Government Reports on Aging, Inequality Tell Us What We Already Know
A report by the Government Accountability Office (GAO), commissioned by Senator Bernie Sanders, is as disheartening as it is unsurprising: Aging and retirement are much harder on the poor and the vanishing middle class than on the rich. Even Social Security, because of its structure, contributes to income and wealth inequality among seniors. Another report, this one released by the Census Bureau on Tuesday, reiterates the importance of Social Security in combating poverty, particularly among the elderly. On the heels of these reports, Senator Elizabeth Warren has unveiled her plans to make Social Security more equitable, both by increasing payments and by raising revenue through the closure of a tax loophole used by none other than VP Joe Biden.
The GAO study followed a cohort of Americans who were middle-aged (defined as between 51 and 61 years old) in 1992 through to old age in 2014. The results are clear, disturbing, and completely expected. The bottom four quintiles’ income remains relatively stable and closely distributed over the two decades studied. The top quintile, however, already made five times more than the next-highest-earning fifth at the beginning of the surveyed period—$250,000 a year as opposed to a little over $50,000. Because higher-earning individuals tend to hold more and better income-bearing investments—stocks, pension funds, and real estate—wealth inequality is even more prominent than income inequality among the elderly, with the end of working life at retirement doing nothing to reduce the disparity between the richest fifth and everyone else.
Inequalities in both life and death stand front and center in the GAO report, for while an estimated three-quarters of participants in the top quintile by income had survived to 2014, only an estimated half of those in the bottom quintile had. The GAO identified low income and low levels of education attainment as correlating to, but not causing, lower longevity. To an actuary or a medical examiner, poverty is a catchall term for a number of discrete but interrelated stressors that unfold over the course of a lifetime due to low income: reduced access to health care, lower-quality nutrition, lower-quality housing, increased exposure to toxic hazards in the environment, and many more.
It is significant to note, as the GAO report goes out of its way to do, that not all persons living in poverty will die early. Overall, the GAO report finds, Americans tend to be living into their seventies and even early eighties. This includes people in the lower-earning quintiles. Overall, people who earn less and have less wealth tend to rely more on Social Security and other programs in retirement. Social Security is crucial to fighting poverty; according to the Census Bureau, Social Security moved the most people out of poverty of all government assistance programs, raising an estimated 27.3 million individuals above the poverty line. By contrast, refundable tax credits only lifted 7.9 million out of poverty. The role of Social Security in securing seniors’ lives is especially pronounced; taking into account supplemental poverty measures (SPM), based on data about reliance on government assistance, a higher percentage of seniors are living in poverty than the official, population-wide rate of 11.8 percent.
Social Security, while crucial to fighting poverty, is exacerbating inequality. Because lower-income individuals pay in less over the course of their lives, they receive back less than higher-earning individuals, who in turn less need the higher payments they receive. Moreover, the tax cap at $132,900 ensures the very wealthiest pay tax on very little of their annual income. Combined with breaks like the “Gingrich-Edwards” loophole, where wealthy individuals can set up corporate structures that shield their earnings from payroll taxes, those who can afford accounting sleights of hand further avoid paying into the system. Strikingly, and perhaps damagingly, this includes former Vice President Joe Biden.
The universality of Social Security is what makes it the most popular government assistance program. With everyone, even the wealthy and politically influential, receiving payments, no one is eager to dismantle or defund the program, as has been the case with SNAP. In increasing benefits across the board, while giving special consideration to lower-income individuals and caretakers, Warren’s plan has the potential to be politically successful as well as effective.
After all, the numbers are clear, and the research is overwhelming, represented by two new reports this week alone: Social Security works, but more can be done.