The rich taking from the poor

USA Today confirms much of what I've been saying for years: government entitlement programs are overwhelmingly tilted towards the affluent elderly at the expense of the working young. From "Generation Gap? About $200,000"

The growing divide between the rich and poor in America is more generation gap than class conflict, according to a USA TODAY analysis of federal government data. The rich are getting richer, but what's received little attention is who these rich people are. Overwhelmingly, they're older folks.

Nearly all additional wealth created in the USA since 1989 has gone to people 55 and older, according to Federal Reserve data. Wealth has doubled since 1989 in households headed by older Americans.

Not so for younger Americans. Households headed by people in their 20s, 30s and 40s have barely kept up with inflation or have fallen behind since 1989. People 35 to 50 actually have lost wealth since 1989 after adjusting for inflation, Fed data show.

And yet we dare not touch a federal program formed in 1935, two months after Babe Ruth retired from baseball.

The implications are far-reaching and can turn conventional wisdom on its head. Social Security and Medicare increasingly are functioning as a transfer of money from less affluent young people to much wealthier older people.

Because the older generation hasn't set aside enough money to cover promised government benefits, young people will have to make up the difference or older people will face benefit cuts. The financial shortfalls of Social Security and Medicare over the next 75 years are so large - $340,000 per household - that they dwarf the wealth of every age group. This hidden debt will make it a challenge for young people to accumulate as much wealth late in life as their parents have.

Translation: the economic disparity will only widen as more government resources are poured into Medicare and Social Security. The discretionary portion of the federal budget currently stands at 38% of all outlays. Every year that goes by without entitlement reform means that mandatory spending will force down all that spending we call the "government." Soon all that will be left is interest on the federal debt, Social Security, Medicare, and some Homeland Security walkie-talkies.