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Home Publications Blogs Beat the Press Social Security and Medicare: A Teachable Moment for Robert Samuelson?

Social Security and Medicare: A Teachable Moment for Robert Samuelson?

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Thursday, 27 January 2011 21:53

Washington Post columnist Robert Samuelson told readers that this is a teachable moment when it comes to Social Security and Medicare. Let's see if he is right.

In his column he takes issue with the idea that people pay for their Social Security and Medicare benefits:

"Consider a man who turned 65 in 2010 and earned an average wage ($43,100). Over his expected lifetime, he will receive an inflation-adjusted $417,000 in Social Security and Medicare benefits, compared with taxes paid of $345,000, estimates an Urban Institute study."

However if we look at this Urban Institute we study that this man will have paid $290,000 for his Social Security benefits. According to the study, he will only get $256,000 back. In other words, he will have paid $34,000 more in taxes than he will get back in benefits. (This calculation assumes that the taxes earn an interest rate that is 2 percentage points above the inflation rate.) So, contrary to what Samuelson implies, the Urban Institute study shows that this middle income person will have more than paid for the Social Security benefits that he is scheduled to receive under current law.

The study does find that this man will get back more in Medicare benefits than what he paid. It estimates the value of his Medicare benefits at $161,000 for which he will have paid $55,000 in taxes. However, the idea that this person is getting some big giveaway from the government is a bit misleading. People in the United States pay more than twice as much per person for their health care as people in Canada, Germany, and other wealthy countries. This means that the money is not really going to the beneficiary, it is going to the pharmaceutical industry, high-priced medical specialists, and other sources of waste in the U.S. health care system.

If our health care costs were in law with those in other countries (all of which enjoy longer life expectancies), then Medicare benefits and taxes would be more nearly in line. More generally, if per person health care costs were in line with costs in the rest of the world, then the United States would be looking at huge budget surpluses, not deficits. This is the reason that honest budget analysts and commentators focus on fixing the health care system, not Social Security and Medicare.

Comments (3)Add Comment
Reducing income inequality preserves SS solvency
written by Goldilocksisableachblonde, January 28, 2011 1:54
This can be easily seen by looking at the Urban Institute figures for couples at low- versus high-income levels. The lower payout on SS contributions as your salary increases means that SS solvency would be improved simply by correcting the current distorted income distribution , which funnels all income to a narrow group at the top , beyond the SS contribution income limit ( ~ 108k ).

Why more progressive groups don't emphasize this point , since it combines two progressive goals - reducing inequality and preserving SS - is a mystery to me. It should be a major talking point , backed up by easily-verified data.
...
written by izzatzo, January 28, 2011 8:49
This means that the money is not really going to the beneficiary, it is going to the pharmaceutical industry, high-priced medical specialists, and other sources of waste in the U.S. health care system.


This is big commie lie. Anyone who participated this week in the Obama-Orama-SOTU-Parade knows that competition will now be used to drive health care resources to their highest valued use and create wealth for the nation, just like Adam Smith said it would.

If you don't believe it, just look as the ads already popping up in hospital emergency rooms - Two-For-One Heart Attack Treatments, but hurry, quantities are limited.

Stupid liberals.
low income=low life expectancy
written by pete, January 28, 2011 10:14
Don't forget the racism built into the social security system...no passing on of wealth for lower incomes, which perpetuates the poverty. There should be a lump sum alternative, rolling the soc. sec. into an IRA. (ooops thats privatizing)

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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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