Wednesday, February 24, 2010

Are We Overpaying Grandpa?

Casey Mulligan over at the New York Times' Economix blog:

The total annual income in the United States (national income, as economists call it) is about $12.5 trillion, or about $40,000 per person per year.  The egalitarian view of government is that it taxes persons with annual incomes more than $40,000, and pays benefits to persons with less than $40,000, so that those with less than average incomes could enjoy living standards closer to the average.

For reasons that I began to explain last week, our government actually does the opposite.  The vast bulk of government spending goes to the elderly, whose average living standards are significantly above $40,000 per year.

Also see Mulligan's article with Xavier Sala-i-Martin, "Internationally Common Features of Public Old-Age Pensions, and Their Implications for Models of the Public Sector," which shows – contra my comments last week that entitlements favor the old because the old vote more – that you get this favoritism even in countries where, shall we say, voting doesn't count as much. (Although, in my defense I'd add that even dictatorships have to pay some attention to public opinion, particularly that of classes who, as Mulligan notes, have more money and presumably more influence than the average.)


Bruce Webb said...

What percentage of state and local taxation goes to children for public education, SCHIPS, and Medicaid?

Grandpas spent a lifetime paying to educate other kids in ways that grew productivity and Real Wages over that period and left those kids and their kids with a much higher material living standard than was even imaginable in the 30s when they were kids and people want to bitch about Backwards Transfers and Intergenerational Inequity?

Gosh what did the Greatest Generation ever do for us? And are none of those Greedy Geezers still paying property tax?

These arguments are the worst kind of special pleading and terribly cynical. Young people need education, old people need health care, does everything need to balance out to the penny?

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