The Government Spends $100 on Bondholders for Every Dollar It Spends on Children

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Saturday, 16 February 2013 09:32

Okay, I made up that number, but suppose that I did calculate the amount of money that average holder of government bonds gets in interest each year and compared it to what we spent on children. According to the logic that they use at the Urban Institute (as recounted by Ezra Klein) I would have demonstrated a tendency for our government to favor bondholders at the expense of our nation's children.

The sophisticates out there would surely point out that bondholders paid for their bonds and therefore are entitled to the interest they get on these bonds. Bravo!

Now if anyone with the same level of sophistication entered the halls of the Urban Institute they could point out that we run a old age, survivors and disability insurance program through the government (Social Security) as well as a senior health insurance program (Medicare). The fact that people collect benefits from these programs reflects the fact that they paid premiums during their working lifetimes -- just like bondholders get interest because they paid for their bonds.

In fact, as the Urban Institute has shown, on average Social Security beneficiaries will get slightly less back in benefits than what they paid into the program in premiums. Medicare beneficiaries will get more back, but this is because we pay way more money to our doctors, drug companies and other health care providers than any other people on the planet. In other words, the big gainers here are the providers, not our seniors.

Anyhow, the comparison of payments to seniors with payments to children makes as much sense as comparing payments to bondholders with payments to children. It is understandable that people who want to cut Social Security and Medicare would make such comparisons (or cut interest payments to bondholders), but it is hard to see why anyone engaged in honest policy debate would take such comparisons seriously.