GENERATIONAL CONFLICTS IN U.S. SOCIAL POLICY

USW 31, November 12, 2012

Theda Skocpol

• Social divisions in the 2012 election – the prominence of the age divide

• Quick overview of the development of Social Security and current disputes about its future

• Why battles over Affordable Care and Medicare are even bigger flashpoints

• Election 2012 again: why did those benefitting most from existing social programs support the candidate who wanted to cut social spending?

Age Groups Voting for Obama and Romney in 2012

0%

10%

20%

30%

40%

50%

60%

18-29 yrs 30-44 yrs 45-59 yrs 60+ yrs

ObamaRomney

SOCIAL SECURITY ACT of 1935

• National system of Old Age Insurance (“Social Security”) funded by payroll tax on employers and employees.

• Federally required, yet state-administered unemployment insurance programs, funded by taxes on employers. States determined taxes and benefit rules and levels.

• Federally subsidized, state-determined and administered public assistance (“welfare”) programs for the needy elderly, for the blind, and for very poor children. States could set benefit levels and many rules for eligibility.

For two-thirds of a century after adoption of the SOCIAL SECURITY ACT of 1935, debates about public social programs remained largely within its framework:

arguments about “welfare” programs for the very poor -- especially families with children

arguments about expanding, then “privatizing” “Social Security” insurance programs that primarily address the needs of elderly retirees

Political debates about welfare in the 1990s increasingly reflected a new societal consensus that even mothers of young children should work for wages.

Source: David Ellwood

As the federal government pulled back from guaranteeing cash welfare, non-cash federal benefits expanded, especially the Earned Income Tax Credit (EITC).

This was especially true during the Clinton administration --which vowed to “Make Work Pay.”

Welfare/support for poor continues to be debated:

• Most Republicans call for tougher work requirements (40 hours a week, instead of 30, with no minimum wage for public service jobs); and they promote increased federal subsidies for “marriage counseling.” Emphasize “personal responsibility.”

• Democrats want participation in educational programs to count -- and argue that federal and state expenditures for child care and health care must be sharply increased to support poor “working families.” Paid Family and Medical Leave is also a goal for many liberal advocates.

• Many poor on TANF face the five-year limit for federally subsidized cash benefits. Poverty has increased, especially in economic recessions and among poor women and men unable to work or find private employment.

“Social Security” debates, in contrast to “welfare” debates, have focused since the 1980s on what to do with an expensive and successful program for an aging population.

Social Security Wage Replacement Rates for Workers Age 65, January 2004

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Low-wage earner Average-wage earner Maximum-wage earner

Pe

rcen

t o

f w

ag

es r

epla

ced

Source: The Century Foundation, Social Security Reform (2005), Figure H, page 14, statistics from Social Security Administration.

84.8%

62.9%

44.6%

Social Security and Elderly Poverty, 1999

8%3%

15%7%

21%

40%

37%

42%

40%

40%

0%

10%

20%

30%

40%

50%

60%

70%

TotalBeneficiaries

Married Nonmarried White Black

Per

cen

t o

f el

der

ly

Poor even with Social Security Kept out of poverty with Social Security

Source: The Century Foundation, Social Security Reform (2005), Figure F, p. 11.

Social Security taxes are a rising proportion of federal revenues -- also the biggest taxes on ordinary Americans -- as the income tax has been cut and rendered less progressive.

Percentage of Households Whose Payroll Taxes

Exceed Their Income Taxes, 2001

The hearts and minds of younger Americans are the battleground for those trying to shape public opinion -- and votes -- about the future of Social Security.

Debates over Social Security’s future – and Medicare’s future -- tend to highlight possible divergences of interest between generationally defined slices of the American population.

Since the late 1980s, many publications have featured stories about the increasing burden Social Security and Medicare will supposedly place on the young.

Critics stress that fewer workers will be available to support a projected growing population of retirees. (Better counting of illegal immigrants, or shifts in immigrant flows, could change these ratios, however.)

The picture is different if children are also considered…

Projected Total and Elderly Dependency Ratios across Industrialized Nations, 2035

0

10

20

30

40

50

60

70

80

90

UnitedStates

Japan Germany France Italy UnitedKingdom

Canada

Dep

end

ents

per

100

ind

ivid

ual

s o

f w

ork

ing

ag

e

Elderly Child

Source: The Century Foundation, Social Security Reform (2005), Figure M, page 26, based on U.N. statistics.

REFORM OPTIONS FOR SOCIAL SECURITY

• Adjust system by finding new sources of revenue, or trimming promised benefits, or a bit of both.

• Privatize the system by moving toward primarily or entirely government-regulated individual Wall Street accounts.

• Enhance benefits in Social Security to let it do more to help working-aged families – for example with caregiver benefits charged against retirement age.

Additional Years of Life Expectancy for American Men at Age 65

15.016.116.5

21.5

0.0

5.0

10.0

15.0

20.0

25.0

1982 2006

Exp

ecte

d y

ears

bey

on

d a

ge

65

Bottom half earnings

Top half earnings

Source: Economic Policy Institute, Briefing Paper #273.

What about raising the retirement age?

79%

75%

79%

78%

72%

84%

77%

69%

67%

77%

5%

11%

7%

13%

18%

4%

11%

17%

20%

10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

$0-30K

$30-50K

$50-75K

$75-100K

$100K+

Democrat

Independent

Republican

Tea Party ID

All

Cut benefits

Raise payrolltax (lift cap)

"Currently, workers pay social security payroll taxes on up to $106,800 of their salary. To ensure the long-term viability of Social Security, would you rather have people pay social security taxes on salaries above $106,800, or would you rather see benefits cut and the retirement age increased to 69?"

Source:Public Policy Policy for Kos, conducted January 20-23, 2011.

If U.S. social provision is uneven across generations, it could become more balanced either by cutting Social Security or by enhancing public supports for working-aged families. Various proposals to adapt to new realities of work and family life include:

•EXPAND SOCIAL SECURITY to include additional risks that working-aged families routinely face.

•SUBSIDIZE CHILD CARE for all working families -- through payments to providers, or refundable tax credits to parents.

•ENACT PAID FAMILY AND MEDICAL LEAVE (building on 1993 U.S. unpaid leave; or enact new programs in the states)

•BOOST LOW WAGES -- expand the Earned Income Tax Credit and/or raise minimum wage

•Require employers to give proportional BENEFITS TO PART-TIME WORKERS

•Conservatives still prefer TAX CUTS -- to let families “keep their own earnings”

Cuts in guaranteed Social Security would almost certainly INCREASE INEQUALITY in the United States -- for both economic and political reasons:

• Lower- and middle-income Americans would lose relatively generous guaranteed, lifetime Social Security payments -- and they are more dependent on those payments.

• Under partial privatization, privileged Americans would pressure Congress to expand tax diversions to private accounts -- then their taxes would no longer go to subsidize pensions for the less-well-to-do.

• Privatization would unleash constant political quarrels over how to regulate the Wall Street accounts -- which would increase business lobbying pressure on Congress.

• Individual political participation by the elderly would become more class-unequal, because Social Security struggles now induce more participation from the less-privileged elderly.

U.S. Health System: expensive, but many low-income working aged families lack affordable health

insurance – a situation the Affordable Care Act of 2010 promises to rectify

Source: SCIENTIFIC AMERICAN (April 1999), p.36.

The U.S. health care system has very high -- and steeply rising -- costs.

Health Insurance Coverage in the U.S., 2009

NOTE: Includes those over age 65. Medicaid/Other Public includes Medicaid, CHIP, other state programs, military-related coverage, and those enrolled in both Medicare and Medicaid (dual eligibles). SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on the Census Bureau's March 2010 Current Population Survey.

Total = 303.3 million

Uninsured Nonelderly vs. All Nonelderly,by Family Poverty Level, 2009

50.0 Million 264.7 Million

Under 100%

100% - 199%

200% - 399%

400% +

NOTES: Data may not total 100% due to rounding. The Federal Poverty Level for a family of four in 2009 was $22,050 (according to the U.S. Census Bureau’s poverty threshold). Family size and total family income are grouped by insurance eligibility. SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of 2010 ASEC Supplement to the CPS.

HOW DID THE UNITED STATES DEVELOP THIS KIND OF HEALTH CARE SYSTEM?

Campaigns for government-subsidized and publicly guaranteed universal health insurance coverage repeatedly failed in the 20th-century United States.

Government and private institutions ended up subsidizing employer-provided private insurance, the construction of acute-care facilities, and high-tech medicine.

Private, fee-for-service physicians carved out a place for themselves as the key actors in an intricate institutional system. This persisted until recent times.

Decrease in Employer

Sponsored Insurance

(million)2.8%

National Unemployme

nt Rate Increase

since 2008(from 7.2% in

Dec-08 to 10.0% in Nov-09)

=

2.8 3.0

Medicaid /CHIP

Enrollment Increase(million)

Uninsured Increase(million)

&

6.9

Note: Totals may not sum due to rounding and other coverage.Source: Based on John Holahan and Bowen Garrett, Rising Unemployment, Medicaid, and the Uninsured, prepared for the Kaiser Commission on Medicaid and the Uninsured, January 2009.

Impact of the Rise in Unemployment on Health Coverage, 2008 to 2009

Patient Protection and Affordable Care Act of 2010

• New rules of the game for insurance companies: make profits, but must serve more patients, better; cannot exclude sick people or those expected to become sick.

• Make insurance available affordable for most Americans: expansions of Medicaid and new subsidies for small businesses and lower and lower-middle income people to buy plans.

• Each state (or compact of states) establishes a regulated insurance exchange, on which plans are listed and can be compared by potential purchasers.

• Improvements in basic Medicare coverage, but cuts in high-end plans and slightly higher taxes for richest beneficiaries.

• New coverage for young people: parental insurance until age 26; expansions of Medicaid and subsidies to buy private plans.

Affordable Care Act passed March 2010 – but the battles have continued

challenges in the courts.

resistance from Republican governors who do not want to expand Medicaid – Supreme Court decision in 2012 allows governors to refuse expansions.

business interests playing both sides.

public opinion remains divided, but people like the specifics.

Affordable Care was central in the 2012 election, and it has now survived.

Uninsured Rates Among Nonelderly by State, 2008-2009

<14% Uninsured (13 states & DC)

14 to 18% Uninsured (20 states)National Average = 18.1%

SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of 2009 and 2010 ASEC Supplements to the CPS., two-year pooled data.

AZ

WA

WY

ID

UT

OR

NV

CA

MT

HI

AK

AR

MS

LA

MN

ND

CO

IA

WISD

MOKS

TN

NMOK

TX

AL

MI

ILOH

IN

KYNC

PA

VAWV

SC

GA

FL

ME

NY

NH

MA

VT

NJ

DE

MD

RI

DC

CT

>18% Uninsured (17 states)

NE

High Stakes for Health Care in 2012 – and Generational Tensions

• Elderly beneficiaries of Social Security and Medicare most opposed to Obama and Democrats.

• Tea Partiers feared cuts in Medicare to pay for Affordable Care.

• Romney-Ryan promised drastic restructuring of Medicare, but only for those under age 55. Obama gained some additional trust on Medicare during the campaign, which may have blunted his losses among older voters.

• Young people, Latinos, and single mothers support Affordable Care more than other groups – and stand to benefit from it. They supported Obama overwhelmingly in this election.

To learn more about Social Security, Medicare, Medicaid, including public opinion and policy

options – See the many two-page briefs on the SSN website at

<http://www.scholarsstrategynetwork.org>