I have largely ignored the Northern Valley Beacon for some time, but I will quote that fountain of bile here because it is instructive. After four paragraphs about Nazis, Professor Newquist has this:
The financial problems of the developed countries have resulted in the designation of a new class of useless eaters by some people. An article in The Atlantic contends that the impending demise of Europe and the eventual failure of America are because there are too many old people on pensions, useless eaters, and not enough young people who contribute to productivity. Advances in medicine have prolonged life expectancy and controlled births, creating the imbalance between old and young. Moreover, these old people raise up in rebellion and protest when the governments propose reducing or taking away their pensions. Furthermore, they tend to watch their money and do not spend a hell of a lot to stimulate the economy. One blog recommended this article as brilliant. The article and its advocates seem irritated that old people do not seem willing to go gently into poverty, destitution, and beyond when it is proposed for them. As it is in the Paul Ryan budget.
In the original paragraph, the word "brilliant" links to my post on an article by Meagan McArdle.
McArdle pointed out that it will be hard for Italy in particular and Europe in general to solve their fiscal problems without economic growth and that it is hard to generate economic growth with declining populations. These judgments strike me as near mathematical certainties and I thought it germane to point them out. Whether or how we can remedy the problem is a much bigger question.
Focusing on something more specific, Social Security is an example of what are called transfer payments. In this case, wealth is transferred from people who work to people who don't. The ratio between the number of people paying in and the number of beneficiaries will matter. If the former is shrinking relative to the latter, the system is very probably in trouble. Anyone who wants to know whether or how the system can be maintained had better pay attention to that ratio.
Professor Newquist seems to assume that, because I and McArdle note that the ratio is shrinking, we are advocating the elimination of the beneficiaries. Thus we are Nazis. The adolescent non sequitur aside, there is still a logical problem. A ratio can be altered by changing either side. McArdle and I were clearly focusing on the problem of declining populations. Of course, Professor Newquist has never been very good when it comes to logic.
Economist Robert Samuelson addresses the problem in his latest column. He notes that FDR was not in fact in favor of what Social Security actually became.
When Roosevelt proposed Social Security in 1935, he envisioned a contributory pension plan. Workers' payroll taxes ("contributions") would be saved and used to pay their retirement benefits. Initially, before workers had time to pay into the system, there would be temporary subsidies. But Roosevelt rejected Social Security as a "pay-as-you-go" system that channeled the taxes of today's workers to pay today's retirees. That, he believed, would saddle future generations with huge debts -- or higher taxes -- as the number of retirees expanded.
What FDR wanted was a genuine pension plan. Worker contributions would be invested and the resulting investments would be paid out. It didn't happen. Congress quickly transformed the system into a pay-go scheme. The left has been very fond of that system. It has meant, so far, that Congress could guarantee levels of payment regardless of economic realities. It depended, however, on a favorable payee/beneficiary ratio. That ratio has changed.
Early Social Security beneficiaries received huge windfalls. A one-earner couple with average wages retiring at 65 in 1960 received lifetime benefits equal to nearly 14 times their payroll taxes, even if those taxes had been saved and invested (which they weren't), calculate Eugene Steuerle and Stephanie Rennane of the Urban Institute.
But now, demographics are unfriendly. In 1960, there were five workers per recipient; today, there are three, and by 2025 the ratio will approach two. Roosevelt's fear has materialized. Paying all benefits requires higher taxes, cuts in other programs or large deficits. Indeed, the burden has increased, because it now includes Medicare, which is also viewed as an entitlement.
That is the problem. The Social Security system as it exists is unsustainable. Medicare is much more so. Pointing out the role that demographics is playing in this drama is merely pointing out the hard facts. If we don't reform these systems, they will collapse. Probably a lot more of the economy will collapse with them.
Newquist is a crackpot; however, his rhetorical strategycondemning anyone who points out the problems, let alone actually tries to address themis distressingly common.