Episode 631: The Long Run : Planet Money Stories about a $50,000 loophole, what neighborhoods mean for kids, and what the Six Million Dollar Man would cost today.
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Episode 631: The Long Run

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Episode 631: The Long Run

Episode 631: The Long Run

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  • Transcript

JACOB GOLDSTEIN, HOST:

Hello, and welcome to PLANET MONEY. I'm Jacob Goldstein.

ROBERT SMITH, HOST:

And I'm Robert Smith. You may know PLANET MONEY as a podcast, which we are, but we have a whole other secret life where we do radio stories on NPR's Morning Edition and All Things Considered, and occasionally we like to bring those radio stories to you. Now, they are random radio stories, but we do try to come up with at least a theme to get you through. And so I have a list here of what I think are great themes.

GOLDSTEIN: All right, give me one.

SMITH: All right, the more things change.

GOLDSTEIN: Isn't that the one we did last time? I feel like you could do that for anything.

SMITH: OK, fine - fine, fine, fine, fine, fine. You go.

GOLDSTEIN: OK, the long run.

SMITH: Oh.

GOLDSTEIN: Yeah, it's good, right? Because they all, one way or another, take this long view, and one of them is about Social Security, which is retirement, which is sort of saving through your whole life. Another one is how poor kids do much, much later - decades later - if you try and help them out when they're little kids. And the third one actually looks at a TV character from the '70s today - the long run.

SMITH: You know what depresses me? I have a whole list of ones here but yours is better. Let's do it. On today's show - the long run.

UNIDENTIFIED WOMAN: This episode of PLANET MONEY is supported by Igloo, whose goal is to make company intranets you actually like. Igloo has file sharing, calendars, social newsfeeds and task management. It also has a responsive design that works great on any device. The platform is highly malleable, which means you can design it to look and feel like your company. Sign up for a free trial of a demo at igloosoftware.com/planetmoney.

SMITH: So we have these pitch meetings where reporters here at PLANET MONEY talk about what they're really into. And David Kestenbaum comes in the other day and he says, I want to do a story about a book entitled "Get What's Yours: The Secrets To Maxing Out Your Social Security."

GOLDSTEIN: And, like, you know, this is not our thing. I mean, people should get whatever they deserve in Social Security - but, like, PLANET MONEY is not a finance tips show.

SMITH: Yeah. And we get hundreds and hundreds of these books every week. But David saw something in here which he thought was remarkable, which was a trick in the book that can get some couples who are claiming Social Security, an extra $50,000.

(SOUNDBITE OF ARCHIVED BROADCAST)

DAVID KESTENBAUM, BYLINE: The story of the $50,000 trick starts with a tennis game between an economist and a reporter. Maybe tennis is overstating it. They're not great.

PAUL SOLMAN: Terrible.

LARRY KOTLIKOFF: If you count the number of braces and knee braces and arm braces, it's a lot.

SOLMAN: Yeah, maybe more than the actual winners we ever had.

KOTLIKOFF: We're thinking about wearing helmets. (Laughter) That's coming.

KESTENBAUM: That's Larry Kotlikoff - he's the economist - and Paul Solman - he's economics correspondent for the "PBS NewsHour." They're two of the authors of the book. But back then, they were playing tennis. They took a break. And Larry said to Paul, hey, what are you and your wife doing about Social Security? Paul was slightly insulted. He'd covered economics for over 30 years.

SOLMAN: I smugly smiled and said, we've got it all figured out, Larry. You don't have to worry about it. We're both waiting until we're 70.

KESTENBAUM: If you wait until age 70, you get bigger Social Security checks. But Larry had a way for Paul and his wife to get even more. You still get to wait until 70 to start collecting your main money, he explained. But while you are waiting, you can also file for additional money - something called a spousal benefit. The spousal benefit dates back to the early days of the Social Security program, when women tended to stay at home and take care of the kids. It was a way for the wives get something out of Social Security as well as the husbands. Now, Paul and his wife both worked. But the way the Social Security Act is written, one of them could claim spousal benefits and still let their own benefits build to a maximum at age 70.

SOLMAN: I was a little anxious because I did think that there was something a little screwy about it.

KESTENBAUM: But Paul did some research, and it seemed to be a real thing. He found some other people who had done it. So he and his wife gave it a try.

SOLMAN: I simply made a date to talk to the Social Security people on the phone. They were incredibly polite. They were incredibly punctual. The woman whom I talked to said, well, you can't do that, sir. I said, oh, yes, I can.

KESTENBAUM: The woman went to talk to her supervisor, and, yes, it was allowed. The money started arriving - about $1,000 a month.

How much did this get you, total?

SOLMAN: Almost $50,000.

KESTENBAUM: That you wouldn't have had otherwise.

SOLMAN: Oh, sure. Yeah.

KESTENBAUM: Did you feel at all guilty?

SOLMAN: No because - well - no. I thought the law is the law, and I should be taking advantage of a benefit that is available to everybody. But I thought everybody should know about it.

KESTENBAUM: That's one of the reasons they wrote the book. This trick seemed kind of crazy to me, though - a way to get double benefits. I asked Larry Kotlikoff, the economist, if he thought you were supposed to be able to do this. Was this an accident of the law? He wasn't sure. The Social Security Act, he said, is so complicated and it's been amended so many times, it's hard to know. So I spent a few days looking into it, and it was weirdly hard to figure out. One key change happened in 1956, but another happened recently in 2000. It was just a few words in an amendment introduced by two senators, two senators who have since died. I tried reaching out to their former staffers, but no one seemed to know for sure what the story was. Finally, I reached the chief actuary for the Social Security Administration, Stephen Goss, and I asked him, was this intentional? Were people supposed to be able to get this extra money?

STEPHEN GOSS: No, our impression is that it was not specifically intended that this opportunity would be provided.

KESTENBAUM: But it is legal and allowed by the law?

GOSS: It is definitely legal. It is definitely allowed. There is nothing wrong at all with people pursuing this.

KESTENBAUM: So this doesn't seem like it's a loophole in the sense of something someone snuck into the law for their own benefit. It's weirder - just a mistake, a mistake that allows some couples to get extra money - for high earners, about $50,000. Stephen Goss expects the spousal benefit trick will eventually cost the Social Security fund about a billion dollars a year. The Obama administration, in its current budget proposal, calls for eliminating aggressive Social Security strategies that benefit the wealthy - mainly this one - but it will take an act of Congress to close the hole that it created.

(SOUNDBITE OF SONG, "SOMEDAY")

THE STROKES: (Singing) I'm working so I won't have to try so hard. Tables, they turn sometimes. Oh, someday.

GOLDSTEIN: In the 1990s, the federal government carried out an experiment. The government wanted to see if moving families out of public housing projects and into neighborhoods with less poverty made lives better for those families.

SMITH: Because this would've been an amazing thing, right? This would've been a solution that did not necessarily cost a lot of money. Just get poor people into better neighborhoods and they will help themselves; that was the theory. But the results didn't really go anywhere. People were disappointed. And then something surprising happened. Just this year - just this year researchers went back and looked at the numbers and said, wait a minute. Maybe there is a lesson to be learned here. And, Jacob, you did a story that was on Morning Edition.

(SOUNDBITE OF ARCHIVED BROADCAST)

GOLDSTEIN: The experiment from the '90s was called the Moving to Opportunity study. The theory behind it seemed like common sense.

>>LUDWIG The idea was that if poor families were able to move into less-poor neighborhoods, their kids would start doing better in school and the adults would start doing better in the job market.

GOLDSTEIN: Jens Ludwig is a University of Chicago professor who's been tracking this project since the '90s. Families that volunteered to participate were randomly assigned to different groups. One group stayed in public housing, another was given special vouchers that could be used to pay the rent but only in neighborhoods with low poverty rates. Thousands of families participated. Researchers followed them for more than a decade. Here's what they found.

JENS LUDWIG: Income did not increase for adults when they moved to lower-poverty areas, which was a big surprise to people.

GOLDSTEIN: The results for children were also discouraging.

LUDWIG: We did not see the big changes in educational outcomes for kids that lots of people had expected to see.

GOLDSTEIN: A final evaluation was published a few years ago, and it seemed like that might be the end of it. But recently, a Harvard economist named Raj Chetty decided to take one more look. Chetty was motivated by a separate study he did, where he found that moving during childhood affects kids' incomes when they grow up. And Chetty says the younger kids are when they move, the bigger the effect.

RAJ CHETTY: So if you move to a better place at age 9 instead of 10, you have an improvement. If you move at age 12 instead of 13, you have an improvement. Every extra year matters.

GOLDSTEIN: So Chetty and his colleagues went back and looked at families from the Moving to Opportunities study who had young kids when they moved back in the '90s. They asked, how are those kids doing now, 20 years later? The answer - much, much better than the kids who did not move.

CHETTY: We find that children who moved before they were 13 years old - so at relatively young ages - are earning 30 percent more as adults. They're about 30 percent more likely to go to college. They're less likely to become single parents. They're living in better neighborhoods themselves as adults.

LUDWIG: It is a huge deal.

GOLDSTEIN: Again, Jens Ludwig, the researcher who's been following this project for decades.

LUDWIG: Everything up to this point would've made you predict that there wouldn't be much of a long-term benefit for the little kids in these households when they reach adulthood. And so it has come as a huge shock to see surprisingly large gains in their earnings.

GOLDSTEIN: That finding is not a huge shock for Marcy Lopez. In the early '90s, she was living in a Los Angeles housing project with a son and a daughter in elementary school.

MARCY LOPEZ: It was terrible. We used to come, like, very late and just run from the car to the apartment 'cause there were always shootings.

GOLDSTEIN: One day, when she went to pay the rent, Marcy saw a flyer about the Moving to Opportunity study. She signed up and wound up moving with her kids to an apartment in west LA. She says the neighborhood felt safer. She liked the local schools. Today, her kids are in their late 20s, and Lopez says they're doing great.

LOPEZ: They graduated. They got married. They have decent jobs. I'm very happy.

GOLDSTEIN: How do you think your kids' lives would've been different if you had stayed at your old neighborhood?

LOPEZ: Oh, my God. Don't even say that (laughter). Probably drop out from school and no jobs - I don't even want to think about it.

GOLDSTEIN: Until now, it's been hard for many poor families to do what Marcy Lopez did. Millions of families get housing vouchers, but those vouchers don't always cover the rent in wealthier neighborhoods. That may soon change. Under new rules, the vouchers in many cities will cover more of the rent when people move to more expensive neighborhoods.

(SOUNDBITE OF SONG, "GO PLACES")

THE NEW PORNOGRAPHERS: (Singing) Make copies, win races. Stay with me, go places once more for the ages.

SMITH: The other day, I was surfing my movie news, as I do in the morning, drinking my coffee, and I see that they are remaking one of my favorite TV shows from the 1970s, "The Six Million Dollar Man." But being an economics reporter now, I noticed something. They have changed the price. The new movie they are making is entitled "The Six Billion Dollar Man."

GOLDSTEIN: And, Robert, you came running over to our desk - to my desk and Kestenbaum's desk - with the news. And then, of course, we spent - I don't know - a half hour talking about inflation and the consumer price index and how have health care prices changed. And we wound up pretty sure that they got the math wrong. And then you went off and did a story about it.

(SOUNDBITE OF ARCHIVED BROADCAST)

SMITH: Come on, $6 billion? It is hard to think of anything that gets a thousand times more expensive - even over 40 years - even in science fiction - because basically, we live in an age of low inflation. Prices for goods are barely going up - maybe 1 or 2 percent a year lately. So what makes "The Six Million Dollar Man" so special? Let's recap. As the TV used to tell us every week back in the '70s, there's this astronaut, and he gets in this terrible accident.

(SOUNDBITE OF TV SHOW, "THE SIX MILLION DOLLAR MAN")

LEE MAJORS: (As Steve Austin) Flight down. I can't hold it. She's breaking up. She's break...

(SOUNDBITE OF EXPLOSION)

SMITH: Steve Austin, a man barely alive. Enter the creepy government agent.

(SOUNDBITE OF TV SHOW, "THE SIX MILLION DOLLAR MAN")

RICHARD ANDERSON: (As Oscar Goldman) Gentlemen, we can rebuild him. We have the technology. We have the capability to make the world's first bionic man.

SMITH: So Steve Austin gets his robotic arm, robotic legs, new eyeball. We assume his insurance company gets the $6 million bill. And he fights bad guys with his awesome bionic powers. I was a huge fan. So was a young professor of economics, Anwar Shaikh.

ANWAR SHAIKH: I'm naturally inclined to techie kind of things, even if they are terrible. And I did watch that TV series.

SMITH: Professor Shaikh now teaches at the New School, studies inflation. And we asked him, how much should the $6 million man cost today? And the answer, he says, depends on how you classify Steve Austin. Now, you could think of him as a piece of technology, right? A running, jumping gadget - and those prices have dropped radically over the last 40 years.

SHAIKH: So if you think of him as a product, the number comes down from 6 million to 12,000.

SMITH: The $12,000 man?

SHAIKH: Yeah, $12,000 man.

SMITH: You know, the $12,000 man does not sound like an exciting movie to watch.

(LAUGHTER)

SHAIKH: Exactly. I wouldn't pay - popcorn costs more than that. So forget it. I'm not going.

SMITH: But wait a minute. The technology may be cheaper, but what about the medical care? That bionic eye doesn't just pop in by itself. Perhaps the $6 million includes doctors, X-rays, private hospital room. Health care has a much higher inflation rate.

SHAIKH: The annual salary of surgeons...

SMITH: Yeah.

SHAIKH: ...Has gone up about five and half times since 1973, so that if you took the salary of surgeons as an index of the cost of the medical care component, you're back to a $33 million man.

SMITH: Thirty-three million. We could not find a calculation that would get us even close to a $6 billion man. And perhaps we should just ignore the hyperbole, just go with the 6 billion. Assume that the new Steve Austin, which would be played by Mark Wahlberg by the way, is just a thousand times more awesome. But I will say back in the old days, a price tag used to mean something. In fact, when Steve Austin met another bionic man in the TV series - great episode - the first thing they did was to compare their bottom lines.

(SOUNDBITE OF TV SHOW, "THE SIX MILLION DOLLAR MAN")

MONTE MARKHAM: (As Barney Hiller) What did you cost?

MAJORS: (As Steven Austin) Six million.

MARKHAM: (As Barney Hiller) Six? Seven.

MAJORS: (As Steve Austin) Well, inflation gets us all.

SMITH: He's not kidding.

(SOUNDBITE OF MUSIC)

SMITH: After the story aired, we had a bunch of letters from people who said, you know, remember the $6 million man is not just a product, the $6 million man is a government project - a military project. And as you probably remember from the very expensive hammers and toilet seats, once you have a military project, there is no real cap on how much the thing could cost. We ran through the calculations. We said, yeah, you know, actually if you treat it like a fighter jet or a aircraft carrier, the $6 million man is going to be more than $33 million man, but there is no way we could do the calculations and make it come out to $6 billion man. I stand by that.

(SOUNDBITE OF MUSIC)

GOLDSTEIN: You can email us at planetmoney@npr.org. Thanks to Nadia Wilson for producing today's show.

SMITH: And NPR recommends you listen to Alt.Latino. It is a weekly dive into the world of Latin alternative music. It's a great podcast. You can find Alt.Latino at npr.org and on the NPR One app. I'm Robert Smith.

GOLDSTEIN: And I'm Jacob Goldstein. Thanks for listening.

(SOUNDBITE OF SONG, "FUTURE STARTS SLOW")

THE KILLS: (Singing) After all, God can keep my soul. England have my bones. But don't ever give me up. I could never get back up when the future starts so slow. No longing for the moonlight, no longing for the sun. No longer will I curse the bad I've done.

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