Krugman vs. Krugman

Krugman vs. Krugman

By Ruth Marcus
Wednesday, November 21, 2007; A17

In liberal Democratic circles, the debate over Social Security has taken a dangerous "don't worry, be happy" turn.

The argument has two equally dishonest components. The first is to deny that Social Security faces a daunting financing problem -- one that will be much easier to fix (and less onerous for the low-income retirees that the head-in-the-sanders purport to care about) sooner rather than later. The second is to mischaracterize the arguments of those who advocate responsible action, accusing them of hyping the system's woes.

One prominent practitioner of this misguided approach is New York Times columnist Paul Krugman. "Inside the Beltway, doomsaying about Social Security -- declaring that the program as we know it can't survive the onslaught of retiring baby boomers -- is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are," Krugman wrote last week. "In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided."

Somebody should introduce Paul Krugman to . . . Paul Krugman.

<>The brunt of Krugman's ire is directed at Democratic presidential candidate Barack Obama for daring to suggest an increase in the amount of income subject to Social Security payroll taxes -- and using the "c" word (crisis) in an interview with National Journal's Linda Douglass. Krugman says the Illinois senator is being "played for a fool" by raising concerns about Social Security and criticizing Hillary Clinton for ducking the issue.

Hard to square with Krugman of 1996, who praised "sensible proposals" to "slow the growth in benefit levels, gradually raise the retirement age . . . and -- last but not least -- raise taxes moderately now, rather than massively later."

much more Krugman vs. Krugman...

http://www.washingtonpost.com/wp-dyn/content/article/2007/11/20/AR2007112001651_pf.html

The crisis that isn't
Here's what you won't hear in the mainstream US media: America's social security system is not in danger of collapse

http://commentisfree.guardian.co.uk/dean_baker/2007/11/the_crisis_that_isnt.html

As Clinton rightly pointed out, the projected problems with social security are distant and relatively minor. There is no reason that she needs to develop a plan for plugging a hole that is not projected to arise until 2046, almost thirty years after the latest date that she can leave the White House.

Obama's own plan called for raising the income cap on the payroll tax, which would be a modest tax increase on upper middle income workers, and a very substantial tax increase on the highest paid workers. Proposing tax increases is not generally a smart way to win elections, but Obama clearly hoped to be rewarded with positive news stories and editorials, and praise for his courage from the print and broadcast pundits. His plan did earn him some praise from these quarters, but not enough to raise him from his second place standing in the polls.

While Obama's attack can be dismissed as simply bad political judgment, the deeper issue is that attacking social security has so much resonance with the media elite. This group has been blatantly ignoring and/or misrepresenting the facts in its attacks on Social Security for almost two decades. They have used their power over the news to force politicians to respond to their agenda, praising those who advance their social security crisis story and damning those who try to keep the projections in perspective.

...snip...

If it is necessary to make up a social security shortfall, will people in 2050 prefer to retire later, get lower benefits, or pay higher taxes? We don't have any real basis for answering this question. Furthermore, the people alive in 2050 will not care how we did answer the question. The country will almost certainly reshape the social security program at least once before 2050 regardless of what we might choose to write into law in the next few years.

Bat Boy Lives! As Do Myths About Social Security
http://www.cepr.net/index.php?option=com_content&task=view&id=1359

...snip...

the baby boomers' retirement has already been financed.

Back in 1983, when Social Security really was running out of money, with just a few months of payments on hand, Congress raised the payroll tax substantially. This was done deliberately in order to pile up a surplus to finance the baby boomers' retirement. And so it did: that accumulated surplus stands at more than two trillion dollars today, and is increasing at a rate of $190 billion annually.

As a result of this surplus, all the baby boomers' will have retired before Social Security runs into a projected shortfall in 2041. That is according to the Social Security's (mostly Republican-appointed) Trustees. According to the non-partisan Congressional Budget Office, Social Security can pay all promised benefits even longer, until 2046. By either date, most baby boomers will be dead, and almost all of the rest retired, before there is a problem.

Of course, there are some who maintain that the surplus "has been spent," that the Social Security Trust Fund "doesn't exist," and so on. These stories should be given all the credibility of reports about "Bat Boy" sightings in the Weekly World News. But unfortunately they are often taken seriously in the major media.

To say that Social Security's surplus "has been spent," is like saying that when you buy a U.S. government bond, your money "has been spent." Whatever has been done with the money, you are still holding a bond, and you will get your interest and principal so long as there is a US government. If there is no US government when you retire, well then you will have other things to worry about than Social Security, including your private savings.

...more...