March 16, 2014
Fortunately for Mr. Will, he works for Jeff Bezos, a man who accumulated $32 billion (more than 40 percent of the annual food stamp budget) by assisting people in evading state and local sales taxes. (Under most state laws, people are obligated to pay sales tax on items they buy over the Internet, however enforcement is essentially zero. The amount of tax that Amazon customers have avoided as a result of purchasing over the web is at least an order of magnitude greater than Amazon’s profits since it inception.) Given his background, Bezos would probably not be concerned that Will misrepresents facts to readers.
Will starts by complaining that President Obama’s proposal to raise the minimum wage would “do very little for very few.” Since the Congressional Budget Office just calculated that the proposed wage hike would directly or indirectly raise the wages of 25 million workers, Will must be giving new meaning to “very few.” He then goes on to complain about the farm subsidies in the new agriculture bill, referring to the “geyser of subsidies” in “the $956 billion farm legislation.” Whatever the merits of the subsidies, they come to less than 10 percent of the total cost of the $956 billion figure highlighted by Will.
Will next complains about the increase in spending on food stamps, telling readers:
“Between 2000, when 17?million received food stamps, and 2006, food stamp spending doubled, even though unemployment averaged just 5.1?percent .” While some of this rise was attributable to increased outreach to eligible families, the employment picture had deteriorated sharply from 2000 to 2006, with the employment to population ratio dropping by 1.5 percentage points. This corresponds to 3.4 million fewer people working. (It’s not clear what information Will thinks he is providing by giving the average unemployment rate for the period. If we are looking at changes, it is the endpoints that matter.) Also, food prices rose by 16 percent over this period, which explains a substantial portion of the increase in spending. (Will’s source shows that the 2000 level of beneficiaries was a low-point driven by the strong economy of the late 1990s. The number of beneficiaries in 2006 was still below the number in 1995.)
We then get this great invention from Will:
“We spend $1 trillion annually on federal welfare programs, decades after Daniel Patrick Moynihan said that if one-third of the money for poverty programs was given directly to the poor, there would be no poor.”
There is no source for this $1 trillion figure, which presumably Will just made up. (Spending on the programs ordinarily thought of as poverty programs, such as food stamps, EITC, and TANF, would not come to one fifth of this amount.)
Will’s next shot is:
“Young people just starting up the earnings ladder and families in the child-rearing, tuition-paying years subsidize the elderly, who have had lifetimes of accumulation. Households headed by people age 75 and older have the highest median net worth of any age group.”
Of course households have paid for their Social Security and Medicare benefits with the taxes they paid in over their working lifetimes. By Will’s logic we can say that the young are subsidizing the rich because the rich receive tens of billions of dollars every year in interest payments on the government bonds they hold. If we can ignore the contributions that seniors made for what are effectively insurance programs run by the government then it also makes sense to ignore the fact that the rich paid to buy the government bonds they hold. Welcome to George Will’s world.
Also wealth is an especially bad measure of well-being of different age groups. People typically borrow early in life and then accumulate wealth over their working years in order to support themselves in retiirement. In George Will’s world a widow with a paid off mortgage but no income other her $1,300 a month Social Security check is doing better than a recent Harvard MBA working at Goldman Sachs who has not yet paid off their student loan debt. Most people probably would not see it this way.
As a practical matter there is no remotely plausible story in which young people will not on average be much better off than their parents and grandparents. If most young people do not see substantial improvements in living standards relative to earlier generations it will be because so much money has been redistributed upward to people like Will’s boss, Jeff Bezos, not because of the Social Security and Medicare benefits received by the elderly.
Will then complains about the zero interest policy of the Fed, even though this hurts to some extent the wealthy elderly on their savings accounts. These are the same folks in the prior paragraph he complained were getting subsidies from the young through Social Security and Medicare. So Will thinks it’s awful that we are giving them so much and so little money.
The next point of complaint is the:
“boom in equity markets — up 30 percent last year alone — has primarily benefited the 10?percent who own 80 percent of all directly owned stocks.”
In fact, the recent rally has just brought stock prices roughly back to their pre-recession level, adjusted for inflation. If stock prices had risen in step with potential economic growth over this period, they would be more than 10 percent higher today.
Will then cites Dallas Federal Reserve Board president Richard Fisher telling readers:
“the federal government’s fiscal and regulatory policies discourage businesses from growing the economy with the mountain of money the Fed has created”
Is that so? Can Will at least give us a fairy tale that would fill out the details. In the real world, business investment is almost back to its pre-recession share of GDP, coming in at 12.3 percent in the last quarter compared with an average of 12.8 percent in the years 2005-2007. Given the huge amounts of excess capacity that still exists in many sectors of the economy, this is actually a pretty strong rate of investment. Perhaps Will could give us a tip on where we would see more investment if there was less government regulation. It would take unprecedented investment shares to fill the gap between potential and actual GDP that Will notes.
Will concludes by telling readers:
“This is why ‘the most vital organ of our nation’s economy — the middle-income worker — is being eviscerated.’ And why the loudest complaints about inequality are coming from those whose policies worsen it.”
There you have it, another chapter in George Will’s world. It doesn’t make much sense, but hey, it’s the Washington Post.
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