By Arnold Kling
To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?
…it seems like we should be looking for ways make sure that all workers have a decent living and a stable retirement, rather than taking away the security that some, albeit too few, have already.
It seems like we should be looking for ways to make sure that everyone has a pony, rather than taking away the ponies that some, albeit too few, have already.
Actually, my point is not to pick on Cohn, tempting although that might be. My point is to commend McArdle’s response. Read her whole piece.
Her main point is that if you live about 90 years and spend the last 30 of them not working, it is hard to maintain your standard of living no matter who pays for it. There is a lot of optimism about stock market returns built into state pension funds, individual retirement plans, and–I would say–even Social Security and Medicare. My argument is that without strong stock market returns, general tax revenues are not going to be robust, and Social Security and Medicare will go broke really soon without robust general tax revenues.
As McArdle puts it,
Whether you collect a dividend check, get a corporate pension, or live off your social security, your retirement is funded by real claims on the output of people in the workforce.
For any given level of output, more consumption by one group (say, people over 65) is going to reduce what can be consumed by everyone else. As the ratio of people over 65 to everyone else goes up, this increases the ratio of state-confiscated income to total income required to keep Social Security and Medicare going. Perhaps to Cohn, this higher confiscation rate represents a kinder and gentler society. But it may not feel kind and gentle to those who earn incomes and have them confiscated.