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Throwing grandma under the bus

from David Ruccio

Neoclassical economists, it seems, want to throw grandma (and grandpa) under the bus.

First, they use the elderly as pawns in their attack on Keynesian economics.

Now, they want to blame the elderly for the budget deficit.

By now, it’s obvious that we need to rewrite the social contract that, over the past half-century, has transformed the federal government’s main task into transferring income from workers to retirees. In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.

These transfers have become so huge that, unless checked, they will sabotage America’s future.

The fact is, the Social Security program has been one of the most successful programs in terms of eliminating poverty.


Before Social Security, most old people had three options: continue working, spend their last days with their children, or move into the poorhouse. Because of Social Security, elderly poverty has declined substantially from the days before the New Deal of the 1930s. The government’s official statistics go back to the ’1960s, when the elderly poverty rate stood at about 35 percent. By the 1980s, the official rate had dropped to 10 percent. Or, to look at it the other way: without Social Security, 19.8 million more Americans (including 1.1 million children) would be poor.

So, the program works. But it still doesn’t work well enough. In fact, if healthcare costs were included, more older people would fall under the poverty line. That’s an argument for expanding Social Security and Medicare, not cutting them.

And, while we’re at it, we could just throw neoclassical economists under the bus.

  1. July 29, 2011 at 5:49 pm

    Not a Samuelson fan, but aren’t you and he talking past each other? Isn’t he disputing the number of people who’d need SS if it were needs-based? Don’t mistake my purpose – think of me as assuming more of MMT than not. The Fed Gov can meet all its obligations, SS is not THE problem. The only economic constraint on Fed Gov spending are the real economy reaching/approaching full capacity/negligible unemployment, etc. Still, the purposes and ends to which Fed Gov spending is put does matter. There may be better uses for deficits than sending Warren Buffet his SS check (supposing he gets one ….). I make that point about running deficits to fight stupid wars, repeatedly.

  2. August 4, 2011 at 10:25 pm

    This is a dilemma of modern economics. On one hand, the advent of social security in the developed world is one of the most successful examples of wealth distribution in history – but only to a point. Unfortunately, the tendency of all things run by governments to take on a life of their own is also something that cannot be ignored. Just like in the classic sci-fi ‘the blob’, government handouts tend to grow and grow unabated until they consume everything. This is unfortunately where we are at in the modern world. Democracy has one major weakness – short-term political gains outweigh long-term consequences in the minds of politicians. So instead of balancing spending with income, governments have run up debt to keep the social welfare programs continuing and growing. Now it has caught up with everyone.

    Yes, one could argue that social welfare is more important than corporate grants or military adventurism, and that would be correct, but once a lobby group has gained traction with politicians on an issue, and public support is garnered, all common sense is lost while the bond market still has breath. Unfortunately, now we are going to see massive cutbacks as the ponzi scheme of government debt crashes around our ears, and the ‘debt bus’ runs over all of us.

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