Economic outlook: lowering clouds for elders

Who gets clobbered the worst during a period of protracted inflation? The Aged? Younger families with children? The middle class? Nonwhites? That perennial debate, which has particularly vexed economists and politicians since inflation in this nation stepped up its pace dramatically in the 1970s, was raised here again with the release this week of a detailed and troubling study on the economic outlook for older Americans.

The report, prepared by Data Resources Inc., a Lexington, Mass.-based research firm, gives a gloomy assessment of the next several decades for older people in the event there is a continuation of slow economic growth and high inflation.

Moreover, the report -- coming against an economic backdrop of deepening recession as well as continuing inflation -- is expected to lead to some increase in political activity in Congress by groups representing people aged 62 or over, as well as those in their mid-50s. There are the ages when most people are concerned about retirement income.

The Data Resources study, prepared for the National Retired Teachers Association (NRTA) and the American Association of Retired Persons (AARP), projects a "decline in the relative share of income going to the elderly. Real incomes of the elderly will rise, but at a slower rate than those of younger cohorts, and the elderly will receive a smaller share of society's resources."

Ironically, according to James Hacking, an official of NRTA and the AARP, this relative decline vis-a-vis other groups is expected to occur despite a swelling over the next few decades in the numbers of older Amerricans.

At present some 23 million are over age-65. By the year 2030 that number is estimated to be more than 50 million, representing the coming of the post-World II "baby boom."

Curiously, the average age of lawmakers in both houses of Congress has been slowly but steadily getting younger -- a process that some legislative analysts assume will continue.

Moreover, there are mounting calls within Congress, although not necessarily from younger lawmakers, for curbing social security cost-of-living increases, as well trimming some aspects of social security payments adn other transfer program benefits going primarily to older people.

According to the Data Resources analysis, even if there is no capping of transfer benefits, older people face lower real-income growth, plus a reduction in their "share" of income in the 1980s.

Annual real-income growth per consumer unit Age 1967-72 1973-76 * 1977-79 * 1980-85 * 1986-90 Under 55 1.9 -1.4 1.6 1.1 2.0 55-61 3.3 -.6 2.3 1.7 2.3 62-64 3.2 .2 1.7 1.3 2.0 65-71 3.1 -.7 .7 .6 .8 72 and over 3.8 2.1 .8 .8 .8

* (Forecast)

The main problem for older Americans during the 1980s, the Data Resources report argues, is that the group as a whole must spend a disproportionately large share of income on goods and services most prone to inflation -- food, fuel, utilities, and medical care.

Further, the group as a whole is made up of creditors with fixed assets in banks and the stock market which tend to show the greatest loss of value during inflation.

Other analysts, however, seriously question whether the elderly are actually hit harder by inflation than other groups, such as younger couples with children. Most older people -- roughly 60 percent of the total -- own their own homes. Houses tend to show sizable appreciation during inflationary periods. Further, actual living costs are usually much lower during retirement than for working families. Transportation costs are lower, as are clothing and food costs.

The elderly also have significant tax breaks not available to younger couples.

Further, the political "clout" of older citizens remains high, and both President Carter and Republican presidential contender Ronald Reagan have clearly indicated support over recent years for protecting living standards for older citizens.

Analysts are in general agreement that there is little possibility that lawmakers would ever undo the basic structure of the social security system -- although they might seek to prune some benefits. But that possibility alone clearly concerns groups like the NRTA and the AARP.