The second key dimension that pits the Brown against the Gray is the balance any deficit-reduction deal strikes between tax increases and spending cuts. Tax increases, especially targeted at the affluent, would fall most heavily on workers in their peak earning years. As Williams notes, those tend to be workers from their mid-forties through their late fifties.
That means any tax hike aimed at the top 2% would also heavily target the youngest edge of the baby boom and the oldest portion of Generation X. In either case, each dollar of deficit-reduction achieved through tax increases, rather than spending cuts, increases the extent to which today’s workers (especially those at the peak of their earnings) are bearing the cost of today’s spending, rather than leaving it for the next generation as debt.
Probably the most pointed collision between the Brown and the Gray revolves around how Washington allocates its future spending. The Brown benefit from programs that support the health and productivity of the future workforce, particularly investment in education, research and infrastructure. The Gray benefit mostly from spending on programs that provide a safety net for retirees, primarily Social Security and Medicare.
Over the past generation, the balance of federal spending has tilted dramatically toward the Gray. In 1969, payments to individuals (mostly entitlements) constituted about one-third of the federal budget. So did federal investments on infrastructure, research and development and education. Today, payments to individuals have exactly doubled, soaring past three-fifths of the budget, while investments have fallen in half to less than one-sixth. Isaacs calculates that the federal government today spends about $7 per senior for each $1 it spends on kids.
Changing that balance isn’t easy. Seniors reacted with outrage when Obama modestly challenged it by slowing the growth of Medicare (a program for the Gray) to help fund his expansion of health coverage for the working-age uninsured (which heavily benefits the Brown.) The first round of budget talks between Obama and the Republican Congress pushed in the other direction. In the 2011 deal to raise the government’s borrowing limit, the two sides agreed to $1.5 trillion in reductions over the next decade solely in so-called “non-defense discretionary” spending (the programs that include government’s investments in areas such as education and research) while exempting entitlements. Under that agreement, spending on these domestic programs, measured as a share of the overall economy, will fall by decade’s end to a record low.
Jared Bernstein, the former chief economic adviser to Vice President Biden, notes that while young people also can benefit from food stamps and Medicaid, those discretionary programs represent the government’s principal spending on opportunity for future generations, from pre-school programs to college loans. “That’s where we embed our mobility ladders,” he says. “And by cutting too deeply into non-discretionary domestic spending we are cutting those ladders down. It’s not fair and it’s not smart economics.”
All of that means that any budget deal won’t be fair to the Brown unless it targets spending cuts not only at the discretionary programs that help them, but also the entitlement programs that the Gray rely upon. Fairness also demands that any changes in entitlement benefits don’t entirely exempt those near retirement (which spares baby boomers from the knife) while targeting retrenchment solely on younger workers retiring decades down the road.
The irony, almost completely obscured as these two giant generations stampede in opposite directions politically, is that they need each other more than today’s debate allows. Unless more minority young people rise into the middle class, there will be no one to pay the payroll taxes needed to fund the entitlements for the growing senior population. As Washington navigates its painful fiscal adjustment, the best way to ensure fairness across generational lines is to remember the simple truth that there is no economic security for the Gray without economic opportunity for the Brown.
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