Comments on “The Social Safety Net for the Elderly,” by Kathleen McGarry

Helen Levy, University of MichiganJune 13, 2012

Elderly poverty

• Everyone has decided that Social Security solved elderly poverty.

• For example, consider “Poverty in America: Trends and Explanations,” by Hilary Hoynes, Marianne Page, and Ann Huff-Stevens, J Econ Perspectives Winter 2006.

Source: “Poverty in America: Trends and Explanations,” by Hoynes, Page, and Huff-Stevens, J Econ Perspectives Winter 2006

Elderly poverty• Everyone has decided that Social Security solved elderly poverty.

“Since the steady fall in elderly poverty rates in recent decades is likely explained by other factors such as Social Security (Englehardt and Gruber, 2004), we focus throughout this paper on the conundrum of why the nonelderly poverty rate has failed to decline as the economy has expanded.” Hoynes and Page, 2006 JEP

• Engelhardt and Gruber (2004), as cited by this chapter: increase in Social Security benefits between 1967 to 2000 explains nearly all the decrease in elderly poverty.

• Moreover, “McGarry (2002) finds that SSI…reduces the poverty gap by nearly 30 percent”

So what should this chapter do?

• Victory lap: take that, Ronald Reagan!– Small dark cloud = looming fiscal armageddon

• Discussion of limitations of poverty (or income more generally) as a measures of well-being– Build on discussion of Supplemental Poverty

Measure– Consumption (Pounder et al. 2006)– Direct measures of hardship (Levy 2009)

What about Medicare?• Swartz points out that Medicare is “routinely credited” with

reducing elderly poverty.• But no one, as far as I know, actually tests this (it’s not clear how you

would)• Finkelstein & McKnight (J Pub Econ 2008), “What Did Medicare Do?”

find that one of the main benefits of Medicare was a reduction in exposure to risk of high out-of-pocket medical spending, but don’t connect to poverty.

• It may not be possible to say what Medicare’s contribution was (and given Gruber & Engelhardt result on Social Security, maybe there’s nothing left to explain?)

• But one or both of these chapters (McGarry, Swartz) should say something like this explicitly.