Proving anew that there is no bottom to demagoguery, some allegedly “reality-based” Democrats are now calling for an increase in Social Security benefits. I’d like for retired people to be able to get more money, but the demands for increased benefits show a lack of understanding regarding the state of Social Security, and unless the Democrats in question are woefully misinformed, they know that they are pushing arguments that don’t pass the laugh test. Chuck Lane lays out the inconvenient facts:
If the country needs more revenue to meet pressing financial needs, the rich should pay their fair share. Broadening the Social Security tax base, which hits 83 percent of national payroll, is one option.
The issue, however, is how to spend the federal government’s limited resources. After national defense, the next two largest items in the fiscal 2013 federal budget were Social Security and Medicare, programs mostly for retirees. The total tab was $1.3 trillion.
Should additional support for retirees get first priority, given that the rich can be tapped only so many times — and that economic privation in this country is disproportionately common among the young, not the old?
The poverty rate for seniors in 2012 averaged 9.1 percent, much lower than the rate for children, which was 21.8 percent, and lower than the overall U.S. rate of 15 percent.
Some 15 percent of youths ages 16 to 24 are neither employed nor attending school, according to a recent study by Opportunity Nation. For middle-class youths, college tuition costs are a constant source of insecurity.
To be sure, social insurance is a major reason for relatively low poverty rates among the elderly. It is also true that the elderly poverty rate is higher, and child poverty lower, when measured according to the Census Bureau’s “supplemental poverty” concept, which tries to factor in government transfer payments and living-expense variables such as older people’s medical costs.
But even by this adjusted measure, elderly poverty is still lower than that of other groups.
What about that “retirement crisis”? It’s said to result from the decline of defined-benefit corporate pensions and their partial replacement with comparatively meager “defined-contribution” programs, such as 401(k) plans and IRAs. The “gigantic failure” of 401(k)s, Krugman writes, threatens “tens of millions” with a “sharp” decline in living standards and makes a “sharp” increase in poverty among the aged “highly likely.”
Yes, there has been a shift from pensions to individual tax-free accounts, but a calmer view would describe this as a trade-off, in which workers lose some predictability and gain some portability: A worker’s 401(k) balance always follows him from job to job, which is not necessarily true for a defined-benefit pension. Nor did corporate pensions always survive intact when their corporate sponsors went bankrupt.
Read the whole thing. Anyone really surprised to find out that Elizabeth Warren and Paul Krugman have joined in the demagoguery regarding this issue?