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Fedea proposes to match public spending for the elderly with programs for young people

Date: April 24, 2024 Time: 09:11:06

The Foundation for Applied Economics Studies (Fedea) has published an article signed by José Ignacio Conde-Ruiz (Fedea and UCM) and Vincenzo Galasso (Unversita Bocconi) in which he proposes introducing an “intergenerational tax rule”. In this he motivates that for each additional euro of public spending directed at the elderly, an additional euro is assigned to spending programs directed at young people, with the aim of “limiting the electoral effect of aging”.

In the same way, it studies to what extent the aging of the population increases the political relevance of older generations, thereby contributing to an “unequal and unfair” intergenerational distribution of public resources. According to Fedea, “constitutional norms” are needed to protect young and future generations and, therefore, he proposes this intergenerational fiscal rule that “automatically” regulates the stipulation of public spending, whose simplest formulation would equal each euro of additional spending to the older people and the youth group.

To cope with demographic dynamics

The intergenerational fiscal rule, according to Fedea, would first of all help to reorient fiscal spending in favor of young people over time and act as a “counterweight” to demographic dynamics, which by increasing the number of older people automatically tend to increase the total cost of programs such as pensions, health or dependency.

Secondly, this rule would increase the opportunity cost of transferring resources to the elderly in order to win an election, since for every euro that politicians wanted to spend on the elderly, they would have to spend the equivalent on the young, with which every euro committed in the election of the older ones it would cost them double.

Youth-friendly programs

And thirdly, it would change public spending towards programs that favor young people, such as education from zero to three years, primary, secondary and even universities, increase the R+D+i budget, housing or aid for emancipation, which would contribute more to growth and job creation.

Specifically, Fedea understands spending that favors young people to be anything that improves productivity or long-term growth, such as investment in education, R+D+i, housing, aid for emancipation or family or in the fight against climate change. The ‘think tank’ indicates in its article that most of the OECD countries are aging rapidly, due to a large reduction in fertility rates and a large increase in life expectancy, particularly in old age, and it is expected that these phenomena continue and “endanger” the financial sustainability of many Welfare State programs

The article shows how political demography is showing that a large part of public resources are being allocated to the older population. Specifically, the percentage of spending on social protection that goes to the elderly has greatly threatened in Spain, which has gone from 75% to 82% of the total between 2008 and 2019. In Germany and France, the increase in spending has been lower, going from 73% to 75% and from 72% to 73%, respectively. In Italy, this percentage has fallen, but it was already very high, at 90.5%.

“And policy makers are elected politicians. In this context, it seems natural to agree with the political economy approach, which posits that parties and politicians respond to electoral incentives. So political demography is against youth,” the study notes.

In the specific case of Spain, Fedea points out that in the next general elections there will be almost 6.6 million potential young voters (from 18 to 30 years old) and close to 10 million potential voters over 65 years of age, and points out that when in the demographic pyramid the relationship between the elderly and the young increases “dramatically”, politics designs its electoral proposals for the “dominant generations”, that is, for the elderly.

But in addition, Fedea assures that the elderly are also more attractive because they are “easier to persuade and mobilize.” “Reaching older people during the election campaign is simple. Just use traditional media: newspapers, TV and radio. Capturing their attention is just as easy,” the article reads.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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