Now that we seem on the edge of giving lots more tax dollars to Donald Trump and his rich friends, the deficit hawks feel newly empowered and have Social Security and Medicare clearly in their sights. Robert Samuelson is on the job, telling us that we haven't prepared for the aging of the population.
His primary weapon is a new report from the OECD on the aging problem. The report says that the ratio of the over 65 population to the 25 to 65 population is projected to rise from 0.124 in 2015 to 0.196 in 2050. Oh wait, I made a mistake, that was the increase in this ratio in the thirty five years from 1945 to 1980. The ratio is projected to rise from 0.246 in 2015 to 0.379 in 2050.
The ratio is projected to rise faster in the next 35 years than it did in the earlier period, but the rise in the ratio in the earlier period did not prevent the country from enjoying huge increases in living standards. The same should hold true over the next 35 years. Real compensation per hour is projected to rise by roughly 60 percent over the the 35 years from 2015 to 2050.
Suppose we had a huge 5.0 percentage point increase in the payroll tax to pay for Social Security and Medicare taxes over this period. This would still leave workers with 50 percent more compensation after-tax than what they have today. Are we scared yet?
Normal productivity growth swamps the impact of demographics, as fans of arithmetic everywhere know. I should also point out, if the robot and artificial intelligence enthusiasts are even half right, productivity will increase far more than the wage projections in the Social Security trustees report assumes.
At this point, all good Beat the Press readers are yelling that most workers have not seen their share of wage growth. The money has gone to CEOs, Wall Street types, doctors and other high end professionals. If that continues over the next 35 years most workers will have a very difficult time dealing with any increase in payroll taxes.
That point is exactly right, which is why the living standards of our children depend hugely on reversing the upward redistribution of the last four decades. That is the point of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.
This is where the real money is. Folks like Robert Samuelson and the billionaire Peter Peterson are trying very hard to distract us from going after the rich, and instead go after our parents' Social Security and Medicare. It's a cheap trick, but they won't give up trying.
It is also worth mentioning in this respect that the GDP we've lost as a result of failing to rein in the growth of the housing bubble, and not having an adequate fiscal stimulus following its collapse, dwarfs any tax increases that may be needed to fund Social Security and Medicare in the years ahead. But Robert Samuelson and the Peterson gang would rather not have us talk about that fact either.