Tuesday, 22 October 2013

The war of the old on the young

The old have declared war on the young. Few dare say this, but the other day Alan Milburn did just  that. This is an emotive issue and there are bound to be strong and passionate feelings. But this blogger, who is himself more in the old category rather than the young,  is in agreement with this premise.

Alan Milburn,  a former UK government minister and an advisor to the current government,  has said that there is a fairness deficit between generations. He thinks that the elderly should lose some of their benefits to make life easier for the young.  It might sound callous, but if you sit back and reflect, there is much merit in what he is saying.

In the West, much of the budget deficits and the debt problem is because of  disproportionate spending on the elderly. Health care costs which are largely consumed by the elderly, are a huge burden on the economies of most nations. Ditto pensions - promised very liberally a long time ago. Medicare and Social Security are the greatest ticking time bombs in the US - and both mostly concern the elderly. Same is the situation with the NHS in Britain. Pensions are a millstone around the neck in France and Germany. Unionisation  and labour laws in Europe protect and coddle the existing workers (mostly older) and keep out the prospective workers (mostly younger). And where do the cuts come ? On education, on infrastructure, on employment - all directly affecting the young. All this while, the debt burden of countries keeps getting ratcheted up which our children have to pay back some day. We are now a civilisation that cares for the elderly and cares two hoots for the young.

Consider the vexed issue of pensions. We are blessedly able to live longer. We all seem to have appropriated pension schemes long ago, that pay out pensions based on the last drawn salary when in service. This is then adjusted for inflation. None of it is funded from our savings - its all funded out of the contributions of the young who are currently working. Frequently we draw more in pension than we drew when in service. If you think this is a particularly European phenomenon - think again. The pension for government and public sector retirees in India follows the same pattern. And after the person dies, his or her spouse continues to get it. If you retire at 60 and die at 90 and your spouse outlives you by 5 years, then you draw pensions for some 35 years. You didn't even work that long in the first place.

Its not just pensions or medical care. All sorts of boondoggles are given to the elderly. Free bus passes. Subsidised transport. Higher interest on savings, discounts and freebies of all kinds. And if you ask them just to work that bit longer before retiring , there is such a furore that governments are terrified of even thinking so.

The future of any civilisation depends on the investment it makes on its youth. Each succeeding generation must build and improve on the previous generation. For the first time, we are faced with a generation which might actually have a lower quality of life than the earlier one.And why is this so ? Simple. Because there are more older people and they vote. Try even making a small cut in benefits to the old - the government will fall. The young ?? Who cares about them. They don't vote en bloc and bring down governments. Many of them don't even have the right to vote - they are not yet 18 or 21. They are old enough to take a crippling debt to go to college but not old enough to vote.

So, we the elderly, ought to pause and reflect rather than continuing to corner all the money. We should provide for old age ourselves - save and create a nest egg for pensions and health care when the time comes when we are too old to work. Fund our own pension schemes  and  not depend on the government to give handouts. We should politely return all subsidies and ask the government to spend it on the young. We have had our time in the sun - let the youth of today enjoy a better quality of life. And pray that the Good Lord will take us into his lap in a timely fashion, and not let us live till 100. When I go to my grave, I would rather go with the knowledge that I sacrificed to make life better for the children, than with the curse that I appropriated all the goodies and left the children to rot.

I know its harsh. But think about it.


Anonymous said...

As always the issue is one of moderation and balance. Given my location, I get to see a lot of older retired folks move in for the nicer winter weather and they seem to live in a parallel universe. Of course there is a huge sample selection problem because these are the people who can own two homes and move between them based on weather. But they spend all day golfing and hiking and biking and zipping around in nice cars and evenings are spent eating out and I am sure they are not refusing their share of social security or medicare. If you have worked hard and earned your money, go ahead and enjoy it but to still be a drag on society is unacceptable. On the other hand my students are going to school full time while trying to hold down a couple of jobs. At some level it probably boils down to individual selfishness.

Shachi said...

As Sriram has reflected in many of his recent posts, is it really worth living for more years with the help of drugs, machines, and/or hospital care? Probably not. Poor quality of life for not much in return. But I can also see how difficult it will be to let go of one's own life or of someone close.

Some level of government support is reasonable, but I agree, the onus largely lies on the individual to plan for retirement without dependency on the kids or government. I see so many people here taking early retirement from their long term employers, starting to receive their social security and medicare benefits, and still continuing to work as consultants and being selfish.

The least I can do to help is not be one of the above.

Ramesh said...

@J - Oh yes, it is individual selfishness for sure. But the way, society intrinsically seems to have accepted that the elderly are deserving of all the handouts, is surprising. I don't agree with Paul Ryan much, but when he says means test Medicare, I am 100% behind it.

@Shachi - Don't listen to Sriram when he goes on about life's end !! In my view there is no question about the need to raise retirement age - it has to be fixed at about 10 years below life expectancy. Anything else is unsustainable.

Sriram Khé said...

Many flags on the play--I use the sports jargon so that Ramesh will finally begin to understand ;)

1. "we the elderly"--you might be old, sir, but we are spring chicken here. I am yet to turn five-oh, and Shachi is barely 29 ;) (Anonymous is always ageless!!!)

2. "When I go to my grave"--I thought that as a good TamBrahm you would want to be cremated. Grave? You switched teams?

3. And the most flagrant foul of all: "Don't listen to Sriram" ...

As we say in baseball, "you're outtaaa here!!!"

Ok, I shall grant you a pass--after all, you were a lifer in the same school that I was ;)

Yes, I have blogged in plenty, and tell students too when the context comes up, that we are robbing from the cradles in order to keep grandmas alive well past their expiration dates.
Ok, that was harsh.
We need to bring those death panels that Sarah Palin warned Obamacare would deliver. Ok, that was asinine.

Seriously, we are robbing the young to pay for the elderly. The suckers that the youth are, they don't realize they are being screwed because their hormonal interests are in, well, you knew I was going to play on the word screwed, right?
I show students the demographic composition, and projections, and ask them where the money will come from. But, this is America, they say. And they have been raised to be eternally optimistic like the good Americans.

So, we wait for the tooth fairy and the unicorn to appear together the days pigs fly when all these troubles will be magically erased.

Until then, watch sports on the telly.

Asha said...

Across castes, gender no subsidies ramesh and here i am talking only about my country india. I believe There should be subsidies only for the economically weaker but for young and the old. There are many rich children who avail scholarships like the kishore vaignanik and other. This should be only for the meritorious young and poor .

Similarly the old poor who are tertiary workers and other economically weaker elders should be considered while the rich old parents of NRI children should'nt be included. (i am hoping you are referring only to government employees in india) because Not all get pensions especially those in private organizations and corporations.

Yes, we have to save for the old age along with investing in good health habits. Because most of the expenditure is on geriatric health care.

off topic, but hope you are aware NLC has started giving pensions to recently retired employees.

The Million Miler said...

Every one in NZ gets a pension at 65,irrespective of the fact you worked and paid taxes or not during all those years! For a couple that's about 500quid a week. Not bad, as healthcare is free (Obama please note!), travel is virtually free on buses/trains and every one else chucks in a senior discount. Now the treasury is making noises about a) raising superannuation age progressively by 2 months every year till it reaches 68 and b) means and assets testing to see if you need a super. Of course people beat the second option by blowing up every thing except your house by getting on to a cruise liner to Alaska, travelling to Ulan Bator and leasing a red Ferrari in the last 5 years prior to superann kicking in! We generation X folks are making our retirement plans assuming there is no superann when we get there in about 20 odd years!

Ramesh said...

@Sriram - All right strapping young man. You are a kiddo. We the elderly bless you :):)

Don't kill the Queen's English. You go to your grave; not go to your cemetery. The glorious language is wasted on you lot across the pond !!

And pllleeeaaase don't use sports metaphors. You are making me laugh until my belly aches :):)

Yes, seriously, this is an area where you have blogged loud and clear. You've come on the side of the young heavily, although I haven't yet heard you cursing the grandma as yet.

By the way, I am amazed to see general agreement here. I thought I would get some flowery curses, but.... Maybe I should send this to T&N from your lovely town and they'll pulverise me.

Ramesh said...

@Asha - Its not just about subsidies. Where does the government spend the money. Should it build schools, should it spur economic activity to create jobs, should it amend antiquated labour laws so that the young are not denied jobs ..... I actually believe nobody should be subsidised ever, other than in extraordinary situations like a natural calamity. Make sure a person is not hungry or is naked . But outside of that create the conditions to help everybody lead lives of dignity. Build low cost housing, build infrastructure, encourage job creation, invest in education of the children and stop all the freebies.

@Kiwi - Isn't this just so awful. When the young really are looking towards a bleaker future.

Sriram Khé said...

Hey, is Asha noting about NLC because she too has Neyveli connections? Should I watch my behavior here then? (Like that really has ever stopped me!!!) ;)

Ravi Rajagopalan said...

@Ramesh: The welfare state has gone too far, and to a large extent this is because of longevity. When pensions were introduced in England in 1920 or so the life expectancy was 65. Today it is 90 in Western countries. Perhaps the most sensible model that exists is the Singapore model where you pay into a pension pot and it pays out for you. There is no state subsidy of any sort - however if a son or daughter shows the parent as a dependent he gets a tax break. But this is Singapore - a nation of philosopher kings and they can get away with it in a restricted city state. I am very sure the welfare state has lead to the unravelling of the family as an economic support system.

Part of the problem you raised with the reserve currency being the dollar is totally related to this - when half the population depends on the other half for tax-funded care, how will the other half save? Since the younger generation will logically expect the safety net to exist when they grow old, they will maintain current spending levels and not save anything. So one ends up buying cheap goods from China, and in return China buys bonds in the expectation that the buyer will keep buying. It is vendor financing on a very large scale and since the buyer happens to the largest and wealthiest democracy, you can trust its payables elevating it to a reserve currency.

Last week the UK announced restrictions on NHS use for those Brits who live overseas but only go home for a cheap operation performed by the NHS. The arguments against it are loaded with moral questions and implementation issues (and of course yours truly is one such affected person). It wont save much on the NHS budget. But the crux of this is that everyone knows these open-ended welfare measures are not sustainable. These are the first of many sch steps that will become necessary.

The sad truth is that only a major national emergency can shake the continental European powers out of their complacency. The horrors of two wars in 20 years in the early 20th century created the welfare state. Perhaps it needs a similar catastrophe to persuade Emile that he does not have the right to a tax-payer funded holiday after he retires.

Its all inter-related. Perhaps Prof Shiller can model this?

Sandhya Sriram said...

First off all, i feel as though, i am now starting to breathe, coming back your blog space.

all things remaining constant, your theory is right. but the enviroment is very different, every where.

In India, medical cost is so expensive. its a cartel, hospitals, doctors, insurance companies, drug makers... no amount of social security or saving when you are young is enough.

if you go west, people spend as though there is no tommorrow, because they believe, the whole economy will pay for them. Retiral difference is one of the key cost differentials in an outsourcing business case.

Dont know whether either side would or could move forward or backward.

Ramesh said...

@sriram - Yes, Asha has Neyveli connections through the Lord of that house ! Much younger though - you may not know him

@Ravi - Agree with some reservations. I think no young man today believes that he will get state care when he is older. But they don't have any options - so they just hope for the best. That is why I consider it utterly irresponsible, stupid, idiotic, etc etc for the US to preach to the Chinese that they should spend more and save less and the state should provide healthcare and retirement benefits.. A greater lunacy would be hard to find.

Yes, the welfare society has gone too far. And yes, without a "revolution" its difficult to change. Shame on our generation and the earlier one for being so selfish and screwing the lives of our children.


Medical costs are excessive anywhere. God forbid, if a medical disaster strikes, it will ruin anybody in any country. That is precisely the reason why we should save for it and not expect some freebie. Sure, what we save may not be enough and we may be forced to compromise on the treatment. Unfortunately that is the reality for all of us.

Universal Teacher said...

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Sriram Khé said...

here is Robert Samuelson on the same topic:

"We need to stop coddling the elderly. ...
political change needs honest debate, and honest debate needs a willingness to accept unpopular facts over friendly fictions. It requires that people who candidly pose difficult choices not be stigmatized. As long as Grandma is the poster child for the elderly, that won’t happen."

Ramesh said...

@Sriram - How about a retirement age for voting .........

Sriram Khé said...

hehehe ... "death panel" at the polling station ;)

Sriram Khé said...

I simply won't let go of this topic, and will blog about it and post comments on it where I can :)

Here is Walter Russel Mead making it blunt with "America needs to stop eating its young":
"our pro-geriatric and pro-middle age policy biases hit twenty-somethings hard."
Read it here: http://blogs.the-american-interest.com/wrm/2013/11/11/life-after-blue-america-needs-to-stop-eating-its-young/

Ramesh said...

@Sriram - You should. But I was disappointed with Mead . From the title, I thought it would be different - the article is verbose and all over the place. It doesn't strike at the core of the problem - the wanton looting of wealth by the old and depriving the young. I stopped reading halfway - maybe he covered it later.

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