Class, Math, and Social Security

Paul Krugman comments on DC’s endless fascination with Social Security cuts:

When medical expenses are big, they’re big; even the very affluent are grateful when Medicare pays the bills for their mother-in-laws bypass or dialysis. The importance of Medicare, in short, is obvious to all but the very rich.

Social Security, by contrast, is something that matters enormously to the bottom half of the income distribution, but no so much to people in the 250K-plus club. A 30 percent cut in benefits would represent disaster for tens of millions of Americans, but a barely noticeable inconvenience for VSPs and everyone they know. A rise in the retirement age would be a vast hardship for people who do manual labor, but if anything a gift to VSPs, who don’t want to step aside in any case. And so on down the line.

So going after Social Security is a way to seem tough and serious — but entirely at the expense of people you don’t know.

Here’s a chart from the Our Fiscal Future report that makes the point:

Even though Social Security is only a very mildly redistributive program, inequality of wealth is such that it’s a vital element of the bottom 60 percent’s living standards but kind of small beer to the top twenty percent. But I would say the other thing here on the Medicare / Social Security contrast is that Medicare isn’t just a subsidy program for old people. It’s also a subsidy program for doctors, nurses, hospital administrators, pharmaceutical executives, etc. Those people have lobbyists, many of their professions are well-respected, and many members of the political/media elite have siblings, cousins, college buddies, and even spouses who work in those fields.


The tragedy is that this very same factor that makes it harder to cut Medicare is also why cutting Social Security is a much worse idea. Our health care sector is low productivity mess and there are a lot of health-improving things a low-income senior can buy with Social Security money but can’t buy with Medicare. Healthy food, a gym membership, home-repair, etc.

But there is a flipside to Krugman’s point here, namely that you could in fact trim Social Security benefits for wealthier Americans without causing them much harm. Conversely, if it were possible to address Social Security’s adequacy problem by boosting benefits at the bottom end you’d do an enormous amount to improve living standards. It’s kind of absurd that such a large share of federal spending goes to income support for the elderly and yet 10 percent of our seniors live below the poverty line.