The wages of a typical worker have barely risen in four decades, many recent college grads are facing unbearable student loan burdens, housing costs are hugely outpacing inflation in many cities, making life especially hard for low- and moderate-income households. Naturally, the problem is the Social Security and Medicare received by baby boomers.
That's what Glenn Kramon, a former assistant managing editor at The New York Times, would have us believe according to his NYT column, seriously. He tells readers:
"My generation will say we paid into the system for decades and deserve our entitlements. But the one-earner baby boomer couple my age who have earned the average wage every year have paid less than $100,000 in Medicare taxes but are taking out benefits worth more than $400,000, after adjusting for inflation, according to C. Eugene Steuerle, a former Treasury official now at the Urban Institute.
"He also found that the couple will receive half a million dollars in Social Security after paying in little more than a quarter million."
Kramon even speculates that Medicare might have been responsible for Trump's victory in 2016.
"I even wonder whether increased Medicare spending is partly responsible for the election of Donald Trump, whose margin of victory came from voters in our generation. Without that spending, might enough of us have died sooner and tipped the balance in favor of Hillary Clinton?"
Before showing why this story is total nonsense, it is worth noting that the story that Social Security and Medicare are somehow responsible for all evil is a recurring theme at respectable news outlets like the NYT and National Public Radio. Just to give a few examples, we had this one last year in the Boston Globe on how the baby boomers are destroyed everything. (That's the title.) We had Abby Huntsman, whose main claim to fame is being born into a rich family, telling us on MSNBC how unfair these programs are to her generation. We have Thomas Friedman who periodically uses his NYT column for this purpose (e.g. here). And, we have Robert Samuelson who does it all the time with his Washington Post column.
Okay, but let's get into some substance. First, if we want to use Steuerle as a source, as Kramon does, let's look at the fuller picture. Kramon took an atypical example, a couple with only one earner, to show the worst case for the program in highlighting the generosity of benefits.
Suppose we took a couple with two average earners for a combined annual income of $102,600 in 2017 dollars (Table 15). Projected lifetime benefits are for someone turning 65 in 2015 are $624,000 compared with lifetime taxes of $557,000. That's an imbalance, but not a huge one. Medicare does show a larger imbalance of $429,000 in benefits compared with $144,000 in taxes, but this is much more than a generational story.
We pay twice as much for our health care per person as other wealthy countries, with nothing to show for it in terms of outcomes. The additional money is going to drug companies, medical equipment suppliers, doctors, insurance companies, and hospital administrators and profits. Are we (I'm a baby boomer, too) supposed to feel guilty because these people get too much money?
This fact is almost never discussed by the generational warriors. When I rudely raise it at their conferences I am told that "cutting costs is hard." Yes, these groups all have powerful lobbies. Of course, the hundreds of millions of people who are currently getting Medicare or expect to in the future are also, in principle, powerful. The generational warriors are willing to fight these people, but not the drug companies, medical equipment companies, etc.
There is one striking sidebar here. The projected costs for Medicare have fallen sharply in recent years because of a huge slowdown in the rate of health care cost growth. This slowdown has gone almost completely unnoticed in the media. The 2018 Medicare trustees report showed a projected shortfall of 0.82 percent of payroll over its 75-year horizon.
That compares to a projected shortfall of 3.88 percent in 2009. This change has the same effect as a drop in the payroll tax of more than 3.0 percentage points. The sharp drop occurred in the Obama years and went virtually unnoticed by the media, even by those who continually whine about the cost of Social Security and Medicare.
The decision to ignore this improvement in Medicare's finances is a bit hard to understand if we are having an honest debate. I'm fairly certain that if the numbers had gone the other way it would have gotten plenty of attention.
But the taxes we pay for and benefits we receive from Social Security and Medicare are only a very small part of the picture of our well-being. After all, if Bill Gates paid a 90 percent tax rate he would still have way more money than almost anyone else in the country. In that story, should we feel sorry for him because of his tax burden?
We pass on a whole economy, society, and environment to our children. If we want to assess generational equity in a serious way, this is what we must look at. I will just hit on a few areas here.
First, our children and grandchildren are much poorer because deficit hawks who claimed to be concerned about future generations prevented us from adequately stimulating the economy following the Great Recession. The weak recovery meant less public and private investment, fewer skills developed by workers, and millions being needlessly unemployed.
The result is a permanently smaller economy. The economy could be as much as 10 percent smaller today than it would have been if we had put in place an adequate stimulus following the Great Recession. Young people feel this effect in the form of much lower wages than they would be seeing otherwise. Can we get some apologies from the folks who blocked stimulus for the harm they inflicted on our children?
The second point is that we have seen a massive upward redistribution over the last four decades so that most workers have seen little benefit from productivity gains over this period. The impact of this upward redistribution dwarfs the impact of any possible increases we might see in Social Security and Medicare taxes. Can we get some apologies from the folks that pushed the trade, regulatory, and labor policies that led to this upward redistribution? (For a longer list you can get my book Rigged [it's free].)
Finally, we have the persistent refusal to take into account government-granted patent and copyright monopolies in assessing harm done to our kids. Maybe this is too complicated for people who write on economic issues. These grants of monopolies effectively allow drug companies, medical equipment suppliers, the software industry and others to impose private taxes on the public by changing prices that are often several thousand percent above the free market price.
If the government imposed a $380 billion tax (1.9 percent of GDP) on drugs everyone would yell and scream. But if it grants patent monopolies that allow Pfizer, Merck and the rest to charge prices that are $380 billion above the free market price, we are not supposed to pay attention.
Sorry folks, that is nonsense. Anyone who talks about the burden of government and taxes and doesn't mention the cost of patent and copyright monopolies is either a liar or does not have any idea what they are talking about. Needless to say, the cost of these monopolies swamps any possible tax increases associated with Social Security and Medicare.
This is, of course, far from a complete accounting. Among the issues left out is global warming, which is, more than anything, what baby boomers should be apologizing for.
Anyhow, the story about baby boomers whacking the kids because of their supposedly generous Social Security and Medicare benefits is one that is popular among folks who control news outlets. Look for many more pieces like this one by Kramon, even though they have no basis in reality.