How Obama is soaking the young
Past generations could expect a better life, but today's youth are picking up the tab for the baby boomers
Boosted by starry-eyed young Americans who embraced his "hope and change" message, Barack Obama ascended to the presidency in 2008 — and was re-elected in 2012. This might have made the idealistic young people who clung to his lofty rhetoric feel good — and maybe Obama really did advance their progressive social agenda. But from an economic standpoint, their support was highly ironic. They have been largely rewarded with high unemployment rates — and long-term policies that transfer wealth from the young to the old.
Consider, for instance, the Affordable Care Act. It is not exactly a win for the young and healthy.
Contingencies, the magazine of the actuarial profession, recently looked at how the Affordable Care Act would affect various age cohorts. According to their study, premiums for younger, healthier individuals may well spike by more than 40 percent.
A little-known provision in the law, called the Adjusted Community Rating, all but guaranteed it would turn out this way.
Here is an oversimplified — but fair — illustration of what this provision means: Let's say a 64-year-old man pays $800 a month for health insurance, and his 27-year-old neighbor pays $100. Collectively, an insurance company gets $900 to insure them both.
But according to the Affordable Care Act, health insurance premiums must fall within a ratio of 3:1 for adults. So assuming the insurance company still seeks to collect $900 a month to cover both neighbors, the older man would now pay just $675, while his younger neighbor would be charged $225.
If you're 64, this is a much better deal. But if you're the 27-year-old, you're now saddled with paying $125 more a month. That is $125 a month less that a young person can invest in a home or education or... whatever.
(A caveat: Assuming someone can get through the enrollment process, ObamaCare does provide subsidies to help many younger, healthier consumers pay for coverage. But in many cases, the subsidies will not be big enough to offset ObamaCare's cost increases — and many consumers will not be eligible for subsidies in the first place. For example, a family of four making around $80,000 would not be eligible for subsidies.)
Now, you might say this is simply what civilized societies do, and young people should just suck it up. That's a completely coherent argument to make if you have a liberal worldview. But ask yourself this: Was it sold to young people that way? Is this fair to them?
Health care isn't the only example of how the young are being fleeced. If being targeted by ObamaCare and enduring high unemployment rates aren't enough of a challenge for young people just starting out in life, the debt burden should add an additional level of concern.
It's not just that young people will have to pay more — it's that they are doing so to make up for the excesses of the baby boomers. As a Wall Street Journal column recently noted, "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."
What we are witnessing today is a historic inter-generational transfer of wealth. Past generations could expect a better life, but today's youth are picking up the tab for the baby boomers. What's more, it is the policies of the man they held up as a hero that are inflaming the problem.
Young people are easy marks. They don't have big lobbies like the AARP. And despite being helpful to Obama, they are still generally taken for granted by politicians. Even worse, the assumption is that they are a wholly-owned subsidiary of the Democratic Party — a designation that means young people can be taken for granted (by Democrats) or written off (by Republicans).
Maybe young people still haven't noticed, or don't really care — at least not enough to change their voting habits. Maybe they are too interested in political issues like immigration reform or gay marriage to worry about their economic future. Or maybe as long as there's bread and circuses (beer and pizza, as my college professor used to say), they'll be fine. But I suspect some day in their 30s when they are trying to get ahead and raise a family, many of them will have buyer's remorse.
Of course, it may not take that long. There is one more irony to discuss. And that is, if healthy young people don't sign up for ObamaCare — if they don't "fall in line" — the whole system could come crashing down. The success of the Affordable Care Act is premised on healthy young people signing up. But what if they don't? What if the glitchy websites prevent them? Or what if they just make a calculated decision to pay the fine ("tax" as John Roberts would have you believe)?
It may be that banking on young people really was fraught with danger. You live by the sword, you die by the sword. Now that would be ironic.