Dean Baker
Al Jazeera English, March 18, 2013

Mark WeisbrotAl Jazeera English, March 17, 2013 En Español | Em Português

In a recent WaPo op-ed with the subtle title “Payments to Elders are Harming Our Future,” Harry Holzer and Isabel Sawhill claim that “our very expensive retirement programs already crowd out public spending on virtually all other priorities—including prog

Okay, that's not exactly what Robert Samuelson said, but pretty close. He actually told readers:

"What frustrates constructive debate is muddled public opinion."

I just thought I would make a small change in the interest of accuracy.

Samuelson is very upset because almost no one, Democrat, Republican, or independent wants to go along with his crusade to cut Social Security and Medicare. He tells readers with disgust:

"In a Pew poll, 87 percent of respondents favored present or greater Social Security spending; only 10 percent backed cuts."

He then demands that President Obama rise to the occasion and insist that people accept lower benefits.

President Obama's time can probably be more productively spent teaching economics and arithmetic to people who write on budget issues in major news outlets. Most of the main assertions in Samuelson's piece are misleading or just flat out wrong.

First, the budget is only constrained at the moment by superstition. There is no obstacle to the government borrowing more money to meet needs and put people back to work. We are not spending more money because we have superstitious people with large amounts of power who are making claims about the dangers of deficits that they cannot support with evidence. Rather than lecturing seniors, who have a median income of $20,000, on the need for lower Social Security and Medicare benefits, Obama could try to confront the people spreading superstitions about deficits.

Samuelson's complaint about the size of spending on the elderly is also highly misleading. He complains:

"In fiscal 2012, Social Security, Medicare, Medicaid and civil service and military retirement cost $1.7 trillion, about half the budget."

The Washington Post had a major column by Steve Pearlstein on the front page of its Outlook section headlined, "Is Capitalism Moral?" The piece notes the sharp upward redistribution of income over the last three decades and asks whether we should just being willing to accept market outcomes.

Of course this question is absurd on its face. The upward redistribution of the last three decades was the result of deliberate government policies designed to redistribute income upward; it was not the natural workings of the market.

For example, trade policy was quite explicitly intended to place segments of the U.S. workforce in direct competition with low paid workers in Mexico, China and other developing countries. The predicted and actual result of this policy has been to push down the wages the bottom 50-70 percent of the workforce to the benefit of those at the top.

This was hardly the free market. We could have adopted trade policies that were designed to put doctors, lawyers and other highly paid professionals in direct competition with their much lower paid counterparts in the developing world. If we had done this, doctors in the U.S. might be earning closer to $100,000 a year rather than the current average of more than $250,000 annually. This would transfer more than $100 billion annually to the rest of the country in the form of lower health care costs.

The government also strengthened and lengthened the periods of monopoly protection provided by both patents and copyrights. This has hugely increased the amount of rents being paid to high-end earners, the pharmaceutical industry and the entertainment industry at the expense of everyone else.

The U.N. Office of the Coordination of Humanitarian Affairs (OCHA) issued a press statement at the end of last week “express[ing] the grave concern of the humanitarian community in country regarding the recent incidents of forced evictions of internally d

On Tuesday, the results of the British Referendum on the Falkland/Malvinas Islands came in. According to the BBC, out of the 1,517 votes cast in the referendum, representing 90 percent of eligible voters on the island, all but three of them voted for having the islands remain territory of the U.K. As the British government must have realized before holding the poll, this is not surprising. Despite the relative proximity of the islands to the Argentine mainland, their inhabitants of the island have very few ties to Argentina:  they are descendants of British colonizers, they speak English and maintain British traditions and citizenship. 

An episode that aired Wednesday of the Russia Today TV program “Crosstalk” focused on the question of sovereignty and self-determination of the islands and featured an Argentine researcher, an analyst from the conservative Heritage Foundation, and a British historian who sided with Argentina’s legal claim for sovereignty on the islands.

Among the highlights from the episode is a discussion over whether the claim for the islands is an imperial project of the U.K. or whether the claim is legally legitimate.  Luke Coffey, a “Margaret Thatcher Fellow” at the Washington D.C.-based Heritage Foundation, argues [9:40] that the islands are in no way a British colonial project, while British historian, Richard Gott, disagrees [10:07]:  “I’m afraid it’s just not true. The British seized the islands in 1833 and subsequently settled it…”  

As Gott and British journalist Richard Norton-Taylor both point out, Britain has always been aware that its claims to the islands may not have been very strong. Norton-Taylor writes: 

The dispute over sovereignty has been going on for centuries, and Britain has never been really confident over its claim to the islands. In 1829, the Duke of Wellington observed: "I have perused the papers respecting the Falkland Islands. It is not clear to me that we have ever possessed the sovereignty of all these islands.”

In his most recent column, Thomas Edsall says there are three ways of defining poverty in the United States: the official measure, the Census Bureau’s Supplemental Poverty Measure, and a consumption-based measure. But this leaves out an important and comm

Mark WeisbrotKansas City Star (KS), March 14, 2013McClatchy Tribune Information Services, March 14, 2013Lexington Herald-Leader (KY), March 14, 2013Bellingham Herald (WA), March 14, 2013Eugene Register-Guard (OR), March 14, 2013Hanover Evening Sun (PA), M

Steve Rattner wants someone to stop stealing from our kids according to the headline of his blog post in the NYT. The finger should be pointed backwards in Rattner's case because if anyone is going to jeopardize the living standards of our kids, it is wealthy people like Mr. Rattner.

We have seen an enormous upward redistribution of income over the last three decades. As a result most workers have seen little of the benefits of economic growth. If this upward redistribution continues, then our children are unlikely to see much of the gains of growth in the future.

Rather than have people focus on the policies that have led to this upward redistribution (trade policy, too big to fail banks, patent policy etc.), wealthy people like Rattner use their money and power to try to divert attention to the cost of Social Security and Medicare. They have thrown enormous resources into trying to scare people with the prospective burdens posed by these programs. For example, Rattner today tells us that with Social Security:

"The present value of the unfunded liability is 'only' $9 trillion."

Are you scared yet? After all, it's "only" $9 trillion. Didn't you love that sarcasm? Yes, $9 trillion is a lot of money, none of us will ever see that much money, even Bill Gates or Warren Buffet. But if we are having a serious discussion, we would talk about this as a share of future income. It's about 0.7 percent of future GDP. Does that scare you?

That's a bit less than half of the cost of the wars in Afghanistan and Iraq over the last decade, that's hardly trivial, but that expense would not impoverish our kids. Medicare and Medicaid are projected to cost more but that has nothing to do with the old stealing from the young, their higher costs are the result of doctors, drug companies, medical supply companies and other providers in the industry charging us two to three times as much as their counterparts in other wealthy countries. If we paid the same amount per person for our health care as people in other wealthy countries then we would be looking at long-term budget surpluses rather than deficits.

Given the disastrous failure of the economics profession to warn of the housing bubble, it is amazing that the country has not rounded up the lot of us (I'll go too) and chased us out of the country. Unfortunately, we still have a profession continuing to use its authority to spread confusion rather than enlightenment. 

Thomas Edsall and his readers are the victims today. In an interesting discussion of trends in poverty, Edsall includes a reference to work by Bruce Meyer and James Sullivan that shows poverty among the elderly has fallen to just 3.2 percent using a consumption based measure of poverty. There are many issues that can be raised about this analysis, as my colleague Shawn Fremstad has pointed out.

However perhaps the most fundamental point for purposes of Edsall's analysis, which explicitly compares poverty rates among the young and the old, is the fact that Meyer and Sullivan:

"report results using an adjusted CPIU-RS that subtracts 0.8 percentage points from the growth in the CPI-U-RS index each year (p 17)."

Okay, if the meaning of this line is not immediately clear, Meyer and Sullivan are assuming that actual rate of annual inflation is 0.8 percentage points less than official data show. This claim is debatable, but its implications are not. If we have been overstating inflation by 0.8 percentage point each year, then we have been understating real income growth by 0.8 percentage points.

This claim lies at the center of Meyer and Sullivan's claim that poverty has fallen sharply. Their adjustment would mean that income has risen by roughly 8 percent more over the last decade than official data show and 16 percent more over the last two decades. (I'm ignoring compounding to keep this simple.) This additional rise in income (or consumption) gets a lot of people over the poverty line.

The Meyer and Sullivan assumption has another important implication which they do not discuss in this paper and apparently did not discuss in their conversations with Mr. Edsall. If income is growing more rapidly than the official data indicate then people were much poorer in the recent past than official data indicate.

This post was amended March 14, 2013 to reflect a correction by The Guardian. The papal conclave announced today that the new pope will be Cardinal Jorge Bergoglio of Argentina. “Pope Francis,” as he will be named, will be the first Latin American pope. A