Tuesday, December 07, 2004

Paul vs Paul

The ever vigilant Minute Man reports a Krugman sighting:

...the politics of privatization depend crucially on convincing the public that the system is in imminent danger of collapse, that we must destroy Social Security in order to save it.

I'll have a lot to say about all this when I return to my regular schedule in January. But right now it seems important to take a break from my break, and debunk the hype about a Social Security crisis.

Funny, but there was another guy with the same name, singing a very different tune during the Clinton Administration:

Social Security ... does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in.

Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in). -- The Boston Review, December/January, 1996-7

And, in a New York Times book review (Oct. 20, 96):

But aren't Social Security and Medicare basically pension funds, in whichworkers' contributions are invested to provide for their retirement?

Hardly. A private pension fund that planned to pay the benefits these programs promise would be accumulating huge reserves. In fact, the so-called "trustfunds" are making barely any provisions for the future.

.... the Federal Government... is in fact living utterly beyond its means. While the present generation of retirees is doing very nicely, the promises that are being made to those now working cannot be honored.

....to avert the crisis ahead.....slow the growth in benefit levels, gradually raise the retirement age, impose limits on expensive terminal medical care that prolongs life for only weeks or days and -- last but not least -- raise taxes moderately now, rather than massively later.

....Something is bound to give -- but what?

Will retired boomers -- who will have even more political clout than today's smallish population of retired voters -- be willing to accept a sharply reduced standard of living? That is hard to imagine.

Will younger voters be willing to accept huge increases in tax rates to support the boomers in the style they have been promised? That is equally hard to imagine.

Or will the Government try to square the circleby simply printing the money it needs, creating runaway inflation? Surely that is inconceivable. Yet one or more of these unthinkable things will happen, because something must.

[Emphasis by the FLUBA throughout]

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