Legacies of the War on Poverty

Chapter 7. The Safety Net for the Elderly

/ 179 Chapter 7 The Safety Net for the Elderly Kathleen Mcgarry W hen Lyndon Johnson declared a War on Poverty in 1964, the poverty rate was 19 percent, a rate deemed far too high for a nation with the wealth and resources of the United States. Yet far worse was the poverty rate for those age sixty-five or older, which stood at 35 percent in 1959 (data for 1964 are not available), more than twice the 17 percent rate among non-elderly adults.1 Despite this inauspicious start, the War on Poverty has been a success for the elderly by almost any measure. In the most recent data available, the poverty rate for the elderly in 2010 was 9 percent, approximately one-quarter of what it once was and far lower than the poverty rate for children, 22 percent, or nonelderly adults, 13.7 percent.2 This dramatic success in reducing poverty among the elderly has spanned racial and ethnic groups and is evidenced even among the oldest-old. However, despite the impressive declines, segments of the elderly population remain who experience disproportionally high risks of poverty, suggesting there is more to do. For example, the poverty rate for elderly women living alone is nearly 20 percent—an enormous improvement from the 1965 rate of 63.3 percent, but unquestionably higher than that for many other groups. Although the War on Poverty has produced stunning results for the elderly, these simple statistics tell only part of the story. For the elderly in particular, an income-based measure of well-being ignores many important factors. By some measures, the gain in well-being accruing to the elderly may be far less than the poverty rates indicate because items such as the soaring cost of health care are ignored . Conversely, the same numbers may mask even greater improvements in well-being because the availability of Medicare and Medicaid (see chapter 10, this volume), in-kind transfers such as Food Stamps, now the Supplemental Nutrition Assistance Program (SNAP), and the prevalence of owner-occupied homes are also ignored. This chapter focuses on the income-related programs established or significantly expanded shortly after Lyndon Johnson’s 1964 State of the Union speech. Legacies of the War on Poverty 180 / RESouRCES oF ThE ELDERLY BEFoRE ThE WaR oN PovERTY The Social Security program has unquestionably played an enormously important role in improving the economic well-being of the elderly. Social Security was established in 1935 and throughout its decades of expansion the incomes of the elderly increased dramatically. Although it is impossible to say what incomes among those sixty-five or older would be without Social Security, it is clear that for low-income elderly, the program improved their standard of living relative to what it would have been in its absence and is the most important component of income by far. Social Security is an entitlement program but it is not means tested; benefits are accrued by all those who engaged in substantial covered employment over their work life.3 Although benefits are a function of earnings, the formula is progressive: benefits for lower-income workers replacing a larger fraction of earnings than for higher-income workers. Not only does Social Security constitute an important component of income, but as a lifetime annuity it insures against longevity risk— the prospect of living longer than expected and depleting resources. Through this insurance mechanism, Social Security provides an additional benefit over what would be an actuarial equivalent lump sum received at retirement. Social Security also provides important insurance to spouses, widows, and dependents . Spouses who are not covered through their employment, or who have low benefits, are eligible for a spousal benefit of 50 percent of that of the covered worker. Furthermore, on the death of a covered spouse, the uncovered individual receives the full benefit to which the partner had been entitled. Spouses who have their own Social Security benefit are entitled to the larger of the benefit based on their earnings or 50 percent of their partner’s benefit. Also, if they outlive their partner, they receive the maximum of their benefit or 100 percent of the deceased partner’s benefit. Survivors of covered workers—widows and widowers and dependent children are entitled to survivor benefits even if the covered worker dies before claiming Social Security benefits. Means-tested programs for the indigent elderly predate the Social Security Act, stemming back to the 1920s when various states began providing assistance to the poor...