Monday, May 16, 2011

Is Robert Samuelson for Real?

WaPo columnist Robert Samuelson has made his bread and butter by constantly yammering about how "entitlements" need to be cut as part of any valid budget deal. He is among those elitist economics panderers who believes firmly that the role of the "dismal science" is to render all normal citizens' lives more dismal than they already are. He doesn't veer from this in his latest screed, 'Well Off Seniors Can Live Well With Less', The Denver Post Business section, May 15, p. 2K). According to Samuelson:

"trimming benefits for well off seniors isn't just budget arithmetic, it's the right thing to do."

This, of course, brings up the question of how he defines a "well off senior". The first impression I had, without further reading, was one that had an ostensible income of say $250,000/ year (mainly from a defined benefit pension) and also had amassed a net worth of at least $2 million. But on perusing the piece, I saw I was totally wrong and Samuelson's threshold is much, much lower. This then presents a problem if Samuelson's base argument is that "Government over-subsidizes the affluent elderly".

In his argument, Samuelson begins by referencing the government's defined "poverty line" of $12,968 for 2009 for an over-65 couple. Let me say first that, as with the Bureau of Labor Statistics unemployment rate, this income level is low-balled, and I'd say deliberately. By lowballing the poverty line it translates into the government having to do much less for citizens in need, including for an array of benefits such as food stamp qualifications, Medicaid and so forth. But anyone who's done any economics knows this number is farcical. Indeed, its been unchanged since ca. 1969 when the value of the dollar was at least 4 times greater, hence the more plausible poverty line for a couple today would be around $48,000/year. However, we will go with the lower level of $38,000/yr. advanced by the Economic Policy Institute. The point is, Samuelson's entire specious argument rests upon an ab initio lowballed number, from which he can lowball all his thresholds, including what defines an "affluent senior".

He then goes on to note:

"The proportion of elderly living in the high income group- defined as four times the poverty line or almost $52,000 for a couple in 2009- rose from 18.4% in 1980 to 30.6% in 2007"

But again, this is neither here nor there. As I showed, the REAL poverty line, not the lowballed farce, is more like $38,000/yr. even if we are very conservative (since factoring in inflation since 1969 I computed $48,000/yr which $52,000/yr. is barely above). Even at $38,000/yr. this means the retired couple at $52,000/yr. is only one major calamity away from indigence since it's barely 36% above the true poverty line. Indeed, most financial columnists writing on retirement incomes (e.g. in Smart Money magazine last issue), place a couple over 65 with $50,000/yr. income as just barely in the middle class! Obviously, something is serious amiss in the picture presented by Samuelson!

Samuelson compounds his defective perceptions (which he obviously hopes to pass on to an untutored American population) by invoking "net worth". He writes:

"In 2007, the median net worth (that is assets minus debts) of 65-plus households was $237,000, or about twice the amount of households aged 45 to 54. Among 65-plus married couples, median net worth was $385,000".

But again this misses the point! All it really shows is that the average American of whatever age group is a terrible saver, and this is most likely based on wage scales that have declined absolutely since 1973 - coupled with increased dollar value debasement. To get a more realistic picture, recall net worth factors in the home as well, and we do know most over 65's own their homes. (Which is a move also heartily recommended by financial planners). Let's say the home is nominally worth $100,000 then subtract to get the actual monetary net worth, which turns out to be $137,000 for the average over-65 household and $285,000 for married couples. But this is nothing! Given current over-65s are already advised to have on hand $225,000 to cover expenses and co-pays Medicare won't! That already eats up the total net worth in real money terms of the average over-65'er and most of the net worth (79%) of the married couples! So WTF does Samuelson want? For our "affluent" or "higher income" seniors to live off cat food, along with no vacations ever, and no amenities, period? A life little better than a peon's with no frills, not even minor luxuries? What, is he fucking nuts?

Again, turning to the expert columnists in niche financial magazines, including Smart Money, Money as well as Forbes, the general consensus is that for a senior couple to be able to live comfortably they will need a net worth of at least $1 million, minus the home value! Along with Social Security, according to this lot, they should be able to arrive at an income of at least $75,000 a year! Once more, we see that Samuelson is being dishonest in how he portrays the conditions, but we can't be amazed because they are based on dishonest government definitions, first of the poverty line for couples, and then for the "high income" definition based on this spurious poverty line.

Samuelson's other stat is more or less correct, to wit that ""for the poorest two-fifths of seniors Social Security provides 83% of their income"

But again, that merely shows how desperate this bottom two quintiles are, not that the next higher two quntiles are living on Easy Street! It shows, indeed, that these bottom two quintiles are living right at the knife edge of imminent poverty, homelessness or worse. Every American ought to be outraged at this, and not merely use it as a basis to take all seniors down to the lowest common denominator - which would indeed happen if Samuelson's plans were implemented.

Yes, Samuelson is correct that "some burden sharing needs to include the elderly". But before we go that route, let's first make sure we get our definitions correct, including what the REAL poverty line is, and how a really "high income" senior is defined. Let's not just pull definitions out of our asses to make our specious arguments for cutting elderly supports to the bone. Samuelson ought to know better, but given he's been on this hobby horse for decades and his brain paths are now single-mindedly fixed, I doubt if he ever will. So be it.

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