Poor Peter Peterson, he spent $1 billion to foster public knowledge on budget issues and he couldn’t find a single person who could tell him about the Social Security trust fund. As a result, he has been running around the country making a fool of himself by announcing publicly that there is no trust fund.
There are literally hundreds of readily available public documents, for example the Social Security Trustees Report, that show that the trust fund holds more than $2.6 trillion in government bonds. The report even documents the specific bonds held by the trust fund. Apparently, none of the experts on Peterson’s payroll has this information or was prepared to bring it to his attention.
This is not the only important piece of information that seems to have escaped Peterson, the people he has hired, the commissions that he has helped to fund, and others involved in their budget crusade. There seems to be almost no knowledge among this group of the fact that the economy is generating more wealth through time.
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They constantly use rhetoric about generational burdens and being fair to our children and grandchildren. Yet, in almost any plausible scenario, our grandchildren will be far wealthier than we are today. For example, the Social Security trustees project that the real average annual wage will be more than 75 percent higher in 2040 than it is at present.
Remarkably, no one on Peterson’s payroll seems to have noticed this fact. They speak of the enormous burdens that we are placing on our children and grandchildren as though they will be poorer on average than current workers. Peterson’s employees have even gotten college kids to run around yelling about how their parents and grandparents are abusing them by running up the national debt. Imagine how foolish these kids will feel when they realize that they will be hugely richer than the people whose Social Security and Medicare benefits Peterson wants to cut.
There is, in fact, a huge issue of intra-generational equity. The baby boomers nearing retirement have seen very little improvement in living standards during their working years. The reason is that the overwhelming majority of the benefits of growth in the last three decades have gone to those in the top 10 percent of the income distribution. The very rich people like Peterson, a wealthy investment banker, were the really big gainers in this story.
This is one reason that many people around the world, including the prime ministers of both France and Germany, are now advocating financial transactions taxes. Even the International Monetary Fund is now advocating increased taxes of the financial sector. Somehow, the numerous experts directly or indirectly on Peterson’s payroll seem to know nothing about the drive to increase taxation on the financial sector.
These experts also seem to have missed the cause of the projected explosion in deficits over the next two decades. The United States currently spends more than twice as much per person for its health care as the average for Germany, Canada, and other wealthy countries. This gap is projected to rise to a ratio of three and four to one in the decades ahead. If health care costs really do actually rise this much, then it will have a devastating impact on the economy.
There will be many more GMs and Chryslers, as companies that pay for their workers’ health care will face an unbearable handicap in international competition. The number of people who are unable to afford care will soar. And rising health care costs will impose an enormous burden on federal, state and local budgets since most health care is now paid for by the government.
However, if we got our health care costs in line so that we paid roughly the same amount per person as in other wealthy countries, then we would be looking at huge budget surpluses, not deficits. So, the real story is that we have a horrible health care cost problem, not a deficit problem.
Unfortunately, Peterson could not get anyone to explain this simple point to him. If they did, he might have spent his billion dollars on setting up health care cost commissions rather than deficit commissions.
It really is sad. Peterson is running around the country proclaiming the economic equivalent of “the earth is flat.” Meanwhile, his employees are promoting false and/or misleading images about the future. If he ever comes across an honest person who explains this to him he will no doubt be hugely embarrassed. Apparently. for people like Peterson, it really is hard to find good help.