Monday, August 22, 2016

It Is Monday And The Washington Post Wants To Cut Social Security Benefits (Again)

To  be more specific, Robert J. Samuelson on the editorial page, and I am posting this because for some reason Dean Baker did not post about this, perhaps bored with yet another round of WaPo and its columnists doing the same old same old over and over again, especially on Mondays.  This one draws on a new study of the impact of aging on economic growth, specifically per capita growth, using US states as the data sources by Nicole Maestas, Kathleen Mullen, and David Powell, the first in the Harvard Medical School and the latter two at the RAND Corporation.  A main finding is that a 10% increase in the percent of a state population that is over 60 implies a 5.5% decline in real per  capital income growth.  They find a third of this due to fewer workers, but the other  two thirds due to  unexplained productivity changes, with RJS recognizing that the paper does not provide completely convincing explanations for this, although there are some, such as that the retirement of older workers with their experience reduces  the productivity of those left behind still working.

Of course, when it comes to the end of the column Samuelson does that old Monday WaPo thing, dragging out Social Security as a big problem. Now indeed, it is certainly the case that anything that damages future economic growth damages the future status of Social Security, although apparently this paper has nothing to say about this, and Samuelson does not provide any specific estimates.  But this does not hold him back from the following: "As a society, we need a better  balanceof  obligation between the older and younger generations.  Until now, policy has favored the elderly.  The remedies to shift the balance are well-known: higher eligibility ages for government benefits; less generous benefits and tax breaks for wealthier retirees. None is politically easy." 

Yes,  that was it, the complete list of possible ways of  dealing with this problem. Should we increase aid to  students going to college or making moves to reduce college tuitions that might help the younger generation?  Nope, not a word.  How about increased aid for poor children?  Nope, not a word.  Medicare was not mentioned,which Dean Baker has regularly pointed out has much more rapidly rising costs than Social Security and helps the old, but as he has regularly also noted, most of that is due to  the continuance of medical care costs rising more rapidly than inflation, just as college tuitions have been.  No suggestion from Samuelson that any effort to try to  restrain these increases might help with this problem.  No, it was all about messing with Social  Security, although for once he did mention tax changes, not a general tax increase, but one maybe just directed at the wealthy, not recognizing that this could undermine future support for the program.

I have not read the paper, only its abstract, but at least one issue appears to me as possibly contributing to the large effects that the authors of this study find that RJS does not note  This is that it might be that they have not accounted for the fact that migration of the young is very responsive to job availability.   So, if a state has more rapid per capita growth than another one, and thus more rapid job growth, it will see younger people moving into it and out of the other one, at least relative to each other.  So, a more rapidly growing state will tend to end up with a lower percentage of elderly than a slower one, without any of this needing to be due to the rise in the percentage of elderly themselves.  This is certainly what is going on in say West Virginia, which has one of the highest percentages of elderly in the country.  Now it may be that they do not want to pay for schools, which may be damaging long run growth, but it is obvious that the main thing going on there is that with the collapse of the coal mining industry, younger people have moved out of the state leaving the old behind, not that some rise in the numbers of  old people drove the coal mining industry out of the state.  However, I must grant that it is possible that they have somehow accounted for this sort of endogeneity effect.

In any case, even if the study has completely covered for all of these sorts of issues, it is completely unsurprising that Samuelson on a Monday somehow sees the only thing that should be done in the face of this supposedly negative effect of the elderly on growth is to cut Social Security benefits.

Barkley Rosser


ProGrowthLiberal said...

Does Robert (no relation to Paul) Samuelson think there is a West Virginia Soc. Sec. system separate from the systems for each of the other 49 states. There is a reason this is a Federal (not state) system. I guess RJS does not know why this is the case.

dilbert dogbert said...

You might add Puerto Rico to West Virginia.