Photo: Marlena Sloss/Bloomberg via Getty Images
If there is one one thing you can say for sure about Elon Musk is that he has a lot of opinions and likes to share them at high volume with the world. The problem here is that his opinions are often incredibly wrong.
Generally, these incredibly wrong opinions are the conventional wisdom among the ultra-right and ultra-rich.
In particular, like most ultra-rich on the far right, Musk desperately fears that the United States is about to be overwhelmed by Social Security and Medicare costs.
He has previously tweeted – in response to evangelical Christian humor site Babylon Bee – that “the real national debt, including unfunded entitlements, is at least $60 trillion”. On the one hand, that’s arguably true. On the other hand, you will understand that it’s not a problem if you know 1) this subject and 2) basic math.
More recently, Musk favored us with this perspective on Social Security:
A big toll to come due to the low birth rate. Japan is a leading indicator.
— Elon Musk (@elonmusk) March 31, 2023
There’s so much wrong with it that it’s hard to know where to begin to explain, but let’s try.
First of all, Musk says the US will struggle to pay Social Security benefits in the future due to a low US birth rate. People who believe this generally point to the declining ratio of American workers to Social Security recipients. The Peter G. Peterson Foundation, founded by another billionaire, is happy to give you the numbers: In 1960, there were 5.1 workers per beneficiary, and now there are only 2.8. Moreover, the ratio is expected to fall to 2.3 by 2035.
This intuitively sounds like a big deal – until you think about it for five seconds. As in many other cases, it was the five seconds of thinking that Musk failed to do.
You don’t need to know the intricacies of how Social Security works to understand it. Just use your little noggin. The obvious reality is that if the declining worker-to-beneficiary ratio is a huge problem, that problem would have already manifested itself.
Again, look at these numbers. In 1960, 5.1. Now 2.8. The ratio has almost halved. (In fact, it dropped more than that in The history of Social Security. In 1950, the worker-to-beneficiary ratio was 16.5.) And yet, despite a fall in the worker-to-retiree ratio that has already occurred, Social Security checks now come out every month like clockwork. . There is no chaos in the streets. There is no reason to expect disaster if the ratio drops a little further to 2.3.
The reason this is possible is the same reason the United States as a whole is a much wealthier country than it was in the past: increased worker productivity. Productivity is the measure of how much the US economy produces per worker, and probably the most important statistic regarding economic well-being. We invent bulldozers, and suddenly one person can do the work of 30 people with shovels. We invent computer printers, and suddenly one person can do the work of 100 typists. We invent E-ZPass, and suddenly no one person can do the job of thousands of toll booth operators.
This is important because, stripping out the complexity, retirement income, whatever it is, is simply money generated by current workers being taken away from them and given to people who are not working. . This is the case with Social Security, where the money is taken in the form of taxes. But it is also true for any type of private savings. The transfer there just uses different mechanisms – say, Dick Cheney, 82, receiving dividends from all the shares he owns.
So that’s it on how much current workers can produce. And if productivity rises fast enough, it will negate any decline in the worker-beneficiary ratio – and the income of current workers and retirees can rise indefinitely. This is exactly what has happened in the past. And we can see that there’s no reason to believe it won’t continue, again using the concept of mathematics.
Economist Dean Baker of the Center for Economic and Policy Research, a Washington think tank, said do this calculation. American productivity has increased by more than 1% per year – sometimes much more – in every 15 years since World War II. If it grows by 1% over the next 15 years, it will be possible for both workers and retirees to see their income increase by almost 9%. If it increases by 2%, around the average since the Second World War, the income of workers and retirees could increase by 20% over the next 15 years. It doesn’t sound like the “count” predicted by Musk.
Essentially what Musk is saying is that technology in general, and his automaker in particular, will fail.
What’s even funnier about Musk’s concern is that it literally contradicts everything about his life. He promised for years that Tesla cars will soon reach “completely autonomous”. If indeed humans can invent vehicles that can drive without people, it will generate a huge boost in productivity – so much so that some people are worried about what millions of truck drivers would be doing if their jobs were soon to be cut. Meanwhile, if low birth rates mean there are fewer workers available, labor costs will rise, meaning it will be worth Tesla investing more in creating self-driving trucks. So what Musk is essentially saying is that technology in general, and his automaker in particular, is going to fail.
Finally, there’s Musk’s characterization of Japan as a “leading indicator.” Here is a photo from Tokyo, illustrating how miserable hell Japan has become due to its low birth rate:
Photo: Philip Fong/AFP via Getty Images
It’s a joke. Japan is an extremely wealthy country by world standards, and its aging population has not changed that. The statistic to pay attention to here is the per capita income of a country. Aging could be a problem if so many people were old and inactive that per capita income fell, but, as the World Bank will tell you, this did not arrive in Japan. In fact, through the magic of productivity, per capita income has continued to rise, albeit more slowly than during Japan’s fastest growing years.
So if you’re tempted by Musk’s words to worry about what a low birth rate means for Social Security, you needn’t worry. A much bigger problem, for Social Security and the United States in general, is the poorly functioning brains of our billionaires.