Krugman on Social Security
Donald Luskin (www.poorandstupid.com) and "justoneminute" are among the bloggers who have ripped into Paul Krugman for flip-flopping on Social Security in his Tuesday New York Times column. Back in 1996 when he was supporting President Clinton's initiatives, Krugman wrote with regard to Social Security, "Where is the crisis? Just over the horizon, that's where." (quote from Luskin) Now, however, he downplays a Congressional Budget Office report that the "trust fund" (a misleading accounting contrivance) will run out in 2052. He says,
But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending.
He goes on to sing the praises of the creaky old system as though it were a success story, and concludes, "And that's why the right wants to destroy it." No, they want to trim back the unsustainable giveaways and direct benefits toward those who need it the most. Krugman was among those on the Left who had to take a long rest after the traumatic defeat they suffered on November 2. Perhaps he needs more time.
I have long been skeptical of "privatizing" Social Security, if that means handing off responsibility for providing entitlements to some private financial entity. Those who argue that individuals could get a better rate or return from private investments than from Federal retirement benefits are missing the point. Social Security is NOT an "investment," it is an ongoing transfer of resources from the younger generation to the older generation. It will work as long as there exists a solid nationwide consensus and trust among political factions. Do those conditions exist any more? Absolutely not. It would be much better, I think, to simply scale current benefits back to the pre-1960s era, when Social Security was still understood as being a supplementary fund aimed primarily at widows, the disabled, and other people unable to provide for themselves. Unfortunately, the benefits were inflated by Democrat Congresses over the decades, to the point that middle class people began counting on Social Security to provide for a comfortable retirement. Big mistake, that. The cyncical doubts of the younger generations about ever getting back a fair share of their contriubtions is entirely appropriate, which is another reason why Krugman's newfound complacency about the solvency of the Social Security system is so utterly misplaced. The Concord Coalition drew attention to the looming catstrophe in the early 1990s, and even though the Bush administration has shaky credentials on fiscal responsibility, it is on the right overall track where this is concerned.
There remains, nevertheless, a sadly-neglected Big Picture, which is the way that Social Security, health care, tax reform, immigration, and the war on terrorism all fit together. President Bush has taken tentative steps by creating "medical savings accounts," but there really should be no distinction between savings accounts intended for health, education, or any purpose, including gambling at the casino. It's the individual's own business! A truly conservative economic policy would be aimed at forthrightly "smashing the bonds of statism" and freeing individuals to pursue happiness as they see fit. That is why I have consistently urged that the hideously complex maze of regulations on 401K plans, etc., etc. be abolished, in favor of simply exempting up to $5,000 of personal savings from Federal income taxes each year. What could be more fair or simple to understand? Such an approach is utterly alien to the mainstream of opinion in the United States, especially the left-liberals who look to the ultra-cushy European social democratic system as a model for our future. They fail to recognize, of course, that the European socio-economic system could not be sustained without many millions of exploited cheap immigrant workers who are not covered by the system. Hence the resentment of these "outsiders" toward the entitled Western citizens, which paves the way for terrorist subversion. Making the connection between entitlements affordability, immigration, and the terrorist threat could be the basis for a radical restoration of economic freedom that would make this a second "American century." Otherwise, China will steadily gain on us, as demonstrated by IBM's sale of its personal computer division to the Lenovo Corporation, headquartered in "Red" China...