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Home Publications Blogs Beat the Press Steve Rattner: Stop Stealing from Our Kids!

Steve Rattner: Stop Stealing from Our Kids!

Thursday, 14 March 2013 14:02

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.

The reality is that the hit to future living standards from demographics is relatively modest. It is easily dwarfed by the gains from projected productivity growth even under very pessimistic assumptions. Even if productivity just grows at the same rate as it did in the slowdown era from 1973-1995 the gains from productivity growth through 2035 would be more than three times the potential hit that our children would face from supporting a larger population of retirees. And after 2035 productivity continues to grow, even as the demographics barely change.

altSource: Author's calculations.

But this story depends on our children being able to capture the gains of productivity growth rather than seeing them all go to the top. That requires a reversal of the policies of the last three decades. But rather than having people talk about the policies that are causing this massive upward redistribution, Rattner is trying to set children against their parents and grandparents. And the NYT is apparently happy to give him the space to do so.

Comments (25)Add Comment
Hammer meet nail....
written by rationalrevolution, March 14, 2013 3:32
Hammer pounds nail on head...
click thru and read the comments to Rattner's post
written by rnold, March 14, 2013 4:21
One does get a good feeling seeing all those negative comments..
written by skeptonomist, March 14, 2013 7:10
"Funding" of SS has about come to an end. The Trust Fund, which was a limited funding to account for the baby boom, was supposed to grow for a few more years, but the rate of increase was fated to slow down even before the recession, and this is according to plan. If the remaining working boomers do not contribute quite as much as planned because of the recession, maybe they should get a little less in benefits, but if the Trust Fund is not mostly gone by the time all boomers are they will have been cheated. Too bad the editors of the NYT don't know any better than to allow charlatans like Rattner to talk about these ridiculous "unfunded liabilities" as if they had some meaning.

And what are the "unfunded liabilities" for the education of children 30+ years hence? Why shouldn't we account for those costs and be saving up for them if we follow the methodology of Rattner and the SS bashers? The fact is that by that time both SS and childrens' benefits (mostly education) will be paid for out of current income - we don't have to save up for them, or cut back on either retirement benefits or education now. SS is the responsibility of the Federal government while education is mostly done by states and localities, so there is limited interaction between them.
Help! I've Fallen and Can't Get Up! Steve Rattner Version of Hansel and Gretel
written by Last Mover, March 14, 2013 7:50
If you can't send an ambulance, just send some children over by way of the next Meals on Wheels van. That will hold me over for a few months until I recover from this nasty fall.

The address is 999 Tasty Children Drive, Witches Brewtown. Just tell them they'll be doing the usual indentured home caregiver services for another senior freeloader who is robbing them of their educational and occupational future. That will get them hungry so they can be fattened up for the feast.
written by John Sundman, March 14, 2013 8:23
For Mr. Rattner to be lecturing anybody about our obligations to our our progeny is ludicrous. He should look in the mirror. In one of his many houses. I'll leave it at that.
written by Union Member, March 14, 2013 8:24

Before Charlatan Rattner was financial advisor to NYC mayor Bloomberg, before he played with NY State pension funds, before he was Obama's Car Czar, before he was a big-time donor to the Democratic Party, and even before he was a hotshot investment banker, Charlatan Rattner was a staff reporter for the New York Times.

Is this the future Charlatan Rattner sees for NYC and Social Security:

written by urban legend, March 14, 2013 9:05
Patents were around long before the 1980s, and generally being corporate-owned, probably have nothing to do with upward distribution to wealthy individuals. Why focus on this likely bogus cause without even mentioning movements toward a flat tax in the Reagan and Bush II administations, abandonment by the fed of the goal of full employment, no minimum wage increases for a decade, the many deliberate anti-labor policies that were central to Reaganism, and corporate governance developments that encouraged top executives to pad their own compensation packages to truly obscene levels? It's developments that have abandoned the middle class and lower-income classes in their necessarily perpetual effort to claim a larger share of corporate revenues (generated in large part by those patents) that have driven the growth of inequality, not the patents themselves.
Patent protection became much deeper and longer
written by Dean, March 14, 2013 9:41
That is why I talk about. We spend close to $250 billion more than the free market cost of drugs each year because of patent protection. As a share of GDP it would not have been even one-third as large 30 years ago.
patents: why do they exist?
written by David, March 14, 2013 11:57
Patents are government-granted monopolies that specifically and legally enforce the distribution of income to the patent-holder (whether they created anything or not). As Michele Boldrin and David K. Levine say in their seminal paper (see link below)
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded – which, as evidence shows, has no correlation with measured productivity. This is at the root of the “patent puzzle”: in spite of the enormeous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R&D expenditure – in addition to the discussion in this paper, see Lerner [2009] and literature therein. As we shall see, there is strong evidence, instead, that patents have many negative consequences.

written by Chris Engel, March 15, 2013 1:37
urban legend,

You're right, patents aren't the ONLY story here.

The move from a progressive tax to a regressive one is probably the PROXIMATE issue here, as you implied in your post.

The work by Emmanual Saez best highlights this:


He effectively argues that the reformation of the progressive tax in the United States has driven the inequality we've seen since the early 80's.

But this doesn't discount Dr. Baker's points on patent monopolies. There has be some reform here, the way the government has willingly overpaid for things that have lined the pockets of patent monopolists has contributed to this inequality.

The problem is that it's so politically unpopular to raise taxes, EVEN ON THE RICH! So the battle is uphill on all fronts, whether you want to attack the issue policy-wise with changes to the tax and regulatory systems, or privately with corporate governance reforms for executive remuneration (LOL fat chance), or if you want to try and go after patent monopolists (this seemed crazy a few years ago, but with all the attention to healthcare costs, this might become politically feasible in the near future).

However way it can be addressed, it's hard to imagine that it _WILL_ get addressed given the fact that we're basically soon to be an oligarchical banana republic where the plutocrats control the peons through the media and manipulate the working class to mobilize for the interests of the aristrocrats that will stop at nothing to maintain their power base.
Patents? Really?
written by Blue Meme, March 15, 2013 8:10
Technology entrepreneurs as the root of evil in the inequality discussion?

What kind of device did you type this piece up on? Upload it with? What kind of technologies are being used to make it possible for anyone in the world to see your post?

All of these things were once risky bets that were created and financed in large part because somebody counted on patent protection.

Many of those things made some people rich, yes. But it is a helluva reach to say that they hurt the poor.

Please direct your fire to the Too Big To Fail finance folks, who actually deserve it.
Ever hear of the "Internet"
written by Dean, March 15, 2013 9:02
it was financed by the government, not patent monopolies.
Ever hear of broadband?
written by Blue Meme, March 15, 2013 9:52
True. But you would still be dialing up on a 300 baud modem and staring at a command line prompt like the ARPANET guys did without the innovations that Silicon Valley brought you. The patent system was a big part of that. And it isn't the big boys who are defenders of the patent system -- it is the underdogs who see it as a way to counter the market power of the largest players who can rely on other means to defeat smaller competitors.

I'm angry as hell at the financial services industry, which wrecked the economy while adding damn near zero benefit. We need to depose our oligarchs.

Tech ain't the problem. Patents aren't the problem either. (Abuse of the patent system, by Big Pharma and others, is a indeed a problem. But there is a baby in there with all that bathwater.)
written by liberal, March 15, 2013 11:48
Blue Meme wrote,

The patent system was a big part of that.

And you know this, how?
written by Blue Meme, March 15, 2013 12:23
liberal wrote:

"And you know this how?"

As someone who has raised venture capital in large part on the strength of a portfolio of patent applications. As someone who has worked for a medium-sized company that had to enforce IP to keep other from copying its innovations once it had done the hard work of pioneering a new class of technology. As someone who has been a successful defendant in patent litigation. As someone who has invalidated bad patents. As someone who has been able to punch far above my weight when working with very large companies by virtue of our patents. As someone who has bought and sold companies that were valued based in large part on their patent portfolios.

I am beginning to understand that there is a lot of latent hostility toward the patent system among people who are convinced that it is one of the ways The Man keeps us down. I've spent a lot of time learning about the patent system and the way it functions in the business world, and it really isn't a tool of oppression in most cases. It does inconvenience those with market power. I think there are some real parallels with the way big companies gull the Tea Party types into hating on progressive taxation -- Fortune 50 execs hate paying taxes, so they try to convince hoi polloi that reasonable top rates actually hurt Joe Sixpack.

The patent system is one of the few curbs on the steamrolling of competition by monopolists. It is far from perfect, but killing it would be exactly the kind of deregulation that would perversely destroy the level playing field the "free market" actually requires. If you succeed in crippling it, the big guys will cheer, and garage inventors will have no way to protect themselves.
written by Chris Engel, March 15, 2013 12:49
Blue Meme,

The anger is more directed toward how abuse of the patent system has led pharmaceutical and medical technology companies to extort the public beyond reason to the point that it's harming us economically.

in the name of public good it is something that should be limited, not eliminated.

patent litigation actually tends to be minimal. it's a drawn out process. innovation in Silicon Valley is more about getting popular and building a following with an idea. usually when an idea has come out, all the tech guys steal it and build on it and so on. are you unaware of just how Mac, DOS, Windows came to be? all those guys stole from each other, built on each other, and creatively collaborated often quite competitively.

Silicon Valley is and always has been driven not by patents but by free thought and creativity and collaboration. I'm getting the feeling you might actually be what is called a "patent troll", based on how much of an advocate you are for litigation and patents.

because while there are formalities to getting a patent on an tech innovations, the process really is so fluid and open that if you've totally robbed someone of an idea you're called on it and unable to truly capitalize.

recourse in the legal system over patents is actually not that common, and when it is, it's usually so far after the fact to be profitable that it clearly wasn't a crucial aspect of driving the innovation within technology to begin with, this is in Silicon Valley especially!
written by Blue Meme, March 15, 2013 1:06
Chris Engel:

"recourse in the legal system over patents is actually not that common"

I completely agree. But that doesn't mean that the patent system isn't serving a valuable purpose, just as the lack of squabbling between neighbors doesn't prove that fences are a bad idea.

Silicon Valley is indeed driven by innovation -- that is what makes SV the engine of growth and change that is has been for the past few decades. But innovation generally requires capital, and capital hates risk. A system that protects innovators reduces risk for investors, thereby increasing innovation.

Anyway, this is all completely OT. Dean's main point -- that the focus on Teh Debt among the VSPs is misplaced, and that growing wealth disparities are doing vast damage -- is what we ought to be amplifying.

I just wanted to say that the patent system isn't the droid he's looking for.
written by Chris Engel, March 15, 2013 1:27
It's not OT. Patent reform is one of Dean Baker's passions and it's always on topic here for that reason, I'd imagine.

In SV when you have an idea the patent filed is just a formality that shows you've fleshed out some idea.

Patent trolls love to "innovate" and then sit on patents, never using them, and then waiting for companies to profit using some idea and then suing long after the fact. The reality is that you never hear about tech giants filing patents against each other, that's why it was such big news that Apple and Samsung were going at it, because it was feared that it would set off a string of them, since almost any of the tech giants could basically sue another one over some breach!

It's also why patent trolls (and I'm not calling you one) are so reviled in SV, not as guardians of innovation, but as opportunists, exploiters of market leaders.

Patents don't drive innovation. Patents drive the efforts to monetize ideas in some ways, but the innovation happens absent that. The open source community is incredibly productive and innovative.

Marketability is the absolutely crucial part of this. But you sure don't need patents.

Facebook is a case in point. Legally, you can always make an argument such a: when you've come up with an idea and sought to develop it (without a patent or anything) with someone ,and that someone takes the idea, runs with it, and makes a ton of money -- thus, since you created the idea you're entitled a payoff if you aren't appropriately cut in. The legal system protects you with or without the patent.

Patents are less relevant in these kinds of business disputes, but certainly strengthen cases. However, Silicon Valley was well known for rejecting patent litigations and as I mentioned before (but typing on my phone and perhaps was unclear) actually stealing and building on each others ideas and letting the market decide which was best. Usually anyone who was part of the innovation was let in on the wares anyway!

And you must not have read Dean Baker's book or know the argument against patents at all:


The main culprits here aren't the tech patents, because they're not the ones who are enforcing them and gouging customers.

The true problems here are the media copyright nazis and the healthcare industry (pharma, medtech, biotech whatever you want to call it), particularly the latter, as the retiring babyboomers are making the money we pay to patent monopolists in the healthcare industry not negligible.

So instead of seeing red just because he mentions patents, maybe you should look into the argument that he's laid out numerous times in his book, reports, and blog posts.

Also while this is a progressive thinktank and blog I don't think you should be censoring yourself to fit the groupthink here. If you don't agree with a point on policy or something, just express it and roll with it. Nobody can learn or grow or understand differences without expressing doubts and discussing the details.
written by Jeff Goodrich, March 15, 2013 7:35
I find it illuminating that Rattner and other fiscal scaremongers only use a present value analysis to measure the cost of future benefits to average taxpayers --- and let's not forget that nobody receives SS or Medicare who has not paid into that system for at least 10 years. When are they going to present value the cost of future wars which, by the way, there is not a DIME of saved taxes to pay for, unlike SS.

If they would do that, we could all scream Rattner-like: OMG! The war "trust fund" cupboard is bare! And so are the oil subsidy, ag subsidy and banking subsidy cupboards! We MUST immediately reduce these "entitlements" or we'll go broke!
the patent system IS one of the droids we are looking for
written by David, March 15, 2013 10:10
Apparently, Blue Meme likes to ignore inconvenient empirical data to the contrary, but patents do not serve any of the purposes which he magically ascribes to them. Maybe BM has a patent himself?
""It is impossible to make a man understand something if his livelihood depends on not understanding it." -- Upton Sinclair

But the rest of you who are interested in how reality actually works and not in chewing taffy distributed by those in favor of centralized power, please do read the paper by Bouldrin and Levine that I linked to above and repeat here for the convenience of those interested in a realistic conversation about the patent system.

The personal computer industry began because Xerox was forced to license, for free, patents that it was content to let lie on the shelf. Both Gates and Jobs profited mightily from this largesse. Again, read the paper linked to above to learn more about the reality of patents. Patents do not help independent inventors, they most often hinder them; patents do not lead to innovation, they stifle innovation; patents are directly opposed to free commerce. This nonsense that they are somehow necessary to forward technological progress is just that: nonsense. They benefit lawyers, yeah. So what?
written by Chris Engel, March 16, 2013 4:38

I think you and I were both smelling the same funk from over there at Blue Meme's pro-patent rant.

While I'm hesitant to call anyone a term like "patent troll" without more evidence (since he did say he was a defendent, not a plaintif--who knows), otherwise he really fits the profile of the guys that abuse patents and even the Courts have been dismissing as trolls.

Xerox is a good example too -- that specific case I wasn't aware of, but everyone knows the history of Silicon Valley has been all about building upon each other's innovations and not clogging the courts with patent complaints.

That's why people in tech are hating Apple a lot for turning litigious against Samsung, who knows how far the patent war could go when there are so many conflicting, overlapping patents that tech companies have.

Hadn't caught that paper by Boldrin/levine (surprised it hasn't come up on my radar faster actually), thanks for the link.

Oh and regarding copyright nazis in digital media -- just remember how much artists were hating on YouTube's copyright violations -- only to learn that illegal videos on youtube were driving serious traffic and popularity of the products of artists -- now EVERYONE can go on YouTube and listen to basiclaly any song they want, for free, and yet the music industry survives, and thrives because they use youtube to generate revenue and to generate buzz -- amazing isn't it? (not if you understand patents :P)

Instead of having a state sanctioned monopoly these copyright holders should just embrace their own marketing and business potential for a product, because that is what's going to win a battle in the market, not a threat of imprisoning people who download a movie or song. Find ways to engage that consumer, for free, online, ad-based revenue, whatever (GET CREATIVE, f*cking businesses) and engage in some level of price discrimination where you get ad-based revenue for provision of media to those who can't afford to deliver an ad-free more convenient copy somewhere. that would extract by far the most surplus...but alas there's market actors colluding (cable companies, tv networks) to suppress this sensible developmnet in the media. it's partly because of dumb copyright monopolies, and partly due to market collusion (arguably illegal, depending on how you want to interpret some of the laws we have against anti-competitive activity)
retired public emergency services administrator
written by mike gramig, March 16, 2013 5:23
"... to allow charlatans like Rattner to talk about these ridiculous "unfunded liabilities" as if they had some meaning. ...follow(ing) the methodology of Rattner and the SS bashers..."

I've been thinking lately about how much sense it makes to prefund the retirement liabilities a la the U.S. Postal Service, or the many state and local underfunded pension systems. If these are going to be continuous benefit pools over long periods of time, should their liabilities be calculated as if they are simple future values? I'm not so sure. If, in fact, productivity gains continue ad infinitum, then these libilities are not quite so scary either. Just wondering.
this reminds me of that
written by nealbirch, March 16, 2013 5:33
written by liberal, March 16, 2013 10:19
blue meme wrote,
As someone who has raised venture capital in large part on the strength of a portfolio of patent applications. As someone who has worked for a medium-sized company that had to enforce IP to keep other from copying its innovations once it had done the hard work of pioneering a new class of technology. As someone who has been a successful defendant in patent litigation. As someone who has invalidated bad patents. As someone who has been able to punch far above my weight when working with very large companies by virtue of our patents. As someone who has bought and sold companies that were valued based in large part on their patent portfolios.

You've done all that, and yet you're so uneducated that you've never heard of the logical fallacy called "appeal to authority"?

written by Blue Meme, March 18, 2013 10:00

The mistake I made was not the logical fallacy called "appeal t authority," which takes the following form:

Most of what authority A has to say on subject matter S is correct.
A says P about subject matter S.
Therefore, P is correct.


The mistake I made was violating one of the most important rules of blog commentary:

Don't feed the trolls.

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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.