The Deliberate Economic Stupidity Of Paul Krugman On Social Security

Paul Krugman is a Nobel Prize winning economist, which makes me think he’s deliberately playing stupid on Social Security:

Social Security is a government program supported by a dedicated tax, like highway maintenance. Now you can say that assigning a particular tax to a particular program is merely a fiction, but in fact such assignments have both legal and political force.

…The date at which the trust fund will run out, according to Social Security Administration projections, has receded steadily into the future: 10 years ago it was 2029, now it’s 2042. As Kevin Drum, Brad DeLong, and others have pointed out, the SSA estimates are very conservative, and quite moderate projections of economic growth push the exhaustion date into the indefinite future.

But the privatizers won’t take yes for an answer when it comes to the sustainability of Social Security. Their answer to the pretty good numbers is to say that the trust fund is meaningless, because it’s invested in U.S. government bonds. They aren’t really saying that government bonds are worthless; their point is that the whole notion of a separate budget for Social Security is a fiction. And if that’s true, the idea that one part of the government can have a positive trust fund while the government as a whole is in debt does become strange.

…The bigger problem for those who want to see a crisis in Social Security’s future is this: if Social Security is just part of the federal budget, with no budget or trust fund of its own, then, well, it’s just part of the federal budget: there can’t be a Social Security crisis. All you can have is a general budget crisis. Rising Social Security benefit payments might be one reason for that crisis, but it’s hard to make the case that it will be central.

…The Social Security system won’t be in trouble: it will, in fact, still have a growing trust fund, because of the interest that the trust earns on its accumulated surplus. The only way Social Security gets in trouble is if Congress votes not to honor U.S. government bonds held by Social Security. That’s not going to happen. So legally, mechanically, 2018 has no meaning.

Now it’s true that rising benefit costs will be a drag on the federal budget. So will rising Medicare costs. So will the ongoing drain from tax cuts. So will whatever wars we get into. I can’t find a story under which Social Security payments, as opposed to other things, become a crucial budgetary problem in 2018.

What we really have is a looming crisis in the General Fund. Social Security, with its own dedicated tax, has been run responsibly; the rest of the government has not. So why are we talking about a Social Security crisis?

Gee, why are we talking about the Social Security crisis? Could it be because, as Krugman very well knows, the “trust fund” is an accounting gimmick?

Shorter Paul Krugman: Because we have a Social Security tax that’s supposed to be used for Social Security, all the money that was taken in via that tax willl in fact be used for Social Security, despite the fact that it has already been spent.

The incredibly obvious problem that Paul Krugman MUST BE pretending not to see, because he’s not a dumb guy, is that there is a gulf as wide as the ocean between the amount of tax money the government is likely to take in and our future obligations. Therefore, since Medicare and Social Security are the two largest lines in the budget, barring a miracle of some sort, it’s hard to imagine how we could possibly make it through the next few decades without dramatically limiting what we pay out for those two programs.

So, when Krugman says…

The only way Social Security gets in trouble is if Congress votes not to honor U.S. government bonds held by Social Security. That’s not going to happen.

…it’s hard to imagine what he’s basing that statement on. Yes, the government may not immediately cut back dramatically on Social Security in 2018, but at some point, it’s hard to see how it doesn’t happen. Certainly Paul Krugman has never suggested any practical way to avoid it — and how could he? So why is Krugman trying to convince everyone that all is well with Social Security? A line from his own post would seem to be the best explanation,

I don’t know why this contradiction is so hard to understand, except to echo Upton Sinclair: it’s hard to get a man to understand something when his salary (or, in the current situation, his membership in the political club) depends on his not understanding it.

If Krugman admits Social Security payments are being jeopardized by the spending we’re doing today, it would mean telling other liberals that they can’t keep spending as they have been and growing government. If he did that, then Krugman’s spot in his own little “political club” would become very shaky indeed.

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