David Leonhardt is upset that people on Social Security will get a $250 check from the government next year and denounces President Obama for pandering to the elderly. There is a lot of serious confusion in this piece. First, he argues that the elderly have suffered less from the downturn from other groups be comparing declines in income and employment. This is actually a much tougher question that Leonhardt implies. The elderly have accumulated assets over their working lifetime. These assets plunged in value with the collapse of the housing bubble and the plunge in stock prices. This plunge has hit the elderly far more than other groups because they were in a position to have assets. So, if we took a wealth-based measure of impact, we would find that the wealthy were hit hardest by the downturn. (Asset prices were propped up by the bubble, but we can hardly blame the elderly for not being any better in recognizing the bubble than Alan Greenspan and the reporters at major media outlets.) Second, in terms of government assistance, the making work pay tax credit is giving money to the vast majority of the under 65 population. The $250 boost to Social Security beneficiaries can be seen as an effort to provide comparable help to those who are no longer working. It's not obvious how this creates an injustice. The third point is that Leonhardt seems to misunderstand the point of stimulus. We need people to spend money. Given the enormous idle capacity in the economy, we would benefit from handing checks to anyone who will agree to spend it. (Contrary to Leonhadt's assertion, this does not create a burden on children and grandchildren -- if anything the growth created by the stimulus is likely to mean we hand them a wealthier country.) The elderly will spend a high share of their checks, which makes this a good form of stimulus. In fact, we really need larger deficits at this point to boost the economy, but politically this is not acceptable. We should thank the elderly for making some additional stimulus politically acceptable. It is almost bizarre that Leonhardt would seize on this $250 check as an item to attack when there are so many larger, more pointless boondoggles. (I got an $8,000 check because I bought a home -- that didn't help anyone but my wife and me and our two dogs.) We gave close to 1 million people a $4,500 check for buying a car. The Wall Street crew pockets $6 billion a year, with many individuals personally pocketing tens of millions, through the fund managers' tax subsidy. How upset can we get about $250 checks to a group that is mostly not very wealthy. Lastly, we get a line about protecting Medicare benefiting the elderly at the expense of our grandchildren. Actually, we could substantially reduce costs for Medicare and fully protect the quality of care. However, this would require attacking the interests of the health care industry. This is an interest group that the politicians (and the media) really pander to.
--Dean Baker
