L.A. Times Column: Deficit hawks' 'generational theft' argument is a sham

Los Angeles Times ^ | 02/27/2013 | Michael Hiltzik

[SeekAndFind]

[SNIP]

So here's the truth about the "generational theft" theme: It's wrong on the numbers and wrong on the implications.

Let's start with that 7-to-1 spending ratio on seniors versus children. Among the flaws in the calculation is that the vast majority of government dollars spent on children comes from state and local governments, which pay most of the cost of education. On a per capita basis, state and local spending on kids swamps the federal government's spending 8 to 1.

Moreover, there are twice as many children 18 and under as seniors 65 and over (this 2008 figure also comes from the Urban Institute report). Put the numbers together and you discover that spending by governments at all levels in 2008 came to about $1 trillion on seniors and $936 billion on children. In other words, very close to 1 to 1.

The notion underlying the comparison of spending on seniors and children is that "if you save a dollar on Social Security it would be transferred automatically to children," observes Theodore R. Marmor, an emeritus professor of public policy at Yale and a long-term student of social welfare programs. He traces this notion to deficit hawks and dismisses it as "not naive, but cynical."

That's because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives.

Payroll taxes have more than covered what today's average retiree will receive back from Social Security. They won't cover the average payout on Medicare, but that's an artifact of uncontrolled healthcare costs, not of the structure of Medicare itself. Changing the terms of that program, say by raising the eligibility age (currently 65) won't save money and may actually raise costs.

[Da Coyote]

If one wonders where the flunkouts from even the most basic math classes go...just pick up a copy of the LA Times.

[sickoflibs]

RE :”That's because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives.
Payroll taxes have more than covered what today's average retiree will receive back from Social Security. They won't cover the average payout on Medicare, but that's an artifact of uncontrolled healthcare costs, not of the structure of Medicare itself. Changing the terms of that program, say by raising the eligibility age (currently 65) won't save money and may actually raise costs.”

He doesnt understand how these programs work. The same seniors who get the benefits cant at the same time be (nearly fully) funding them. That has to be done by younger people who work.

Medicare is different than SS in that it provides services.
There is a question as to what happens to people who would be over 55 but will not get medicare for a few more years and do not have employer based insurance.

They would go on Obama-care instead. Is that cheaper? Do we know?

[goldstategop]

Social Security and Medicare are defined contribution programs - not entitlement programs.

Entitlement programs are paid for out of general tax revenues and are means-tested.

Social Security/Medicare on the hand are paid into by their beneficiaries. They get back what they paid into them during their working lives when they retire.

The people on them are not moochers and don’t deserve to have their benefits cut or their eligibility age for them increased. Society made a pact with them to put their money aside for their later years.

To say its generational theft isn’t accurate and misses the point. A decent society takes care of its aged and sick and we wouldn’t have it any other way. Its who we are as a country.

[King Moonracer]

I wonder if Libtards get whiplash from nodding their agreement to this drivel. To suggest that retirees have prepaid most or all of their government benefits is leftist BS.

[KarlInOhio]

This article is the equivalent of yelling "Squirrel!" to distract people. I never heard the "generation theft" argument backed up by saying that "we spend too much on the old and should spend more on the kids". It has always been that the government spends too much and is running up a debt of over $16 trillion. The author tries to claim that we are getting a lot, including captial goods like highways, from the spending but we are not getting anywhere close to what we have spent. Most of the projects for the stimulus were plans from the bottom of the cities' road departments pile which never were important enough to build with their own money or previous years' smaller piles of federal money. We aren't building a new interstate highway system. We're building a hundred thousand sidewalks where people aren't walking.

And even more than the debt, the creation of a tidal wave of new money out of thin air is just waiting to hit shore in a destructive crush of hyperinflation.

[bt_dooftlook]

“That’s because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives. “

That is a lie.

First, most retirees, at least up until now, took out far more in benefits than they ever paid in.

Second, both Medicaid and Security are funded out of the current budget. Their “trust funds” are special government bonds that must be redeemed on demand.

In short, the monies people thought they were setting aside went to current beneficiaries or went into the general fund, where it helped mask deficit spending. What they in fact were buying was a promise of some large future payout, contingent on electing politicians who wouldn’t reform the system.

Millions of people are going to wake up soon and find out that there is no money in SS, and that their “benefits” are contingent on a shrinking workforce with declining incomes. Millions of workers will simultaneously realize that they are being fleeced to cover current benefits, benefits which are mathematically impossible for them to ever receive.

And then the intergenerational wars really begin...YMMV

[Sgt_Schultze]

I can't tell if this is from "professor" Ted or the author:

That's because most of the spending on seniors is in Social Security and Medicare, and therefore has been largely paid for by those very beneficiaries over the course of their working lives.

In either case the writer is an a$$.

As soon as the money was collected it was spent and replaced with government bonds. Since there is only government paper in the SS "trust fund," the government will have to either sell additional debt or increase taxes to redeem the current paper. That action will fall on tomorrow's employees (today's youth). The government is spending money today that my grandchildren haven't even earned yet!

[Principled]

Society made a pact with them to put their money aside for their later years.

That is false.

FDR made a pact to transfer wealth. He may have had good intentions - and that's a separate argument. Nevertheless, the "pact" that would have and could still work would be a "pact" to keep saving your OWN money until retirement. Not saving for someone else.

freakin' duh

just sayin'

[goldstategop]

You don’t understand how a defined contribution program works.

In your working years, a part of your salary is taken through taxes and that money goes into your Social Security account. Upon your retirement, its paid back to you to look after you in old age.

Young people are taxed exactly the same way. These benefits are your money the government keeps in trust for you! This is the way Social Security has always worked.

There is no “free rider.” Any one who works is eligible for Social Security. Entitlement programs like welfare on the other hand have certain income and enrollment requirements. Social Security is a universal society program and entitlement programs usually cover only the very poor/disabled.

No comparison exists between a defined contribution program and an entitlement program and the public understands the difference between them.

[Jack Hammer]

Wonder what these reporters will be writing when the f*cked up economy results in them being laid off and they can’t find any jobs.

[Fee]

A decent government does not take money out of Soc Security lock box and spend it on other entitlements and wars when it is needed to head off demographic changes and logevity and then cover up the crime by having their allies in the media lecture taxpayers that they must make up the difference or they are not taking care of the old and aged. IMHO those politicians should be found guilty of fraud and financial sabotage of the US economy, lined up against the wall and shot. Any reporter or US citizen that abeit in the cover up should be shipped off to Alaska to build roads to nowhere till they are dead.

[sickoflibs]

RE :”In your working years, a part of your salary is taken through taxes and that money goes into your Social Security account. Upon your retirement, its paid back to you to look after you in old age.”

You dont understand how the gubment works. It taxes money from some and spends it on others, There is no savings account, the Fed gub is not designed to save money. Any left over (payroll) tax revenue was spent on the spot. That is completely different than a 401K.

I swear JUST YESTERDAY I had a lib here make a point using same assumption as you, he claimed that Nixon decided to steal the SS surplus to fund Vietnam. I had to explain to him the exact same thing. If they raise FICA taxes they spend the extra $$$, if they cut them they borrow the difference to pay benefits as they did the past couple of years. Taxpayers have to fund the bill either way.

The only way SS and medicare pays benefits is taxing and borrowing. Your imaginary SS piggy bank has nothin in it.

[JCBreckenridge]

“Social Security and Medicare are defined contribution programs - not entitlement programs.”

Then we should have no problem making participation voluntary.

[JCBreckenridge]

“A decent society takes care of its aged and sick”

The same society that has aborted 1/3rd of my generation?

[Kegger]

Social Security is not an insurance program at all. It is simply a payroll tax on one side and a welfare program on the other. Your Social Security benefits are always subject to the whim of 535 politicians in Washington. Congress has cut Social Security benefits in the past and is likely to do so in the future.

[SomeCallMeTim]

In your working years, a part of your salary is taken through taxes and that money goes into your Social Security account. Upon your retirement, its paid back to you to look after you in old age.

You forgot your /sarc tag.

Seriously, I find it hard to believe that ANYONE paying ANY attention to the world today still believes in a "Social Security Trust Fund".... What you describe would be AWESOME... but, that's NOT how they do it.

You'd be better off telling us more about Santa Claus.

[Marathoner]

Exactly. I’ve read that the Supreme Court has ruled that no one has legal claim to any of their “contributions”. It is a Ponzi scheme of the worst kind, perhaps the worst thing (of many) FDR fostered on the Republic.

[SomeCallMeTim]

In your working years, a part of your salary is taken through taxes and that money goes into your Social Security account. Upon your retirement, its paid back to you to look after you in old age.

You forgot your /sarc tag.

Seriously, I find it hard to believe that ANYONE paying ANY attention to the world today still believes in a "Social Security Trust Fund".... What you describe would be AWESOME... but, that's NOT how they do it.

You'd be better off telling us more about Santa Claus.

[Rusty0604]

Most people get more out of Medicare than they put in. Costs have risen more than anticipated, and the benefit is distributed evenly to so many people, regardless of how much a person has paid into it over their lifetime (it doesn’t belong to the individual). There isn’t enough money so it is paid for in part by current workers.