June 08, 2015
Just kidding, in a piece noting high levels of youth disengagement from the labor market (neither employed, nor looking for work) Samuelson complains:
“Those with jobs subsidize their usually better-off elders through Social Security and Medicare payroll taxes.”
Of course workers pay for these benefits. On average workers pay slightly more for their Social Security than the benefits they can expect to get back in retirement. They pay less than the cost of Medicare benefits, but this is because protectionists dominate policy in the United States and keep trade barriers in place that keep health care costs close to twice as high in other wealthy countries. Therefore it would be more accurate to say that their payroll taxes subsidize the income of doctors and drug companies.
It is true that in the current year Social Security and Medicare beneficiaries are not paying for their benefits, but if we ignore past payments, as Samuelson appears to be doing, then we should also ignore the fact that Peter Peterson and other wealthy people paid for the government bonds they own. From this perspective, we can then say that the interest paid on government bonds is simply a subsidy to the people who collect it.
Samuelson is right to note the high rates of non-employment among young people. The obvious solution would be to have government have big stimulus programs that could employ millions of young people. Unfortunately, deficit hawks (like Robert Samuelson) have forced government to go in the opposite direction and pursue policies of austerity.
In light of Samuelson’s complain about subsidies for the old, it is worth noting his comment:
“To be sure, there are correctives. … Older workers will retire or die, opening up permanent slots for the young.”
The rate at which older workers retire will depend in large part on whether they can survive on their Social Security benefits. If these are made less generous, then we would expect fewer older workers to retire, leaving fewer jobs for young people.
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