July 31, 2015
Steve Rattner is right that the baby boom generation failed millennials, but he has the reason wrong. He argues that we failed the millennials because they may have to pay higher taxes to support our and their Social Security and Medicare.
It’s hard to see the story here. We baby boomers have to pay much more in Social Security and Medicare taxes than did our parents and grandparents. Did they do us some horrible injustice? We do enjoy higher living standards and longer life spans, so what’s the injustice if we pay another 2-3 percentage points of our wages in taxes? If there is some moral wrong here, it’s difficult to see.
On the other hand there is the real problem that most millennials are not seeing real wage gains. This has nothing to with Social Security, it has to do with the fact that baby boomers let incompetent Wall Street types run the economy for their own benefit. This crew gave us the stock bubble in the 1990s and the housing bubble in the last decade. They also have given us an over-valued dollar. This creates a trade deficit that makes it virtually impossible to get to full employment without bubbles.
The net effect of the Wall Streeters policies has been the weak labor market of the last 14 years, which along with other policies has led to the bulk of the gains from economic growth going to the top one percent. Baby boomers should apologize for this upward redistribution, but the burden of Social Security is a molehill by comparison. If so much money was not being redistributed upward, real wages would be rising by 1.5-2.0 percent annually, taking 5-10 percent of these wage gains to cover the cost of longer retirements would not pose any obvious problems.
Addendum
I should have also pointed out that Rattner repeats the nonsense claim that Social Security could save any substantial amount of money by taking away benefits from wealthy seniors. If we define “wealthy” to be a non-Social Security income of $80,000 per person (less than half the cutoff for “wealthy” when President Obama raised taxes in 2013), the program could save just over 1 percent of its spending by phasing out benefits for higher income individuals. While it is possible to get lots of money by taxing rich people, it is not possible to get much money by taking away their Social Security since they don’t get much more than the rest of us. Rattner’s plan can only save much money for the program if he wants to take away benefits from middle income people.
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