Tug of War Over Social Programs. At issue: how to divide tight federal aid funds between the elderly and children in need

A NEW set of poverty figures gives fresh impetus to an old question: Will America's young and elderly soon be in frenzied competition for scarce dollars? Experts say no. ``It's mostly an intellectual issue raised in some quarters,'' - one for which there is ``not much evidence,'' says Marilyn Moon, director of the Public Policy Institute of the American Association of Retired Persons (AARP).

But the issue ``is more complicated'' than young vs. old, says Douglas Besharov, a resident scholar of the American Enterprise Institute (AEI). He and other experts warn that focusing attention on today's intergenerational battle risks missing the very real conflicts for funding that do exist among competing interests in American society. One example: Can America afford to allow the middle class and poor to continue receiving what many view as federal subsidies, such as social security retirement payments, in the name of fighting poverty?

These underlying competitions threaten to become acute as the Bush administration and Congress begin to grapple with ways to reduce the annual national budget deficit of about $150 billion. On Jan. 20 the new President and the Congress formally assume their offices and the responsibility for what happens on deficit reduction, aid to children, and safeguards for the elderly.

But if no major intergenerational conflict exists now, it could crop up decades into the future, some experts caution. In about 30 years about 77 million baby-boomers will be retired. For every retiree drawing social security payments ``only one American will be working to support'' him - and that person will be paying whopping social security taxes, says J.J. Wuerthner Jr., an executive director of Americans for Generational Equity (AGE). Today, between three and four workers support each retiree, according to the Social Security Administration.

The poverty figures released last week that spawn these concerns come from the US Bureau of the Census and are based on 1986 statistics. They conclude that social security - America's most successful antipoverty program - has made a huge difference in the lives of the elderly.

Today only 14 percent of elderly Americans are poor, and social security retirement payments are a key reason that many more are not. Without those monthly checks from Uncle Sam, 47 percent of America's 29 million elderly would live in poverty, the Census Bureau says.

Programs to aid children are far less successful. The often-criticized welfare programs that give cash to poor families reduced last year's national poverty rate by less than 1 percent, according to the Census Bureau.

Nationally, 35 million Americans are poor - 13 percent of all citizens. The poverty that 25 years ago was heavily concentrated among the elderly today disproportionately afflicts America's youngest citizens. Four in every 10 poor Americans is a child, and 1 in every 4 children is poor. Black children suffer the most: Almost half are impoverished.

Federal spending for children is not insignificant, however. Despite all the talk about the Reagan administration having cut back social spending for eight years, this year the federal government expects to spend about $37.4 billion on programs that directly benefit children, according to the National Governors' Association. That amount is $13 billion more than it spent seven years earlier.

Children actually receive more funding than is acknowledged, AEI's Mr. Besharov says, but much of it comes from state expenditures. Federal financing is tilted toward the elderly, he says, but state and local funding provides a lot more money for children. That's because the bulk of education financing comes from states and localities. When that money is factored in, Besharov says, there is almost parity between young and old.

In any case, experts say ways exist to provide more federal funds for children without decreasing elderly funds. Barbara Blum, president of the Foundation for Child Development, supports establishing a separate federal fund - ``something quite similar to social security tax payments ... which would be dedicated to children'' and their needs. Like social security taxes, it would be paid jointly by employers and employees. The idea originated with Jules Sugarman, now secretary of Human Services in the state of Washington; in the 1960s Mr. Sugarman was one of the principal architects of the widely applauded Head Start program for preschoolers.

FINANCIAL experts say that ways also exist to find more funds for the 1 in 8 elderly people still in poverty, or to meet needs such as nursing-home care, without impinging on money that children require. Robert Greenstein, director of the Center for Budget and Policy Priorities, says changes in federal financing mechanisms - such as a capital-gains tax at death and changes or removal of the cap on social security taxes - would also ``free up'' to aid children some of the money that medicaid now is paying for long-term nursing care of the elderly.

These ``elderly'' programs indirectly aid the retirees' adult children, too. Besharov says ``many of these government programs which we label as aid to the elderly could as well be labeled as aid to younger families,'' because they relieve most middle-aged parents from the need to provide financial and other aid to their elderly parents.

AGE's Mr. Wuerthner notes that in the US there is an ``interdependence of the generations,'' which he calls ``a compact'' between parents and children. Parents rear their children, provide them with education, and try to pass on to them a good America. When they age, they are cared for by their children, in part through government programs like social security and medicare.

Mr. Greenstein and Mrs. Blum say that discussing intergenerational conflicts as though they occurred only between the very young and very old ignores many of the people in the most serious trouble in America today: young families with children. ``The families that have been doing the worst in the last few years,'' Greenstein says, ``are families with young children,'' especially families whose head is under 30.

Hidden inside all these complex issues is the issue of middle class vs. poor, Besharov says. ``The real need for reform is to squeeze a little of the middle-class subsidy,'' like social security payments to those not in financial need, ``out of programs for the elderly.''

Further, Besharov says about 1 million to 2 million older Americans ``desperately need expanded programs, and they aren't getting them,'' because money is spent to subsidize middle class elderly.

There's a major irony in all this. Dr. Moon, who doesn't think there's an intergenerational issue now, says that the publicity over the question may wind up creating the issue, by raising a specter to which people react.