In this age when the American right is pushing for removal of the safety net that was established under FDR through the Social Security, Medicaid and Medicare systems, it is appropriate to look at the status of the elderly in America and consider what might be the effect of cuts in those social services that benefit the elderly in particular.
The Employee Benefit Research Institute's January 2006 Notes includes a report on the Income of the Elderly Population, Age 65 and Over, 2004, available as a pdf download, here. The study is based on the Census Bureau's March 2005 population survey.
Not unsurprisingly,
The income of the elderly population in the United States, like that of many ordinary Americans in the lower four quintiles of the income distribution, declined in 2004 even while economic growth favors the owners of capital with extraordinary returns.
The media income level ... of the elderly population increased from $11,679 (in constant 2004 dollars) in 1974 to $15,407 (in 2004 dollars) in 1999. ... By 2004 the median income of the elderly had declined to $15,043. The averge income of the elderly followed a similar patternover this period except for a decline from 1989 to 1994.
EBRI reports that American elderly depend on Social Security for the largest chunk of their income--41.8% on average. The lowest quintile of elderly receive almost 92% of their income from Social Security, while the highest income group receives almost 20% from Social Security. Other sources include pensions and other retirement income at 20.8%, income from assets at 12.8% and salaries at 22.7%. for the lowest quintile, these other sources are relatively small--1.9% from pensions, 3% from assets, and 0.5% from earnings. The wealthiest elderly in the upper quintile received about 25% from pensions, 18% from assets, and 36% from earnings (numbers are rounded). Women and unmarried elderly receive more of their income from Social Security than men or married elderly.
Social Security is the program that prevents many elderly from falling into poverty--without Social Security income, almost half of America's elderly would be below the poverty line. See Deanne Loonin and Elizabeth Renuart, Life and Debt: A Survey of Data Addressing the Debt Loads of Older Persons and Policy Recommendations, National Consumer Law Center 2006, available here on SSRN. Loonin and Renuart find, however, that increasing numbers of American elderly are suffering from significant debt burdens because Social Security and pension income are insufficient for day-to-day needs. Fewer elderly have pensions, and many of those pensions may not pay full benefits in the future, due to $450 billion of corporate underfunding of pension plans. The elderly "are going into debt, filing bankruptcy, and in many cases losing their homes in greater numbers than ever before." Id. at 2.
Much of the problem is credit card debt. The report notes a "staggering" increase of 217% between 1992 and 2001, to a per capital average credit card debt of $5,844. "Roughly one-fifth of elder households with annual incomes below $50,000 (70 percent of seniors) were in debt hardship, meaning they spent more than 40 percent of their income on debt payments." Id. at 2. They also tend to refinance their mortgages to gain cash to address needs, often at predatory rates.
Women are particularly vulnerable, since they still earn on average only 75% of what men earn, are less likely than men to have full-time, year-round work before retirement, and are more likely to be single and live alone in retirement. Id. at 5 (citing Heather C. McGhee & Tamara Draut, Demos, Retiring in the Red: The Growth of Debt Among Older Americans, available here). Women's lower earnings during work years translate into lower Social Security benefits as well.
Why are the elderly increasingly over their heads in debt? Loonin and Renuart suggest a series of higher costs, including housing, health care, energy, property taxes and transportion. Home mortgage debt is a major factor--having increased from 20% of the total debt in 1989 to 70% in 2001. here at 7. Out of pocket health care costs amounted to $3,500 annually in 2002, an increase of 45% over 1992, yet growing numbers of seniors have inadequate (or no) health insurance. Id. at 9 (noting an increase of uninsured seniors from 5.2 million in 2000 to 6.4 million in 2003). Health care is likely the major culprit in the excessive credit card debt carried by seniors.
There is growing evidence that many older Americans are using their credit cards to pay the rising costs of deductibles, co-pays, dental and vision care, prescription drugs, and other uncovered costs of health care. A recent study of consumers of all ages investigating the link between medical expenses and bankruptcy filings found that over 25 percent of debtors surveyed cited illness or injury as a specific reason for filing for bankruptcy with about the same number of filers reporting uncovered medical bills of $1000 and higher. Medical debt may also be a key factor explaining the high rates of predatory loans among seniors.
These statistics are sobering. If we want senior Americans to have a decent quality of life, we need to maintain a tax structure that can adequately fund these needs. These statistics demonstrate that this is not the time to consider further tax breaks on investment income of the wealthy. We should instead consider how best to fund the kind of single-payer universal health care system that other advanced democracies already enjoy.
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