It is now a foregone conclusion that some sort of prescription drug benefit for the elderly will be enacted by Congress and signed into law this year. The Congressional Budget Office cleared the way for this action on June 11, when it estimated the cost of a Senate Democrat plan at just $318 billion over 10 years -- close to the $300 billion provided for in the budget. Democrats reportedly were overjoyed at this modest cost estimate, having expected something closer to $400 billion.
Of course, even $400 billion is probably a very low estimate of the true, ultimate cost of this legislation. It is safe to assume, based on the experience with past entitlement programs, that once implemented, the cost of a prescription drug plan inevitably will skyrocket far beyond even the highest projection. The reason is that estimates never accurately predict how such programs will change behavior. When the government starts paying the bills for prescription drugs, however, we can safely assume that people are going to use a lot more of them. Moreover, the increased demand for drugs will raise their prices above what otherwise would be the case.
But there is a larger question about this legislation, and that is: Why enact it at all? There is really no demonstrable need for it. The answer is that the elderly are the most potent voting bloc in America. For example, in the 1998 congressional elections, just 42 percent of all registered voters voted, but almost 60 percent of those over age 65 did. Therefore, members of Congress give the elderly whatever they want, no matter what the need or the cost.
Contributing to Congress' incentive to pander shamelessly to every whim of the elderly is the fact that those who pay the bills for such pandering barely vote at all. Among those between the ages of 18 and 24, who will end up paying through the nose for the prescription drug plan, only 16.6 percent voted in 1998, according to the Census Bureau. In short, you cannot really blame politicians when they can freely take money from those who don't vote and use it to buy votes from those who do.
This is grossly unfair. Just because some people allow themselves to be taken advantage of doesn't make it right to do so, nor is it right to pander to the politically powerful just because it works. This is especially the case when those who are being taken advantage of are relatively poor and those who are being pandered to are far better off financially.
The fact is that the elderly are the wealthiest group in American society and the least deserving of more government handouts. They already receive vastly more in Social Security benefits than any of them ever paid in to the system, with the difference being taxed from today's workers. Nor do the elderly pay more than a tiny fraction of the cost of Medicare. It is essentially a welfare program for anyone over age 65, no matter how well off they may be.
Increasingly the elderly are rich, in large part because they don't have to pay for things that the working population has to pay for, such as health care. According to a recent Census Bureau report, those age 65 to 69 have the highest median net worth of any age group: $106,408 in 1995. By contrast, those under age 35 had a net worth of just $7,428, and those between the ages of 35 and 44 had a net worth of only $31,691.
A prime source of the elderly's growing wealth is that many own their homes free and clear. According to the Bureau of Labor Statistics, 65.4 percent of elderly homeowners in 1997 had no mortgage. Therefore, they had no mortgage payment and paid no rent. Yet many still have substantial incomes from pensions and investments, as well as Social Security. According to a new study from the CBO, the average after-tax income of elderly households is just 10 percent less than that of the non-elderly: $44,000 for the former and $48,500 for the latter.
When one takes into account Medicare and the value of assets, it turns out that the elderly as a group are 24 percent better off than the non-elderly, according to a study by economists Stephen Crystal and Dennis Shea, both of Rutgers University. They further estimate that the elderly are 83 percent better off than families with small children.
These conclusions are not disputed by advocates for the elderly. A new AARP report, "Beyond 50," shows that the elderly as a whole have never been wealthier or healthier.
Nevertheless, the view persists in many circles that the elderly are overwhelmingly poor and in ill health. That is what justifies the enactment of ever more giveaway programs for them by Congress. Unfortunately, it will continue until those who are taxed to pay the bills finally demand fairness and start voting in larger numbers to get it.
Chart data: Median Net Worth by Age, 1995
Age Group ---- Net Worth
Under 35 ---- $7,428
35-44 ---- 31,691
45-54 ---- 61,248
55-64 ---- 91,330
65-69 ---- 106,408
70-74 ---- 97,414
75 and up ---- 81,600
Source: Census Bureau
Note to editors: Data on voting can be found at www.census.gov/population/socdemo/voting/cps1998/tab01.txt. Data on wealth can be found at www.census.gov/hhes/www/wealth/1995/wlth95-1.html. The AARP report is at www.aarp.org/press/beyond50/.