Bureau of the Census, have income exceeding $75,000...

...The suburban miracle symbolized by Levittown-$7,990, no money down-could never have happened had not the government decided to get into the business of subsidizing mortgages, thereby providing for millions what they could otherwise not have afforded: a home of their own...

...This is the real stuff of generational politics...

...Within the space of one generation, more than two-thirds of the nation realized the dream of homeownership...

...That portion of the nation’s limited wealth squandered on its unneedy old must be subtracted in equal measure from what can be invested toward future economic growth...

...The roots of generational entitlement: The Townsendites of the 1930s demandedS 200 a month for everyone over 60...

...Witness Florida Rep...

...Like so manygovernmentefforts that laterwent awry, this one started with good intentions, as a temporary measure on a relatively small scale...

...The genesis even can be traced to a specific day-July 22, 1932, the day the Federal Home Loan Bank Board was born...

...About the time of the OPEC oil embargo, Youth went to law school, or else into the woods, and hasn’t really bothered anyone since...

...But this the younger generation must realize: unlike a previous generation, it does not have the luxury of discounting politics...

...The major player in the rise and the decline of American homeownership has been, not surprisingly, the federal government...

...Put bluntly, the old have come to insist that the young not only hold them harmless for their past profligacy, but sacrifice their own prosperity to pay for it...

...In 1959, for example, 27 percent of all elderly households lived below the poverty line...

...By the young I generally mean those under 30...

...photos by John Vachon, courtesy of the Library of congress...

...Like so manygovernmentefforts that laterwent awry, this one started with good intentions, as a temporary measure on a relatively small scale...

...And if Congress miscalculated the cost of its generosity, it could always borrowjust a little bit more...

...The federal budget cuts that have accompanied these tax reductions have been concentrated in such programs as food stamps, welfare, and job training, which largely affect young adults and children...

...Madison, by return mail, noted a theoretical problem worthy of mention...

...This ethos finally fell away when those who are now old came to power...

...Although none of Jefferson’s fellow revolutionaries doubted that public debts truly do encumber the young and the unborn, they found many obvious, practical problems with the proposal...

...Conversely, it followed that we have no right to burden futuregenerations with the price of our own freedom and pursuit of happiness...

...It is upon the youngest that the burden of this new generational politics squarely falls...

...as for those between the ages of 30 and 50, which includes the first contingent of the muchheralded Baby Boom, their interests are so intertwined with bothgenerations that they have little role in this conflict...

...In the early 1930s Townsend proposed that everyone overage 60 be given a $200-amonth pension-a princely sum by the standards of the day...

...Take It from T.J...

...A major reason is that both political parties find it far more convenient to ignore the obvious, not only because it seems so irreconcilably unjust but because they are parties to the injustice themselves...

...Hoover proposed the Bank Board at the nadir of the Depression, a time when almost 1,000 homes were being forced into foreclosure each day...

...Its progenitor was none other than that hapless president whose name will be forever synonymous with government tinkering in the face of national catastrophe: Herbert Hoover...

...Consider one more statistic from history’s ledger...

...they instead wanted money to pay their own bills...

...The genesis even can be traced to a specific day-July 22, 1932, the day the Federal Home Loan Bank Board was born...

...Behind a justifiable concern for the impoverished elderly of the period laya far more radical notion: the mere act of surviving to an arbitrary age entitled one tospecial reward...

...The left implores the young not to burn so much oi1,deplete the topsoi1,orpollute the water and air...

...Unfortunately today’s young can make no such assumption, and herein lies the central injustice of the new generational politics of the eighties...

...Curiously enough, this was a question that interested Thomas Jefferson, who probably coined that great Enlightenment slogan, “The Earth Belongs to the Living...

...The magnitude of these entitlements thus compromises the young’s very ability to finance them, a conundrum made far more unjust by yet another burden: the unpaid bills the old have left behind...

...One’s success in life didn’t matter...

...Using the social security trustees’ own demographic and economic assumptions, economic consultant Horace W. Brock has calculated that to realize the same level of retirement benefits, today’s young workers must force their ownchildren to beara tax burden three times as large...

...Hoover proposed the Bank Board at the nadir of the Depression, a time when almost 1,000 homes were being forced into foreclosure each day...

...If, after all, one falters before reaching age 65, does he deserve any less help from society...

...But there is a danger in the youngergeneration’s political awakening...

...The young might accede to the selfish demands of their elders were they assured that their own children could be made to suffer a similar extraction some day on their behalf...

...As the government’s generosity becomes further limited, the old promise to become even more militant in advancing their claims of generational privilege...

...Meanwhile the elderly-rich and poor-not only have been spared substantial cuts in their programs, from social security to medicare to civil servant retirement pensions, but have seen them increase annually...

...Though the rush of enthusiasm that greeted Townsend’s proposal was not enough to overwhelm Congress, lawmakers incorporated the plan’s general premise into the Social Security Act of 1935...

...as the 18th-century English essayist Joseph Addison once quoted the selfish Everyman of hisera, “We are always doing something for posterity, but I would fain see what posterity has ever done for us...

...But most important, in contrast to Madison’s prescriptionforajust debt, these deficits were not incurred, by and large, to provide improvements for the future, but to satisfy the appetites of the present...

...What the past generation has abused or overconsumed, the next must conserve, restore, or do without...

...For with the decline of Youth has come the arrival of an entirely new era in American life,onein which the circumstances of one’s age-as much as one’s race, sex, or social class-have become a prime determinant of one’seconomic destinyand political self-interest...

...Rather than address the matterofequityamong the generations, both political parties propose to make amends for the profligacy of the past by urging the young to make sacrifices in the interest of posterity...

...It is also a distinction the nation no longer can afford to make...

...And thus the circumstances of age, rather than social class or professional success, now largely determine who in this society will remain tenants and who the landed gentry...

...many of them expect it should come with even greater ease...

...The resulting suburban growth has been hailed as a social triumph...

...But today only 7.6 percent of all elderly households fall below the poverty line, a figure that takes into account not only income but the economic value of the elderly’s subsidized health...

...To answer this question, Jefferson consulted European mortality tables of the era and inferred that of all people alive at any one moment of the 18th century, half would be dead within 24 years and 8 months...

...A new majority soon emerges and finds itself saddled with obligations for which it never voted...

...For the first time in American history, the federal government was using its credit to protect American homeowners from the hazards of the marketplace...

...Were we bound by thedebtsand feudalarrangements of the dead, Jefferson reckoned, revolution would always be illegitimate...

...Typical of the accolades Pepper receives was a recent ABC News report that showed him celebrating his 82nd birthday, surrounded by children, while a reporter described the congressman’s lifelong goal of “trying to bridge the gap between the young and the old...

...Since 1964 the accumulated debt of American government, industry, and private households has risen almost five-fold, from $1.2 trillion to more than $5 trillion...

...Any majority that votes today to borrow from the future will soon become a minorityas its members grow old and die...

...Inherit the Whirlwind The result of these unexamined claims ofgenerational privilege has been to replace one injustice, the poverty of some of the old, withanother-the burdeningofall the young...

...The Bank Board allowed savings and loans to borrow money from commercial banks, using existing (often shaky) mortgages ascollateral...

...Why has this conflict between generationsgone largely unnoticed...

...Claude Pepper, perhaps the best-known defender of the current social security system...

...The older generation enjoyed more than itsexertionsjustified, borrowing from the future to subsidizecurrent consumption...

...This was Jefferson’s argument against public debt...

...Unfortunately, its inevitable collapse has denied the young access toaffordable property-largely by virtue of their having come too late on the scene...

...The older generation accordingly has not conveyed to the young the improvements that previous generations felt obligated to make...

...the right demands that the young forego more government entitlements, sacrificing instead for a balanced budget, a bigger defense, and an eventual return to honest money...

...More than$lO billioninsocial security checks will go to elderly households whose income already exceeds $25,000 annually...

...The magnitude of this encumbrance is unprecedented in American history...

...If there were ever a generation that had reason to take to the streets, it is this one...

...But by 1979 it was costing almost $25 billion, or three times the projected cost for 1990, with costs still rising sharply...

...So the prosperity following World War I1 was part real, part illusory...

...Later arrivals face the prospect of getting much less, or nothing at all...

...Had the older generation invested its wealth in new plantsand equipmentat a rate competitive with the Japanese,orevenequal to that of American industry in the past, I very much doubt such bureaucraticcareers would have commanded so much respect and high salaries, rtlative to the engineers, scientists, and entrepreneurs on which our productive growth depends...

...In the last two decades deficit financing became not an intermittent device to cope with national emergencies but a convenient habit...

...How this debt was incurred reveals much about the injustice that now exists between the generations...

...The Depression made this repayment schedule too onerous for many mortgage holders, but it was not their plight that sparked Hoover's concern so much as that of the nation's 12,000 savings and loans...

...Older workers obviously have higher incomes than younger ones and hence benefit disproportionately from tax cuts...

...But the longer necessary reform is postponed, the more inevitable the result: the relegation of today’s young to an old age that is truly desperate and impoverished...

...The Twilight Moan Once upon a time the idea of generational entitlement might have made some sense...

...The idea did not go over well...

...Little wonder so many remain skeptical...

...It has not yet happened...

...Another reason is that most pensions are indexed to the cost of living, which has gone up faster than the salaries of people of working age...

...If youdoubt this, looknofurther than to how the federal government spends its money...

...As my generation seeks and fails to live out the values and expectations of an age it never really knew, it is only a matter of time untilit perceives its true circumstance...

...in Townsend’s brave old world John D. Rockefeller would be just as entitled to his $200 as the poor widow of a West Virginia coal miner...

...The young not only feel entitled to the same prosperity...

...Nonetheless, in the next half-century the notion of generational entitlement would spread and gain respectability, insinuating itself into almost every facet of American life...

...Between the various transfer payments to the elderly and the interest on the national debt, the young must suffer almost oneofevery two taxdollars they now pay the federal government to support the older generation’s past and present standard of living...

...Worst of all, it has left the values and expectations of an era in which affluence seemed automatic...

...Yet a handicapped young adult dependent today on the government’s SSI program receives just $284 a month...

...And to those who deserve compassion, we should be unselfish-but give to each according to his need, not to his generation...

...The banks cooperated because they were guaranteed repayment by the Bank Board, which had a $125million credit line with the treasury...

...Social security, for example, is primarily financed by an additional tax on current workers who must also pay federal income tax...

...Although it is nowhere required by the Constitution, each successive administration, even Franklin RoosevelCs, felt morally inhibited about borrowing from the future to finance current consumption...

...For example, though social security would disburse over $102 billion in 1980, the Rooseveltadministration projected a 1980 cost ofjust $1.3 billion...

...Phillip Longman is 26 and a Princeton...

...Constitution be drafted so as to forbid any legislature from incurring debts not payable within this precise number of years and months...

...most homebuyers paid half the purchase price as a down payment and repaid the remainder in three to five years...

...Rather than riskoffending thesensibilities -and the voting might-of the elderly, liberals prefer to consider themasexempt from scrutinyas the Reagan administration now considers the Pen tagon...

...most homebuyers paid half the purchase price as a down payment and repaid the remainder in three to five years...

...Today the elderly are not only as well off as the rest of America, during the last decade they were the only major segment of our society that stayed abreast of inflation...

...cheap credit, find themselves not only unable to buy a home but having to pay more in taxes to make up for this and other generational entitlements...

...Those searching for an historical antecedent to all this might recall the scheme of Dr...

...Francis E. Townsend...

...That every old person deserves security from poverty is indisputable, for we owe this to all our citizens...

...the young so far have eschewed the streets as well as the halls of Congress...

...It is useful to recall that in 1946 the majorityof Americans were still renters...

...Herein lies a great paradox...

...Indeed, it is worth pondering for a moment the phenomenon of the organized old, which so far has been one of the most successful-and, 1 think, dangerous-political movements of our time...

...That elderly citizens deserve an automatic reward solely for having reached a certain age is, however, a different credo, and one at odds with the egalitarian principles on which American democracy is based...

...This disagreement has nothing to do with anything so trivialas “lifestyle” or “higher consciousness,”but much to do with how the responsibilities and benefits of American life are shared...

...But limited how...

...Having lived beyond its means, the nation has left to its young its decaying cities, its obsolete factories, its unsound pension systems, and its other unpaid bills...

...As for those who argue that the elderly’s entitlements are “insurance” and not “welfare,” it is crucial to understand that however much this distinction protects certain sensibilities, it is more semantic than real...

...Supply-side economics, usually criticized as a desire by consefvatives to enrich the wealthyat the poor’s expense, should also be seen as a device for a huge transfer of wealth between generations...

...Its progenitor was none other than that hapless president whose name will be forever synonymous with government tinkering in the face of national catastrophe: Herbert Hoover...

...This is roughly equal to all the admitted debt of the federal goverment and thus serves to redouble the measure of encumbrance now presented to the young by the old...

...In a famous letter to James Madison, he thus proposed that the U.S...

...Still, governingsuch behavior wasastrong belief that a deficit necessarily incurred one year should be matched by surplus taxation in the years following so that over time each generation lived within its means...

...Taking America To The Cleaners by Philip Longman For most Americans, one of the small consolations of the 1970s-that generally dreary decade of scandal, malaise, and national decline-was the seeming demise of Youth...

...Of course, any change in this system must pay decent regard to the aroused expectations of those now retired or nearing retirement...

...Indeed, theaverage social security beneficiary today receives in only 19 months what he or she contributed in a lifetime...

...This appeal to posterity, however noble in sentiment, cannot help but ring hollow, for one of its purposes is to distract us from the morecontentious issue of generational conflict...

...Ifthisinequitywentno further than how the federal government divided its largesse, it might be tolerable...

...For the sturm und drung of generational conflict vanished from American life just when the young finally had true cause not to trust anyone over 30...

...The long-term mortgage, that happy instrument that later made possible the modern definition of what it means to be middleclass, was still unknown...

...The Bank Board allowed savings and loans to borrow money from commercial banks, using existing (often shaky) mortgages ascollateral...

...Rather than question thesegenerational entitlements, most partisans of the right try to take credit for them, insisting that this largesse is the result of promises that cannot be altered, much less broken...

...They had little enthusiasm for repossessing homes...

...in a decaying infrastructure of streets, bridges, water systems, and factories that will require at least $ I trillion to repair and whose dilapidated condition also threatens our economic future...

...Unlike other generational movements, the agenda of what is often called the “Gray Rebel1ion”is largely materialistic, a straightforward call for even greater transfers of wealth from the young to the old in order to finance the continued expansion of social security, medicare, and other entitlement programs...

...Unless the young join in this grubby competition for equity, they will find their birthright mortgaged even more...

...Long-standing debts incurred to fight just wars, build lasting infrastructure, or deal with true national emergencies are quite properly passed on to succeeding generations, who perhaps will owe their very existence to such expenditures...

...Just to restore the nation’s dilapidated bridges, highways, and water systems will now require, by conservative estimates, over $1 trillion in the next decade...

...Witness the desire for jobs that are both wellpaying and “meaningful,” the latter term usually referring to those careers furthest from productive enterprise: the law, communications, and consulting, to name a few...

...care, pensions, various tax exemptions based on age, and the value of property and other financial assets...

...The nation kept its taxes low, built expensive armaments, and financed a vast array of new social programs, from medicare to food stamps...

...This year 28 percent of the federal government’s outlays willgo to social security, medicare, and other transfer payment sfor the 1 I percent of the population over 65-all of that disbursed regardless of need...