With Dean Baker on leave and Bruce Webb and other usual suspects laying low, I guess it is up to me to dump on the Washington Post's Editorial Page Editor, Fred Hiatt, for his latest assault on entitlement programs for the American elderly, something that he is the ringleader of at the WaPo editorial page, leading such eager followers as Robert J. Samuelson and Ruth Marcus, among others. Much of today's column, "Never-Compromise wins again: New Democrats are being driven to extreme positions," is old hysterical boilerplate, but there are some new themes. One is to dump on Congressional Democrats for supporting expanding Social Security, which is the "extreme position" he denounces them for, and is something he clearly never expected to see. The other is to see how he adjusts some of his standard lines in the face of this shifting of the political ground from trying to push cuts in Social Security (and Medicare) to trying to oppose efforts to expand its payments. Of course, his main line is to compare unfavorably the Congressional Dems to the GOPsters as sources of "gridlock." If only they would get on with good old Bowles-Simpson, all would be right in the VSP world!
In the face of this push to expand Social Security benefits, with Maryland's Rep. Chris Van Hollen being the main object of Hiatt's wrath (and Van Hollen is accused of moving to this position from his supposedly responsible previous position favoring Bowles-Simpson for, ack!, political reasons as he is running to replace Barbara Milkuski in the Senate, and, horrors!, he has figured out that expanding Social Security benefits might be, awful!, popular with Dem primary voters in MD), Hiatt softens up just a bit on his usual criticisms of Social Security. In particular, for the first time I have ever seen, he admits that "It is by no means lavish; the average monthly retirement benefits is about $1,300. It must be protected." And, he admits that it is "an essential and successful program that has lifted and continues to lift millions of elderly Americans out of poverty." Wow! This is the first time I have seen Hiatt say anything even remotely as positive as this about the program. But, hey, nothing like the earth moving under your feet politically to bring out the recognition that the program is not just some awful nightmare of fiscal disaster.
But of course, it still is such a disaster in his eyes, even if he now admits it has some virtues. So, he informs us that "But those monthly benefits are paid out of the taxes of working Americans, of whom there were more than five for every beneficiary in 1960. Today there are fewer than three workers for every pensioner. In 2030, the ratio will be two to one." Well. So those benefits are coming out of the hides of the virtuous younger workers! That the recipients have paid into the system in the past is not mentioned.
This demographic pitch is the main negative argument he provides, aside from his general whining about how the Dems are now contributing to gridlock and not accepting the sublime VSP wisdom of Bowles-Simpson. This is old stuff, but all the more reason for pointing out how silly it is. Presented this way to someone never thinking about the issue before or not knowing much,this forecasted change can sound pretty scary. However, what Hiatt and others pushing this line never mention is that this is not bad when one compares the US with other high income nations. Indeed, we have among the best demographics of any of these nations for such programs. That ratio we shall have in 2030 is what one finds already in Germany, where the budget is not in bad shape, people can retire earlier than in the US, and the benefits are higher than in the US. This is something to panic and freak out about? Obviously not, but one will not hear this from Hiatt and his flunkies.
Barkley Rosser
http://www.ssa.gov/oact/tr/2014/V_A_demo.html#271410
ReplyDeleteThe ratio of people 20-64 to those older is expected to be .366 in 2030. The total 'Dependency ratio' which includes children under 20 will be .829.
In 1960 the numbers were .173 and .905. Considering the greater participation of women in the workforce the actual dependency ratio of old and young combined on workers has actual declined and not increased. Even as worker productivity has improved. Now this doesn't quite ap to worker to beneficiary ratios which are found in this table
http://www.ssa.gov/oact/tr/2014/IV_B_LRest.html#493869 There you do find the 5.0 down to 2.2 in 2030 ratio. On the other hand if Hiatt would have picked 1965 that would have already been down to 4.0, less scary. Plus Hiatt slips from 'beneficiary' to 'pensioner' and so ignores the number of the former who are survivors and disabled, or in older terms 'widows,orphans and cripples' or categories of people whom there has always been a societal responsibility. Hiatt is just repeating numbers he doesn't understand, as overall dependency numbers show this isn't some increased burden in real terms.
I don't try to respond to the WaPo because Dean has that beat covered. Literally as in 'Beat the Press'. But I am still around.
Thanks, Bruce, for further clarifying how misleading Hiatt's arguments are. Dean has taken a break, but will supposedly return to duty on Beat the Press tomorrow. IN the meantime, the rest of us have had to hold down the fort, :-).
ReplyDelete"..."But those monthly benefits are paid out of the taxes of working Americans, of whom there were more than five for every beneficiary in 1960. Today there are fewer than three workers for every pensioner. In 2030, the ratio will be two to one." ..."
ReplyDeleteThree things:
(i) in a time of deflation benefits can be paid by simply distributing more money into the economy;
(ii) to increase the number of workers we could simply destroy or ban the technology that puts them out of work. Make sense?
(iii) it shoud not be taken as a given that because someone is working they therefore are in a position to pay tax. That should depend upon their incomes after reasonable living expenses are accounted for;