Restoring Prosperity to the Middle Class
Presented at Life@50+
AARP’s National Event & Expo
Los Angeles, CA
September 22, 2011
Good morning everyone—It's great to look out over this sea of beautiful people. We're glad you're all here to celebrate Life@50+ with us—your AARP family.
As Phil said, coming to LA is like coming home. This is where it all started—where AARP was born.
When a young Dr. Andrus first walked into Lincoln High School—just a few miles from here—she saw engraved above the big iron gate at the front entrance one word—"Opportunity."
She spent the next 28 years as principal at Lincoln bringing "Opportunity" to life. By the time Dr. Andrus left Lincoln in 1944, she had made the school the center of the community. The doors at Lincoln High School welcomed high school students, adult students and people in the community seeking new skills and a better life.
After retiring to nurse her ailing mother back to health, she continued bringing opportunity to life. This time for older Americans.
She founded AARP in 1958—after she retired—to address the compelling needs of older Americans all across the country.
And, I'm proud to say—AARP is still following in her footsteps today—Bringing opportunity to life. We’re helping people to re-imagine their lives—to find new pathways to happiness and peace of mind in a world that is constantly changing. We know that people 50+ don’t want to just be a part of the future, they want to help make the future. And, they’re reinventing themselves to do just that.
That's what Life@50+ is all about. And, that's what AARP is all about.
Throughout our history, we have fought to make life better for people in their quest to achieve the American Dream.
I don't think it's an exaggeration to say that these efforts have contributed to a better America—for all people, and especially those 50+.
* More people are living longer and in generally better health, largely because of Medicare.
* They are remaining productive longer and staying in the workforce longer—many out of need, but also many out of choice.
* By fighting to end age discrimination in the workplace, we’ve seen the number of workers 65+ grow by nearly 60 percent in the last decade.
* The poverty rate among people 65+ fell from more than 35 percent in 1960 to 9 percent in 2010.
Now, what does all that data mean? Combined, all of these trends helped lead to a vast expansion of the middle class.
For more than three decades following World War II an economically vibrant and expanding middle class grew out of our great economic prosperity. We functioned under a social compact—America’s social compact—
* That assured that workers would benefit from the fruits of their labor,
* That prosperity would be broadly shared
* And, that workers would have basic protections against life’s financial risks.
In 1965, we added Medicare to assure that older Americans would have basic health care and Medicaid to protect and help lift up the poor.
AARP has been fighting to protect and strengthen these programs ever since. We know that Social Security, Medicare and Medicaid have been and continue to be vital to middle-class growth and prosperity.
As middle-class families prospered and low-income families moved up the economic ladder—the middle class expanded.
But other forces began eating away at their share of the economic pie—causing middle-class families to lose ground financially and to face growing insecurity.
This has been going on for nearly a generation. And, it has been made much worse by the Great Recession. Let's take a look at how this has affected a typical American family.
Let’s call them John and Anne. They are in their late 50s. They're married with two children, and they live in Evanston, Illinois. They're both college graduates. They have a combined income of just over $70,000 a year and a combined retirement savings of about $80,000.
John and Anne are concerned about the challenges they face as they get older. John has not seen much of a salary increase over the last decade. But he has seen dramatic increases in his cost of living. He has to work many more hours just to make ends meet. And, he now expects that he will have to keep working into his 70s.
With both children in college, Anne and John are worried about how they will earn enough to get them through graduation. They tapped into their home equity when housing values increased to finance college costs. But tuition is now around $21,000 for each child. It increases significantly every year and is becoming harder for them to afford.
They're also spending a lot more on health care. Their premiums increase every year—often by more than any salary increase they receive. And, the value of their home has decreased substantially over the past five years. So, they will have less money from the eventual sale of their home to supplement their retirement and unforeseen needs such as long-term care.
Higher costs for housing, education and health leave them with less money for food, transportation, leisure activities and retirement savings. And they now realize they will have to rely primarily on Social Security and Medicare to finance their retirement and health care.
Yet, John and Anne consider themselves lucky. Many of their friends have lost their jobs in the recent recession. Some have lost their homes. And still others have had to file for bankruptcy.
John and Anne are not alone.
* The latest Census data show that the typical American family got poorer during the last decade as median incomes declined. 15.1 percent of Americans now live in poverty—the highest level since 1993.
* A recent study by the RAND Corporation found that increased health care spending wiped out income gains that typical American families made over the last ten years.
* The Wall Street Journal recently reported that more Americans are reaching their 60s with so much debt that they can't afford to retire.
* And the Census also reports that the share of Americans without health insurance rose to 16.3 percent. Government is insuring more people—employers are insuring less. According to Families USA, the number of uninsured now exceeds the combined population of 25 states and the District of Columbia.
The undeniable truth is this: Over the past generation, more and more of the middle class have fallen off the cliff into poverty—pulled down by a lack of job opportunities, rising health care costs, inadequate savings, declining home values, a lack of consumer protections and stagnant wages that have not kept pace with the costs of meeting basic needs.
Now, I’m all for shared sacrifice, but not to the point where it has disproportionate impact—like it has had on the middle class.
So, how do middle-class families cope? They typically do four things:
1. They work longer and delay their retirement. And, many who have already retired end up going back to work—if they can find a job. And, that’s been made more difficult by the recession.
2. The spouse continues working or goes back into the workforce—again, if he or she can find a job.
3. They drastically reduce their standard of living, and rely more on government programs to help them make ends meet. Or,
4. They take on more debt—borrowing against their homes and 401(k)s, running up credit card balances, taking out loans, and borrowing from family members. As a result, the median debt of middle-class families has increased 292 percent over the last decade.
This is taking a serious toll. Working age adults now comprise a record share of the poor in this country—nearly 57 percent according to the most recent census data.
And, we have seen a dramatic rise in the number of people who go to bed hungry every night—not knowing where their next meal is coming from. Each day, nearly 9 million Americans 50 and older are at risk of hunger. Here in California, nearly 8 percent of those 50-59 are at risk of going hungry.
That’s why we launched our Drive to End Hunger last year at Life@50+ in Orlando. And that’s why the Drive to End Hunger is a major focus of our event this year.
In just one year—through our Drive to End Hunger work and the support of dedicated members like you—we’ve reached 73 million people with information on this critical issue.
And, AARP Foundation has donated more than 3.4 million meals to hunger relief organizations across the country.
The sad reality is—Middle-class Americans have never felt more insecure. They are anxious about the future. They see the American Dream slipping away. Today, a majority of middle-class Americans believe that the next generation of adults will be worse off than their parents. If that happens, it will be the first time in our history. We cannot allow that to happen!
So, what do we do? How do we restore middle-class security and confidence? How do we once again ensure that everyone has the opportunity to achieve the American Dream?
The first thing we have to do is get America back to work. Without jobs, economic growth and prosperity for the middle class and others is not possible. More middle-class workers—like John and Anne—will need to work longer to maintain their standard of living in retirement. We need to preserve middle-class jobs that offer opportunity for advancement.
And, we need to improve the pay and quality of lower-skilled jobs that represent the fastest growing occupations in the decades ahead.
At the same time, we also have to change the debate in this country.
As we meet here this week, a “Super-committee" of the Congress—six Republicans and six Democrats—is hard at work in Washington. Their mandate is to reduce the federal deficit by an additional $1.5 trillion between 2012 and 2021.
This is a worthwhile goal. There is no question that we need to address our nation’s long-term fiscal problems. They affect all of us—and most importantly, our children and grandchildren. How we address these problems will determine what kinds of lives they will have and what their future will be.
Their futures will not be very bright if they are drowning in the red ink of budget deficits and a soaring national debt.
However, their futures will not be very bright if they can’t afford health care, or if they can’t afford a quality education, or if they don’t have the opportunity to attain long-term financial security. That is part of the debate that has to be heard again and again.
Their health and financial security will be in deep jeopardy if Washington makes harmful cuts to Medicare and Social Security. People like John and Anne and future generations will rely on those benefits even more than seniors today as pensions continue to disappear and health costs continue to rise.
That's why this debate is about so much more than reducing the deficit. It's about what kind of country we want to be.
Our goals must include restoring prosperity to the middle class. The prosperity of the middle class has been the chief engine of growth in the economy for more than a century.
If we focus on restoring prosperity to the middle class, we will get our economy going again, put people back to work, increase the revenue needed to fund the government and reduce the deficit.
Restoring prosperity to the middle class will not happen overnight. It will time and political courage. But it's something we must do.
We cannot afford put it off.
Failure to act will only put the American Dream further out of reach. It will further jeopardize the economic progress that has allowed the middle class to prosper. And it will hinder those striving to reach the middle class.
In these challenging times, Medicare, Medicaid and Social Security have become increasingly important for middle-class families—and especially for security in retirement.
Cutting these benefits—which have helped the middle class to grow and to prosper—is exactly the wrong approach to take. If these benefits are cut—as many political leaders now propose—it would force millions of older Americans and their families out of the middle class—closer to the dangers of poverty.
We are fighting—and we must all fight—to make sure that doesn't happen. The only way to restore prosperity to the middle class is to strengthen and improve these programs for today's and tomorrow’s beneficiaries.
Unfortunately, Social Security and Medicare have become targets—both in Washington and on the campaign trail. Those who have marked them with a bull's eye can't seem to see beyond the numbers to the people who have earned and rely on the benefits these programs provide.
We've heard that Social Security is going broke—that it is a failed program—a "Ponzi Scheme."
We know better. People like John and Anne know better.
I don't have to tell you that for the last 70 years, people have been paying into Social Security and have received every penny they've earned. And that's helped them maintain their middle-class lifestyle in retirement.
I don't have to tell you that Social Security can pay full benefits for the next 25 years. And, after that, it will need modest changes—just as it did in 1983 when President Reagan and Speaker Tip O'Neil worked together to secure it for this generation of beneficiaries.
I don't have to tell you that for more than a third of people 65 and older, Social Security is all that stands between them and abject poverty.
I don't have to tell you that if Social Security did not exist, roughly 45 percent of people 65+ would be poor today. More than half of all seniors get more than half of their annual family income from Social Security.
And, we must remember that Social Security is not just a retirement program. It’s a lifetime family insurance program that provides benefits to people with disabilities, widows, and other survivors.
Social Security has also done wonders for younger Americans who have, in many cases, been relieved of providing financial support to their aging parents. It has contributed greatly to the strength of the middle class, enabling nearly 70 percent of Americans to own their own homes and millions of families to send their children to colleges and universities.
Simply put, Social Security has been the most successful domestic program in the history of our country—bar none. We must make sure that its success continues.
Strengthening Social Security is the cornerstone of providing economic security for today’s beneficiaries and future generations. We need to implement a combination of measures to ensure that Social Security remains solvent in the long term while protecting and improving benefits for those who rely on it the most.
But we can’t stop there.
In order to restore prosperity to the middle class, we must also slow the growth of health care costs and make Medicare sustainable.
Much of the current policy debate in Washington focuses on the need to reduce the growth of health care costs to help close the government’s long-term federal budget gap. But the truth is, slowing the growth of health care costs will also reduce the economic stress on middle-class family budgets. Health insurance premiums alone have increased 182 percent over the last decade.
An analysis by the President’s Council of Economic Advisors shows that lowering the growth rate of health care costs by 1.5 percentage points per year will increase the real income of middle-class families by $2,600 in 2020; $10,000 in 2030; and $24,300 by 2040. That’s real relief.
If we focus on lowering the growth rate of health care costs throughout the health care system, we will also lower the cost of Medicare and Medicaid.
At the same time, reforms in Medicare and Medicaid—such as payment innovations to promote value, not volume; consumer information initiatives; and an emphasis on improving the health care delivery system, like integrated care programs—will bring significant savings to these programs and spur innovative cost reductions in private insurance as well.
My point is, we can’t just cut Medicare or raise the eligibility age to reduce the deficit. We have to reform it to make it work, and we have to lower the costs to keep it sustainable for generations to come.
At AARP, we're working hard to do our part to restore prosperity to the middle class. Because of your letters, your calls and emails to your elected representatives in Congress and to the White House, and your participation in town hall meetings, we have been able to protect these programs so far. But we've got a lot more work to do. And we need your help. We need your voice.
* We need you to tell our elected officials in Washington to strengthen Social Security by restoring long-term solvency to the program while protecting and improving benefits for those who rely on it today.
* We need you to tell our elected officials in Washington to slow the growth of health care costs, improve Medicare and make it sustainable for future generations.
* And, we need you to tell our elected officials in Washington that we need to reduce the deficit, but not at the risk of jeopardizing the health and financial security of future generations.
Let me close by saying what I think we all know to be true—These are challenging times. But they are also exciting times. They're exciting because it's during times like this when great change can occur. It's times like these when we can bring opportunity to life by leading that change—just as Dr. Andrus did over 50 years ago.
At AARP, we're committed to leading that change. We're committed to bringing the lifetimes of experience of people 50-plus to serve all generations, to restoring prosperity to the middle class, and to giving everyone the opportunity to achieve the American Dream.