November 06, 2015
Most young people today are having tough times economically. As we know, the main reason for this fact is that so much income has been redistributed upward over the last thirty five years. (Also, we have a cult of deficit reduction in which our leaders in Washington insist on keeping deficits small even when this means slowing growth and keeping people out of work.) Their parents are not doing notably better, with most approaching retirement with little to support them other than their Social Security and Medicare. The wealth holdings of the middle quintile of households headed by someone between the ages 55–64 averaged $165,700 in 2013. Excluding home equity it was just $89,300.
But Social Security and Medicare are still something. And the guiding philosophy of many in Washington is that a dollar that is in the pocket of a poor or middle-class person is a dollar that could be in the pocket of a rich person. Furthermore, if they can get the kiddies to complain about their parents’ Social Security and Medicare they may not notice all the money that the Wall Street gang, the pharmaceutical companies, and the rest are pocketing at their expense.
Hence we get folks like private equity billionaire Peter Peterson devoting much of his fortune to perpetuate attacks on Social Security and Medicare. The Washington Post has also been a major actor in this effort using both its news and opinion pages to advance the cause. Unfortunately, they appear to have enlisted a relatively new economics reporter, Jim Tankersley, who should know better.
Tankersley used his column to complain that “baby boomers are what’s wrong with the economy.” He adds in the subhead, “they chewed up resources, they ran up the debt, and escaped responsibility.”
He lays out the case in the third and fourth paragraph:
“Boomers soaked up a lot of economic opportunity without bothering to preserve much for the generations to come. They burned a lot of cheap fossil fuels, filled the atmosphere with heat-trapping gases, and will probably never pay the costs of averting catastrophic climate change or helping their grandchildren adapt to a warmer world. They took control of Washington at the turn of the millennium, and they used it to rack up a lot of federal debt, even before the Great Recession hit.
“If anyone deserves to pay more to shore up the federal safety net, either through higher taxes or lower benefits, it’s boomers — the generation that was born into some of the strongest job growth in the history of America, gobbled up the best parts, and left its children and grandchildren with some bones to pick through and a big bill to pay. Politicians shouldn’t be talking about holding that generation harmless. They should be asking how future workers can claw back some of the spoils that the “Me Generation” hoarded for itself.”
Okay, so it was the masses of boomers who opted to do nothing about global warming, not for example folks like the owners of the Washington Post who chose to leave the topic as a backburner issue while they instead hyped budget deficits endlessly? I know, we expect boomers out in Chicago, Kansas City, and rural Iowa to spend time in the evening after they come home from their jobs as truckdrivers, school teachers, and day care workers to read up on global warming. They should know that they can’t count on the professional journalists to give them the necessary information to recognize the enormity of the crisis. Yeah, we boomers let everyone down.
In terms of the federal debt, a bit of an economics lesson is in order here. We began to run large deficits in 2002 because the stock bubble that had been driving the economy collapsed. We needed a new source of demand in the economy. The rich folks controlling policy didn’t want us to talk about the over-valued dollar that was causing the trade deficit, so that meant running large budget deficits. The alternative of having balanced budgets would have meant less growth, employment. and investment. Maybe in Washington Post land that would be a better story for our children, but not in the real world.
Of course things really would have been fun if we tried to balance the budget after the collapse of the housing bubble. We may have been able to push unemployment above 20 percent. Lots of kids would be growing up on the streets, but at least us boomers could tell them they don’t have to worry about the national debt.
Tankersley goes on to blame boomers for opening up trade with China and other developing countries in a way that wiped out millions of middle class jobs, while protecting doctors, lawyers, and other highly educated workers. (Okay, he doesn’t complain about the protection part.) Are the boomers as a whole really to blame for this policy? After all, recent trade deals have always polled very badly. On the other hand, folks like Tankersley’s editors at the Post are big fans. So are most of the millionaires and billionaires who contribute to political campaigns.
Then we get my favorite part:
“The Urban Institute has estimated that a typical couple retiring in 2011, at the leading edge of the boomer wave, will end up drawing about $200,000 more from Medicare and Social Security than they paid in taxes to support those programs. Because Social Security benefits increase faster than inflation, boomers will enjoy bigger checks from the program, in real terms, than their parents did.”
Yes, us boomers will get more back from Social Security than our parents, but that’s because we paid in at a 12.4 percent rate through almost our whole working lifetime. Our parents paid a considerably lower tax rate on a lower base. In fact, if Tankersley looked at the study he cites he would see that most boomers can expect to get less back from Social Security than we paid in.
The $200,000 gap is more than 100 percent explained by Medicare. And this is because we pay so much to doctors and drug companies for our health care. If we paid the same amount per capita for our health care as people in Europe and Japan, our Medicare taxes would easily cover the bill. So are we boomers as a generation supposed to feel guilty because our doctors and drug companies get so much money?
Finally, it is worth noting that our kids will do just fine unless inequality within generations continues to grow. The Social Security trustees project that real wages will rise on average by more than 50 percent over the next three decades.
Source: Social Security Trustees Report and author’s calculations.
This means that our children will do fine if they don’t let all the money continue to go to the likes of Peter Peterson, Robert Rubin, and Jeff Bezos. So us boomers may have an obligation to help our kids retake the country from the rich, but they should keep their hands off our Social Security and Medicare. We paid for it.
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