April 2012, Week 4


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Sun, 22 Apr 2012 23:53:57 -0400
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Robert Samuelson Shows that the Post Has no Fact 
Checkers on Its Opinion Pages
Dean Baker
April 8, 2012

Social Security and Medicare are hugely important for
the security of the non-rich population of the United
States. For this reason, Robert Samuelson and the
Washington Post hate them.

As we know, this is a question of basic political
philosophy. In the view of Samuelson and the Post, a
dollar that it is in the pocket of low or middle class
people is a dollar that could be in the pocket of the
rich. And Medicare and Social Security are keeping many
dollars in the pockets of low and middle class people.

Today's column
by Robert Samuelson tries to tell us that Franklin
Roosevelt would be appalled by the current state of the
Social Security program. Of course, he produces not a
single iota of evidence to support this position,
although it is very clear that Samuelson doesn't like
Social Security.

Samuelson begins by telling us that:

"It [Social Security] has become what was then called
'the dole' and is now known as 'welfare.' This forgotten
history clarifies why America's budget problems are so

He later adds:

"Millions of Americans believe (falsely) that their
payroll taxes have been segregated to pay for their
benefits and that, therefore, they 'earned' these
benefits. To reduce them would be to take something that
is rightfully theirs."

Of course Samuelson is 100 percent wrong here. Payroll
taxes have been segregated. That is the point of the
Social Security trust fund and the Social Security
trustees report. These institutions would make no sense
if the funds were not segregated.

Samuelson is welcome to not like the way in which the
funds were segregated, in the same way that I don't like
the Yankees, but that doesn't change the fact that the
Yankees have a very good baseball team. Since its
beginnings, the government has maintained a separate
Social Security account. Under the law, no money can be
paid out in Social Security benefits unless the Trust
Fund has the money to pay for them.

In this sense, the funds are absolutely segregated.
Samuelson doesn't like this, but why should any of the
rest of us care? The rest of the piece shows the same
dishonesty and lack of respect for facts.

Samuelson later tells readers:

"But now, demographics are unfriendly. In 1960, there
were five workers per recipient; today, there are three,
and by 2025 the ratio will approach two. Roosevelt's
fear has materialized. Paying all benefits requires
higher taxes, cuts in other programs or large deficits."

Okay, let's think about this for a minute. We went from
five workers per retiree in the 1960s to roughly three
workers for each retiree in the 90s. This ratio is
projected to fall to roughly two workers per retiree by
2030 (not 2025, as readers of the Trustees report 
[http://www.ssa.gov/oact/tr/2011/IV_B_LRest.html] know).

On average we were much richer in the 90s than in the
sixties, in spite of the fall in the ratio of workers to
retirees. The same will be true in 2030, even assuming
that we see the projected decline in the ratio of
workers to retirees.

A small fact that Samuelson never mentions in this piece
is that the Congressional Budget Office projects the
program to be fully funded through 2038, with no changes
whatsoever (i.e. no new taxes, contra Samuelson). If we
want to make the program fully solvent for the rest of
the century, a tax increase that is equal to 5 percent
of projected wage growth over the next three decades
should be roughly sufficient to do the trick. Are you
scared yet?

There is an issue that most workers have not shared in
the economy's growth over the last three decades. This
is indeed a problem. If recent trends in inequality
persist then any increase in Social Security taxes will
be a burden, but the problem here are the policies that
have brought about this upward redistribution of income
not Social Security.

Then Samuelson gives us his coup de grace:

"Although new recipients have paid payroll taxes higher
and longer than their predecessors, their benefits still
exceed taxes paid even assuming (again, fictitiously)
that they had been invested. A two-earner couple with
average wages retiring in 2010 would receive lifetime
Social Security and Medicare benefits worth $906,000
compared with taxes of $704,000, estimate Steuerle and

Okay, this is a really nice trick. Remember we were
talking about Social Security? Note that Samuelson
refers to "lifetime Social Security and Medicare
benefits." It wasn't an accident that he brought
Medicare into this discussion. That is because Steuerle
and Rennane's calculations show 
that this average earning couple would get back less in
Social Security benefits than what they paid in taxes.
That would not fit well with Samuelson's story, so he
brings in Medicare (remember this is the Washington

And, the high cost of Medicare benefits is not due to
their great generosity. The high cost is due to the fact
that we pay our doctors, our drug companies, and our
medical equipment suppliers way more than do people in
any other country, and we have no better outcomes. If
our per person costs for health care were comparable to
costs in Germany, Canada, the UK or any other wealthy
country, then workers would be paying far more for their
Medicare benefits than the cost of what they are getting
in care.

The story here is that Samuelson wants to punish
ordinary workers for the fact that we pay doctors and
the other big winners in this story too much. That may
not make sense, but they don't call this paper "Fox on
15th Street" for nothing.


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