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Home Publications Blogs Beat the Press Robert Samuelson's Bad Math on Generational Equity

Robert Samuelson's Bad Math on Generational Equity

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Sunday, 02 March 2014 22:03

Yes, it's Monday morning and Robert Samuelson again complains we are being cruel to our children. As in the past, he is not bothered by the likelihood that we will hand them a planet badly damaged by global warming. Nor is he upset that we might hand them a country in which the rules are rigged to give the rich a hugely disproportionate share of national income.

Nope, this is the Washington Post. He is upset that seniors will be getting Social Security checks averaging $1,500-$1,600 a month. And that it will be paying bloated prices for seniors' health care. In keeping with the Washington Post's fundamental philosophy that a dollar in the pocket of someone who is not rich is a dollar that could be in the pocket of a rich person, Samuelson is not upset about overpayments to wealthy doctors and drug companies, he's upset about seniors getting health care.

Those who actually give a damn about the well-being of our children and grandchildren know that on average their pay will be about 40 percent higher in three decades. If they pay two or three percentage points more of their wages in Social Security taxes, to support their own longer retirements, who gives a damn? We pay much higher Social Security and Medicare taxes than our parents and grandparents' generations.

If most people in our children and grandchildren's generation do not enjoy substantially higher living standards than we do it will be due to the fact that the Jeff Bezos of the world have managed to appropriate most of the gains from growth. Serious people therefore focus on policies to reverse the upward redistribution of income over the last three decades, however employees of Jeff Bezos, and apparently the Pew Foundation, try to divert people's attention to get them upset about the $1,300 monthly Social Security checks going to today's seniors. 

Comments (12)Add Comment
Future plans
written by Squeezed Turnip, March 02, 2014 10:24
… Those who actually give a damn about the well-being of our children and grandchildren know that on average their pay will be about 40 percent higher in three decades. …


Well, the plans of the VSPs in DC and their dark overlords are for wages to remain stagnant for an additional 40 years. They don't want to pay no stinkin' wage increases and definitely not enough to pay for us peons to actually stop working. And why would somebody need healthcare if they're working? And if somebody's not working despite the total lack of incentives (wage increases) being unprovided, screw 'em.

Seriously, though, it's not exactly math that Samuelson is bad at, it's logic. Of course, Aristotelian logic did work in its day, 2000+ years ago, but things have kind of progressed since then. Quick, alert the press (especially Robert Samuelson)!
...
written by watermelonpunch, March 03, 2014 7:21
Well, the plans of the VSPs in DC and their dark overlords are for wages to remain stagnant for an additional 40 years.


As I read this page, that's exactly what I was thinking.
Indeed, I think they want it to go backwards. Some want to get rid of the minimum wage altogether and repeal child labor laws, and get rid of work safety regulations & environmental regulations.
So maybe that's Samuelson's logic?
They want seniors who can't work any longer to depend on having several grade school age grandchildren leaving school to toil. Bonus, these kids won't be learning about science, which people with views like Samuelson's also seem to object to.
Samuelson Fails to Account for Efficiency Savings From Drones, Robots and Cat Food
written by Last Mover, March 03, 2014 8:44
Finally, aging. Every day 10,000 baby boomers turn 65. The retiree flood is swamping the federal budget. By 2022, Social Security, Medicare and the non-child share of Medicaid will exceed half the budget, up from 30 percent in 1990, projects an Urban Institute study. To make room for the elderly, defense and many domestic programs are being relentlessly squeezed.

There’s no generational justice, argues Taylor: “The young today are paying taxes to support a level of benefits for the old that they themselves have no prospect of receiving when they become old.”


As usual, Robert Samuelson misses the big picture on what is actually crowding out parts of the government budget.

Specifically, military drones will replace the entire DOD at 5% of total cost, robots will replace care of the elderly at similar savings, and cat food consumed by seniors will free up the best red meat for the younger generation who can work harder and live longer than ever

Being a zero-sum kinda guy who dwells on such tradeoffs, it's surprising Samuelson missed this. He'll probably figure in out in 20 years after he claims austerity was responsible for the recovery.
...
written by skeptonomist, March 03, 2014 9:50
What people outside the WaPo should be concerned with is the breakdown of non-Social-Security pensions, which probably means that retirees will be worse off overall in the future. Defined benefit programs are becoming scarce in private enterprise and are under attack in municipalities and states. Personal savings accounts may look fairly good now, but P/E for the stock market is well above average, and nobody is going to be making much money on bonds for some time. Outside of SS, the outlook for future retirees is bleak. SS benefits are tied to prices, which does not give retirees the benefit of productivity increases.
Social Security benefits are tied to average wages until age 60
written by Mike B., March 03, 2014 11:44
Social Security benefits are determined by the average wage index in the year a person turns 60. Therefore, beneficiaries get the benefit of productivity increases to the extent they are passed on as higher wages until they are 60. After that, benefits are tied to CPI-W.
...
written by PeonInChief, March 03, 2014 12:33
Every time one of these pundits announces that the elderly are taking up too much of the budget, he (or unfortunately, not a few shes) should be reminded that the Social Security taxes that were banked to support us were used to reduce the deficit for nigh on 30 years now. The money enabled Congress to spend money they knew they were going to have to pay back. Now they don't want to pay it back. It's not a policy choice--it's thieving.
Samuelson WAS able to do financial math last September 2013.
written by John Wright, March 03, 2014 10:07
On September 4, 2013, Samuelson wrote an opinion piece titled "Syria and the myth that Americans are 'war weary'.

see "http://www.washingtonpost.com/opinions/robert-samuelson-syria-and-the-war-weary-myth/2013/09/04/cb03c268-1566-11e3-a2ec-b47e45e6f8ef_story.html"

He wrote: "The truth is that for most Americans, the constant combat has imposed no burdens, required no sacrifices and involved no disruptions. True, the money spent has been substantial. From 2001 to 2012,
reckons the Congressional Budget Office (CBO), the wars in Iraq and Afghanistan along with related
operations cost $1.4 trillion. Although that’s a lot even by Washington standards, it pales next to all
federal spending and the economy’s total production. From 2001 to 2012, federal spending totaled
$33.3 trillion; the wars were 4 percent of that. Over the same period, the American economy produced
$163 trillion of goods and services. War spending equaled nine-tenths of 1 percent of that.
As important, no special tax was ever imposed to pay war costs. They were simply added to budget
deficits, so that few, if any, Americans suffered a loss of income. It’s doubtful that much other
government spending was crowded out by the wars."

Now if 1.4 trillion in today's dollars is nothing to worry about, let's ask what $1.4 trillion would compound to in the 75 year Social Security time horizon mentioned by the Conservative Heritage foundation in May of 2013.

Heritage mentioned a 12.3 trillion unfunded obligation in 75 years.

$1.4 trillion compounded at 3% over 75 years is
1.4 Trillion * 1.03^75 = 12.85 trillion, which is ABOVE the Heritage shortage number.

For it appears the long term funding shortfall the VSP's seem to be worried about in the Social Security trust fund is about the same scale the VSP's were willing to expend, and continue to justify, in some unfunded foreign wars.

Perhaps we need to declare a "War on Elderly Poverty" to enlist Samuelson's support?
Calling BS
written by cas127, March 04, 2014 1:08
"know that on average their pay will be about 40 percent higher in three decades."

Hmmm...because household incomes have stagnated/declined over the last 15 years?

I don't think assuming the growth rates of 1946 to 1999 is a very good guide for the next 50 years.

China has been eating our lunch and will continue to do so.

...
written by dax, March 04, 2014 6:25
"If they pay two or three percentage points more of their wages in Social Security taxes, to support their own longer retirements, who gives a damn?"

They do. I disagree with you on this one Dean. Suppose you have a young poor guy and an old poor guy. The young poor guy is told to suck it up and give some of his current income to support the old poor guy. You seem to have two answers. The first is, Blame the rich guy. Well, yes, it would be better of course to get the rich guy to pay, but the whole problem is he's not, and the young poor guy is the one paying. Your second answer is, the young poor as a group will be richer in the future than the old poor as a group are today, so the young poor guy has little cause for complaint. This is a sixty-year old talking. Even if in 30 years the young poor may be richer, now they are poor, and it is probably worse to be young and poor than old and poor. Secondly, even if as a group the young poor will be richer, many of the individuals will not be (some of them will even be dead), so why are they being made more miserable when they are young?
get a clue, dax
written by ifthethunderdontgetya™³²®©, March 04, 2014 10:53
.
Suppose you have a young poor guy and an old poor guy

Standard framing. Let's forget the rich plutocrats who want to spend all the monies on wars for the rich, and welfare for the rich, like Samuelson and his bossed do, and indulge in a inter-generational bum fight.

"Ten cookies at ten place setting. Rich guy rushes in, stuffs nine of them in his mouth, and yells, "The old guy is trying to steal your cookie!"
~
...
written by dax, March 05, 2014 6:29
"Let's forget the rich plutocrats who want to spend all the monies on wars for the rich..."

No let's not forget them. By all means take their money away. And if you do succeed to take it away, then notice you won't need to take anything from the poor young. But if you don't take their money away, then what do you do? Apparently take from the poor young to give to the poor old. And that's wrong.
Bad addition by oligarchs mouthpiece
written by Codger37, March 05, 2014 8:08
Poor old fellow omitted the War (defense/black ops/NSA) budgets that should be included in the sums thus providing context for the 1.2 trillion (he should have times that by 10 due to ongoing, gifts to other nations and for off site prisons and 'other.'

When ding this one finds WE WERE ROBBED and are paying interest to the robbers :-).

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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