Public Spending on Children and the Elderly from a Life-Cycle Perspective

The life-cycle framework views human development as consisting of three basic stages: childhood, working-age adulthood, and old age. Children and the elderly – the two dependent groups who are unable to live off their own labor income – must be supported by some combination of public and private supports. One can imagine a social compact under which each adult generation invests in the education of the childhood generation in return for future payment of retirement benefits to the parent generation. Under such a compact, high spending on retirement relative to education is not unfair because all individuals receive both children’s and elderly benefits over a full life span – and pay out taxes during the intervening working years to support the education and retirement of the preceding and succeeding generations. However, our current system of public expenditures is inequitable across generations, defined as birth cohorts rather than age groups: the vast and growing size of health and retirement benefits will require today’s children to bear a heavy tax burden when they grow up to be working-age adults. For our children’s sake, we should curtail the projected growth in spending on the elderly and also pay our share of taxes to maintain the vitality of our health and retirement benefit systems