S&P’s U.S. Downgrade: What’s Age Got to Do With It?

S&P’s U.S. Downgrade: What’s Age Got to Do With It?

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SAN FRANCISCO, Calif.--One of the more intriguing discussions about Standard and Poor’s downgrading of the United States’ credit rating came last Tuesday morning in a testy interview with Rep. Barney Frank, D-Mass., and Steve Inskeep on NPR’s Morning Edition.

The edgy exchange exposed deep flaws in what passes for conventional wisdom in the national media about balanced compromise on the National Debt. But more than that, it raised questions about why genuine concern for vulnerable Americans is so easily dismissed by even presumably liberal media. And where does the idea come from that so-called austerities – ones acceptable by S&P and other international financial entities -- can only be fair if one side agrees, say, to tax increases on corporate jets, if the other must compromise the wellbeing of poor and middle-income seniors and their families?

For a clue to the answer, readers can look toward S&P -- not its downgrading of the U.S. credit rating last week, but its dour report of last October titled, “Global Aging 2010: An Irreversible Truth." Actually, “report” may be too bland a description for what some might read as an edict sovereign nations must follow closely – or else find themselves severely disciplined by lowered credit ratings and subsequently starved economies.

Defense vs. Medicare

In Tuesday’s interview, Rep. Frank sharply challenged NPR’s Inskeep when his questions reflected the “irreversible truth” quietly advanced for years in financial and political circles by S&P, the International Monetary Fund and other global money entities.

When Inskeep stated, “the biggest part of the federal budget is entitlements,” Frank countered, “No, wrong. I'm sorry. The defense budget is bigger than Medicare, and Social Security is, in fact, self-financing, still is.”

Inskeep pressed Frank to stipulate that “a very, very, very, very, very big part of the budget is entitlements.” He asked if Democrats (“seen as resisting cuts”) will appoint people to the new congressional super committee, charged with slashing another $1 trillion-plus from the federal budget, “who are ready to make a deal?”

Frank retorted, “I am not going to tell an 80-year-old woman living on $19,000 a year that she gets no cost-of-living, or that a man who has been doing physical labor all his life and is now at a 67-year-old retirement -- which is where Social Security will be soon -- that he has to work four or five more years.”

Mainstream media has long reflected the presumption that liberal leaders are uncompromising bleeding hearts, who are as culpable as Wall Street interests in jeopardizing the nation’s economic future. The assumed intransigence on both sides of the debate was common in Washington press-corps reporting on the presidential entitlement reform commissions during the Bill Clinton and George W. Bush administrations.

But partisan bickering begs the question: Where did the idea of curtailing even very modest health and income security programs, such as provided by the United States to its retirees, become conventional thinking? Why should anyone care about S&P’s fiscal prescription?

S&P’s “alarming” report on aging

On Tuesday, S&P President Deven Sharma denied on CNBC that his company was overreaching to compensate for its having given AAA-ratings to companies propped up by subprime mortgages. S&P’s dismal performance fueling the current economic conflagration. (S&P’s competitors, Moody’s and Fitch are yet to reduce their triple-A rating of the United States.)

But Sharma insisted, “Our role is to call risks objectively, with transparency.”

In truth, this week’s S&P debacle stands in the shadow of its longstanding political influence. Last April, I was surprised by comments made by one of the leading business consultants in the field of aging, Ken Dychtwald, best known for his book Age Wave. Dychtwald has advised a long list of Fortune 500 CEOs on how best to position their products and services for the huge baby boomer market.

He mentioned in an interview last fall that S&P had published an “alarming” report “that credit-rated all the countries of the world based on their aging burden. It is a sophisticated report, and all the people I know in investment and business read it and took it seriously.” Dychtwald also noted that reporters have posed more negative questions and comments about older people than he's heard in two decades.

Dychtwald added, “Basically, the conclusion was, if you have a lot of old people, your country’s going to go belly up.”

In fact, the “Irreversible Truth” report was the third such analysis issued by S&P since 2004. S&P’s age-dominated perspective came in the wake of two decades of international efforts by major economic entities to impose austerities on public spending – the kind of cuts triggering riots from London to Athens over the depletion of social investments ranging from education to health care to the kind of job-generating public stimulus programs that many progressive economists, some with Nobel prizes, say are keys to economic growth and recovery. The S&P report takes the position that economic growth is not enough.

Those who wonder why so much pressure in the United States is bearing down on Social Security, Medicare and Medicaid, here is what S&P told global financial leaders – and the world’s finance ministers last October:

“No other force is likely to shape the future of national economic health, public finances, and policymaking as the irreversible rate at which the world's population is aging. The problem has been long observed and is well understood . . . . Standard & Poor's Ratings Services believes that the cost of caring for these people will profoundly affect growth prospects and dominate public finance policy debates worldwide.”

Downgrade threats ignore elders’ contributions

The report goes on in dull and dour terms about “the burden of aging-related spending” and applies its framework to nations both advanced and emerging. The S&P document speaks of “future budgetary imbalances” caused by poorly managed spending on the old. As technocratic jargon goes, the report may fall short of evoking the phrase, “the banality of evil,” but it repeatedly suggests an air of paternalism that is negligent of its consequences.

Not only are advanced economies, such as the United States, facing problems, according to S&P’s report, developing nations need to come around and start “pruning benefits” promised by their social security systems. And nations must realize that the costs of long-term care will place them at “an upside risk” unless they resist political pressure to help families cover the costs of long-term care programs for frail seniors.

Nowhere in its 60-page “objective” analysis, does the S&P report refer to the cost of wars, corruption or unwarranted tax breaks for the wealthy. Typically, the finance world refers to these as temporary expenses, not those requiring, as S&P says, “structural reforms of pension and health-care systems.” Nor does the ratings agency examine how better control of overall health care costs – the major source of escalating government budgets in the United States. It only calculates the strain eldercare will place on national economies.

S&P’s report on aging does, however, render thinly veiled warnings to countries that they might find themselves, for example, “less likely to retain investment-grade ratings” lest they wrest control of their budgets in the agency’s prescribed manner.

Dychtwald, someone usually upbeat about the corporate world and its potential for serving seniors and profiting from serving senior markets, observed, “What I’ve seen in the past couple of years is a multiplication of serious minded people talking about aging in very negative ways. I think that’s because the economists have seized the subject. They’re viewing older people not in terms of their qualities of contribution and wisdom, but seeing them as a burden on the government. And the stories are turning more and more dark.”

The enormous undue influence of S&P and other big-finance concerns, fails to incorporate the alternative view of population aging common among experts who actually know gerontology, that older people, especially today’s increasingly healthier and educated seniors, represent a rich fund of human capital. Their economic and social contributions, if encouraged and supported, such as through vigorous enforcement of anti-discrimination laws for older workers, can go a long way to offset health care expenditures and boost national productivity.

Lacking in S&P’s global economic outlook is what Dychtwald called “the other side of the equation.” More than seeing grandparents as threats to national bottom lines, he said, they need to ask, honestly, “What is it that old people give? What is their value? What is the wealth of nations?”



 

Comments

 
Matt Thornhill

Posted Aug 12 2011

Great piece, Paul.

You're right in that there is virtually no dialogue about how we, as a nation, leverage the "longevity dividend" for social good.

Dychtwald has a line he uses that I like: It's time to stop focusing on the problems of aging, and start thinking about the promise of aging.

Our future as an "older" nation (and world) ultimately should be a good thing. Getting there from here is what's going to be hard. And messy.

Matt

Anonymous

Posted Aug 12 2011

BRAVO Paul - the first mention of this connection, which is obviously a major driver of the S&P position. Ageism is having a brutal impact on our economy - via S&P's judgements about the absence of value of older adults.
Ken Dychtwald

Brent Green

Posted Aug 12 2011

Thank you for participating in my radio show, Generation Reinvention. Ken Dychtwald sent me a link to this article just minutes before we began recording your show. You and I thus had a chance to discuss this timely article and its implications. I have always appreciated your insightful reporting, analysis and consistency with which you expose underlying ageism in allegedly “objective research” and “sophisticated reports.” We need astute analysis and reframing of arguments in favor of penalizing aging nations for population aging. Those who have weighed in here agree about the real opportunities of aging nations and the possibilities of creating new social and economic paradigms to take advantage of the “wealth of nations” referred to by Ken.

Brent

Anonymous

Posted Aug 12 2011

Outstanding work, Paul. I haven't seen anyone else connect these dots in news coverage or editorially. I hope your piece is reproduced widely. Thank you.

Maria Vesperi

Anonymous

Posted Aug 13 2011

Paul and Ken,
A vital and clarion call from each of you. This is a great piece. Please continue with your elevation and amplification of the "promise" and actual contributions of all of us for a healthy, interdependent and connected society. Many thanks, Jennie Chin Hansen

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