Government spending on the elderly continues to climb.  Fueled by rapid growth in the number of Americans over age 65 and increased spending on benefits per person, public expenditures devoted to the elderly continue to edge up. A crucial question for future policy making is whether rising outlays on programs for the aged will squeeze out spending on programs for children, especially investments in their schooling. Many pessimists think this outcome is inevitable, and they urge us to reduce government commitments to the elderly to make room for spending on the young.

Federal spending is especially concentrated on the elderly. The Urban Institute publishes annual estimates of federal outlays on children and adults over 65. The estimates inevitably show a huge imbalance in spending on the two groups. In 2011, federal spending for the elderly amounted to almost $28,000 per person over 65.  In the same year, per capita spending on Americans under 19 amounted to just $4,900 per person. This means aged Americans received $5.72 in federal spending for every $1.00 received by a child 18 or younger.

The Urban Institute’s latest estimates show that federal spending on youngsters has trended down in recent years.  After reaching a peak of about $500 billion in 2010, expenditures on children fell 7 percent by 2012, and they have remained unchanged since then.

Future prospects are not encouraging. Urban Institute analysts predict that from 2014 to 2025, only 2 percent of federal spending growth will go to children. Almost 60 percent will be swallowed up by additional outlays on Social Security, Medicare, and Medicaid. Spending on many federal programs that provide benefits to children are financed out of discretionary programs. In contrast, big public programs for the aged seem to run on automatic pilot, with spending linked to changes in the cost of living and the size of the population past 65. Spending on most domestic discretionary programs is expected to be severely constrained as a result of Congressionally imposed budget caps. This is bad news for many federal programs targeted on children.

Focusing solely on federal government spending gives a misleading picture, however. While federal spending is heavily concentrated on the elderly, state and local spending tilts toward programs that help children, notably, through public school budgets.  Whereas aged Americans receive $5.72 in federal spending for each $1.00 received by someone under 19, those under 19 receive $10.11 in state and local spending for each $1.00 received by someone who is 65 or older. To be sure, total federal spending is considerably greater than that of state and local governments, but the imbalance of public spending on the young and the old is less extreme than federal budget statistics suggest.

Government spending on the aged is high because legislators (and voters) decided to establish government-backed pensions—through Social Security—in the 1930s and government-guaranteed health insurance for the elderly—through Medicare—in the 1960s.  In view of the overwhelming and enduring popularity of these two programs, most voters appear to think this was a sensible choice.  One implication of the policies is that Americans past 65 derive a sizable percentage of their retirement income, and an even bigger share of their health care, from public budgets.

The nation has not made an equivalent commitment to support the incomes or guarantee the health insurance of Americans under 65, except in special circumstances.  Those circumstances include temporary unemployment, a permanent work disability, and low household income.  Families headed by someone under 65 are expected to derive their support mainly from their jobs and from their own savings.  If non-aged families prosper, government spending on them falls.  If instead breadwinners become disabled or lose their jobs, government spending will increase as a result of higher disability payments, unemployment and food stamp benefits, and public assistance rolls.

Nearly all children are raised in families headed by someone under 65.  The government benefits they receive, except for free public schooling, increase in bad times and should decline when the unemployment rate falls.  The Urban Institute’s numbers are instructive.  Between 2007 and 2011, real federal spending on children increased 27 percent, or more than 6 percent a year, as the unemployment rate soared in the Great Recession. Federal spending on children then fell as unemployment—and outlays on government transfer payments—shrank.  For many categories of public spending on children, we cannot assume that lower spending signals a weaker commitment to children’s well-being. Instead it may signal a healthier private economy, a lower unemployment rate, and faster improvement in breadwinner incomes.

Of course, some components of government spending on children do not automatically rise in a slumping economy or shrink when breadwinners’ earnings improve.  Public investments in children’s preschool and K-12 education should be adjusted to reflect the needs of children for compensatory instruction and the expected payoff of added investment in schooling.  Statistics on public school budgets show that spending per pupil has increased considerably faster than inflation and faster than GDP per person over the past seven decades (see Chart 1). Whether spending has increased as fast as warranted is debatable, but rising government spending on the aged has not caused per-pupil spending on K-12 schools to shrink.

Government spending on children’s health has also increased over time as public insurance for children has been expanded.  In 2014 just 6 percent of Americans under age 19 lacked health insurance for the entire year.  The only age group with higher health insurance coverage was the population past 65, which is covered by Medicare (see Chart 2).  The main explanation for rising insurance coverage among children is that federal and state health insurance programs have been expanded to cover most low-income children.  Insurance coverage of children can and should be improved, but a sizeable expansion of public insurance has occurred despite the increase in public spending on the elderly.

The presumption that rising outlays on programs for Americans past 65 must come at the expense of spending on children rests on the unstated assumption that voters will zealously defend programs for the aged while tolerating cuts in programs that fund education, income protection, and health coverage for the young.  The trend toward higher public spending on the elderly has been underway for at least five decades, but the predicted cuts in spending on the young have yet to materialize.

Editor's Note: this op-ed first appeared in Real Clear Markets.

Senator Barack Obama’s Iowa victory has been largely attributed to his success among young voters.  According to the entrance polls, not only did he win an outright majority of the youth vote, the 24-and-under crowd also turned out to vote with unusual strength.

Can he do it again in New Hampshire and beyond?

The Iowa caucuses are unusual in three key respects when it comes to mobilization of young voters and their influence on the election outcome.

First, Obama and the other candidates have spent the last year building impressive organizations within Iowa to mobilize their supporters.  In this decade, campaigns have retooled their get-out-the-vote efforts to emphasize person-to-person contact, which has been demonstrated to significantly increase turnout among all voters.  Turnout in both parties’ caucuses—particularly the record 236,000 on the Democratic side—benefited from peaked voter interest and this new campaign tactic.

Unlike previous efforts to mobilize young voters by concerts and celebrities, young voters are particularly energized when encouraged to vote by their peers.  Obama’s campaign specifically tailored mobilization efforts to young voters.  It clearly worked, as the youth were a larger share of caucus attendees than they were four years ago.

Second, the caucuses occur in the evening when people with families, and/or working night shifts, are unable to participate.  The caucuses favor turnout among people who have time on their hands, like students who have yet to return to college from their winter break. 

Third, despite the historically high turnout on the Democratic side of the Iowa caucuses, the caucuses are still low-turnout affairs, with only about 16 percent of eligible Iowans participating on January 3.  Where organization and time can galvanize youth relative to other Iowa caucus attendees, it is highly unlikely that young voters will be as large a share of the electorate in primary states like New Hampshire where more people participate simply because voting is less burdensome.

These factors suggest that Obama will be disadvantaged in upcoming elections. 

But surprisingly, no; it is Hillary Clinton who will be disadvantaged because of the age of her supporters.

Where Obama’s support comes from the youth, Clinton’s comes from the elderly.  She was just shy of winning a majority of their vote in the Iowa caucuses.

Like the youth, the elderly also traditionally constitute a larger share of Iowa caucus attendees than of primary voters.  Older Americans are habitual voters and have time on their hands.

When candidate support among the different ages of Iowa caucus attendees are applied to the age distribution of the 2004 New Hampshire Democratic primary electorate, support for Obama and John Edwards rises, while support for Clinton actually decreases. 

Obama’s strength among people in their 30’s—a demographic he also won—will likely pack a larger wallop among the larger New Hampshire electorate, offsetting the youth’s lower share of the electorate.

Edwards, who eked out a win among middle-aged voters, benefits from their higher turnout. Edward's attacks on Clinton following Iowa make strategic sense. He believes that if he can become the alternative to Obama, Clinton's older supporters will flock to him, setting up all out generational war on the Democratic side.

Clinton sees her elderly support base diminish, and it is not replenished with fresh voters elsewhere.

Of course, the situation is still fluid.  2008 is not 2004, New Hampshire is not Iowa and we have yet to see where Joe Biden’s and Chris Dodd’s supporters go now that those contenders are out. 

Yet, Obama’s eggs are not all in one basket.  He does not need to rely on young voters solely to win New Hampshire; he just needs them to be as animated as they were in Iowa to add to his support among their slightly older peers. 

On the Republican side, we have to look back eight years to the last contested Republican nomination to understand what increased youth turnout means to the election outcome. It does not appear to be much. The age profile of the Republican Iowa 2000 electorate looks similar to that of 2008, with the exception that the 2008 Republican electorate is more middle-aged. When the Republican contest moved from the Iowa caucuses to the New Hampshire primary in 2000, the age profile remained relatively steady with the exception that the share of the electorate of those in their 30's increased while those 60 and older decreased.

Mike Huckabee won every age demographic category in 2008, but so did George W. Bush in 2000. John McCain came roaring back from an Iowa fifth place finish in 2000 to win New Hampshire and is poised to do so again. The difference between Iowa and New Hampshire Republican electorates is more about their ideologies rather than their ages.

There may still be something to learn from the age distribution of support for the Republican candidates. McCain drew his support in 2000 and from middle-aged and older voters, who together will likely make up a majority of the New Hampshire Republican electorate. Will he do it again in 2008?

Looking past Huckabee's Iowa's support, McCain and Mitt Romney both drew more support from older voters. There are thus three candidates vying for votes from older New Hampshire independents, who may choose to vote in either the Democratic or Republican primary: McCain, Romney, and Clinton. This may favor Obama, too, as his independent supporters are not faced with the same difficult choice of which primary to vote in as Clinton's are.

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