Why Raising The Retirement Age is a Horrible Idea
Newstalgia: ““We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. … Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me. And I welcome their hatred!” Ever since FDR gave America the New Deal , the right-wing of this country has been trying to destroy it. The recurring theme in the recovery plan was Roosevelt’s pledge to help the “forgotten man at the bottom of the economic pyramid.” — The term New Deal was coined during Franklin Roosevelt’s 1932 Democratic presidential nomination acceptance speech, when he said, “I pledge you, I pledge myself, to a new deal for the American people.” Roosevelt summarized the New Deal as a “use of the authority of government as an organized form of self-help for all classes and groups and sections of our country.” FDR was considered a traitor by his rich friends, but he vowed not to be swayed by their hatred. I won’t get into each different program, but he embarked on tremendous deficit spending and Keynesian economics to accomplish this because that’s what the country needed to do recover from the Great Depression. From there many other social programs, civil rights/liberties legislation created along with Medicare and Medicaid which came from LBJ’s The Great Society helped protect the middle class and poor of this country. History taught us this lesson all too well. There were deficit hawks going crazy over this and they later prevailed which then bogged down the economic gains FDR had achieved. Conservatives try to spin our social safety nets into the left wanting some imaginary super rich to pay for the lower 98 percent’s rock and roll lifestyles while we’re cashing our unemployment checks. Now after the financial meltdown caused by the mortgage scandal, the federal deficit is high and what’s coming out of many of these modern day deficit hawks is that we must raise the retirement age of Social Security and Medicare recipients to help reduce the deficit and save us all. Help, we’re burning! It is a horribly cruel idea for many reasons, but it’s being floated around as a way to get some economic stimulus pumped back into our struggling economy: How Badly Do Progressives Want Fiscal Stimulus? Badly enough to take the deal suggested by the Financial Times ? From ThinkProgress : In broad terms, the needed elements are plain: further short-term stimulus combined with credible longer-term fiscal restraint. Cut the payroll tax, extend jobless benefits and subsidise new jobs; then curb entitlement spending by raising the retirement age. In my view, raising the retirement age is basically the worst possible form that credible longer-term fiscal restraint could take. The way this works is that if you’re rich, the benefit cut in dollars and cents terms is very small since your life expectancy at 65 is already high. But if you’re poor, the benefit cut is much more severe. Except in real psychological terms it’s even more regressive than that, since poor people are more likely to have jobs that are physically taxing and generally unpleasant. So it sounds like a stinker of a deal to me. This is NOT a good thing for people who work for a living. but raising the retirement age seems to run off the lips of our beltway pundit class so effortlessly it’s frightening. They act like soft spoken carnival barkers trying to suck you into a tent show you desperately don’t want to see, And we”ll even push it back twenty years or so because we’re so nice and want to make your life easier. They make Roger Popeil look like an amateur. They frame it as if it’s not much of a hardship to the people who receive it. 65, 67 or 69— what’s the big freaking deal? Other fear-mongering techniques like…our life expectancy is much higher now than it was back then so we have to raise the retirement age or our souls are doomed to burn in hell. Again, another lie. Kevin Drum writes a good piece on these zombie lies. Zombie Idea Watch: Raising the Retirement Age I’m perpetually amazed by the parade of pundits and talking heads who continue to insist that the first and best way of attacking entitlement spending is to raise the retirement age. In fact, as Matt says, it’s probably the worst possible way of doing it: not only does it produce pretty modest savings, but it’s savagely unfair to the poor and the working class. As the chart on the right shows , the life expectancy of upper income earners has gone up a lot over the past few decades, so even if you increase their retirement age they still have a lot more retirement years than they used to. But low earners? Their life expectancy has barely gone up at all. If you raise their retirement age, it entirely wipes out the tiny gains they’ve made. The bottom line is that high earners get longer retirements while poor people just tread water. And it’s even worse than that. Not only do high earners get long retirements, but they’ve mostly spent their lives working in cushy jobs that don’t wreck their bodies and are often fairly interesting. An extra couple of years of work isn’t that big a deal for them. But for truck drivers and coal miners and nursing home workers? That’s hard work that’s hard on their bodies, and it’s absolutely no fun. An extra couple of years of that is something to shudder at. But wait! It’s even worse than that! If raising the retirement age were the only way to address entitlement spending, maybe we’d have to bite the bullet and do it. But it’s not. There are dozens and dozens of better ways to do it. Social Security is quite easy to fix without touching the retirement age: there’s a nice list of options here from the CBO, and you’ll note that raising the retirement age is barely even a blip compared to all the other options. Medicare is more complicated, but it’s still the case that raising the retirement age (a) doesn’t save very much money, since healthcare costs go up rapidly the older you get, and (b) doesn’t change the rate of growth of Medicare, which is our key problem. Like it or not, the answer has to be found elsewhere. So why does this zombie idea continually resurface with such clock like predictability? Two reasons, I’d guess. First, it’s a perfect sound bite. “Raise the retirement age” is a whole lot easier to understand than “Change the AIME bend points, reduce the top two PIA factors, and raise the taxable maximum to cover 90% of earnings.” So that’s what we get. Second, all the loudest voices come from highly educated, white-collar folks who write and talk for a living. They belong to, and speak for, a class that has interesting jobs that don’t tax their bodies, probably aren’t planning to retire at 65 anyway, and in any case, get paid well enough that they can retire early on their investments if they want to, regardless of Uncle Sam’s official retirement age. So it just slips their mind that a higher retirement age would be a way bigger deal to other people than it is to them. Basically, they need to get out more. Raising the retirement age is an idea that really needs to be buried once and for all. Social Security’s retirement age is already scheduled to rise to 67, and for medical care, age 65 is old enough already. There are plenty of other ways of tackling entitlements, ways that are both fairer and more effective. Anybody who really cares about this stuff needs to understand that.
Why Raising The Retirement Age is a Horrible Idea
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on August 24, 2011. Filed under