I heart Paul Krugman

[Rex Kickass]

http://www.nytimes.com/2004/12/07/opinion/07krugman.html?hp

[southsider2k5]

http://www.nytimes.com/2004/12/07/opinion/07krugman.html?hp

LMAO, ah the good old Paul Krugman. I like the part where he refers to his fix only costing .54% of annual GDP, as if to minimize the fact is he talking about roughly $60 billion a year, if we start today.

 

Sure its not hard to come up with fiscal packages to pay for this, you just have to find the political capital to tell two generations of tax payers who are by and large convinced that they will never see this money, to spend even more than the nearly 8% of their paycheck they pay now, to a system that they don't believe will exsist when they retire.

 

Social security is a pyramid scheme, that only succeeds when there are more people paying in, versus taking out. That's it. There is no big secret there.

 

Plus his numbers seem fishy to me. Even reading some of Al Gore's old campaign promises, Gore is claiming to be able to extend SS through 2050 with his plan, inferring that before Bush took office, SS wasn't expected to last through then, but much a much shorter time period.

 

Is Krugman now stating that Bush has by and large somehow fixed SS for at least an extra decade? Most sites I found claimed SS would be bankrupt much earlier than 2052.

 

2029

http://www.arusa.com/tmpls/sect3_2.htm

 

http://home.flash.net/~bob001/ss.htm

 

2030

http://www.socialsecurity.org/pubs/ssps/ssp1es.html

 

2032

http://www.wealth4freedom.com/truth/2/SS1.htm

 

2037

http://www.socialsecurityreform.org/problem/index.cfm

 

2042

http://newsfromrussia.com/science/2004/03/24/52971.html

 

So has Bush saved SS for an extra 10-25ish years?

[jackie hayes]

LMAO, ah the good old Paul Krugman.  I like the part where he refers to his fix only costing .54% of annual GDP, as if to minimize the fact is he talking about roughly $60 billion a year, if we start today.

 

Sure its not hard to come up with fiscal packages to pay for this, you just have to find the political capital to tell two generations of tax payers who are by and large convinced that they will never see this money, to spend even more than the nearly 8% of their paycheck they pay now, to a system that they don't believe will exsist when they retire.

 

Social security is a pyramid scheme, that only succeeds when there are more people paying in, versus taking out.  That's it.  There is no big secret there.

 

Plus his numbers seem fishy to me.  Even reading some of Al Gore's old campaign promises, Gore is claiming to be able to extend SS through 2050 with his plan, inferring that before Bush took office, SS wasn't expected to last through then, but much a much shorter time period. 

 

Is Krugman now stating that Bush has by and large somehow fixed SS for at least an extra decade?  Most sites I found claimed SS would be bankrupt much earlier than 2052.

 

2029

http://www.arusa.com/tmpls/sect3_2.htm

 

http://home.flash.net/~bob001/ss.htm

 

2030

http://www.socialsecurity.org/pubs/ssps/ssp1es.html

 

2032

http://www.wealth4freedom.com/truth/2/SS1.htm

 

2037

http://www.socialsecurityreform.org/problem/index.cfm

 

2042

http://newsfromrussia.com/science/2004/03/24/52971.html

 

So has Bush saved SS for an extra 10-25ish years?

Please. Krugman goes more than a little overboard on politics, but when it comes to economics he's as good as anyone. His analysis here is impeccable. The federal government has used SS revenues to finance spending, claiming that it was okay since the government as a whole wasn't in deficit. But now the SS Admin is looking at a shortfall in the foreseeable future, that's a totally different system.... Bush certainly hasn't helped SS. He hasn't done anything about SS in particular yet, and he's made the ex-SS budget picture much worse.

[NUKE_CLEVELAND]

Personally, until I see concrete reform in SS I will have absolutely ZERO confidence in it being there in 40 years when I'm supposed to retire. Its this reason why I'm salting every spare dime I can find in mutual funds.

[southsider2k5]

Please.  Krugman goes more than a little overboard on politics, but when it comes to economics he's as good as anyone.  His analysis here is impeccable.  The federal government has used SS revenues to finance spending, claiming that it was okay since the government as a whole wasn't in deficit.  But now the SS Admin is looking at a shortfall in the foreseeable future, that's a totally different system....  Bush certainly hasn't helped SS.  He hasn't done anything about SS in particular yet, and he's made the ex-SS budget picture much worse.

Which is kinda my point. He is extremely liberal, while siting the most conservative possible economic forcast to make the basis for this arguement. He calls Bush to the matt as being hypocritical, yet he uses numbers he doesn't buy to make the jist of his arguement. He basically just painted himself with his own brush. There is no way I think that things have gotten better for SS, in fact it has be worse, yet he ignores that to make his arguement. Simply put. Pot meet kettle.

[jackie hayes]

Which is kinda my point.  He is extremely liberal, while siting the most conservative possible economic forcast to make the basis for this arguement.  He calls Bush to the matt as being hypocritical, yet he uses numbers he doesn't buy to make the jist of his arguement.  He basically just painted himself with his own brush.  There is no way I think that things have gotten better for SS, in fact it has be worse, yet he ignores that to make his arguement.  Simply put.  Pot meet kettle.

What? Numbers are not conservative or liberal in a political sense. The CBO is well-respected largely b/c it's nonpartisan. Their projections are probably too optimistic, but they're not extreme in any sense.

 

His main point is that we could, by changing fiscal plans (taxes and spending), support Social Security much longer than Bush wants anyone to believe. Which is true, flat-out true. Whether that means 2150 or 2100, or whether small changes in the program might be a better option (spreading a decline in benefits over many generations, instead of heaping all the crap on one generation), these are minor details -- he never says that we should leave SS totally unchanged, just that doing so, if we wanted to, wouldn't be the cataclysm some have predicted.

 

The Bush admin will respond that SS should stand on its own legs -- but they haven't been saying that as they've been borrowing excess SS revenue and then citing the government's unified budget deficit. (And Krugman rightly points out this inconsistency.)

[Texsox]

I have faith in America.

[southsider2k5]

What?  Numbers are not conservative or liberal in a political sense.  The CBO is well-respected largely b/c it's nonpartisan.  Their projections are probably too optimistic, but they're not extreme in any sense.

 

His main point is that we could, by changing fiscal plans (taxes and spending), support Social Security much longer than Bush wants anyone to believe.  Which is true, flat-out true.  Whether that means 2150 or 2100, or whether small changes in the program might be a better option (spreading a decline in benefits over many generations, instead of heaping all the crap on one generation), these are minor details -- he never says that we should leave SS totally unchanged, just that doing so, if we wanted to, wouldn't be the cataclysm some have predicted.

 

The Bush admin will respond that SS should stand on its own legs -- but they haven't been saying that as they've been borrowing excess SS revenue and then citing the government's unified budget deficit.  (And Krugman rightly points out this inconsistency.)

Numbers are always reflective of the people who want them. The CBO always reflects the interests of those in power. With Bush in power, all of the sudden SS has added about 10 years, since Al Gore was making his statements about saving SS. So either SS has added 10 years of solvency, or someone monkied the numbers.

[Texsox]

Numbers are always reflective of the people who want them.  The CBO always reflects the interests of those in power.  With Bush in power, all of the sudden SS has added about 10 years, since Al Gore was making his statements about saving SS.  So either SS has added 10 years of solvency, or someone monkied the numbers.

Isn't the major investment that SS makes in US treasury bills? Since we are running some big deficits, it may have added a few years. In a strange contra-intuitive way.

 

IMNSHO, we have asked SS to do too much. A roof, medicine, and some food, is about all one should expect. I see it as almost like public assistance. If you want cable tv, play some golf, and do some travelling, you better be savings some of your paychecks.

[jackie hayes]

Numbers are always reflective of the people who want them.  The CBO always reflects the interests of those in power.  With Bush in power, all of the sudden SS has added about 10 years, since Al Gore was making his statements about saving SS.  So either SS has added 10 years of solvency, or someone monkied the numbers.

The CBO doesn't change its methods based on the party in power. They are largely independant, with strict rules regarding what can and cannot be considered in making projections. Unless Congress changed the rules, and I don't recall anything like that happening, I doubt their models changed very much. Gore may well have been working off of different projections, but I'd have to see the details.

[jackie hayes]

Isn't the major investment that SS makes in US treasury bills? Since we are running some big deficits, it may have added a few years. In a strange contra-intuitive way.

 

IMNSHO, we have asked SS to do too much. A roof, medicine, and some food, is about all one should expect. I see it as almost like public assistance. If you want cable tv, play some golf, and do some travelling, you better be savings some of your paychecks.

Yes, they have special (nontradeable) government debt. So all the assets of one part of government is made up of another part's debt. The government as a whole has already spent all the surplus from SS.

[EvilJester99]

I have faith in America.

Hands Tex a life preserver... You're going to need this...

[Texsox]

Hands Tex a life preserver... You're going to need this...  

All I am thinking of SS for is a safety net. Imagine if we suddenly allowed ten million seniors to starve to death in the streets? That's what I envision if these dire predictions come true.

[Rex Kickass]

No, I think what Krugman was saying is that because money from the payroll tax is pumping itself into Social Security, that it is perpetuating itself - you know, like its designed to.

[jackie hayes]

No, I think what Krugman was saying is that because money from the payroll tax is pumping itself into Social Security, that it is perpetuating itself - you know, like its designed to.

That's not what he's saying. The only way SS could do that is through the "Trust Fund", and it's known that the Fund will go bust eventually (and that "Fund" is really just an accounting gimmick, anyway). That's why he says the 0.54% of GDP would be "additional revenues", that is, above and beyond what the payroll tax brings in.

[Rex Kickass]

So we're talking about 65 billion dollars a year extra to maintain a safe, low to no risk social security net for American seniors who need this money in retirement.

 

The Bush administration is proposing transitioning one third of the payroll tax to private investment. And this week admitted that the government would have to borrow an additional trillion dollars to make that happen. Over ten years.

 

Last time I checked, that's 100 billion a year over ten years. More than what Krugman estimates it would take to maintain SSI in perpetuity according to what you've said. Then you have to calculate the interest on the borrowing that the US would have to do. Assuming that this interest yield would be somewhere along the lines of an average savings bond, you are looking at about 3.5% interest per year on the One Trillion dollars. That's by my calculations - about 35 billion more per year.

 

If the bonds issued to pay for SSI are 20 year notes, we are talking about a cost of 1.3-1.6 trillion (I'm no good at figuring out compound interest). All I know is if my low end figure is correct, that averages out to a per year total of 65 billion. That's if the transition costs to SSI stay around a trillion dollars, and that's a big if. That's also if the interest rates stay low when these bonds are issued. Again a big if.

 

All that money to save the system like it is, which can not go bankrupt - by the way - being a government expenditure - unless the gov't itself goes bankrupt. Or to convert it into a new system that puts your retirement savings at risk. Directly opposed to the original goals of the program to begin with.

[southsider2k5]

A rebuttal on Krugmans article. Take it for what its worth as the guy is pretty much the anti-Krugman. He does make some interesting points and contradictions

 

http://www.poorandstupid.com/2004_12_05_ch...252303225885741

[jackie hayes]

A rebuttal on Krugmans article.  Take it for what its worth as the guy is pretty much the anti-Krugman.  He does make some interesting points and contradictions

 

http://www.poorandstupid.com/2004_12_05_ch...252303225885741

No, he doesn't. He shows that he simply doesn't understand Krugman's argument. For example, "Krugman's belief in non-existent Social Security Trust Fund assets is typical of the unrealistic way academic economists approach real-world problems". Krugman is very clear on the Trust Fund. If SS is on its own, then the assets are there, since a bond is a bond. If not, then it's hard to justify saying that there is a crisis in SS itself (only in the overall budget outlook). Yet the Bush administration holds both positions -- they say SS is in trouble b/c it can't pay for itself, meanwhile pointing to budget numbers that reflect the unified budget, not the ex-SS budget. That's simply not honest, and that's Krugman's main point.

 

I don't want to keep SS unchanged, and I agree that it's gotten too big. But it's a joke to say that Krugman's all confused. If you want to argue with his priorities, okay. But his numbers and analysis are very sound. (Well, CBO projections are usually a little too optimistic, so I think 2052 is probably too far in the future. But they don't have any partisan bias, so it still is understandable why Krugman's using them. Anyway, 5-10 years either way doesn't affect the argument very much.)

[Rex Kickass]

But why the need to privatize Social Security in the first place? I thought we already had proposed PSAs. They were called IRAs as I recall.

 

I think what Krugman and a lot of people that are against the idea of privatization of SSI want to say is about more than the numbers. Its about the ideas behind Social Security, the basis of thought behind its creation. SSI wasn't meant to participate in the forces of the economy. It was specifically created to shield our senior citizens from want due to the forces of the economy.

[jackie hayes]

But why the need to privatize Social Security in the first place? I thought we already had proposed PSAs. They were called IRAs as I recall.

 

I think what Krugman and a lot of people that are against the idea of privatization of SSI want to say is about more than the numbers. Its about the ideas behind Social Security, the basis of thought behind its creation. SSI wasn't meant to participate in the forces of the economy. It was specifically created to shield our senior citizens from want due to the forces of the economy.

Krugman believes that Republicans want to kill SS. Which is understandable, b/c a full privatization means just eliminating the whole thing and letting people spend that money as they please. But that hasn't been proposed yet (the Republican plan, after all, still involves forced saving), and there's no reason to argue about something that noone's proposing. The real question is, is SS too big? Are benefits more than we should expect the government to provide? It just hasn't looked sustainable, so I'd say yes. And the forces that made it unsustainable, lower population growth and longer-life, are not diminishing, meaning that we can't expect a one-time fix to save SS.

 

Also, SS will inevitably play a big part ("participate") in the economy, through interest rates and savings behavior.