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Home Publications Blogs Beat the Press The Generation War Goes on Parade

The Generation War Goes on Parade

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Monday, 07 April 2014 03:52

Paul Taylor, a vice president at Pew and the author of a new book on generational conflict, took his generation war story to Parade Magazine this weekend. This magazine, which is distributed to millions of people with their Sunday paper, included a piece by Taylor that warned:

"By the time every boomer is collecting Social Security and Medicare, those two programs are projected to eat up about half our entire federal budget—and both the Social Security trust fund and one of Medicare’s two trust funds will be broke. That’s because the ratio of taxpayers to retirees will have fallen to its lowest level ever, about 2 to 1. (When Social Security first went into effect, the ratio was more than 20 to 1.) But renegotiating the social contract between the generations will be a tall order, because these days, young and old in America don’t look alike, act alike, or vote alike."

This comment is fundamentally misleading. First, the ratio of taxpayers to retirees at the time Social Security started has nothing to do with the time of day. Amazon had only a few thousand customers in the first months it was operating. So what?

When Social Security was first created its actuaries knew full well that life expectancies would increase and that the ratio of workers to retirees would decline, and they adjusted the program accordingly. This was done primarily through a series of tax increases that were scheduled decades in advance. In addition, the commission chaired by Alan Greenspan in 1983 increased the age at which workers qualify for full benefits from 65 to 67. This increase is phased in over the period from 2002 to 2022. It is remarkable that Taylor seems unaware of these facts.

While the program is still projected to face a shortfall over its 75-year planning horizon, close to half of this shortfall is attributable to the upward redistribution of income over the last three decades. This upward redistribution has worsened the finances of the program in two ways.

First, it increased the portion of wage income that went to workers who earned more than the wage cap. In 1983, when the Greenspan commission set the cap at its current level (which is indexed to average wages), only 10 percent of wage income was above the cap and escaped taxation. Now it is close the 18 percent of wage income.

The other way in which the upward redistribution hurt the finances of the program was that it increased the ratio of payouts to taxes because of the progressive nature of the program's benefit structure. With the typical worker's pay falling relative to the overall average wage, because so much money is going to high-end earners, their replacement ratio (the portion of their wages replaced by their benefit) is rising. This is good in that it protects workers, but it does impose larger costs on the program.

The other important point about the upward redistribution we have seen over this period is that the money that workers have lost due to the redistribution to people like doctors, Wall Street types, and the Koch brothers dwarfs any potential tax increases that could be needed to finance Social Security. The Social Security Trustees project that average hourly compensation will rise by more than 50 percent over the next three decades.

The prospective increase in compensation is more than ten times the size of any possible tax increase that would needed to keep Social Security fully financed well into the next century. If the upward redistribution of the last three decades continues, it will make far more difference to the living standards of young workers than paying for their parents' Social Security. It is therefore striking that Parade would opt to make such a big deal out of an issue that is likely have minimal impact on the well-being of young people. (The impact of global warming, if left unaddressed, will also swamp the impact of any prospective Social Security tax increases.)

The finances of Medicare are notably worse than Social Security, but this is due to the fact that people in the United States pay more than twice as much per person for our healthcare as people in other wealthy countries without anything to show for it in terms of outcomes. These high costs are due to the fact that our doctors make twice as much as doctors in other wealthy countries, and we pay twice as much for our drugs, medical equipment, and other medical goods and services.

Here also the issue is not a generational one, but rather one of reducing the enormous waste in our health care system. Of course this waste largely goes to enrich those at the top.

It is striking that Parade would run a piece that seems to deliberately misrepresent the problems facing the nation's young. At a time when many young people are facing great economic difficulty due to policies promoting upward redistribution of income and a macroeconomic policy that keeps millions of workers unnecessarily unemployed, this piece is trying to convince young people that their greatest problem is their parents' Social Security and Medicare.  

Comments (14)Add Comment
Nyt today also provides cover for high unemployment, redistribution up policies
written by jaaaaayceeeee, April 07, 2014 5:59

On the front page of the Business section, Annie Lowrey does some good reporting on how hard it is for local governments trying to ease inequality.

Unfortunately, she then quotes, uncritcally, Harvard's Edward Glaser claiming that more affordardable housing is the responsibility of local government, and that the only big ways to reduce inequality are federal tax code and benefits.
Government for the People
written by Robert Salzberg, April 07, 2014 6:10
When considering funding government programs, the question should be what do we want and how do we want to pay for it? Dr. Baker has written in the past about how Americans are more than happy to have their taxes raised to keep Social Security benefits intact.

A majority of Americans also support some form of single payer health care which would be much cheaper for everyone.

So does Mr. Taylor think we shouldn't do what the People want?

We don't need to 'renegotiate the social contract'. We just need to improve the financing and design of our health care and retirement programs.


Social Contract Isn't Between Generations
written by Robert Salzberg, April 07, 2014 7:26
Mr. Taylor propagates the myth that Social Security and Medicare are a " social contract between the generations". Social Security and Medicare are social insurance programs. Unless they die early, the young will eventually be old enough to collect the benefits they pay for today.

Young people that get disabled early also reap the benefits of Social Security and Medicare. Millions of young Americans have older parents and grandparents that they would have to directly support if we didn't have Medicare and Social Security.

Those that support slashing benefits or voucherizing Medicare would cut promised benefits and violate a decades old social contract that has been paid in advance. So whose really advocating for pitting the old against the young?
A Social Contract We Can All Live With
written by Larry Signor, April 07, 2014 8:45
Paul Taylor completely misses the boat.(Just as an aside: Why must benefit cuts always be mentioned in the same breath as tax increases?). Taylor manages to do this on at least 4 levels:

1. He has actuarial confusion. Not all Boomers will be collecting benefits simultaneously. Some will die, some will continue to work and most will phase in as they reach the age qualification. (Taylor does not mention if he has retired.) No tsunami here. Perhaps a tad congested.
2. He uses the Big Lie...only the elderly use Social Insurance Programs. Many Millennials have been the beneficiaries of SIPs such as SNAP, CHIP, WIC, SSI, school lunch program etc. It is the rich Boomers who oppose SIPs, not the Millenials.
3. Taylor winds up with this doozy: "Every generation will have to share in the pain­.". This means less than nothing. We don't tax "generations", we tax wealth and income. Many Boomers still pay significant payroll taxes because they earn significant compensation. Many Millenials are not in such a fortunate financial position, so pay proportionately less in payroll taxes.

Taylor should have left this one on the editors floor.
4
written by Larry Signor, April 07, 2014 9:00
4. Taylor implies that our children are myopic graspers who shy from inter-generational conflict because of it. Aside from being insulting, Taylor is an intellectual Luddite. His entire analysis falls apart if we see a robust economic recovery in the future, which is, historically, very possible.
The Zero-Sum Count Monster Strikes Again: America Has Only 12 Aircraft Carriers
written by Last Mover, April 07, 2014 9:45

By this flawed logic Paul Taylor would have you believe for example, that SS and Medicare would go broke even if the federal budget itself was small compared to total economic output.

That is, even though SS and Medicare would be "eating up half" the (smaller) federal budget, relative to total output it would still go broke from not enough working taxpayers and too many retirees.

For example, what would Taylor's doomsday scenario look like if the one trillion dollar output gap was closed?

In any case it represents the dismal level of economic propaganda dished out by VSPs like Taylor and accepted by willful economic illiterates, reduced to the addition and subtraction of simple whole numbers spiced up by a few simple fractions out of context.

Seriously, this falls to the level of Mitt Romney trying to scare people in the debate with Obama, that America has only 12 active aircraft carriers. ONLY TWELVE! And Obama calmly reminds him that aircraft carriers are those things go around the world with airplanes on them that fly all over the place.

We're all gonna die America, and not just because of SS and Medicare going broke. We don't have enough aircraft carriers either. Like Count (Dracula) of Sesame Street would say when talking to children, it all adds up you know.
...
written by Dryly 41, April 07, 2014 9:54
This post is spot on. It should be noted that that the massive Federal Debt that Republican "Charlatans and Cranks" profess to worry about(but only when there is a Democrat in the White House) were created by the 1981, 2001, and, 2003 "supply side" tax cuts enacted by Ronald Reagan and George W. Bush. This led to 20 years of budget deficits in each year of the Reagan and Bush family presidencies, and, increased the Gross Federal Debt from 32.5% of GDP to 85.1%(Clinton reduced it by 9.7%). The "supply side" tax cuts and resultant deficits: 1. slowed economic growth by crowing out private investment; 2. raised interest rates; 3. "supply side" was a major factor in creating the inequality we have today as they were, as Budget Director Davisbclqp Stockman said "a Trojan Horse" to lower the upper tax brackets.
...
written by skeptonomist, April 07, 2014 10:01
And again, as Dean has mentioned before, workers have to support children as well as old people, and the fraction of people of working age in the population stays fairly constant near 0.6 - see the graph here:

http://www.skeptometrics.org/RealDemographics.html

The variations of the ratio between about 0.56 and 0.64 are obviously far less important than the other factors that Dean discusses. The trend does mean that more of the tax burden must be borne by the federal government, which does SS and Medicare, and less by local and state governments, which do most of the education of children.
Taylor may be getting desperate to get his message out
written by John Wright, April 07, 2014 10:16
Taylor's piece even mentions "a generational war needs combatants and these two aren't spoiling for a fight"

And then goes on to mention "interdependence".

This is exactly the issue, a dollar received in SS benefits by Grandma is likely used to help fund the multi-generational family.

He should look at the American family as a small business that is rather agnostic about the sources of its cash, so cutting social security benefits for one member in order to increase current income for another is viewed with some apathy.

As I recall, the median net worth of American families is low, about 170K for white families and 7K for Black/Hispanic.

The real family wealth is in the future income stream from SS/Medicare.

No wonder there is little pressure, in my view, to cut SS coming from the hoi polloi.

The pressure to change (AKA "reform") SS always seems to come from some think tank (Peterson Institute), foundation founded by the wealthy (Pew) or wealthy celebrity (Abby Huntsman).

And "reforming" SS for the future is seemingly the only issue that merits long term concern by think tanks/foundations.

Where were these long term thinkers when it came to accurate assessment of USA's future costs related to military actions in Iraq/Afghanistan?

Taylor also lumped the relatively healthy SS with Medicare in order to make his projection that those two programs would eat up half the federal budget.

But he made no mention that the USA spends about 2x more as a percentage of GDP on medical than other developed countries, which Dean has pointed out numerous times.

Furthermore, perhaps high SS/Medicare expenses MIGHT crowd out the funding to US military/security complex, paying a peace dividend to the American taxpayer and to the world in general.

And maybe the entire USA economy would be more productive, and SS/Medicare more financially affordable, if the financial sector were downsized and the people re-employed in more productive pursuits.

That Taylor's piece ended up in Parade magazine is a possible sign of desperation as to judge from the advertising in this West Coast version of Parade, the target readers are those who need oxygen therapy, silver coins, pet food, or anti-allergy medicine.

I'd guess the target audience is then the very people who would see their benefits decreased.

This is a "Hail Mary" pass by Taylor.
Exactly John Wright - The target audience seems to be the elderly.
written by Anna Lee, April 07, 2014 11:10
My husband turned 68 yesterday. He is a 1946 boomer. This means the 1964 boomers are turning 50. Gee, one more giant recession and they will all probably be permanently retired.

On the other hand, this is a country that can be convinced that the word "entitlement" is demeaning.
Where's the beef?
written by Mike Ballard, April 07, 2014 7:30
Worker productivity has increased substantially since the 1930s. That means lots of wealth has been generated for where else can wealth come from, other than Nature and Nature has no Social Security or Medicare costs to maintain. Capital treats Nature as a given.

Labour is ENTITLED to all the wealth it produces; however most workers don't see it that way. Most workers believe what capitalist media outlets like "Parade" spoon feed them on Sundays. Most workers believe the wealth of this nation belongs rightly to the employing class, like most of them think that they live under one nation under God. In reality, most of the messages they get reaffirm this thinking even as they pledge allegiance to the flag and the employing class of America.
...
written by Procopius, April 07, 2014 9:36
I don't know if Taylor calls himself a Christian or a Jew, but the fifth of the commandments listed in Exodus 20 is "Honor your father and your mother, that your days may be long upon the land which the LORD your God is giving you." Now Taylor may not have any understanding of the social milieu in which that commandment was issued, but it did not mean standing up whan your father or mother came into the room. It meant supporting and caring for them when they were too old to contribute economically to the family's wealth. I'm certain the Muslims have a similar requirement under Sharia, since Allah also commanded charity to others. Of course it's notable that many of our more prosperous Christians are rather careless of obeying the commandments which their poorer brethren want so badly to place in public places. Come to think of it, so are the poorer brethren, but that's getting too far off topic.
...
written by jamzo, April 08, 2014 9:39
http://www.pewresearch.org/staff/paul-taylor/

Paul Taylor is the executive vice president of special projects at the Pew Research Center, where he oversees demographic, social and generational research. Taylor is the author of The Next America, a new book examining generations and the country’s changing demographics. From 1996 through 2003, he served as president and board chairman of the Alliance for Better Campaigns. Before that, he was a newspaper reporter for 25 years, the last 14 at The Washington Post, where he covered national politics and served as a foreign correspondent. From 1992-1995, he was the Post’s bureau chief in South Africa and reported on the historic transformation from apartheid to democracy. He also covered four U.S. presidential campaigns. Taylor is also the author of See How They Run (Knopf, 1990) and co-author of The Old News Versus the New News (Twentieth Century Fund, 1992). He twice served as the visiting Ferris Professor of Journalism at Princeton University, in 1989 and 1995. He graduated in 1970 with a bachelor’s in American Studies from Yale University. Taylor has lectured at numerous colleges and frequently discusses Pew Research studies in print and broadcast media.
---------------------------------
http://en.wikipedia.org/wiki/PublicAffairs

PublicAffairs (or PublicAffairs Books) is an imprint of the Perseus Books Group, an American book publishing company located in New York City.

Perseus Books Group is owned by Perseus Funds Group (holding company Perseus LLC), a capital management firm that grew from about $20 million in 1995 to over $2 billion now. Large infusions of cash helped it grow exponentially, and it reportedly closed investment funds to new investors almost as fast as it opened them. The board has many prominent former Clinton and Carter Administration officials.[citation needed]
Some additional background on the Pew Trust in a documentary film
written by John Wright, April 08, 2014 10:29
There is a documentary titled

"The Art of the Steal" (2009 film)

This is described by Wikipedia this way:

"he Art of the Steal is a 2009 documentary film about the alleged theft of what is generally considered to be the world's best collection of post-Impressionist art (valued in 2009 at least $25-billion), theft by the second and later generations of the foundation's board, after the Pew Trust, Annenberg Foundation, and Philadelphia politicians, including Pennsylvania Governor Ed Rendell, violated the clear intent of the written will of the collector and owner, Doctor Albert C. Barnes. It describes the successful effort by Philadelphia's leading aristocrats to break Barnes's will and move the collection away from the setting and arrangement that Barnes had painstakingly established for it in Lower Merion to downtown Philadelphia."

It is an interesting demonstation of the elite, including the Pew Trust, looking out for more tourist dollars for Philadelphia.


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