Social Security and Medicare are hugely important for the security of the non-rich population of the United States. For this reason, Robert Samuelson and the Washington Post hate them.
As we know, this is a question of basic political philosophy. In the view of Samuelson and the Post, a dollar that it is in the pocket of low or middle class people is a dollar that could be in the pocket of the rich. And Medicare and Social Security are keeping many dollars in the pockets of low and middle class people.
Today’s column by Robert Samuelson tries to tell us that Franklin Roosevelt would be appalled by the current state of the Social Security program. Of course, he produces not a single iota of evidence to support this position, although it is very clear that Samuelson doesn’t like Social Security.
Samuelson begins by telling us that:
“It [Social Security] has become what was then called ‘the dole’ and is now known as ‘welfare.’ This forgotten history clarifies why America’s budget problems are so intractable.”
He later adds:
“Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they ‘earned’ these benefits. To reduce them would be to take something that is rightfully theirs.”
Of course Samuelson is 100 percent wrong here. Payroll taxes have been segregated. That is the point of the Social Security trust fund and the Social Security trustees report. These institutions would make no sense if the funds were not segregated.
Samuelson is welcome to not like the way in which the funds were segregated, in the same way that I don’t like the Yankees, but that doesn’t change the fact that the Yankees have a very good baseball team. Since its beginnings, the government has maintained a separate Social Security account. Under the law, no money can be paid out in Social Security benefits unless the Trust Fund has the money to pay for them.
In this sense, the funds are absolutely segregated. Samuelson doesn’t like this, but why should any of the rest of us care? The rest of the piece shows the same dishonesty and lack of respect for facts.
Samuelson later tells readers:
“But now, demographics are unfriendly. In 1960, there were five workers per recipient; today, there are three, and by 2025 the ratio will approach two. Roosevelt’s fear has materialized. Paying all benefits requires higher taxes, cuts in other programs or large deficits.”
Okay, let’s think about this for a minute. We went from five workers per retiree in the 1960s to roughly three workers for each retiree in the 90s. This ratio is projected to fall to roughly two workers per retiree by 2030 (not 2025, as readers of the Trustees report know).
On average we were much richer in the 90s than in the sixties, in spite of the fall in the ratio of workers to retirees. The same will be true in 2030, even assuming that we see the projected decline in the ratio of workers to retirees.
A small fact that Samuelson never mentions in this piece is that the Congressional Budget Office projects the program to be fully funded through 2038, with no changes whatsoever (i.e. no new taxes, contra Samuelson). If we want to make the program fully solvent for the rest of the century, a tax increase that is equal to 5 percent of projected wage growth over the next three decades should be roughly sufficient to do the trick. Are you scared yet?
There is an issue that most workers have not shared in the economy’s growth over the last three decades. This is indeed a problem. If recent trends in inequality persist then any increase in Social Security taxes will be a burden, but the problem here are the policies that have brought about this upward redistribution of income, not Social Security.
Then Samuelson gives us his coup de grace:
“Although new recipients have paid payroll taxes higher and longer than their predecessors, their benefits still exceed taxes paid even assuming (again, fictitiously) that they had been invested. A two-earner couple with average wages retiring in 2010 would receive lifetime Social Security and Medicare benefits worth $906,000 compared with taxes of $704,000, estimate Steuerle and Rennane.”
Okay, this is a really nice trick. Remember we were talking about Social Security? Note that Samuelson refers to “lifetime Social Security and Medicare benefits.” It wasn’t an accident that he brought Medicare into this discussion. That is because Steuerle and Rennane’s calculations show that this average earning couple would get back less in Social Security benefits than what they paid in taxes. That would not fit well with Samuelson’s story, so he brings in Medicare (remember this is the Washington Post).
And, the high cost of Medicare benefits is not due to their great generosity. The high cost is due to the fact that we pay our doctors, our drug companies, and our medical equipment suppliers way more than do people in any other country, and we have no better outcomes. If our per person costs for health care were comparable to costs in Germany, Canada, the UK or any other wealthy country, then workers would be paying far more for their Medicare benefits than the cost of what they are getting in care.
The story here is that Samuelson wants to punish ordinary workers for the fact that we pay doctors and the other big winners in this story too much. That may not make sense, but they don’t call this paper “Fox on 15th Street” for nothing.
Social Security and Medicare are hugely important for the security of the non-rich population of the United States. For this reason, Robert Samuelson and the Washington Post hate them.
As we know, this is a question of basic political philosophy. In the view of Samuelson and the Post, a dollar that it is in the pocket of low or middle class people is a dollar that could be in the pocket of the rich. And Medicare and Social Security are keeping many dollars in the pockets of low and middle class people.
Today’s column by Robert Samuelson tries to tell us that Franklin Roosevelt would be appalled by the current state of the Social Security program. Of course, he produces not a single iota of evidence to support this position, although it is very clear that Samuelson doesn’t like Social Security.
Samuelson begins by telling us that:
“It [Social Security] has become what was then called ‘the dole’ and is now known as ‘welfare.’ This forgotten history clarifies why America’s budget problems are so intractable.”
He later adds:
“Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they ‘earned’ these benefits. To reduce them would be to take something that is rightfully theirs.”
Of course Samuelson is 100 percent wrong here. Payroll taxes have been segregated. That is the point of the Social Security trust fund and the Social Security trustees report. These institutions would make no sense if the funds were not segregated.
Samuelson is welcome to not like the way in which the funds were segregated, in the same way that I don’t like the Yankees, but that doesn’t change the fact that the Yankees have a very good baseball team. Since its beginnings, the government has maintained a separate Social Security account. Under the law, no money can be paid out in Social Security benefits unless the Trust Fund has the money to pay for them.
In this sense, the funds are absolutely segregated. Samuelson doesn’t like this, but why should any of the rest of us care? The rest of the piece shows the same dishonesty and lack of respect for facts.
Samuelson later tells readers:
“But now, demographics are unfriendly. In 1960, there were five workers per recipient; today, there are three, and by 2025 the ratio will approach two. Roosevelt’s fear has materialized. Paying all benefits requires higher taxes, cuts in other programs or large deficits.”
Okay, let’s think about this for a minute. We went from five workers per retiree in the 1960s to roughly three workers for each retiree in the 90s. This ratio is projected to fall to roughly two workers per retiree by 2030 (not 2025, as readers of the Trustees report know).
On average we were much richer in the 90s than in the sixties, in spite of the fall in the ratio of workers to retirees. The same will be true in 2030, even assuming that we see the projected decline in the ratio of workers to retirees.
A small fact that Samuelson never mentions in this piece is that the Congressional Budget Office projects the program to be fully funded through 2038, with no changes whatsoever (i.e. no new taxes, contra Samuelson). If we want to make the program fully solvent for the rest of the century, a tax increase that is equal to 5 percent of projected wage growth over the next three decades should be roughly sufficient to do the trick. Are you scared yet?
There is an issue that most workers have not shared in the economy’s growth over the last three decades. This is indeed a problem. If recent trends in inequality persist then any increase in Social Security taxes will be a burden, but the problem here are the policies that have brought about this upward redistribution of income, not Social Security.
Then Samuelson gives us his coup de grace:
“Although new recipients have paid payroll taxes higher and longer than their predecessors, their benefits still exceed taxes paid even assuming (again, fictitiously) that they had been invested. A two-earner couple with average wages retiring in 2010 would receive lifetime Social Security and Medicare benefits worth $906,000 compared with taxes of $704,000, estimate Steuerle and Rennane.”
Okay, this is a really nice trick. Remember we were talking about Social Security? Note that Samuelson refers to “lifetime Social Security and Medicare benefits.” It wasn’t an accident that he brought Medicare into this discussion. That is because Steuerle and Rennane’s calculations show that this average earning couple would get back less in Social Security benefits than what they paid in taxes. That would not fit well with Samuelson’s story, so he brings in Medicare (remember this is the Washington Post).
And, the high cost of Medicare benefits is not due to their great generosity. The high cost is due to the fact that we pay our doctors, our drug companies, and our medical equipment suppliers way more than do people in any other country, and we have no better outcomes. If our per person costs for health care were comparable to costs in Germany, Canada, the UK or any other wealthy country, then workers would be paying far more for their Medicare benefits than the cost of what they are getting in care.
The story here is that Samuelson wants to punish ordinary workers for the fact that we pay doctors and the other big winners in this story too much. That may not make sense, but they don’t call this paper “Fox on 15th Street” for nothing.
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In a NYT Economix blogpost Jason DeParle ponders the fact that government surveys are not showing much increase in poverty, even though we know there are many people experiencing long periods of unemployment and many forms of government assistance have been cut back. One possible explanation is that people in poverty and extreme poverty are less likely to be covered by the survey.
My colleague, John Schmitt, found clear evidence of a coverage problem in comparing employment rates as shown in the 2000 Census and the overlapping months of the Current Population Survey (CPS). This is a useful check on the accuracy of the CPS, the main survey for measuring both unemployment and poverty, since the Census has near universal reach with a response rate of close to 99 percent. By comparison, the coverage rate for the CPS is close to 88 percent.
Even after applying a Census adjustment formula, Schmitt still found a substantial difference in employment rates, with the CPS showing an overall employment rate that was more than a full percentage point higher than the Census. The difference was largest for groups with the lowest coverage rates. In the case of young African American men, who have a coverage rate of close to two-thirds, the CPS showed an employment rate that was 8 percentage points higher than the Census for the same months of 2000.
These results are consistent with a story where the CPS is missing more people through time and the people who it misses are disproportionately at the bottom of the income ladder. If this is true, then there could be a rise in poverty that is largely missed in the standard surveys.
In a NYT Economix blogpost Jason DeParle ponders the fact that government surveys are not showing much increase in poverty, even though we know there are many people experiencing long periods of unemployment and many forms of government assistance have been cut back. One possible explanation is that people in poverty and extreme poverty are less likely to be covered by the survey.
My colleague, John Schmitt, found clear evidence of a coverage problem in comparing employment rates as shown in the 2000 Census and the overlapping months of the Current Population Survey (CPS). This is a useful check on the accuracy of the CPS, the main survey for measuring both unemployment and poverty, since the Census has near universal reach with a response rate of close to 99 percent. By comparison, the coverage rate for the CPS is close to 88 percent.
Even after applying a Census adjustment formula, Schmitt still found a substantial difference in employment rates, with the CPS showing an overall employment rate that was more than a full percentage point higher than the Census. The difference was largest for groups with the lowest coverage rates. In the case of young African American men, who have a coverage rate of close to two-thirds, the CPS showed an employment rate that was 8 percentage points higher than the Census for the same months of 2000.
These results are consistent with a story where the CPS is missing more people through time and the people who it misses are disproportionately at the bottom of the income ladder. If this is true, then there could be a rise in poverty that is largely missed in the standard surveys.
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I met Paul Ryan when I debated him over President Bush’s Social Security privatization plan back in 2005. He seemed like a nice, reasonably intelligent guy.
However this has nothing to do with the time of day when we are talking about his budget, the budget that NYT columnist James B. Stewart assured us is a good starting point in his column on Saturday. What Stewart tells us is reasonable is that the budget calls for cuts in entitlements and tax reform. He then asks who could disagree with this.
One has to wonder whether Stewart has looked at the Ryan budget. First, on taxes the only specifics are cuts in the tax rates paid by rich people and corporations. None of the offsetting tax increases are specified.
If this sounds like a sensible opening gambit, let’s imagine the equivalent on the opposite side. Suppose that we proposed to increase Social Security benefits for the bottom two income quintiles of retirees. Suppose that we also proposed increased spending on infrastructure, research and development, and education.
Suppose the left-wing Ryan budget wrote down that these spending increases would be offset by unspecified reductions in government waste. We then told CBO to score it accordingly. Is this a good starting point for further discussion?
In terms of the other parts, if Stewart read the CBO analysis of Ryan’s proposal from last year he would find that his “reform” hugely increases the cost of providing health care to seniors. The point of Medicare was to make health care affordable to workers in their old age. Of course we can save money by reducing what the government pays, but the point is to do so in a way that still leaves retirees able to pay for care. Ryan’s plan is a huge step in the opposite direction according to the Congressional Budget Office.
The Ryan plan also hugely cuts non-entitlement spending. By 2050 it essentially eliminates all spending on items other than Social Security, health care and defense. By the end of the 10-year budget horizon most of the areas that we think of as the domain of the federal government (e.g. federal highways and airports, federal courts and law enforcement, drug research and safety, the State Department and Justice Department) will be cut by around 50 percent under the Ryan plan. How could Stewart have missed this?
Stewart has one other egregious error in this column. He refers to the Bowles-Simpson Commission report. Sorry folks, there was no commission report. According to the commission’s by-laws a report required the support of 14 of the 18 commission members. The report being touted as a report of the commission only had the support of 11 commissioners. Arithmetic lesson for policy pundits number 28,742: 11 is less than 14.
The Ryan budget is proving to be a wonderful Rorschach test. We have people who want to be part of the inside Washington conversation who praise the budget’s courage and integrity. Then we have people who believe in arithmetic who call it what it is: a piece of trash.
By the way, Paul Ryan is a very nice guy.
I met Paul Ryan when I debated him over President Bush’s Social Security privatization plan back in 2005. He seemed like a nice, reasonably intelligent guy.
However this has nothing to do with the time of day when we are talking about his budget, the budget that NYT columnist James B. Stewart assured us is a good starting point in his column on Saturday. What Stewart tells us is reasonable is that the budget calls for cuts in entitlements and tax reform. He then asks who could disagree with this.
One has to wonder whether Stewart has looked at the Ryan budget. First, on taxes the only specifics are cuts in the tax rates paid by rich people and corporations. None of the offsetting tax increases are specified.
If this sounds like a sensible opening gambit, let’s imagine the equivalent on the opposite side. Suppose that we proposed to increase Social Security benefits for the bottom two income quintiles of retirees. Suppose that we also proposed increased spending on infrastructure, research and development, and education.
Suppose the left-wing Ryan budget wrote down that these spending increases would be offset by unspecified reductions in government waste. We then told CBO to score it accordingly. Is this a good starting point for further discussion?
In terms of the other parts, if Stewart read the CBO analysis of Ryan’s proposal from last year he would find that his “reform” hugely increases the cost of providing health care to seniors. The point of Medicare was to make health care affordable to workers in their old age. Of course we can save money by reducing what the government pays, but the point is to do so in a way that still leaves retirees able to pay for care. Ryan’s plan is a huge step in the opposite direction according to the Congressional Budget Office.
The Ryan plan also hugely cuts non-entitlement spending. By 2050 it essentially eliminates all spending on items other than Social Security, health care and defense. By the end of the 10-year budget horizon most of the areas that we think of as the domain of the federal government (e.g. federal highways and airports, federal courts and law enforcement, drug research and safety, the State Department and Justice Department) will be cut by around 50 percent under the Ryan plan. How could Stewart have missed this?
Stewart has one other egregious error in this column. He refers to the Bowles-Simpson Commission report. Sorry folks, there was no commission report. According to the commission’s by-laws a report required the support of 14 of the 18 commission members. The report being touted as a report of the commission only had the support of 11 commissioners. Arithmetic lesson for policy pundits number 28,742: 11 is less than 14.
The Ryan budget is proving to be a wonderful Rorschach test. We have people who want to be part of the inside Washington conversation who praise the budget’s courage and integrity. Then we have people who believe in arithmetic who call it what it is: a piece of trash.
By the way, Paul Ryan is a very nice guy.
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Back in February and March when we got reasonably strong employment numbers, some of us noted how unusually good weather likely inflated job growth (see last paragraphs). That is why we were not especially surprised that the March job numbers came in below the average for the prior three months and many economists’ expectations.
However, the news stories today were filled with accounts from surprised economists who discovered the influence of the weather on economic data. This stuff really is not rocket science.
In the winter months we usually get some serious snowstorms in the Northeast and Midwest. This means construction sights get shutdown and project starts are delayed. People will be less likely to go out to restaurants when the streets are covered with snow or it’s below zero. The same applies to shopping at the mall or buying a new car. If the weather is really bad, factories will shut down because they can’t get necessary supplies.
None of this happened this winter which meant that job growth was better in the winter months than would ordinarily be the case. But if we didn’t get the winter weakness that we expect, then we won’t see the same spring bounce that we usually get.
People were hired in January or February who would not ordinarily be hired until March or April. Similarly, people who bought their car in the winter months will not be buying another one in the spring.
None of this means that the economy is about to sink into recession. It just means that some of the growth from the spring months was pulled forward to the winter months. It’s no big deal and there is no excuse for anyone who does this stuff for a living to be surprised.
Back in February and March when we got reasonably strong employment numbers, some of us noted how unusually good weather likely inflated job growth (see last paragraphs). That is why we were not especially surprised that the March job numbers came in below the average for the prior three months and many economists’ expectations.
However, the news stories today were filled with accounts from surprised economists who discovered the influence of the weather on economic data. This stuff really is not rocket science.
In the winter months we usually get some serious snowstorms in the Northeast and Midwest. This means construction sights get shutdown and project starts are delayed. People will be less likely to go out to restaurants when the streets are covered with snow or it’s below zero. The same applies to shopping at the mall or buying a new car. If the weather is really bad, factories will shut down because they can’t get necessary supplies.
None of this happened this winter which meant that job growth was better in the winter months than would ordinarily be the case. But if we didn’t get the winter weakness that we expect, then we won’t see the same spring bounce that we usually get.
People were hired in January or February who would not ordinarily be hired until March or April. Similarly, people who bought their car in the winter months will not be buying another one in the spring.
None of this means that the economy is about to sink into recession. It just means that some of the growth from the spring months was pulled forward to the winter months. It’s no big deal and there is no excuse for anyone who does this stuff for a living to be surprised.
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Many pundits have been telling us that the reason that workers are not getting jobs is that employers cannot find workers with the skills needed for the positions available. I have regularly ridiculed this position, since if it were true we would see sharply rising wages in some sectors as employers competed for the limited group of workers who have the necessary skills. Of course we don’t see any major sector of the labor market with rapidly rising wages.
However, I must now reconsider this view. David Brooks presented compelling evidence that employers cannot find workers with the necessary skills in his column today. In this column he criticizes Obama for attacking the budget proposed by Paul Ryan (and endorsed by the House Republicans and Governor Romney), which, according to the Congressional Budget Office (CBO), would eliminate the federal government except for health care programs, Social Security, and defense by 2050.
Brooks focuses on the more near-term story. He tells readers:
“In 2013, according to Veronique de Rugy of George Mason University, the Ryan budget would be about 5 percent smaller than the Obama budget, and it would grow a percent or two more slowly each year. After 10 years, government would be smaller under Ryan, but, as Daniel Mitchell of the Cato Institute complains, it would still take up a larger share of national output than when Bill Clinton left office.”
Yeah in 2023 the budget will be larger than the last Clinton budget, what could Obama possibly be complaining about?
Okay, now if David Brooks knew arithmetic, he would be able to look at the CBO projections and see that in 2023, it projects that spending on items other than interest, health care spending, and Social Security is projected to be equal to 6.75 percent of GDP in 2023. He would also look back and see that this spending was equal to roughly 9.3 percent of spending in 2000.
Currently, military spending (excluding the war in Afghanistan) is approximately 4.0 percent of GDP. If Representative Ryan left military spending at this level, as he has suggested in his criticisms of President Obama’s proposed cuts, his 2023 budget would leave an amount equal to 2.75 percent of GDP for everything else. If he allowed the defense budget to fall back to 3.0 percent of GDP, its 2000 level and also the low point for the last 60 years, he would leave 3.75 percent of GDP for everything else.
Since President Clinton’s 2000 budget allotted 6.3 percent of GDP for this everything else category (e.g. roads and bridges, education, medical research, the Justice Department and the federal prison system, and the national park system) the Ryan-Romney budget implies a cut of between 40 and 56 percent in most categories of government spending. If David Brooks knew arithmetic, he would realize that cuts of this magnitude are a big deal and that Obama is absolutely right to make a big issue of them.
Source: Congressional Budget Office and author’s calculations, see text.
Unfortunately, the NYT is unable to find columnists who know arithmetic. Therefore, they have to print David Brooks making silly assertions about the Ryan budget and President Obama’s criticisms of it.
Many pundits have been telling us that the reason that workers are not getting jobs is that employers cannot find workers with the skills needed for the positions available. I have regularly ridiculed this position, since if it were true we would see sharply rising wages in some sectors as employers competed for the limited group of workers who have the necessary skills. Of course we don’t see any major sector of the labor market with rapidly rising wages.
However, I must now reconsider this view. David Brooks presented compelling evidence that employers cannot find workers with the necessary skills in his column today. In this column he criticizes Obama for attacking the budget proposed by Paul Ryan (and endorsed by the House Republicans and Governor Romney), which, according to the Congressional Budget Office (CBO), would eliminate the federal government except for health care programs, Social Security, and defense by 2050.
Brooks focuses on the more near-term story. He tells readers:
“In 2013, according to Veronique de Rugy of George Mason University, the Ryan budget would be about 5 percent smaller than the Obama budget, and it would grow a percent or two more slowly each year. After 10 years, government would be smaller under Ryan, but, as Daniel Mitchell of the Cato Institute complains, it would still take up a larger share of national output than when Bill Clinton left office.”
Yeah in 2023 the budget will be larger than the last Clinton budget, what could Obama possibly be complaining about?
Okay, now if David Brooks knew arithmetic, he would be able to look at the CBO projections and see that in 2023, it projects that spending on items other than interest, health care spending, and Social Security is projected to be equal to 6.75 percent of GDP in 2023. He would also look back and see that this spending was equal to roughly 9.3 percent of spending in 2000.
Currently, military spending (excluding the war in Afghanistan) is approximately 4.0 percent of GDP. If Representative Ryan left military spending at this level, as he has suggested in his criticisms of President Obama’s proposed cuts, his 2023 budget would leave an amount equal to 2.75 percent of GDP for everything else. If he allowed the defense budget to fall back to 3.0 percent of GDP, its 2000 level and also the low point for the last 60 years, he would leave 3.75 percent of GDP for everything else.
Since President Clinton’s 2000 budget allotted 6.3 percent of GDP for this everything else category (e.g. roads and bridges, education, medical research, the Justice Department and the federal prison system, and the national park system) the Ryan-Romney budget implies a cut of between 40 and 56 percent in most categories of government spending. If David Brooks knew arithmetic, he would realize that cuts of this magnitude are a big deal and that Obama is absolutely right to make a big issue of them.
Source: Congressional Budget Office and author’s calculations, see text.
Unfortunately, the NYT is unable to find columnists who know arithmetic. Therefore, they have to print David Brooks making silly assertions about the Ryan budget and President Obama’s criticisms of it.
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That would have been worth mentioning in a piece that reported that profit growth is expected to slow in the first quarter of 2012 and may stagnate for the year as a whole. With profits already near post-war highs as a share of income, they can’t grow any more rapidly than GDP unless the profit share goes still higher. Since it is unreasonable to expect the share of GDP going to profits to continue to rise indefinitely, a slowdown in profit growth was virtually inevitable.
That would have been worth mentioning in a piece that reported that profit growth is expected to slow in the first quarter of 2012 and may stagnate for the year as a whole. With profits already near post-war highs as a share of income, they can’t grow any more rapidly than GDP unless the profit share goes still higher. Since it is unreasonable to expect the share of GDP going to profits to continue to rise indefinitely, a slowdown in profit growth was virtually inevitable.
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At least it thinks that this is a reasonable position deserving some of the paper’s scarce column space. The Post printed a column today by Michael W. Hodin warning about the “inexorable” aging of the population. At one point Hodin asks:
“What if we reimagined and redefined what it means to age? What if, in light of our longer lifespans, ‘middle age’ were 55 to 75?”
While the piece implies that aging poses some radically new problem for the world, the fact is that populations have been aging for well over a hundred years due to both increases in life expectancy and also declining birth rates. In other words, this is just a continuation of a long trend, not a departure from it.
Furthermore, just as aging of the population in the past has been associated with a rise in the standard of living there is no reason to believe that this will not be the case in the future. If economies can sustain a 2.0 percent rate of productivity growth (slightly less than the average in the U.S. over the last 60 years) then output per worker hour will be almost 120 percent higher in 2050 than it is today.
This increase in productivity would swamp the effect of even the most rapid growth of a population of aged dependent. For example, if we have 3 workers for every retiree today and expect to have 2 workers for every retiree in 2050 (roughly the projected numbers), if retirees have a standard of living that is 75 percent as high as workers then workers and retirees would be still be able to enjoy standards of living that are close to twice their current level in this story. This does not even count the savings from the lower share of young dependents that would be the result of lower birth rates.
The piece also mistakenly implies that fiscal crises facing several European countries and state governments in the United States are due to the aging of the population. Actually, we had a huge economic crisis as a result of the collapse of housing bubbles in the United States and Europe. The resulting downturn is the cause of these fiscal crises. Mr. Hodin was apparently unaware of the economic crisis.
At least it thinks that this is a reasonable position deserving some of the paper’s scarce column space. The Post printed a column today by Michael W. Hodin warning about the “inexorable” aging of the population. At one point Hodin asks:
“What if we reimagined and redefined what it means to age? What if, in light of our longer lifespans, ‘middle age’ were 55 to 75?”
While the piece implies that aging poses some radically new problem for the world, the fact is that populations have been aging for well over a hundred years due to both increases in life expectancy and also declining birth rates. In other words, this is just a continuation of a long trend, not a departure from it.
Furthermore, just as aging of the population in the past has been associated with a rise in the standard of living there is no reason to believe that this will not be the case in the future. If economies can sustain a 2.0 percent rate of productivity growth (slightly less than the average in the U.S. over the last 60 years) then output per worker hour will be almost 120 percent higher in 2050 than it is today.
This increase in productivity would swamp the effect of even the most rapid growth of a population of aged dependent. For example, if we have 3 workers for every retiree today and expect to have 2 workers for every retiree in 2050 (roughly the projected numbers), if retirees have a standard of living that is 75 percent as high as workers then workers and retirees would be still be able to enjoy standards of living that are close to twice their current level in this story. This does not even count the savings from the lower share of young dependents that would be the result of lower birth rates.
The piece also mistakenly implies that fiscal crises facing several European countries and state governments in the United States are due to the aging of the population. Actually, we had a huge economic crisis as a result of the collapse of housing bubbles in the United States and Europe. The resulting downturn is the cause of these fiscal crises. Mr. Hodin was apparently unaware of the economic crisis.
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It is well-known that the Washington Post is obsessed with the budget deficit and that it feels little need to restrict this obsession to the opinion pages (hence its nickname, “Fox on 15th Street”). It once again ran an editorial in its news section as it told readers about the country’s “rocketing debt.”
The editorial then asked:
“Why can’t America’s leaders, at the helm of such a wealthy country, find a solution that both puts the nation on a long-term path to financial security and preserves the vast array of vital services government provides?”
Of course the obvious answer is that there is no obvious reason that the country should be worried right now about writing down numbers on paper that show the nation will be on a “long-term path to financial security and preserves the vast array of vital services government provides.”
The immediate problem facing the country are the tens of millions of workers who are unemployed or underemployed due to economic mismanagement by people like Alan Greenspan and Ben Bernanke. The question that all reasonable people should be asking is why America’s leaders can’t find a solution that will put these people back to work? After all, Keynes showed us how to restore an economy to full employment more than 70 years ago. The only reason that the country currently faces a large budget deficit and rising debt to GDP ratio is the economic downturn caused by the collapse of the housing bubble.
It is also worth reminding readers that the horror stories of exploding health care costs are entirely the result of the broken health care system in the United States. We spend more than twice as much per person on health care in the United States than in other wealthy countries. If we had the same per person health care costs as in other countries then we would be looking at enormous budget surpluses, not deficits. That is why serious people focus on the problem of health care costs, not budget deficits.
The piece also includes the assertion that:
“Economists say high debt levels can increase the risk of financial crises.”
To make this more accurate the statement should say that:
“Economists who failed to see the last economic crisis say high debt levels can increase the risk of financial crises.”
It is well-known that the Washington Post is obsessed with the budget deficit and that it feels little need to restrict this obsession to the opinion pages (hence its nickname, “Fox on 15th Street”). It once again ran an editorial in its news section as it told readers about the country’s “rocketing debt.”
The editorial then asked:
“Why can’t America’s leaders, at the helm of such a wealthy country, find a solution that both puts the nation on a long-term path to financial security and preserves the vast array of vital services government provides?”
Of course the obvious answer is that there is no obvious reason that the country should be worried right now about writing down numbers on paper that show the nation will be on a “long-term path to financial security and preserves the vast array of vital services government provides.”
The immediate problem facing the country are the tens of millions of workers who are unemployed or underemployed due to economic mismanagement by people like Alan Greenspan and Ben Bernanke. The question that all reasonable people should be asking is why America’s leaders can’t find a solution that will put these people back to work? After all, Keynes showed us how to restore an economy to full employment more than 70 years ago. The only reason that the country currently faces a large budget deficit and rising debt to GDP ratio is the economic downturn caused by the collapse of the housing bubble.
It is also worth reminding readers that the horror stories of exploding health care costs are entirely the result of the broken health care system in the United States. We spend more than twice as much per person on health care in the United States than in other wealthy countries. If we had the same per person health care costs as in other countries then we would be looking at enormous budget surpluses, not deficits. That is why serious people focus on the problem of health care costs, not budget deficits.
The piece also includes the assertion that:
“Economists say high debt levels can increase the risk of financial crises.”
To make this more accurate the statement should say that:
“Economists who failed to see the last economic crisis say high debt levels can increase the risk of financial crises.”
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The NYT did some really serious he said/she said budget reporting in a front page article on the House Republican budget proposed by Representative Paul Ryan, which also has been endorsed by Governor Romney. The article reports what both Democrats and Republicans say about the Ryan budget without making any effort to verify the extent to which the statements are true. In several cases, this could be quite easily done.
For example, the article tells readers in reference to the Ryan budget and the budget proposed by Mitt Romney:
“Both budgets, the Obama campaign asserts, would cut taxes sharply for the wealthy; gut public education, medical research, and other government programs; and increase the burden on the elderly to pay for their own health care.”
This is not just something that “the Obama campaign asserts,” it happens to be true. Both plans call for sharp reductions in the tax rates paid by high income earners. Both have explicitly ruled out eliminating the tax breaks that most directly affect high income taxpayers: the special lower tax rate on capital gains and dividend income.
In terms of the cuts to public education, medical research and other government programs, it is possible to go to the Congressional Budget Office’s analysis of the Ryan budget, which was done under his direction. This analysis shows that all discretionary spending (the category which includes these items), plus non-health mandatory spending, is projected to shrink to 3.75 percent of GDP by 2050.
This 3.75 percent of GDP includes defense spending. Currently defense spending is close to 4.0 percent of GDP, not including the cost of the war in Afghanistan. It has never been below 3.0 percent of GDP since the start of the Cold War. In other words, it is an objective fact that the Ryan plan would:
“gut public education, medical research, and other government programs; and increase the burden on the elderly to pay for their own health care,”
not just something that the Obama campaign asserts. The NYT should have pointed this out to readers. The NYT’s reporters have the time to examine CBO’s analysis of the Ryan budget, most readers do not.
At one point the article also wrongly refers to “parts of the [budget] plan intended to spur economic growth.” It is not clear that any parts of the budget plan are “intended” to spur growth. There are parts of the plan, such as the tax cuts for the wealthy, which Romney and Ryan claim are intended to spur growth, but the NYT has no idea whether this is really the intent of these cuts.
It is entirely possible that the reason that Romney and Ryan propose cuts in tax rates for the wealthy is to give more money to wealthy people, many of whom are supporting their political efforts. Since there is no evidence that these tax cuts will actually lead to more growth, it is at least as plausible that the intention is to give money to the wealthy (something we know that tax cuts will do), as it is that they are intended to promote growth.
The NYT did some really serious he said/she said budget reporting in a front page article on the House Republican budget proposed by Representative Paul Ryan, which also has been endorsed by Governor Romney. The article reports what both Democrats and Republicans say about the Ryan budget without making any effort to verify the extent to which the statements are true. In several cases, this could be quite easily done.
For example, the article tells readers in reference to the Ryan budget and the budget proposed by Mitt Romney:
“Both budgets, the Obama campaign asserts, would cut taxes sharply for the wealthy; gut public education, medical research, and other government programs; and increase the burden on the elderly to pay for their own health care.”
This is not just something that “the Obama campaign asserts,” it happens to be true. Both plans call for sharp reductions in the tax rates paid by high income earners. Both have explicitly ruled out eliminating the tax breaks that most directly affect high income taxpayers: the special lower tax rate on capital gains and dividend income.
In terms of the cuts to public education, medical research and other government programs, it is possible to go to the Congressional Budget Office’s analysis of the Ryan budget, which was done under his direction. This analysis shows that all discretionary spending (the category which includes these items), plus non-health mandatory spending, is projected to shrink to 3.75 percent of GDP by 2050.
This 3.75 percent of GDP includes defense spending. Currently defense spending is close to 4.0 percent of GDP, not including the cost of the war in Afghanistan. It has never been below 3.0 percent of GDP since the start of the Cold War. In other words, it is an objective fact that the Ryan plan would:
“gut public education, medical research, and other government programs; and increase the burden on the elderly to pay for their own health care,”
not just something that the Obama campaign asserts. The NYT should have pointed this out to readers. The NYT’s reporters have the time to examine CBO’s analysis of the Ryan budget, most readers do not.
At one point the article also wrongly refers to “parts of the [budget] plan intended to spur economic growth.” It is not clear that any parts of the budget plan are “intended” to spur growth. There are parts of the plan, such as the tax cuts for the wealthy, which Romney and Ryan claim are intended to spur growth, but the NYT has no idea whether this is really the intent of these cuts.
It is entirely possible that the reason that Romney and Ryan propose cuts in tax rates for the wealthy is to give more money to wealthy people, many of whom are supporting their political efforts. Since there is no evidence that these tax cuts will actually lead to more growth, it is at least as plausible that the intention is to give money to the wealthy (something we know that tax cuts will do), as it is that they are intended to promote growth.
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