http://www.nytimes.com/2010/08/16/opinion/16krugman.html
https://archive.is/oqq1c
It's no surprise that Paul Krugman would defend Social Security. After all, Krugman attempts to argue that WW II brought great benefits, so why wouldn't he do the same for a forced government retirement scheme, even if it performs more poorly for the majority of Americans than all other investment alternatives, including bank CDs?
Notice this statement from a 2005 study by the Federal Reserve Bank of St. Louis, entitled 'Social Security versus Private Retirement Accounts: A Historical Analysis' —
https://research.stlouisfed.org/publications/review/05/03/part1/GarrettRhine.pdf
Figures 5 through 7 provide the following conclusions: For those people retiring at age 62, none would benefit more from the current Social Security system relative to private investments in the S&P 500 (Figure 5). A person retiring at age 65 will only benefit more from Social Security relative to a private investment in the S&P 500 if he is a low earner and lives to be at least 96 years old (Figure 6). Finally, for those retiring at age 70, the only individuals that benefit more from Social Security are low earners who live to be at least 94 years old and average earners who live to be at least 108 years old, assuming an investment in the S&P 500 (Figure 7).To make this conclusion more vivid, notice that you must live over 94 years, if you retire before age 70, to benefit more from Social Security, than a private account that used dollar cost averaging to invest your Social Security contributions in the S&P 500. In 2010, it was estimated that only about 2% of the U.S. population would even be over age 90 —
https://www.census.gov/library/publications/2011/acs/acs-17.html
In short, the vast majority of people are harmed by Social Security, when compared with the return they could have received, had their Social Security contributions gone into a private account.
This is what Krugman describes as 'bringing dignity and decency to the lives of older Americans'. And if you have the temerity to criticize such a terrible alternative? In Krugman's view you have committed a 'a cruel attack'.
And it's perversely fascinating to see yet another article by Krugman, in which he denounces others for a quality that he himself displays in the same article. Krugman's article, 'Attacking Social Security', is a good exhibit of 'ideology and posturing', that at the same time attacks others for supposedly making claims that are about ideology and posturing.
Here's how Krugman sums up any criticism of Social Security:
So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.Then after giving no details about how Social Security actually works, or real details of an actual criticism, Krugman dismisses critics with these empty statements —
And having invented a crisis, what do Social Security’s attackers want to do? They don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. So think about it this way: In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.Krugman's claim that conservatives hate Social Security, because 'its success undermines their claim that government is always the problem, never the solution', is especially fascinating given his empty defense of a program that supposedly demonstrates a government solution that deserves to be celebrated. Krugman's hypocrisy is stunning — he repeats the usual fallacies regarding Social Security, consistent with his own mantra that 'government is always the solution, never the problem', and then accuses others of having an ideological bias.
What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.
If Social Security is so helpful to people, as Krugman claims, why does he resort to contemptuously dismissing criticism of the so-called 'trust fund', while offering no details about how the 'fund' works? And why is there a Federal Reserve study that shows many people would have been better off had their contributions simply been put into bank CDs?
To be clear, Krugman's mocking description of criticism of Social Security as an 'exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don't count', is obviously absurd. That description explains nothing, and doesn't address the basis of any criticism — legitimate, or not.
And does a Nobel Prize winning economist really not understand that all government securities are a liability to tax payers, including those that were purchased with the Social Security surpluses?
I wrote in detail in a previous post about this common way of dismissing criticism of Social Security — that is, pretending it's meaningful to say 'you owe yourself money', and that tax payers could treat money they owed as an asset.
Amounts collected via the 'OASDI' payroll deduction that are not paid to beneficiaries, are used to purchase government treasuries — in this case, special issue government bonds — which means any Social Security surplus is put into the government's general fund and spent. The treasury bonds held by the Social Security trust fund are a liability to future U.S. taxpayers, since U.S. taxpayers owe both the principle and interest on those bonds — just like U.S. taxpayers owe the principle and interest on every other government security. All government securities are a claim on future tax receipts, and therefore a liability to taxpayers, regardless of who is holding those securities.
This is what makes the often heard comment: 'the Social Security trust fund earns interest', so tragically amusing — many Americans are maintaining a delusion that the interest they must pay via tax collections is a return that they are earning. Yes, the Social Security trust fund earns interest, and if you are a U.S. taxpayer, you are one of the people who is paying that interest.
If anyone is playing three-card monte, it's Krugman, and anyone else who refuses to make these obvious points.
Here are previous posts I wrote that go into more detail about the problems with Social Security, and the dishonest way people tend to describe it:
http://maxautonomy.blogspot.com/2014/05/the-will-to-believe.html
http://maxautonomy.blogspot.com/2014/06/pretending-you-owe-yourself-hazard.html
This post is especially troubling, in that it explains why the widely held belief that U.S. taxpayers have an earned right to a benefit from a Social Security account, is false —
http://maxautonomy.blogspot.com/2014/06/pretending-youre-helping-people.html
http://www.nytimes.com/2010/08/16/opinion/16krugman.html
https://archive.is/oqq1c
Attacking Social Security
By Paul Krugman
Published: August 15, 2010
Social Security turned 75 last week. It should have been a joyous occasion, a time to celebrate a program that has brought dignity and decency to the lives of older Americans.
But the program is under attack, with some Democrats as well as nearly all Republicans joining the assault. Rumor has it that President Obama’s deficit commission may call for deep benefit cuts, in particular a sharp rise in the retirement age.
Social Security’s attackers claim that they’re concerned about the program’s financial future. But their math doesn’t add up, and their hostility isn’t really about dollars and cents. Instead, it’s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.
About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.
But neither of these potential problems is a clear and present danger. Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.
Meanwhile, an aging population will eventually (over the course of the next 20 years) cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P. To give you some perspective, that’s a significantly smaller increase than the rise in defense spending since 2001, which Washington certainly didn’t consider a crisis, or even a reason to rethink some of the Bush tax cuts.
So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.
It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.
And having invented a crisis, what do Social Security’s attackers want to do? They don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. So think about it this way: In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.
What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.
And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.
The currently fashionable idea of raising the retirement age even more than it will rise under existing law — it has already gone from 65 to 66, it’s scheduled to rise to 67, but now some are proposing that it go to 70 — is usually justified with assertions that life expectancy has risen, so people can easily work later into life. But that’s only true for affluent, white-collar workers — the people who need Social Security least.
I’m not just talking about the fact that it’s a lot easier to imagine working until you’re 70 if you have a comfortable office job than if you’re engaged in manual labor. America is becoming an increasingly unequal society — and the growing disparities extend to matters of life and death. Life expectancy at age 65 has risen a lot at the top of the income distribution, but much less for lower-income workers. And remember, the retirement age is already scheduled to rise under current law.
So let’s beat back this unnecessary, unfair and — let’s not mince words — cruel attack on working Americans. Big cuts in Social Security should not be on the table.
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