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Hullabaloo


Monday, June 14, 2010

 
Basic Arithmetic

by digby


Dean Baker challenges the conventional wisdom and does some basic arithmetic on one of the most solid, unquestionable pieces of conventional wisdom in the land --- the idea that there will soon not be enough workers to cover all the old people:

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?


And imagine what would happen if we counted in all the undocumented workers who would happily pay into the system if they could just do their work without being harassed for trying to make a living.

And yes, I'm still scared because it's simply an article of faith that social security must be cut (excuse me 'reformed") just as I'm going to need it the most because of all sorts of reasons, none of which is born out by reality.

As Kevin Drum observed the other day, all these deficit hawks are really poseurs:

The basic problem, as about a million pundits have pointed out before, is that most of the things we talk about will have only a small long-term effect on federal spending. We could raise taxes a bit, cut a few programs here and there, resolve to fight fewer wars, and fix Social Security, and that would all be great. It would have a genuinely positive effect. But it's a drop in the ocean compared to healthcare costs. If we don't rein those in, they'll swamp everything else.

But what are the odds of that? The recent healthcare reform bill made a start on holding down spending, but it was a pretty small start and generated massive opposition anyway. In the near term, then, there's simply no chance of making a credible commitment to seriously reduce the growth rate of healthcare costs. But this is the subject that separates the posers from the real players. Forget Social Security, which is a smallish problem and an easily solved one. That's mostly good for demagogues. Healthcare spending is the 800 pound gorilla. Solve that, and you've solved our long-term spending problem. Ignore it, and you don't.


I think that's a fairly good rule of thumb. Any deficit scold who doesn't put reducing health care costs at the very top of the agenda is just a demagogic crank doing the dirty work for the aristocratic overlords.


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