The Economics and Politics of Aging
If this book sold only 535 copies, and each found its way into the hands of a member of the U.S. Senate and House of Representatives, it would be a great publishing success.
Bookstore browsers may be deterred by the rather ambitious subtitle, "How the Coming Age Wave Will Transform Americaand the World," but those who pause to read the opening sentence may want to consider the possibility that the contents of this book could be quite helpful to their personal and national economic health: "The challenge of global aging, like a massive iceberg, looms ahead in the future of the largest and most affluent economies of the world."
An investment banker and a former secretary of commerce, Peter Peterson advances and defends the thesis that global aging will be the "transcendent political and economic issue of the twenty-first century." Acknowledging a long and generally familiar list of "great hazards" looming large before the human community, Peterson uses the iceberg metaphor to suggest that demographic aging is a global challenge calling for a global solution. Some readers may find the arithmetic of the early chapters uninspiring, but abundant graphs and a sprinkling of cartoons make the ratios intelligible, even interesting. And those who are not much inclined to think globally will find in these pages more than enough to get them thinking and acting locally or, better, nationally to assure the future of both Social Security and adequate health care for all.
Much of the ongoing national debate about health care finance reform and the reform of Social Security is biased, uninformed and narrowly self-interested. This is why I would hope this book will be read by elected representatives, public officials and those who advise them on these two pressing issues. Peterson is accurate in presenting the data, clear in declaring his own preferences and passionate in calling for action before a point of irreversibility is passed.
The challenge of global aging is a byproduct of the affluence, individualism and technological progress that most of the world appears to want. Given the strength of these social forces, demographers will tell you, you can expect a shift from high fertility and high mortality to low fertility and low mortality; they call this "the demographic transition." The economic consequences of this transition are what Peterson wants to bring to the awareness of a wide audience.
"Pay-as-you-go" entitlements describe the social security system in most advanced nations. But what happens when the ratio of workers to retirees (fewer workers supporting more retirees) signals an unmanageable payment burden on the workers? Peterson presents a salad of six basic strategies for the consideration of policy makers. Some combination of these six could be fashioned, he says, into a "workable paradigm":
Lower retirement ages and longer lifespans add to the weight of benefit costs, so reduce dependency among the elderly byencouraging longer work lives.
In order to attend to the problem of the shrinking denominator (fewer workers), encourage more work from the nonelderlyeither by getting working-age citizens to work more or by increasing the inflow of working-age immigrants.
Raise more numerous and productive children in order to spread the cost burden over a larger and more affluent rising generation. The affluence, presumably, will be a function of the productivity, which, in turn, depends on better education.
Stress filial obligation and hope that tomorrow’s grown childrenwill be more willing to support, through familial and informal devices, their own elderly parents.
Target benefits on the basis of financial need; this will increase the "carrying capacity" of the younger generation by reducing benefits to the affluent elderly.
Require people to provide in advance for their own old-age dependency by saving and investing more of their income during their work lives.
Nobody said it is going to be easy! Peterson addresses the predictable complaints, as well as criticisms elicited by his suggestions; they come from all ideological bases and from all the warring policy camps. The beauty of his book, in my opinion, is that it provides a well-lighted arena within which conflicting views can literally mix it up.
What, you might ask, does the author really think? "To be successful," he writes, "any new paradigm must draw on various and diverse strategies: from later retirement, to investing in children, to stronger families, to means testing. But I believe that transitioning to a funded and mandatory system of personal retirement accounts is probably the most essential strategy of all."
If leaders in government (especially Congress) and non-governmental organizations (like A.A.R.P., A.F.L.-C.I.O. and many other special interest groups) read this book, it will help them face up to the hard choices. If voters and ordinary citizens read it in order to arrange better the pros and cons of all possible policy choices in their minds, they will be able to encourage the decision makers to keep the issue on the table. The ensuing policy debate will, one might hope, generate sufficient light to see the iceberg and less heat. Heat alone will never melt what Peterson sees as "the iceberg dead ahead."
This article also appeared in print, under the headline “The Economics and Politics of Aging,” in the January 15, 2000, issue.
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