Washington Post economics columnist Robert Samuelson was wringing his hands this weekend over America's "dysfunctional" politics, and the country's consequent failure to deal with several trends that, if not halted, are destined to impoverish us all.
No argument on the first part of the hand-wringing. On the second part, Samuelson is stacking his own deck.
A big target of Samuelson's concern is the elderly. "Every day 10,000 baby boomers turn 65," Samuelson wrote. "The retiree flood is swamping the federal budget." We can stipulate to the first assertion. The second is a complete non sequitur.
Dean Baker delivers a good summary of what's wrong with Samuelson's claim here. A couple of further points struck us, however.
First is a reaction to the epigraph of his column, which comes from a historian named D.W. Brogan, who wrote: "There is no parallel in history to the [American] experiment of free government on this scale. The scale accounts for a great deal, including . . . pessimism about the present or the future of America."
I was rather unnerved myself by Brogan's pessimism, until I looked closer and discovered that he wrote these words in 1944. Presumably he was grousing about Social Security, which had just started paying out benefits.
Given that the American experiment has managed quite nicely from 1944 right up to 2014 (that's 70 years, if you're counting), it would seem that Brogan's credentials as a forecaster of the future are pretty well shot to hell. Samuelson did Brogan's reputation no favors by reminding us how this prediction has turned out.
More to the point, Samuelson again: "Liberals won’t come to terms with aging. Believing that spending on the elderly and near-elderly constitutes the essence of progressivism — and ignoring the affluence of many elderly — some liberals even support raising these benefits."
Let's focus on that crack about "the affluence of many elderly," because it's the centerpiece of the "generational theft" claim that Samuelson plainly has bought into. This is the threadbare notion that grandparents are impoverishing their grandchildren with their grasping demands. We've dismantled this campaign here and here, and we also chastised Bill Maher here for thoughtlessly repeating it on a recent TV program.
The "affluent elderly" notion chiefly derives from two sources. One is the long campaign by the hedge fund billionaire Pete Peterson to persuade us that Social Security is undermined by the cost of paying out benefits to people like him. That's nonsense; the money paid out to millionaires and billionaires is barely a rounding error on Social Security's outflow.
The other is a 2011 study that placed the median net worth of households led by people 65 and older at $170,000. Is that a lot? No; since the study measured assets in 2009, it's probably mostly, or entirely, the equity in a house. Even if it's not, a $170,000 nest egg, dipped into at the traditional recommended rate of 4% a year so it lasts longer, would produce $6,800 a year, or about $567 a month. Does that sound "affluent" to you?
The true picture of elderly finances comes from the Social Security Administration, which reports that its benefits account for half the income or more of 53% of married couples older than 65 and 74% of unmarried persons; and 90% or more of the income of 23% of married couples and nearly half of unmarried elders. Samuelson asks why "some liberals even support raising these benefits." Now he knows.
The essence of Samuelson's hand-wringing is the assumption that America is already spending as much of its income as it can afford, and every extra dime paid out to the aged means a drastic cut in all other federal spending, including defense.
"Even if unworthy government programs are cut," he writes, "federal spending will easily exceed one-fifth of national income, which is more than today’s taxes will cover."
We think Samuelson means one-fifth of gross domestic product, which isn't exactly the same as national income. At least, the budget study he links to refers to GDP. It doesn't matter that much, since national income tracks GDP pretty closely, year after year.
What does matter is that there's nothing exceptional about federal spending exceeding one-fifth of GDP, or national income: The average share of GDP going to federal spending has averaged more than 21% over the past 40 years.
Samuelson pays lip service to the idea that the GOP will have to fold on taxes, and let them rise. But he ties that to "a bargain in which Democrats trim retiree benefits (Social Security and Medicare)." He's made the case for the first part of that bargain; but he hasn't come close to demonstrating the wisdom of the second.