Robert Samuelson's Generation Squeezed is 
Victimized by the One Percent, Not their Parents
Dean Baker
CEPR
06 August 2012
http://www.cepr.net/index.php/beat-the-press/

[moderator: please use the link above to view 
the accompaning charts]

Ding, ding, ding! Robert Samuelson has just written the
1 millionth piece to appear in the Washington Post
claiming that an aging population will undermine our
children's prosperity. He gets awarded a miniature
golden baseball bat to symbolize his and the newspapers
decades of bashing the elderly and trying to take away
their Social Security and Medicare.

Arithmetic fans know that if our children and
grandchildren live worse than we do it will be because
the folks at the top grabbed away all the money. In any
plausible scenario the gains from productivity growth
will swamp any additional burdens placed on workers from
a larger population of retirees.

The projections that Samuelson cites to make his point
in fact demonstrate the opposite. He told readers:

"The ratio of workers to retirees, 5-to-1 in 1960 and 3-
to-1 in 2010, is projected at nearly 2-to-1 by 2025."

Yep, we have had a sharp decline in the ratio of workers
to retirees from 1960 to 2010 (most of it by 1990) and
yet average living standards rose substantially. This
means that there is no reason that average living
standards won't continue to rise in the next several
decades as the ratio of workers to retirees falls
further.

The simple chart below compares the impact of the
projected change in the ratio of workers to retirees on
the living standards of workers assuming that an average
retiree has 75 percent of the living standard of an
average worker. It compares scenarios of 1.0 percent,
1.5 percent and 2.0 percent productivity growth.

As can be seen, the impact of higher productivity growth
in raising living standards swamps the impact of
demographic change in lowering living standards. It is
also important to note that the negative demographic
shift ends in 2035. After that point the demographics
stabilize or even improve slightly, which means that all
future gains in productivity will go into the pockets of
our children and grandchildren.

Of course BTP fans everywhere are jumping and down
yelling that ordinary workers have not been seeing the
gains of productivity growth. Real wages have been
nearly stagnant for the last three decades. This is of
course right, but that is exactly the point.

If our children and grandchildren do not enjoy
substantially higher living standards than we do today,
it will not be because they are paying for their parents
or grandparents' Social Security. It will be because the
one percent have rigged the economic system so that most
of the gains from growth go to the top.

The answer here is not cutting Social Security and
Medicare, it is ending too big to fail insurance for
huge banks and otherwise cutting a bloated financial
system down to size. It is about ending trade and
monetary policies that are decided to benefit the rich
at the expense of the rest of us. It is about curtailing
patent monopolies that has us spending $300 billion a
year on drugs that would sell for $30 billion in a
competitive market. And it is about fixing a corporate
governance system where boards of directors are given 6-
figure payoffs to look the other way as top management
pillages the company. (See The End of Loser Liberalism:
Making Markets Progressive.)

In other words, the real story is not about inter-
generational equality, no matter how many times the Post
repeats this line. The real story is about intra-
generational inequality.

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