The Generational Social Security Rip Off

A couple of years ago we had a movement ranting about income inequality among the best and worst-paid in the U.S. The new movement, being pioneered by billionaire former hedge fund manager Stanley Druckenmiller, is to focus on the inequality between older and younger generations. Specificially, Druckenmiller talks about his generation and previous ones receive quite a few government benefits that the younger generations will have to pay for. The younger generations won’t be able to receive the same ratio of benefits to taxes paid and will have to pay much higher taxes in order to pay for the bills the older generations ran up by taking out debt. You can read details in this Wall Street Journal interview (subscription might be required).

Which brings him back to his thieving generation. For three decades until 2010, Mr. Druckenmiller ran the hedge fund he founded, Duquesne Capital. Now retired from managing other people’s money, he looks after his own assets, which Forbes magazine recently estimated at $2.9 billion. And he wonders why in five years the massively indebted U.S. government will begin sending him a Social Security check for $3,500 each month. Because he earned it?

“I didn’t earn it,” he responds, while pointing to a bar chart that is part of his college presentation. Drawing on research by Boston University economist Laurence Kotlikoff, it shows the generational wealth transfer that benefits oldsters at the expense of the young.

While many seniors believe they are simply drawing out the “savings” they were forced to deposit into Social Security and Medicare, they are actually drawing out much more, especially relative to later generations. That’s because politicians have voted to award the seniors ever more generous benefits. As a result, while today’s 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans.