No More 10 Minute Breaks: The Federal Government Spends a Lot More on the Elderly Than on Children. Should It?

The U.S. government spends far more on social programs for the elderly than it does on children, even though a growing body of research suggests investments in early childhood can have substantial long-term benefits for individuals and society, according to a new study.

The federal government in 2015 spent roughly $35,000 per elderly person, much of it via Social Security and Medicare, and around $5,000 per child through programs like food stamps, Medicaid and tax credits, according to a paper to be presented Thursday at the Brookings Institution. Accounting for spending on public elementary and secondary schools—$11,222 per pupil in the most recent available data, mostly from state and local governments—narrows the gap, but doesn’t close it.

“This imbalance is of particular interest given the fact that spending on children can be viewed as an investment while spending on the elderly is not,” said University of California, Berkeley economist Hilary Hoynes and Northwestern University economist Diane Whitmore Schanzenbach in the paper, part of the Washington think tank’s semiannual Brookings Papers on Economic Activity conference.

Their paper reviewed what the economists described as a “rapidly growing research literature” suggesting that “investments in early life can have particularly strong impacts on later-life outcomes” for low-income children, including better health, educational attainment and earnings. Among the existing efforts discussed: nutritional support through food stamps, tax credits that help boost family incomes, health coverage through Medicaid and cash welfare payments.

But “government spending has not responded to our increasing understanding of the importance of resources during early life, and the positive spillovers from safety-net spending on children,” they wrote. While such programs likely don’t pay for themselves down the road in the form of higher tax revenues and reduced government spending, the economists wrote, they still have benefits for individuals and more broadly.

“The costs are easily measured today but many of the benefits are harder to measure and may not appear until the longer run,” Ms. Hoynes and Ms. Schanzenbach wrote.

They also noted the composition of government spending on the safety net for children has shifted over the past quarter-century. Direct cash assistance to low-income families has declined over time as more resources have gone to the Medicaid health-insurance program and tax credits aimed at working parents, such as the earned-income tax credit. The distribution of benefits has changed, too, with relatively less spending going to the poorest families in favor of people with higher incomes.

That could pose problems during future economic downturns, since “building a safety net around work leaves families with little protection during times of high unemployment,” the researchers wrote.

Two in Every Five U.S. Children Spend at Least a Year in Poverty (Sept. 9, 2015)

Get a Job? Most Welfare Recipients Already Have One (April 13, 2015)

Early Childhood Education Boosts Lifetime Achievement, Paper Finds (Oct. 17, 2014)

from Real Time Economics http://ift.tt/2oS3zf8