Before seeing how we are benefiting unequally from entitlement programs like Social Security and Medicare, let’s start with some history.
During 1934, with unemployment high and production low, British economist John Maynard Keynes was reported to have crumpled up a pile of towels rather than just one after washing his hands in a U.S. restaurant. His goal he said (if this really happened and no one is sure) was to create more jobs.
More than businesses though, Keynes (1883-1946) believed that a contracting economy needed the job creation that government could provide through deficit financing. Government spending would then multiply as it passed from hand to hand. Just pay a worker, he or she spends that income, the recipient then spends it, businesses have to expand and an inflated total (called the multiplier) of spending enters the GDP.
Implementing a Keynesian approach during the 1930s Great Depression, government passed Social Security and unemployment legislation. Called a government safety net, they were supposed to provide income minimums to the jobless and people over 65 who qualified.
30 years later, Lyndon Johnson said to Wilbur Mills, the Chairman of the House Ways and Means Committee, “I’ve just been looking through the polls here, and I’ve got only a few weaknesses, and the worst of them is that I’m not doing anything for the old folks. I need some help from you, Wilbur. How about letting Medicare get to the House floor?” Mills said yes and, in 1965, federally subsidized medical care for people 65 and over became the law of the land.
Then, during the Great Recession (December 2007 to June 2009), President Obama perpetuated a Keynesian approach and an increase in entitlement spending through the American Recovery and Reinvestment Act of 2009, the $787 billion bailout program that ballooned to $840 billion in 2011.
Today, almost 80 years since entitlements began with Social Security, we can look at their potential impact on the following generational groups:
The Greatest Generation, the Silent Generation and the Baby Boomers could benefit most from entitlement legislation:
Our bottom line: A Keynesian philosophy that employs massive government spending to end a recession has also helped entitlement programs to grow and unequally impact generations.
John Maynard Keynes and the Generational Impact of Entitlements
Elaine Schwartz
Elaine Schwartz has spent her career sharing the interesting side of economics. At the Kent Place School in Summit, NJ, she has been honored through an Endowed Chair in Economics and the History Department chairmanship. At the same time, she developed curricula and wrote several books including Understanding Our Economy (originally published by Addison Wesley as Economics Our American Economy) and Econ 101 ½ (Avon Books/Harper Collins). Elaine has also written in the Encyclopedia of New Jersey (Rutgers University Press) and was a featured teacher in the Annenberg/CPB video project “The Economics Classroom.” Beyond the classroom, she has presented Econ 101 ½ talks and led workshops for the Foundation for Teaching Economics, the National Council on Economic Education and for the Concord Coalition.
