If there’s one thing you can say for sure about Elon Musk, it’s that he has a huge number of opinions and loves to share them at high volume with the world. The problem here is that his opinions are often stunningly wrong.
Generally, these stunningly wrong opinions are the conventional wisdom among the ultra-right and ultra-rich.
In particular, like most of the ultra-right ultra-rich, Musk is desperately concerned that the U.S. is about to be overwhelmed by the costs of Social Security and Medicare.
He’s previously tweeted — in response to the Christian evangelical humor site Babylon Bee — that “True national debt, including unfunded entitlements, is at least $60 trillion.” On the one hand, this is arguably true. On the other hand, you will understand it’s not a problem if you are familiar with 1) this subject and 2) basic math.
More recently, Musk favored us with this perspective on Social Security:
Big reckoning coming due to low birth rate. Japan is a leading indicator.
— Elon Musk (@elonmusk) March 31, 2023
There’s so much wrong with this that it’s difficult to know where to start explaining, but let’s try.
First of all, Musk is saying that the U.S. will have difficulty paying Social Security benefits in the future due to a low U.S. birth rate. People who believe this generally point to the falling ratio of U.S. workers to Social Security beneficiaries. 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 projected to fall to 2.3 by 2035.
This does sound intuitively like it must be a big problem — until you think about it for five seconds. As in many other cases, this is the five seconds of thinking that Musk has failed to do.
You don’t need to know anything about the intricacies of how Social Security works to understand it. Just use your little noggin. The obvious reality is that if a falling ratio of workers to beneficiaries is an enormous problem, this problem would already have manifested itself.
Again, look at those numbers. In 1960, 5.1. Now, 2.8. The ratio has dropped by almost half. (In fact, it’s dropped by more than that in Social Security’s history. In 1950 the worker-to-beneficiary ratio was 16.5.) And yet despite a plunge in the worker-retiree ratio that has already happened, the Social Security checks today go out every month like clockwork. There is no mayhem in the streets. There’s no reason to expect disaster if the ratio goes down a little more, to 2.3.
The reason this is possible is the same reason the U.S. overall is a far richer country than it was in the past: an increase in worker productivity. Productivity is the measure of how much the U.S. 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 zero people can do the work of thousands of tollbooth operators.
This matters because, when you strip away the complexity, retirement income of any kind is simply money generated by present-day workers being taken from them and given to people who aren’t working. This is true with Social Security, where the money is taken in the form of taxes. But it’s also true with any kind of private savings. The transfer there just uses different mechanisms — say, Dick Cheney, 82, getting dividends from all the stock he owns.
So it’s all about how much present day workers can produce. And if productivity goes up fast enough, it will swamp any fall in the worker-beneficiary ratio — and the income of both present day workers and retirees can rise indefinitely. This is exactly what happened in the past. And we can see that there’s no reason to believe it won’t continue, again using the concept of math.
The economist Dean Baker of the Center for Economic and Policy Research, a Washington think tank, has done this math. U.S. productivity has grown at more than 1 percent per year — sometimes much more — over every 15-year period since World War II. If it grows at 1 percent for the next 15 years, it will be possible for both workers and retirees to see their income increase by almost 9 percent. If it grows at 2 percent — about the average since World War II — the income of both workers and retirees can grow by 20 percent during the next 15 years. This does not seem like the “reckoning” predicted by Musk.
What Musk is essentially saying is that technology in general, and his car company in particular, are going to fail.
What’s even funnier about Musk’s fretting is that it contradicts literally everything about his life. He’s promised for years that Tesla’s cars will soon achieve “full self-driving.” If indeed humans can invent vehicles that can drive without people, this will generate a huge increase in productivity — so much so that some people worry about what millions of truck drivers would do if their jobs are shortly eliminated. Meanwhile, if low birth rates mean there are fewer workers available, the cost of labor will rise, meaning that it will be worth it for Tesla to invest more in creating self-driving trucks. So what Musk is essentially saying is that technology in general, and his car company in particular, are going to fail.
Finally, there’s Musk’s characterization of Japan as a “leading indicator.” Here’s a picture of Tokyo, depicting what a poverty-stricken hellscape Japan has now become due to its low birthrate:
That is a joke. Japan is an extremely rich country by world standards, and the aging of its population has not changed that. The statistic to pay attention here is a country’s per capita income. Aging might be a problem if so many people were old and out of the workforce that per capita income fell, but, as the World Bank will tell you, that hasn’t happened in Japan. In fact, thanks to the magic of productivity, per capita income has continued to rise, albeit more slowly than in Japan’s years of fastest growth.
So if you’re tempted by Musk’s words to be concerned about what a low birth rate means for Social Security, you don’t need to sweat it. A much bigger problem, for Social Security and the U.S. in general, are the low-functioning brains of our billionaires.