January 01, 2018
That one isn’t mine, it actually is the title of a Bloomberg column. (The “OMG” is mine.) This one may be a bit over the top: it complains both that we have too many people on the planet and that we have rising ratios of old to young, but it shows that all is fair when it comes to attacks on Social Security and Medicare.
Now that the Republicans have just shifted another big chunk of national income to the one percent, it is only natural that the media would focus on the need to cut Social Security and Medicare, put in the guise of generational equity. I’m sure I’ll have more occasion to write about this issue, but the basic issue is idiocy from the word go.
Will people on average have higher standards of living 20 or 30 years from now than they do today? I know of literally no economic forecast that shows otherwise. The “robots taking our jobs” folks are arguing that they will have hugely higher standards of living, even if they are too confused to know it.
Is it possible that most workers won’t be sharing in these gains? Absolutely, but that is a story of intra-generational inequality, not inter-generational inequality. It’s really that simple.
I should also point that the effort by this crew to measure inequality exclusively in terms of taxes and direct benefits (like Social Security) fails on its own terms. Direct spending by the government is only one way in which it pays for activities. Another major way it pays for items is through granting patent and copyright monopolies.
From the standpoint of individuals, it makes no difference if they pay high prices for drugs because the government puts an excise tax on the drugs or if they grant Pfizer a patent monopoly that allows it to charge a markup of 10,000 percent above the free market price. And there is a huge amount of money at stake.
We spent more than $450 billion on prescription drugs last year that likely would have cost less than $80 billion in a free market. The difference of $370 billion is almost equal to 2.0 percent of GDP. It is roughly three times the amount at stake with the recent tax cut. If we throw in the additional cost of medical equipment, software, and other items, the sums would easily be two or even three times as large.
No honest economist would ignore this huge cost in assessing the burden of government policy. Unfortunately, there is little market for honest economics in the United States at present. Instead, we get this tripe about the old eating the young.
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