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The 1% Starts a Bogus Generational War

September 24, 2014

Dean Baker, a progressive economist who writes for Common Dreams, deconstructs a recent Washington Post article by Catherine Rampell that would typically have garnered sympathetic coverage in this blog had I not read his analysis first.

Here’s what’s happening relative to this issue— and relative to too many arcane economic issues in our country: a neo-liberal or conservative Think Tank issues a white paper full of persuasive statistics that “distract people from the upward redistribution to the rich” in this case by misrepresenting spending on the elderly, which purportedly “…threatens to crowd out spending on our children.” Baker not only asserts that “just about every claim in the column is either seriously misleading or outright wrong“, he proves it by presenting facts to the contrary or by illustrating that the spending comparisons are bogus. A clear case in point is illustrated in these paragraphs from Rampell’s article:

Spending on kids as a share of the budget is projected to decline dramatically in the coming decade — to just 7.8 percent by 2024. If you exclude health spending, spending on children falls in raw, inflation-adjusted dollars, too, not just as a percentage of total spending.

“‘Kids’ share of federal spending isn’t tumbling because children are suddenly becoming a smaller fraction of the population. Nor is this happening because we live in an “age of austerity”; the sizes of both the economy and tax revenue are at all-time highs, after accounting for inflation, and are expected to keep growing. Federal spending overall is likewise projected to swell in coming years.”

And this rejoinder from Baker:

Okay, why would we exclude spending on health care for kids, unless we are trying to deceive readers? After all, the piece doesn’t exclude spending on health care when it discusses spending on the elderly. Also, we know that the main avenue for spending on kids is education. This is done primarily at the state and local level. Rampell acknowledges this point later in the piece, but then why the histrionics over the age composition of federal spending?

Also saying that we are not in an age of austerity is bizarre. Tax revenues as a share of GDP have fallen to levels not seen since the 1950s. Yes, the economy is growing and the budget is growing along with it, but what matters are the shares of the GDP going to tax revenue.

Ms. Rampell also uses the federal government’s increased social security spending as evidence that children are being short changed but neglects to mention one key point that Baker emphasizes:

The numbers for spending on seniors might sound dramatic, but it is important to remember that they paid for their Social Security benefits in full. In fact,according to the Urban Institute, which provided much of the basis for this column, the typical senior will have paid somewhat more in taxes to Social Security over their working lifetime than what they can expect to receive back in benefits. Complaining about what seniors get paid out without noting what they paid in would be like complaining about the interest payments that rich people get on their government bonds without noting that they paid for their bonds.

By the time Baker finishes with his analysis, both Rampell’s column and the Think Tank White Paper it is based on are exposed as flawed and inaccurate. Alas, Baker’s arguments are more sophisticated and less dramatic than those advanced by the think tanks that generate these seemingly shocking statistics… and they are also not picked up by the mainstream press or the Sunday talk shows… and so we should expect to be reading more articles about how the elderly are stealing from the children but should NOT expect to read articles about “…the upward redistribution to the rich.”  Oh… and the hidden message is this: we don’t need to raise taxes on the wealthy, we can solve our problems by reducing spending on the elderly.

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