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.
Source: 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.
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