NEW YORK -- Martin Feldstein, a former top economic adviser to President Ronald Reagan, said too many elderly Americans are trapped in poverty.
"I think it’s really shocking that we spend about $500 billion a year on Social Security, and yet we have many, many old people in poverty," said Feldstein, a Harvard economist, at The Economist's Buttonwood Gathering on Wednesday. "Something's wrong with that system."
Feldstein said that the Social Security system especially fails women who aren't in the workforce. He said that young and middle-aged women who lose husbands to death or divorce and don't have enough work experience get left out in the cold.
"If they don’t have an income history of their own, the Social Security system fails them," he said.
Feldstein served as chairman of the Council of Economic Advisers under Reagan from 1982 to 1984, when the poverty rate fell. But the poverty rate when Reagan left office was higher than it was when he took office.
Feldstein also said the government is failing to encourage Americans to save.
“We don't encourage wealth accumulation," Feldstein said. "We don't encourage people to have personal retirement accounts, personal savings accounts that they can use when there are medical emergencies or unemployment emergencies, and I think we ought to both encourage and tax facilitate for middle- and lower-income people to accumulate liquid wealth."
There is data that backs up Feldstein's point. Nearly one in three middle-class Americans say they plan to work into their 80s because they cannot afford to retire earlier, according to a recent Wells Fargo survey. Roughly one in two Americans are not saving for retirement at all. And one in two Americans do not have enough emergency savings to cover three months of expenses, according to Bankrate.com.