Social Security is the most popular legacy of Franklin Roosevelt's New Deal. Last year almost 60 million Americans received benefits from the program. Payments amounted to over $875 billion, nearly a quarter of all federal spending.  For more than two decades, most discussion of Social Security, at least in Washington, has centered on its funding shortfall. Contributions to the program are not high enough to pay for all benefits scheduled under current law. The Social Security Trust Fund is expected to be depleted around 2030. If Congress does not address the funding problem before reserves are exhausted, monthly payments will have to be cut about one-fifth.

Despite the projected shortfall, Democrats in Congress have begun to argue that Social Security benefits should be expanded rather than cut.  Senators Bernie Sanders and Brian Schatz have offered proposals to boost monthly pensions while at the same time shoring up Social Security finances through tax hikes on high-income Americans. 

That Democratic voters and lawmakers embrace these ideas is not surprising. But opinion polling suggests such reforms also enjoy broad support among self-identified independents and Republicans. For example, 57 percent of Republicans (versus 71 percent of Democrats) favor increasing cost-of-living adjustments in the benefit formula. Forty-eight percent of Republicans (versus 67 percent of Democrats) favor boosting the minimum benefit available to low-wage workers who have contributed for many years to the program.  Seventy-four percent of Republicans (versus 88 percent of Democrats) favor raising taxes in order to protect benefits. These polling numbers were obtained in 2013, but more recent polls show similar opinions. Even if debates among Washington insiders and GOP lawmakers focus on how to trim benefits in order to keep Social Security solvent, poll results suggest Senator Sanders holds views closer to those of the typical voter.

One question for both voters and policymakers is whether the aged population is really the most deserving target for additional government spending.  Much of the discussion of voter disaffection in the current election cycle has focused on the stagnation of middle class incomes and the rise in inequality.  While these represent major problems for families headed by a working-age person, they have not been notably troublesome for the nation’s elderly.  The incomes of the elderly, unlike those of the nonelderly, have increased steadily over the past three or four decades.  For low- and middle-income retirees, incomes have clearly improved. The same cannot be said for the incomes of low- and middle-income working-age families. Income inequality among the elderly has increased, to be sure, but much more slowly than among working-age families.

In new research with my colleagues Barry Bosworth and Kan Zhang, I have examined trends in real incomes and inequality among the nation’s elderly and compared them with the same trends in working-age families. We show that inequality has increased among both the elderly and nonelderly, but it has increased much faster among families headed by prime-age and younger adults than among families headed by someone past age 62.  More to the point, real money incomes have increased much faster among middle- and low-income aged families compared with middle- and low-income working-age families. 

Our estimates of the annual rate of change in real money income are displayed in the chart below. The changes are estimated over the period from 1979 to 2012 based on data reported in the Census Bureau’s annual income survey. The top panel shows changes in families with a head who is less than 62. The bottom panel shows changes in families with a head older than 62.  Each bar shows the annual rate of change in real income at the indicated position of the income distribution, either for nonaged families (in the top panel) or for aged families (in the bottom panel).  At the top of the two income distributions—that is, at the 98^th income percentile—real income gains are virtually the same in the two groups.  Further down the income ladder, the income gains differ noticeably, with bigger differences the further down we go.  Middle- and low-income working-age families have clearly fared much worse than families with an equivalent position in the old-age income distribution.

Estimates of income growth based solely on pre-tax cash incomes, such as the ones in the chart, almost certainly understate the improvement families have seen in their living standards, as I have argued elsewhere (here and here).  However, the understatement is bigger in the case of elderly and low-income Americans than it is for the nonelderly and affluent.  If we adjust family incomes to reflect the taxes families owe and the monetary value of their noncash benefits, the relative improvement in the standard of living of older Americans is even greater than is shown in the chart. Under almost any plausible income definition, the elderly have fared better than the nonelderly, especially at the bottom of the income distribution.

The income statistics do not prove the policy reforms urged by Congressional Democrats are unneeded or undesirable. Their proposals spring from an accurate reading of a long-term trend toward less pension coverage — ironically, a trend that has mainly affected working-age adults.  Whereas workers in the 1950s through the 1970s enjoyed continuous improvement in their access to employer-provided retirement benefits, the improvement ceased after 1980. Since that time, private-sector workers have seen reductions in the coverage and generosity of their employer-sponsored pensions. If the private sector voluntarily provides less retirement protection, it does not seem unreasonable to expect the government to provide more.

A crucial reason the nation’s elderly population fared better compared with the nonelderly after 1980 is that Social Security and Medicare provided them government protection that was far more generous (and more costly to taxpayers) than the protection available to working-age adults and their youngsters. The gap was especially glaring in the case of families headed by low-wage breadwinners, who have suffered sizeable reductions in pay and employment opportunities. In the years since 1980, their losses have been only modestly compensated through changes in the tax code and expansions of public health insurance.

Changes in the labor market make it important to protect future retirement benefits provided through Social Security. The same labor market developments make it even more urgent to expand the employment opportunities and improve the protections and work supports offered to working-age breadwinners.  In 2016, the weakening of future income protection for the aged is mostly theoretical. In contrast, the sinking fortunes of less skilled working-age adults are anything but theoretical. They are plain to anyone who can read Census and Bureau of Labor Statistics reports. If taxpayers can identify additional resources to pay for major new initiatives, my vote is for programs that improve the prospects of struggling wage earners. The equity arguments for such an initiative seem to me more persuasive than the case for an across-the-board benefit hike targeted on retirees.

Editor's note: This piece originally appeared in Real Clear Markets. 

There's a little more than a week to go before the Democratic National Convention begins in Boston. Senator John Kerry is both raising and spending money at a furious pace. The Kerry campaign raised about $182 million from March through June. Senator Kerry also outspent President George Bush in advertising throughout most of the summer. But the president still has more cash on hand, reportedly $63 million at the end of May. That's the latest figure available. The president also has more time to spend that money before accepting his Republican nomination on September 2. Anthony Corrado is an expert on campaign finance.

Listen to the entire interview

Hypocrisy is not scarce in the world of politics. But the current House and Senate budget resolutions set new lows. Each proposes to cut about $5 trillion from government spending over the next decade in pursuit of a balanced budget. Whatever one may think of putting the goal of reducing spending when the ratio of the debt-to-GDP is projected to be stable above investing in the nation’s future, you would think that deficit-reduction hawks wouldn’t cut spending that has been proven to lower the deficit.

Yes, there are expenditures that actually lower the deficit, typically by many dollars for each dollar spent. In this category are outlays on ‘program integrity’ to find and punish fraud, tax evasion, and plain old bureaucratic mistakes. You might suppose that those outlays would be spared. Guess again. Consider the following:

Medicare. Roughly 10% of Medicare’s $600 billion budget goes for what officials delicately call ‘improper payments, according to the 2014 financial report of the Department of Health and Human Services. Some are improper merely because providers ‘up-code’ legitimate services to boost their incomes. Some payments go for services that serve no valid purpose. And some go for phantom services that were never provided. Whatever the cause, approximately $60 billion of improper payments is not ‘chump change.’

Medicare tries to root out these improper payments, but it lacks sufficient staff to do the job. What it does spend on ‘program integrity’ yields an estimated $14.40? for each dollar spent, about $10 billion a year in total. That number counts only directly measurable savings, such as recoveries and claim denials. A full reckoning of savings would add in the hard-to-measure ‘policeman on the beat’ effect that discourages violations by would-be cheats.

Fat targets remain. A recent report from the Institute of Medicine presented findings that veritably scream ‘fraud.’ Per person spending on durable medical equipment and home health care is ten times higher in Miami-Dade County, Florida than the national average. Such equipment and home health accounts for nearly three-quarters of the geographical variation in per person Medicare spending. Yet, only 4% of current recoveries of improper payments come from audits of these two items and little from the highest spending locations.

Why doesn’t Medicare spend more and go after the remaining overpayments, you may wonder? The simple answer is that Congress gives Medicare too little money for administration. Direct overhead expenses of Medicare amount to only about 1.5% of program outlays—6% if one includes the internal administrative costs of private health plans that serve Medicare enrollees. Medicare doesn’t need to spend as much on administration as the average of 19% spent by private insurers, because for example, Medicare need not pay dividends to private shareholders or advertise.

But spending more on Medicare administration would both pay for itself—$2 for each added dollar spent, according to the conservative estimate in the President’s most recent budget—and improve the quality of care. With more staff, Medicare could stop more improper payments and reduce the use of approved therapies in unapproved ways that do no good and may cause harm.

Taxes. Compare two numbers: $540 billion and $468 billion. The first number is the amount of taxes owed but not paid. The second number is the projected federal budget deficit for 2015, according to the Congressional Budget Office.

Collecting all taxes legally owed but not paid is an impossibility. It just isn’t worth going after every violation. But current enforcement falls far short of practical limits. Expenditures on enforcement directly yields $4 to $6 for each dollar spent on enforcement. Indirect savings are many times larger—the cop-on-the-beat effect again. So, in an era of ostentatious concern about budget deficits, you would expect fiscal fretting in Congress to lead to increased efforts to collect what the law says people owe in taxes.

Wrong again. Between 2010 and 2014, the IRS budget was cut in real terms by 20%. At the same time, the agency had to shoulder new tasks under health reform, as well as process an avalanche of applications for tax exemptions unleashed by the 2010 Supreme Court decision in the Citizens United case. With less money to spend and more to do, enforcement staff dropped by 15% and inflation adjusted collections dropped 13%.

One should acknowledge that enforcement will not do away with most avoidance and evasion. Needlessly complex tax laws are the root cause of most tax underpayment. Tax reform would do even more than improved administration to increase the ratio of taxes paid to taxes due. But until that glorious day when Congress finds the wit and will to make the tax system simpler and fairer, it would behoove a nation trying to make ends meet to spend $2 billion to $3 billion more each year to directly collect $10 billion to 15 billion a year more of legally owed taxes and, almost certainly, raise far more than that by frightening borderline scoff-laws.

Disability Insurance. Thirteen million people with disabling conditions who are judged incapable of engaging in substantial gainful activity received $161 billion in disability insurance in 2013. If the disabling conditions improve enough so that beneficiaries can return to work, benefits are supposed to be stopped. Such improvement is rare. But when administrators believe that there is some chance, the law requires them to check. They may ask beneficiaries to fill out a questionnaire or, in some cases, undergo a new medical exam at government expense. Each dollar spent in these ways generated an estimated $16 in savings in 2013.

Still, the Social Security Administration is so understaffed that SSA has a backlog of 1.3 million disability reviews. Current estimates indicate that spending a little over $1 billion a year more on such reviews over the next decade would save $43 billion. Rather than giving Social Security the staff and spending authority to work down this backlog and realize those savings, Congress has been cutting the agency’s administrative budget and sequestration threatens further cuts.

Claiming that better administration will balance the budget would be wrong. But it would help. And it would stop some people from shirking their legal responsibilities and lighten the burdens of those who shoulder theirs. The failure of Congress to provide enough staff to run programs costing hundreds of billions of dollars a year as efficiently and honestly as possible is about as good a definition of criminal negligence as one can find.