COVID-19 Policy: Yet Another Intergenerational Transfer

There is still a lot we don’t know about the COVID-19 pandemic, but one thing we do know is that those most at risk of death are the elderly and people with other underlying health problems. While there is a small risk of death for people who are healthy and young, most healthy young people fully recover, and often, it appears, have no symptoms at all. Meanwhile, healthy young individuals disproportionately bear the economic costs of the government policies designed in response to the virus.

Retirees, who are more at risk from the virus, still collect their pensions and Social Security, and suffer minimal economic consequences from the government’s shutdown of the economy. Younger people, who are at much less risk from the virus, bear that economic cost.

Remember, the economic turmoil that we are now experiencing is not the result of the virus; it is the result of government policies in response to the virus. These government policies are yet another example of policies that impose costs on the working population for the benefit of the elderly.

The federal government is a huge intergenerational transfer program, imposing costs on the young for the benefit of the old. The two largest government programs are Social Security and Medicare. Add in Medicaid payments going to the elderly and other transfer programs, and it is easy to characterize the federal government as an organization that takes from the young to give to the old. Policies in response to COVID-19 are another example. They take jobs away from the young to protect the health of the old.

The irony of all this is that there is no need to do it. If the safest thing for those at high risk is to self-isolate and stay at home, they can choose to do that without a government mandate, and without forcing everybody to stay home. Others, who are less at risk from the virus but have more financial risk if they are out of work, could choose to work without interacting with those who choose to shelter at home. The virus might spread more rapidly, but this would more rapidly build herd immunity and the pandemic would be over sooner. That would benefit both those who value their jobs and those who are most at risk from the virus.

The young and healthy are forced to bear the economic costs of the government’s COVID-19 policies partly based on the argument that if they got it, the virus could spread to their grandparents. The government’s reaction to COVID-19 is consistent with government policy in general: impose costs on the young for the benefit of the old.

Randall G. Holcombe is a Senior Fellow at the Independent Institute, the DeVoe Moore Professor of Economics at Florida State University, and author of the Independent Institute book Liberty in Peril: Democracy and Power in American History.
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