A social security card on a bed of money

The Serious People are after your social security.

Robert Samuelson is angry that President Obama doesn’t agree with him that Social Security and Medicare should be cut. Who does Obama think he is, disagreeing with Samuelson and the Serious People?

Just to be clear on the playing field here (Samuelson seems confused), not only does President Obama oppose cuts to these programs, his opponent Governor Romney also argued against cuts to Medicare. And polls consistently show that the vast majority of Republicans, conservatives and even self-identified Tea Party supporters also oppose cuts to Social Security and Medicare. So President Obama is defending a position that has the support of the vast majority of the American people regardless of political or ideological affiliation.

Samuelson gets a lot of other items in his piece wrong as well. When complaining about Social Security and Medicare he tells readers:

The young will pay more and get less.

Actually, this is not true. Near retirees will have paid in to Social Security at current tax rates through almost their whol working life and will have to wait until age 67 to retire with full benefits. Younger workers will be able to anticipate longer life expectancies which means that they will likely get a slightly better return on average on their Social Security taxes. In terms of return on Medicare, if we care about outcomes, they almost certainly will do better with this program as well. Since Samuelson provides no sources, it is not clear what he thinks he is talking about.

He is also upset that:

Supporting retirees is now the federal government’s main activity.

To people who not ideologues, this makes sense since the government can provide retirement income and health care benefits far more efficiently than the private sector. Apparently Samuelson wants to waste resources and have slower growth just so he can feel good about having a smaller government.

Samuelson then redefines “rich” telling readers that:

“The Administration on Aging reports that in 2010, 25.9 percent of households headed by someone 65 or older had incomes exceeding $75,000.” Isn’t that neat; when it comes to taxes we are told that $250,000 is not rich, but getting $75,000 a year is rich when we talk about people collecting the Social Security and Medicare benefits that they paid for.

On this point, Samuelson misrepresents research by Eugene Steuerle and Caleb Quakenbush, reporting that it shows an average earning couple who retired in 2010 will collect more back in Social Security and Medicare benefits than they paid in taxes to these programs. In fact, their research shows that they will collect somewhat less in Social Security benefits than they paid into the program in taxes, using a 2.0 percent real interest rate.

The research does show that this couple’s Medicare benefits will on average will cost more than what they paid in taxes, but there are two important qualifications to this conclusion. First, the projections assume that health care costs rise at a far more rapid pace than they have over the last 5 years. A recent study from the Federal Reserve Board, along with other research, provides serious grounds for questioning the assumption of rapid health care cost growth.

The other important qualification is that the main reason for the high costs is not what the couple is receiving, but what health care providers are getting paid. We pay more than twice as much per person as people in other wealthy countries. This gap is assumed to grow to a ratio of 3 or 4 to 1 in these projections. It is a bit peculiar to get upset at seniors because we pay too much money to doctors and drug companies.

Finally, folks who are genuinely concerned about generational equity must remember that wages in average for people in their twenties are projected to be on average more than 50 percent higher than were wages for people now in their 60s. While most workers have not shared in this wage growth this is due to the enormous upward redistribution of income over the last three decades.

The amount of upward redistribution to CEOs, Wall Street types, and doctors and lawyers, swamps anything that young people might lose in paying for their parents’ or grandparents’ Social Security and Medicare. People who were honestly concerned about the living standard of the young would be focused on this upward redistribution and not be wasting time trying to steal away workers’ Social Security and Medicare.

Dean Baker is co-director of the Center for Economy and Policy Research. He also writes a regular blog, Beat the Press, where this post originally appeared.

Photo by 401k 2012 released under a Creative Commons lcense.