Asymmetrical Information

Hmmm..... so let me get this straight: the tax cut was good, increasing payroll taxes won't work because of the Laffer curve, reprogressivizing the tax code will cause high income earners to stop working. Aside from euthanasia or inventing a time machine and assassinating FDR in 1932, what do libertairians propose we do?

sorry for the typo.

Also, if you have a link to the Gokhale and Gale studies, I'd be interested to read.

A few modest proposals

Let younger workers opt out and invest a portion of their payroll tax dollars in exchange for not receiving Medicare or Social Security. Since it’s a bad deal already for my generation, we’re better off being able to opt out and get the benefits of compound interest. Moreover since the program promises more than it can pay out with revenue, this would reduce the unfunded liabilities of the program.

Phase in an increase of the retirement age. IIRC it’s being raised to 67, I’d raise it to at least 70 to take into account longer life expectancies and longer work lives. Also the longer people work, the more years they pay into the system(s) and the fewer years they collect from it.

Lower the Cost of Living Adjustments which (AIUI) overestimate inflation. The late Senator Moynahan one said that if we reduced the COLAs to reflect the true rate of inflation it could save as much as a trillion dollars over a decade. I was never a particularly big fan of his and question the number (he could be talking about increased tax revenues as well as lower payments from entitlement programs) but the theory is sound even if it does not save as much revenue.

Means test both programs to reduce the number of recipients and the amount being paid out. This will probably happen anyway since general revenue will have to be used to prop up the programs when they lose money, in which case the phony claim that this is a “sacred trust for all Americans” will pretty much be shown the for the crock it always was.

Thorley,

Your ideas are great in principle but I can easily imagine a scenario in which the highest wage earners see the benefit of opting out of the system and those who remain in (those with less to put aside for retirement) vote to pass higher taxes on those who opted out to make up for the new and larger shortfall that would be created by the opting out itself. Tyranny of the majority!

Wallster,

Here are the links and citations for the studies in question:

"Reassessing the Fiscal Gap: Why Tax-Deferred Saving Will Not Solve the Problem", with William G. Gale and Peter R. Orszag, July 2003
http://elsa.berkeley.edu/users/auerbach/reassessing.pdf

New Budget Measures for New Budget Priorities
By Jagadeesh Gokhale, Kent Smetters
http://www.aei.org/docLib/20030508_gokhale.pdf

Garth,

I agree that that is always a legitimate concern and while I won’t pretend to have a perfect solution to the problem of Paul voting to rob Peter, however I think that we can mitigate the damage with the sort of reforms I’ve proposed.

Letting younger workers opt out and invest their payroll tax dollars gives them a stake in a lower tax economy and economic mobility which hopefully they will be motivated to defend at the voting booth. Focusing on the least painful ways of reducing expenditures such as means testing (which would also undercut public support for the programs which I’ll wager is the major reason so many on the Left are loath to support it – although some do), reducing COLA’s, and phasing in a higher retirement age can also reduce the fiscal crunch while deflecting charges of “cutting the programs.”

Again these would probably mitigate the political problem somewhat but not solve it entirely. I’d be delighted if you or anyone else can offer any suggestions of how to fix the entitlement problem while mitigating any damage done by the redistribution of wealth crowd.

eliminate all ss benefits for anyone under 50

or, freeze all ss benefits, but keep 50% of the payroll tax for ss

just kill this stupid program as soon as possible

stop creating unfunded liabilities

will this work politically? no.. but it needs to be done ASAP

I agree with "Hey" -- why can't we just say to the everybody under a certain age "You're going to get hit both ways, coming and going. Social Security and Medicare are not going to be there for you, but you're going to have to pay in." And then everybody below say 18 will be permanently free of both payroll taxes and SS/Medicare.

What's wrong with that mathematically? (Not that there's any chance in hell of it getting through Congress.)

Immediate raising the retirement age to 72 for anyone born after 1948 would be good start.

Oh -- and one more thing --

Wasn't the original purpose of Social Security to make sure that old people weren't eating cat food for dinner? Aren't the benefits that people are drawing down right now a little bit higher than subsistence level?

Just the opposite, unfortunately, Klug -- due to the spiraling cost of prescription drugs, there are seniors out there who are eating cat food to save up for the drugs that are keeping them alive... ouch.

Nonetheless, the suggestion to raise the retirement age is a well-taken one, and will probably have to be implemented: almost certainly to stave off the even worse disaster of a default on the credit of the United States, an event that would surely trigger a Great Depression.

Thanks Winston.

Some solid suggestions too, but if we allow younger workers to opt out now, then the 'unfunded liability' problem becomes worse, not better...... as nobody over 50 is going to opt out of receiving benefits now that they've paid in their whole lives.

Any solution that includes privatization will involve massive transfers from General revenues to make up for the contributions that are now going to private accounts. That's why the administration pretty much gave up on SS privatization. They created a committee, the committee came up with 3 proposals, and all three included nebulous 'transfers from general revenue' at some point in the 2010s to 2030s.

Privatizing won't work now, and it would cost less to fix social security than scrap it and start over with private accounts, unless you tell all old people 'sorry, we decided to cancel the program.... you won't be getting any benefits.'

Raise the age, adjusting COLA are two definite aspects of whatever eventual fix occurs. I would also advocate increasing contributions by progressivizing the SS tax, but I know that idea is going to be shouted down in this forum so just forget I said it.

"I would also advocate increasing contributions by progressivizing the SS tax"

You probably mean progressive along income lines. Why not progressive along party lines? The democrats were the ones who started this mess; the democrats are the ones who are in love with SS, so let them pay more for it. I say, double the payroll taxes of registered democrats. That will help whether the result is more money for SS or fewer democrats. ;-)

Wallster wrote:

Some solid suggestions too, but if we allow younger workers to opt out now, then the 'unfunded liability' problem becomes worse, not better...... as nobody over 50 is going to opt out of receiving benefits now that they've paid in their whole lives.

Actually letting younger workers opt out would reduce the unfunded liability problem. Here’s a simple example.

The government promises a dollar to Sam Senior (liability of $1.00). In order to pay Sam Senior, it taxes John Junior a dollar and promises John Junior $1.25. The unfunded liability is this program would be $1.25 ($2.25 in expenditures with $1.00 in revenue).

If instead John is allowed to opt out which means that he no has to pay $1.00 for Sam but also is not promised a $1.25 then the unfunded liability is only the $1.00 promised to Sam.

If we let younger workers opt out, then yes the programs will be losing at least part of the revenue from their payroll taxes but the programs will gain more by no longer having to pay those workers future benefits. Since Social Security essentially promises to pay you more than you pay into it by taking money from other marks (hence its similarity to a ponzai scheme), it would make sense that reducing the participants in the program would reduce its liabilities as well even if they are no longer paying into the system.

If it were up to me, I would probably let younger workers opt out by letting them invest 10 of the 12.5 percent they pay into the system (including the employer portion of FICA which is as much a tax on the employee) with the other 2.5 percent going to maintain benefits for current recipients. They would not receive any future benefits from the program but would be able to direct most of the payroll taxes into their own private accounts while still providing some revenue to maintain the system.

"America's unfunded liabilities -- almost all of them for Medicare and Social Security, oh Tax Cut detractors -- are now up to somewhere between $44 trillion (Gokhale and Smetters) and $59 trillion (Gale et. al.) ... Gale, Auerbach and Orszag estimate that payroll taxes would have to increase to 22% to make up the gap. "

No way. This can't be, I don't believe it. The problem just isn't that big.

After all, Krugman himself said the entire future Medicare and Social Security shortfall is *less* than, and therefore *caused by* the Bush tax cuts!

"the present value of the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years.."

http://www.pkarchive.org/column/032103.html

That in spite of the fact that GAO, Gale, etc. say Medicare and SS spending will grow by about 10pts of GDP just by 2040 and keep accelerating upward from there, while the Bush tax cuts at most would amount to a tad over 2% of GDP total.

BTW, I am amazed how little comment this particular Krugman column drew from his critics. It is absolutely his worst of all-time, because (1) the topic is within his own field of purported Nobel-quality expertise -- so he doesn't have his usual excuse of not knowing what he is talking about; and (2) to believe it requires ignorance to the point of wilfullness, or perhaps to put it in Krugman's terminology, "lying".

E.g, *before* Bush was elected (and his tax cuts passed, of course) GAO's estimates of the annual deficits to come from Medicare and SS on current law ended around 2040 because they exceeded the entire size of government today. And *everybody* knew of that general problem. But Krugman writes the whole thing was created *by* Bush! So the Bush tax cuts worked backward in time before they were enacted!

Krugman really should have had his membership in the American Economic Association revoked for that one. And what with all the lather from his mouth that's blown up into his eyes apparently having done permanent damage as far as his ability to see simple facts, maybe he should have been fitted for a seeing eye dog too.

But as far all his detractors who like to pound him on every little thing, I don't remember them going after him on this Jason Blair job hardly at all -- when they could have pounded him through the ground on it. That was curious.

Thorley: My eyes glazed over once I realized that your math worked out by saying the obligation of $1.25 in 40 years is worth more than paying out $1.00 today. Look up "present value".

Second, before you start calculating your "return" on Social Security investments, look at the title again: "Social Security Insurance. Payroll taxes cover more than old-age pensions, they include survivor's benefits, disability, and other programs. When was the last time you calculated your rate of return on your car insurance?

Catfish N. Cod wrote:

Just the opposite, unfortunately, Klug -- due to the spiraling cost of prescription drugs, there are seniors out there who are eating cat food to save up for the drugs that are keeping them alive... ouch.

Just on a side note, how expensive is cat food compared to a cheap human staple such as say tuna fish?

The reason that I ask is that while I haven’t bought pet food in quite a while, it seems to me that there are plenty of human staples cheaper than cat food on the average, in which case the theory that people are substituting pet food for human food in order to save money seems questionable.

Jim,

Calm down. Either it wasn't a mistake or PK's critics are mostly idiots, or both. Since we know the critics are mostly idiots, it's possible it was a mistake, but could you have misinterpreted?

"That in spite of the fact that GAO, Gale, etc. say Medicare and SS spending will grow by about 10pts of GDP just by 2040 and keep accelerating upward from there, while the Bush tax cuts at most would amount to a tad over 2% of GDP total."

This doesn't seem to say that the shortfall will be 10 pts of GDP.

And in any case, even if it's true that the tax cuts don't cover the full gap, does that make them irrelevant to the problem? Despite all the handwaving about relative sizes, it's clear that they do make a difference.

Adam wrote:

Thorley: My eyes glazed over once I realized that your math worked out by saying the obligation of $1.25 in 40 years is worth more than paying out $1.00 today. Look up "present value".

Please show me anywhere in my example I mentioned a 40 year time period or is that just an assumption that you’re throwing into the mix?

I purposefully left out the time factor in order to make as simple an example (although I suppose I should have stated that initially or simply used a one week time period as is commonly used in explaining the concept) in order to show how letting a person opt out of a ponzai scheme who has been promised more than they paid into it reduces the unfunded liability.

Second, before you start calculating your "return" on Social Security investments, look at the title again: "Social Security Insurance. Payroll taxes cover more than old-age pensions, they include survivor's benefits, disability, and other programs. When was the last time you calculated your rate of return on your car insurance?

Actually the formal title is Old Age Survivor and Disability Insurance but calling it “insurance” (as opposed to other nations who refer to it as a public pension) doesn’t alter the fact that most significant portion of the system is Old Age portion (which makes up about 85% of total outlays IIRC) and the portion we’re most concerned about when talking about unfunded liabilities.

Adam wrote:

Thorley: My eyes glazed over once I realized that your math worked out by saying the obligation of $1.25 in 40 years is worth more than paying out $1.00 today. Look up "present value".

Please show me anywhere in my example I mentioned a 40 year time period or is that just an assumption that you’re throwing into the mix?

I purposefully left out the time factor in order to make as simple an example as possible using present values (although I suppose I should have stated that initially or simply used a one week time period as is commonly used in explaining the concept) in order to show how letting a person opt out of a ponzai scheme who has been promised more than they paid into it reduces the unfunded liability.

Unless you want to make the argument that the present value of the payments received is not exceeded by the present value of the outlays (which is contrary to both reports cited by Jane), it doesn't alter the issue at hand.

Second, before you start calculating your "return" on Social Security investments, look at the title again: "Social Security Insurance. Payroll taxes cover more than old-age pensions, they include survivor's benefits, disability, and other programs. When was the last time you calculated your rate of return on your car insurance?

Actually the formal title is Old Age Survivor and Disability Insurance but calling it “insurance” (as opposed to other nations who refer to it as a public pension) doesn’t alter the fact that most significant portion of the system is Old Age portion (which makes up about 85% of total outlays IIRC) and the portion we’re most concerned about when talking about unfunded liabilities.

Chris - perhaps we should eliminate SS benefits for all who vote Republican as well. And perhaps repossess the benefits already received by all seniors who are registered Republican. After all, it is Republicans who want to kill SS, let them give up their benefits. That would help whether the result is fewer liabilities for SS or fewer Republicans ;)!

Thorley - Sam Senior has already been promised his dollar, back when he contributed. Unless you tell him to go fly a kite and deny him the benefits he has been promised his whole working life, you are not going to eliminate that dollar of liability. By allowing John Junior to invest his dollar in a private account, the immediate unfunded liability becomes $1, whereas under your scenario the unfunded liability is $1.25, but 30 years in the future. I realize that you were using simple figures for your example so I'm not going to claim that the $1.25 discounted for 30 years is less than $1 now.

Theoretically, John Junior contributed $1 in exchange for $1 in NPV of future benefits.

I'm pretty sure getting rid of the civil service protections and passing massive tort reform would help the whole situation.

Give me the power - I'll cut 20% of the spending and 20% of the goverment jobs, and I guarantee that you'll see more responsive government.

That should also give you $800 billion a year to play with - or give more tax cuts.

And the state budgets next.

Of course, this would lessen the power of politicians - so it's a pipe dream.

Wallster said:
Sam Senior has already been promised his dollar, back when he contributed. Unless you tell him to go fly a kite and deny him the benefits he has been promised his whole working life

That, in essence, is exactly what I would propose for the US (I'm Australian). This problem has been known about - I am not talking about the precise numbers calculated recently, but the mere fact that it doesn't add up - for several decades. The boomers have absolutely NO excuse. All that value is just plain GONE - someone has to wear the cost through taxes, and that should be those bastards from the 60's who expanded the goddamn mess in the first place. Raising the retirement age to 70-75 (on a sliding scale) will help, but this will also be (unfairly) blamed as a source of increasing unemployment as well as objected to by the hippies.

Don't tell me it's NOT the hippies' fault - LIKE HELL IT ISN'T. The warnings had been sounded for bloody decades, but the bastards didn't want to listen. The growing social security bubble was so blatant even decades ago that in the early eighties the Labor government (ie LEFT-wing) in Australia realised they had to do something about it or we'd be bankrupted by social security for aged pensioners. Beginning at 3% now at 9%, a certain percentage of income was compulsorily set aside into PRIVATE pension funds (we call them superannuation). People can, and many do, voluntarily put extra money in. This is effectively one of the solutions Americans are only just NOW contemplating. For those who think investing in stockmarkets would be the end of the world, our economy has done fairly well by world standards. The super funds are going from strength to strength, the financial-planning industry is booming down here, and nobody worth taking seriously is advocating the shutdown of either them or the superannuation industry to go back to transfer payments despite the short-run vicissitudes of markets. It's still Labor policy to increase expanding this program, with a target contribution rate of 15% of income. In other words, any politician who says privatising social security will be disasterous - as though racking up trillions in unfunded liabilities wont be - is a thoroughly dishonest SOB.

Screw the hippies and their complaints. It's their bloody fault and they'd be getting what they deserve. The rest of us can and should rely on our own retirement planning with our own funds.

JJM

Adam wrote:

"... before you start calculating your "return" on Social Security investments, look at the title again: "Social Security Insurance. Payroll taxes cover more than old-age pensions, they include survivor's benefits, disability, and other programs. When was the last time you calculated your rate of return on your car insurance?"

Well, the Social Security Administration actuaries themselves compute the rate of return on SS contributions including *all* benefits, and report they will be negative for many if not most persons entering the work force in the 1990s, including low-income individuals. The only group for which it will be significantly positive (about 2%) will be lower income couples with children due to survivor benefits. Any private insurance arragnement can beat those results. As would any private pension program with insurance options.

~~~
Bernard wrote:

"Calm down.

Why? I'm greatly amused by the combination of self-righteousness and blind foolishness. ;-)

"Either it wasn't a mistake ..."

Oh, it was a mistake all right. Even PK's biggest defenders have admitted it elsewhere, and how he came to do it in their opinion, although PK himself never publishes meaningful corrections.

"This doesn't seem to say that the shortfall will be 10 pts of GDP."

As I said before, in 2000 GAO estimated that on curent law the annual deficit would be *20 pts* of GDP by around 2045, after which it stopped counting because it said that was too much to be plausible (e.g. http://www.gao.gov/new.items/d01385t.pdf , figure 2). Whereas Krugman said that without the Bush tax cuts -- which of course didn't exist when GAO made its projection -- "revenue ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years.."

Now if you want to square that circle on PK's behalf, be my guest. ;-)

Thorley,

"The government promises a dollar to Sam Senior (liability of $1.00). In order to pay Sam Senior, it taxes John Junior a dollar and promises John Junior $1.25. The unfunded liability is this program would be $1.25 ($2.25 in expenditures with $1.00 in revenue)."

Isn't the $1.25 to JJ going to be paid in forty years, or maybe thirty? You seem to be claiming it's due today.

"Present value" is a business concept that doesn't apply to government the same way because the government isn't investing the money. The money isn't going to grow because it's already spent.

The SS ponzi scheme worked in the past because both the number of workers and their productivity were continually increasing, so the tax base was increasing fairly quickly. It was much easier for the gov't to raise $1.25 in 1995 than $1 (in inflation-adjusted dollars) in 1955 because the workers were both richer and more numerous. But within another decade (assuming the retirement age isn't raised), the number of SS recipients will be growing much faster than the number of workers.

Maybe productivity increases will pick up the pace sufficiently to compensate (that is, the workers will be so much richer that they won't resist 1/3 of their wages going to support retirees), but I doubt it. Too many of the kids graduating from American schools know nothing useful, and least of all how to buckle down and work. And any actual growth in the workforce will soon be coming from immigration - if we continue to find jobs for immigrants instead of pushing all the data entry, telephone-talker, and manufacturing jobs out to the countries they came from.

And when the government cranks up the taxes to make up the shortfall, the economy goes into the toilet.

" "Present value" is a business concept that doesn't apply to government "

Reading past that first line is a guaranteed waste of time.

Jim,

As I recall the argument, Krugman cited a study from the Center on Budget Policies and Priorities which showed that the PV of the tax cuts exceeded that of the Social Security deficit and the Medicare Hospital Insurance program (Is this Part A or Part B?).

I further recall that the assumptions about lost revenue from tax cuts were conservative.

Whatever you think of this, my main point is that it's clearly wrong to ignore the substantial effect of the tax cuts, even if they don't cover all the gap. By that logic, any time a combination of factors creates a problem you would ignore each individual factor, since it by itself didn't create the problem.

"Aside from euthanasia or inventing a time machine and assassinating FDR in 1932, what do libertairians propose we do?"

Assassination would have been excessive--showing him the numbers from 1980 on and smacking him on the back of the head would probably be sufficient. If FDR had simply put everyone over 65 on welfare who could prove they needed it by means-testing, and paid for it via general revenues, we wouldn't have this problem today.

Jim,

Krugman made very, very clear in the article cited, that he was basing his analysis on a report by the CBPP. The CBPP can be wrong, of course, just like anyone else, but it is a highly respected outfit.

So your whole "Jason Blair" argument simply disappears. Krugman made nothing up. Nor did he make a mistake. He simply quoted, correctly, a paper by a well-known policy institute.

So much for that argument.

Personally, I give little weight to all these 75 year projections. I realize we need to do them but the idea that we can predict, with any degree of certainty, what GDP and demographic patterns will be decades from now, is ridiculous. Did anyone in 1925 predict how 2000 GDP and worker-retiree ratios would look? Of course not.

Even the SS Trustees accept that a fast growing economy will eliminate the gap altogether ( I don't remember off hand how they define that and I'm too lazy to look it up). Yes, they think that's a low likelihood scenario but how would they know? Why would the Trustees have any special insight into GDP growth or demographic shifts? Their base case scenario is GDP growing at 1.8% annually. Does that sound reasonable? If it's 3% to 3.5% (as many now believe the long-term rate growth is) and we add the possibility of yet more immigration in the next few decades the whole problem could vanish or be significantly smaller.

I'll let time and the experts hash it out. But let's not create bogus arguments.

GT: "Krugman made very, very clear in the article cited, that he was basing his analysis on a report by the CBPP. The CBPP can be wrong, of course, just like anyone else, but it is a highly respected outfit. So your whole 'Jayson Blair' argument simply disappears. Krugman made nothing up. Nor did he make a mistake. He simply quoted, correctly, a paper by a well-known policy institute. So much for that argument."

Yes, but this is exactly like Bush trying to alibi himself in the Yellowcake Affair by saying (correctly, formally speaking) that he was just "quoting" the British government. Apparently neither of these guys made the most minimal attempt to fact-check their sources. Bush, we now know, was warned repeatedly by the CIA that the Blair government was spouting hooey, but repeated its statement anyway. The CBPP, judging from that 2000 GAO Report that Glass quotes, was spouting hooey on the subject of Social Security, and Krugman quoted them without checking either.

That being said, I was amused to see Glass -- just a few hours after he erupted at Krugman for "lathering", "talking about things he doesn't know about", and "being blind to simple facts" -- cooing in Brad Delong's Aug. 1 blog thread on Andrew Sullivan that it's unfair to attack Sullivan for doing exactly the same things during his most recent attack on Krugman: "People make mistakes outside their special little realm of experience, that's all... We should all realize it can always happen to us, and not get *too* worked up about it." Rightio, Jim -- even though Sullivan does it with more regularity than Krugman (remember, as just one example, his bizarre attack on Krugman for being a pawn of Enron)?

If correctly understanding a not-very-complicated report from the Social Security trustees is "outside of his range of experience", one would think that, as a professional economist, Krugman should at least be able to recognize this and refrain from commenting.

What is wrong with passing off our bills to the next generation? How else are we going to get back some of the money we spent raising the spoiled little turds?

Moomaw conveniently glosses over the fact that economics IS Krugman's "special little realm of experience"; that's his bread and butter. The fact that he speaks authoritatively as an economist should be some sort of incentive ensuring he checks his data somewhat more thoroughly than a mere journalist.

Bruce,

Bush has people working for him that contradicted what the Brits said. Krugman did not. (I would also note that what Bush said was not even technically true since he said that the Brits had "learned" and not that they "claimed".)

In any case it's not clear to me that the CBPP report is contradicted by the other ones. Remember that the CBPP report did something that none of the others did, and that is to measure both the tax cut and SS shortfalls using the same assumptions.

Krugman was perfectly correct and made no mistake in quoting the CBPP report and explaining what it means. Are there other reports? Sure. Is the CBPP the last word? Of course not.

But, I can hear the doubters wail, shouldn't Krugman have listed the counter opinions in his piece? Of course not. No one does that in an opinion column. That would require a 40 page review-of-the-literature piece.

Take this The Economist article, for example. Does it explain once, as the SS TRustee's report makes clear, that faster economic growth would make most of the problem disappear? Or higher immigration? Does it explain the HUGE differences that even small changes in the assumptions can make? Does it tell us that the predictions are based on economic and demographic predictions 75 years out, something nobody knows at all? Nope, not once. It only mentions a couple of reports giving no room for any of the dissenting, or at least different, views.

To Ms. McArdle and David Perron: I was NOT, to put it mildly, saying that economics is "outside K's range of experience" -- I was criticizing Glass for sneering that K frequently shoots off his mouth about other things "he doesn't know about", and then announcing earnestly on Delong's site that we should forgive Sullivan for frequently doing exactly the same thing.

To GT: The difference between the projected deficit figures in that GAO report and what Krugman said in his column is HUGE. Take a look at the charts in the former yourself. The GAO (and don't forget that it wrote this during Clinton's last year) projected that if all Social Security surpluses are saved, the combined Medicare-Medicaid-Social Security deficit will equal 20% of the GDP in 2042 -- and if ALL government surpluses were saved from 2000 on, the deficit would reach that point in 2072. (It adds that, while there are obviously huge differences in projections of such things as the economic growth rate, it's trying to err on the side of optimism in all these estimates.) This is unsurprising, since it also projected that the percentage of the U.S. population over 65 will increase from 12% right now to 20% in 2042 and 22% in 2072. Granted that Bush's gratuitous tax cuts pump still more gasoline on the fire, but obviously Krugman and the CBPP are talking nonsense when they say that just eliminating those cuts will definitely solve the problem for 75 years. Something else very big has to give.

So what do we do? Well, the Usurer tells us that we should just cut off the current generation of retirees from ALL the money they initially paid into the system in order to totally privatize it immediately. Serves 'em right, dang hippies. Ah, yes, there's nothing like ethically sound economics. I take for granted that we are going to have to start charging Social Security and Medicare taxes on the rich (which, I see, even flat-taxer William Niskanen supports) AND initiate means tests AND raise the retirement age several years for everybody. Any scheme to gradually privatize Social Security has to be imposed on top of those requirements, and will presumably involve substantial further moves on all three fronts to compensate for the revenue lost to any privatization schemes. Of course, as long as people over 65 vote at twice the rate that people under 30 do, this isn't likely to happen for a long time (further evidence, as far as I'm concerned, that we need an anti-deficit Constitutional amendment with genuine teeth).

Correction: the prominent flat-taxer who wants to remove the ceiling on Social Security taxes isn't Niskanen, but Alvin Rabushka. (Well, I knew it was some guy who had a three-syllable name with a "k" in it.)

The money is already gone and replaced by a pile of paper whose sole source of income is taxation, so there is nothing for them to be cut off from except tax revenues. Recognising this and then putting the boomers *openly* on tax revenues at levels that just barely pay the bills (and increasing the retirement age) is indeed the only ethical thing to do - unethical in this context would be to pretend that any trace of the real value that SS contributors have paid still exists and then jacking up what the everyone pays in taxes to maintain that fraud. As I said, the warnings were sounded perfectly clearly several decades ago and were duly acted upon by respected western governments, so my sympathies only go out to that minority of boomers that would have voted against SS had they the option.

Going straight to privatisation wouldn't fly electorally, no, but that is no excuse for the Republicans not to tell everyone to look at countries such as Australia (we're not the only ones with this) and show fully working examples of phasing-in that haven't crashed the economy or endangered people's retirements. If Social Security is the third rail, then the Australian experience is a half-decent rubber mat. Further, use guilt trips - subtle and not-so-subtle - on the boomers: use a favourite hobby-horse of the Democrats' against them and say it's For The Children (TM), because for once it actually is. Finally, tell the hippies that there is definitely going to be a point by which time it will be patently obvious who's to blame, the younger will have aged and be more electorally active, and so the revenge taken on the hippies at that point will perhaps be more vicious then than the results of taking the rightful action today would be. For example, already there is talk in the UK of the coming threat to the health-care provision to the elderly...

Jane is right - none of this is going to be pretty, and yes it is going to be a hard sell to the voting body politic, but use a mix of appeal to reason, appeal to family, and appeal to coming-revenge-threats-when-defenseless. The alternative is going to be a bloodbath that may not be only economically figurative.

I had much more to say on actual advice, but (as usual for me) it grew too long to remain a mere comment so I put it on my own blog.

JJM

"...Putting the boomers *openly* on tax revenues at levels that just barely pay the bills (and increasing the retirement age) is indeed the only ethical thing to do - unethical in this context would be to pretend that any trace of the real value that SS contributors have paid still exists and then jacking up what everyone pays in taxes to maintain that fraud."

Ah. So it's ethical to put even retirees who worked their tails off on "levels that just barely pay the bills" in order to avoid extending Social Security taxes to the upper classes, who currently don't them at all? Because, presumably, the upper classes work harder for each dollar they earn? Right... The only reason to place any limits on an increase in Social Security taxes upon the upper class is the purely practical one Ms. McArdle mentioned -- raise them too high and you'll eventually produce Laffer Curve disincentives that will lower their productivity. This has nothing to do with any ethical reason why it's immoral to increase taxes (of any sort) on the wealthy.

A quick scan of the Usurer's blogsite reveals that he's a proudly proclaimed Ayn Randian, which explains the extreme peculiarity of his economic ethics as described above.

Second postscript on the Usurer: he is indeed a classic Randian, complete with the sociopathic Just So new morality of the species. Harming others through physical action is immoral; harming them through neglect is not, because...well, just because.
(http://usurer.ubersportingpundit.com/archives/001859.html)

One wonders how many of these characters have children. (Rand, of course, didn't.)

"The only reason to place any limits on an increase in Social Security taxes upon the upper class is the purely practical one Ms. McArdle mentioned -- raise them too high and you'll eventually produce Laffer Curve disincentives that will lower their productivity. "

Well, there's actually another reason that has been cited by those running SS starting with FDR himself, though the Greenspan Commission, down to the most recent SS Advisory Commission.

SS contributions *earn benefits*, so if you increase SS taxes you must pay out more benefits. So you don't do much to close the funding gap.

The fact that all contributions *earn benefits* is the political rock upon which SS has been built from day one -- people believe they will get benefits back on their contributions. ("That's *your* money in the Trust Fund!", as the Democratic politicians always say).

Now we can just start imposing taxes on the rich to pay for the SS benefits of the poorer, of course -- but to the extent we do, we turn Social Security into a rich-pay-for-poor welfare program. And those are never popular.

If you impose payroll taxes on the rich without giving them corresponding benefits, you might as well just be open about things and pay for SS out of general revenue income taxes -- a proposal that was explicitly rejected by FDR and everyone who's run SS since him, for *political* reasons. It would destroy the political base of SS as we know it.

Remember, the economics of Social Security reform is simple, it is the *politics* of it that is hard. SS just can't continue meeting political promises that have been long made -- as a matter or artithmetic. Which is putting the politicians and political groups who made those promises in a quandry.

The hard economics are in Medicare reform, which is a much bigger issue.

Thanks to an exchange on Brad Delong's site, I now understand Glass' and my mistake in our attack on Krugman. When Krugman, Gale and the CBPP say that the revenue losses from Bush's tax cuts will "exceed the 75-year actuarial deficit in the Social Security and Medicare trust funds", they mean "the deficit in tbose trust funds as it would be WITHOUT the Bush tax cuts added on." They're not saying that eliminating the Bush tax cuts would eliminate the SocSec-Medicare problem -- they're just saying that the Bush tax cuts, if made permanent, would make it vastly worse. Gale says this explicitly: Bush's tax cutting "deserves EQUAL billing with Social Security and Medicare as 'the real fiscal danger.'...A long-term resolution of [the SocSec-Medicare-Medicaid problem] will have to include significant INCREASES in tax revenues as a share of the economy." (Emphases mine.)

Specifically, the CBPP predicts that the accumulated SocSec-Medicare deficit without the Bush tax cuts will equal $10 trillion by 2078 (which does not clash with that graph Glass and I kept quoting in the GAO report, which just indicates that the ACCUMULATED deficit will grow from 13% of GDP in 2040 to 20% of GDP in 2045) -- but if the Bush tax cuts become permanent, this deficit will equal $22 to $24 trillion instead. Gale agrees with this.

As for Glass' objection that taxing the rich to pay for the SocSec-Medicare deficit will be "politically unacceptable": that depends on how far one goes with this, of course. If SocSec runs out of money, its "political base" will be destroyed in any case -- and its political base would be "destroyed" just as thoroughly if you tried to solve the problem instead by means-testing SocSec and Medicare payments while maintaining the current level of payroll taxes on everyone who now pays them. If you really want to see its political base destroyed in a hurry, try following Usurer's course of immediately eliminating SocSec and Medicare payments almost completely for the retirees who have already paid into the system.

So the problem is serious and ugly, as McArdle says -- and Krugman, Gale and the CBPP agree with her. Their point is just that Bush's tax cuts will make it even worse -- much worse.

"If you really want to see its political base destroyed in a hurry, try following Usurer's course of immediately eliminating SocSec and Medicare payments almost completely for the retirees who have already paid into the system."

For those still scratchine their heads over the huge difference between CBPP's estimates of the fiscal shortfall and those of Gokhale and Smetters: this politically impossible plan of Usurer's is something CBPP implicitly assumes we will carry out in 2078. G&S run their estimates out to perpetuity to avoid relying on this sort of bogus windfall.

"...Usurer's course of immediately eliminating SocSec and Medicare payments almost completely for the retirees who have already paid into the system."

You make it sound like I was suggesting - as actual practice rather than what they deserve - total abandonment, Galt's Gulch style. I said no such thing, expressly identified in agreement with you that in reality there is no option but to increase taxes, and then suggested just openly naming what is already the case along with instituting a phase-out/phase-in policy (dove-tailed grandfathering) that extends over 30 years. Taxes is the only way to fund it in the interim, but right thing to do is also set things up to reduce the burden from what it would be without them.

If you really think that such a thing simply wont succeed electorally, that the boomers will irrationally cling to the the maintenance of the SS-as-returns-on-investment fraud come hell or high water (ie as a 'pride' thing rather than a change in actual living standards), then in effect you're saying the US is just plain screwed. Personally, as much as I hold the boomers in contempt, I don't quite buy THAT degree of irrationality. Dove-tailed reform will require balls and deft maneuvering, but that it can be done as it has been done before. Whining about Bush's tax cuts is not the answer.

JJM

Sorry Bruce, the people over at DeLong's site are going to have to try again. Let's "do our homework" as PK would want.

Krumgan wrote:
~~~
[Many] say something like this: "Sure, you can criticize those tax cuts, but the real problem is the long-run deficits of Social Security and Medicare, and the unwillingness of either party to reform those programs"...

There's only one problem with this reasonable, balanced, non-shrill position: it's completely wrong. The Bush tax cuts, not the retirement programs, are the main reason why our fiscal future suddenly looks so bleak.
~~~~

Note well: Krugman was NOT saying the fiscal situation was bad to start with and the Bush cuts made it worse. Krugman was *refuting* that common argument and saying the Bush cuts *caused* the situation.

Krugman specifically said the tax cut revenue "would have been more than enough to 'top up'Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

Do PK's fans over there have an explanation for that claim? There is one.

"When Krugman, Gale and the CBPP say that the revenue losses..."

Stop right there! Krugman and Gale do *not* say the same thing! Gale is right --- Krugman was wrong. Do not conflate Krugman and Gale.

Krugman quotes Gale and CBPP this way:

"The new study, carried out by the Center on Budget and Policy Priorities, estimates the present value of the revenue that will be lost because of the Bush tax cuts ... The total comes to $12 trillion to $14 trillion — more than the Social Security and Medicare shortfalls combined."

But the CBPP study that Krugman quoted did NOT say the total SS/Medicare shortfall was $12T to $14T -- Wrong! Error! For as Arnold Kling pointed out at http://econlog.econlib.org/archives/000072.html the CPBB study did NOT include the cost of Medicare Part B, which is financed with general revenue, in its number here for the cost of Medicare. It included only Medicare Part A, which is much the *lesser* part financed from a 1% payroll tax.

By looking only at a *portion* of Medicare's cost, the effect was that "The CBPP was able to shrink the gap between entitlement spending and tax revenues in the middle of the century from something in the range of 5-10 percent of GDP to something less than 2 percent of GDP" to quote Arnold, who did is econ PhD at MIT just like Krugman did.

But Krugman took that number from the study to be the *entire* cost of Medicare, and therefore concluded that an *entire* SS/Medicare shorfall of only 2% of GDP -- instead of the real one of 10+% of GDP -- was covered by the Bush tax cut amounting to 2% of GDP.

So Krugman was *serious* when he wrote that without the tax cut "revenue would have been more than enough to 'top up'Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

Now look at Gale on Gale. He says the cost of the Bush tax cut is 2.4% of GDP while spending on these programs including ALL OF MEDICARE will increase by over 11% of GDP by 2035 and rising thereafter. And Megan above quotes him as giving the current value of the total SS/Medicare shortfall as *$59 trillion* -- not the mere $14T Krugman cited him as giving for the same thing.
Krugman was just *wrong*.

BTW, you should have had more faith in your first reading of the GAO report. When you now say "that graph Glass and I kept quoting in the GAO report, which just indicates that the ACCUMULATED deficit will grow from 13% of GDP in 2040 to 20% of GDP in 2045)..." you go wrong yourself.

You were right before. In the GAO report figures 2 & 3 shows the ANNUAL deficit at 20% of GDP and going straight up around 2045 -- the term for "accumulated deficit" is "national debt" and it is already way over 20% of GDP today -- and figure 4 shows ANNUAL spending on just these three program being 14pts of GDP higher than today, and well exceeding the size of the entire federal gov't today.

Which kind of dwarfs a 2.4% of GDP tax cut, doesn't it?

http://www.gao.gov/new.items/d01385t.pdf

Krugman was wrong -- just plain wrong by a discounted to current value amount of around a mere $45 trillion or so, as per Gale. All his fans can just deal with it.

hi all,

what amazes me is that so many folks are clinging to the tax cuts that the bush admin made over the last three years. i am not certain why suggesting that we cannot afford the level of tax relief we have received, poorly targeted as it is, should be considered "whining." the micro suggestions many folks propose, e.g., opting out of ss scheme, older retirement, etc, will not make up the drain of resources we are currently experiencing and will experience. i feel like i am listening to folks fiddle as rome burns.

even reagan, when faced with deficits partially raised income taxes, after having initially cut them. that would be a good start.

To Jim Glass: take a look at Gale's Congressional testimony, as pointed out by DeLong (www.brook.edu/views/testimony/gale/20030724.htm:

"These prospective revenue losses [from Bush's tax cuts] are huge. They are more than three times as large as the 75-year actuarial deficit in Social Security, expressed as a share of GDP. They exceed the 75-year actuarial deficit in the Social Security and Medicare Trust Funds. They are larger than the permanent deficit in Social Security. These facts imply that the agressive tsx-cutting agenda that the Administration has pursued the last few years deserves EQUAL billing [emphasis mine] with Social Security and Medicare as 'the real fiscal danger'."

As for your reiteration that Krugman royally put his foot in on this, I'll check his column again. What is beyond question is that Gale also thinks Bush's tax cuts are an absolutely godawful idea.

Usurer (aka John MCVey), 1:09 PM "You make it sound like I was suggesting - as actual practice rather than what they deserve - total abandonment, Galt's Gulch style. I said no such thing."

I was focusing on what you said earlier they "deserve" -- a view which follows completely naturally from your declared enthusiasm for Ayn Rand's sociopathic New Morality. (While there was nothing at all amusing about 9-11, it is amusing to consider the advice Rand would have been handing out to all those firemen as they rushed into the WTC.)

"[E]ven [R]eagan, when faced with deficits partially raised income taxes, after having initially cut them."

All the more reason why assuming unchanged tax policy for 75 years-- and in the process assuming away the sunsets in the Bush tax cuts-- is a meaningless exercise.

Bruce, as big a fan as I am of Gale's work, I believe there's a trick hidden in there: he calculates the tax cuts in perpetuity, and then compares them to a 75-year average. Unsurprisingly, they're larger.

Compare them, on the other hand, to the perpetuity gap and the gap dwarfs the tax cuts.

A quick scan of the Usurer's blogsite reveals that he's a proudly proclaimed Ayn Randian, which explains the extreme peculiarity of his economic ethics as described above.

Second postscript on the Usurer: he is indeed a classic Randian, complete with the sociopathic Just So new morality of the species. Harming others through physical action is immoral; harming them through neglect is not, because...well, just because.
(http://usurer.ubersportingpundit.com/archives/001859.html)

One wonders how many of these characters have children. (Rand, of course, didn't.)

Sounds as if Bruce has been hard at work diversifying his collection of logical fallacies.

Let's keep our commentaries confined to what people actually said, eh Bruce?

Bruce Moomaw takes issue with the following:

Harming others through physical action is immoral; harming them through neglect is not, because...well, just because.

I'm no Randian, but I certainly don't think that "harming others through neglect" is immoral in and of itself. I guess it's a question of philosophy, but I never subscribed to the notion that I owe something to every other human being on this planet.

Frankly, I'm not sure why anyone would want to make an argument to the contrary -- if we take the premise that actively working to harm someone is morally equivalent to simply not always doing your damnedest to help them, well, I guess that makes you equivalent to a serial killer. After all, the fact that you even have a computer to participate here indicates that you had enough money to keep some homeless man (or a village in Africa) from starving -- yet you selfishly spent it on expensive equipment instead. Hell, the time and effort you put into writing your post (which is basically worthless, just like mine) could have been spent working at a soup kitchen, or earning money that could buy food for someone who needs it.

Sorry, I just don't except the "harming through neglect" argument. Neglect is just that: the lack of action to help out another human being. With the exception of, say, caring for your child, you are under no obligation to support other people -- it may be the nice, decent thing to do, but it's not an obligation, and you certainly don't have to do it all the time. (And you should be applauded for when you do take the time.) But otherwise, "neglect" is perfectly fine; in fact, it's so routine, you take most of it for granted, unless you happen to work 18 hours a day, live in abject poverty on minimal nutrition, and give away all your wealth to help others.

"I was focusing on what you said earlier they "deserve" -- a view which follows completely naturally from your declared enthusiasm for Ayn Rand's sociopathic New Morality."

Actually you're wrong. I was referring specifically to the 60's generation (those 15-30 by the time of say Woodstock, to pick a date), not those older and currently retired and living on Social Security. In no way did I say that the older generations ought ideally be cut off where only practicality tempers the sentiment. I never said a word about them, so you cannot rightly claim to know what I think, not even with your scanty and jaundiced glance over my blog. The only thing you CAN say is that I do indeed note that the *eventual* shutdown of all aspects of the welfare state is a non-negotiable moral requirement, and that I don't buy the 'compassion' argument that the care and concern we have for family and friends ought equally be extended to total strangers and without any consent on our part beyond a nanoscopic influence at the ballot box.

The older people (pre-60's generations still alive today) didn't make a great big point of claiming to be capable of broad-reaching economic and political criticism, didn't go around constantly yapping about inexorable immiseration and other long-term consequences arising from capitalism, and didn't go around formulating alternative social orders with visions of the future in mind. There was more honest trust back then, naive perhaps, and taken advantage of by politicians. They were lied to and defrauded. They were also the ones who fought in WW2, in Korea, and the early stages of the Viet Nam war, and those who stayed behind kept the economy running. These people deserve to have the promises made to them kept, not because the were made (the means by which they were to be kept no longer exists), but as recompense for risking their lives and being defrauded while they were away. As far as aged social security goes, our grandfathers (and grandmothers) should be honourably grandfathered with due respect to what they did for us. These payments are at our expense, we know it and the honest among them know it too. I for one have no problem with it as I hold them as offerings in gratitude.

The same does NOT apply to the 60's generation, because of the claims they made and the explicit warnings they were repeatedly given and ignored. They claimed to judge and consider long-term consequences, and actively supported SS on that basis. Thus ideally they should reap what they have sown. This is tempered, in part by that not everyone from that era shared their peers' attitudes and had no choice but to pay the SS taxes disguised as investments, and in part because a shut-down wouldn't fly electorally.

You didn't have clue what I thought or why I thought it, and as your firemen quip shows STILL don't and have no real intention finding out if it doesn't give you something to sneer at. You just saw 'Objectivism' and ran with it while waving the fradulent 'compassion' flag, casting about ad hominem and blatant misrepresentation as you went. Beyond the fact that this thread is getting dated and over-long, you're not worth responding to by anyone any further.

JJM

"Gale also thinks Bush's tax cuts are an absolutely godawful idea"

The thing is, tax increases to fund transfers to people richer than the taxpayers -- from Warren Buffet and Bill Gates on down -- are a pretty bad idea too. But Gale doesn't mention that, even though those transfers are what cause a very good part of the fiscal gap his is so concerned about.

Seniors aren't the poorest group in America any more like they were in the '30s even up to the '60s. The are the richest group now and are getting richer, pulling away from everyone else, as time passes.

The irony of the class warriors like Krugman (and to a lesser extant DeLong, Gale, etc.) is that they think it's just awful to cut taxes to let "the rich" keep more of their money today -- but they want to base today's entire fiscal policy on the need to raise taxes to make transfers *to* the rich in the future. I'd think that making trasfers *to* the rich would be even less "progressive" than just letting them keep the rich keep own money, but go figure.

The financing gap they go on about is caused 4-to-1 by spending promises over any kind of tax deficiency, and if those guys showed any inclination to control spending *at all* -- say by coming out against extending this new prescription drug benefit to Warren Buffett, as Ted Kennedy insists it must be by threat of filibuster -- then it might be possible for some of us to take their professed concern about the funding gap more seriously.

"I was criticizing Glass for sneering that K frequently shoots off his mouth about other things 'he doesn't know about', and then announcing earnestly on Delong's site that we should forgive Sullivan for frequently doing exactly the same thing."

Well, geeze, first you might note the difference between making howlers outside one's area of expertise while writing in one's spare moments on a blog, and making howlers when being paid quite a substantial sum of money to be an authoritative voice on the editorial pages of the New York Times with the world's greatest assembly of fact checkers at your disposal.

No, what Sullivan and DeLong and Meegan and such folk do on their blogs really is not quite "exactly the same thing". ;-)

Second, I didn't say Sully's howlers should be "forgiven" or overlooked, I just suggested that people shouldn't get *too* self-righteous about correcting such things, being that we all make such mistakes when venturing outside our own realms of expertise and we we probably wouldn't like taking such righteous criticism ourselves.

As amateurs, that is. If being paid a whole bunch of money to blog accurately with an office of fact checkers at our disposal, then we'd do best to take criticism gracefully and admit all our mistakes willingly. And I'm sure we all would. Just like PK. ;-)

Wallster wrote:

Thorley - Sam Senior has already been promised his dollar, back when he contributed. Unless you tell him to go fly a kite and deny him the benefits he has been promised his whole working life, you are not going to eliminate that dollar of liability.

What we do about dealing with the $1.00 unfunded liability is pretty much an open matter. My example was only to show why it is that letting younger workers/payers opt out actually reduces that liability which means that privatization could be a net benefit to the system. Letting younger workers opt out means that there are less benefits expected to be paid in the future which makes the problem that much more manageable.

As far as what to do with the Sam Seniors of the plan – the law as it stands is that no one has a “right” to receive so much a dime from Social Security (there was a SCOTUS ruling on this matter in which someone was denied benefits either because they left the country or were imprisoned or something that allowed the federal government to deny them benefits). Ideally I would have no problem eliminating both systems yesterday but that isn’t feasible. Instead I think that phasing in changes like an increase in the retirement age and COLA adjustment would reduce the benefits being paid in the future without affecting those receiving benefits and means testing for wealthier recipients (which will happen anyway IMNHO when we start to use general revenue to prop up the systems) would be the most expeditious without increasing the redistributionist nature of these ponzai schemes.

By allowing John Junior to invest his dollar in a private account, the immediate unfunded liability becomes $1, whereas under your scenario the unfunded liability is $1.25, but 30 years in the future. I realize that you were using simple figures for your example so I'm not going to claim that the $1.25 discounted for 30 years is less than $1 now.

You seem to have missed the clarification I gave to Adam in my last post. The $1.00 and $1.25 figures are both present values (partially my fault for neglecting to put that in my original post).

Theoretically, John Junior contributed $1 in exchange for $1 in NPV of future benefits.

Except that in my example much like the real Social Security system, each “contributor” is being promised more in benefits (in real dollars) then they pay in payroll taxes, which is why we are talking about the Social Security and Medicare systems’ unfunded liability of $44-59 Trillion (in real dollars).

Jim,

What Krugman wrote was perfectly true when he wrote it and remains true now.

The article he quoted says exactly what he claims it says.

As the CBPP says, estimates of actuarial deficits for Medicare "B" make little sense unless it is calculated for all federal programs taken together, relative to all projected general revenues

The only argument you can make against Krugman's article is that it was incomplete, that it did not distinguish between Medicare "A" and "B". That he should have explained that there was another part of Medicare, paid from general revenues that based on current projections will likely balloon in the next few decades.

Problem is, that's a complaint that can be leveled against all other columns.

Starting with the Economist article Jane links to. The Economist article is also incomplete. It says nothing about the impact of tax cuts. More importantly it treats the projections as a single number when, in reality, projections are a range of outcomes with different probabilities based on the underlying assumptions. The fact is nobody knows what GDP growth will be next year, much less 75 years from now. Even demographic patterns are difficult to predict due to wars and migrations and technological advances. Imagine someone in 1925 trying to predict the following 75 years.

GT wrote:

The only argument you can make against Krugman's article is that it was incomplete, that it did not distinguish between Medicare "A" and "B". That he should have explained that there was another part of Medicare, paid from general revenues that based on current projections will likely balloon in the next few decades.

Problem is, that's a complaint that can be leveled against all other columns.

Sorry but that just doesn’t wash. If you’re going to write an article comparing the actuarial deficits of Medicare/Social Security to future decreases in revenue from a series of tax cuts and you omit a huge portion of the actuarial deficit from Medicare, it’s a pretty glaring omission that calls into question the entire argument he’s making.

Something else about Krugman’s argument struck me and I don’t think anyone else has brought this up (my apologies if anyone did and I missed it). Krugman appears to be arguing that Medicare and Social Security would be just fine if not for the tax cuts passed by Congress and the POTUS (hereinafter referred to as the “Bush Tax Cuts”).

It seems to me that if both programs were fine, then that would mean that they would be collecting enough revenue on their own to pay all future expenses. But if Krugman and others are trying to imply that the Bush Tax Cuts are somehow endangering these programs’ future, then it must be because he and others SS/MC supporters were expecting a large infusion of cash from the federal income tax to prop up these programs.

In other words, by blaming the Bush Tax Cuts for lowering future federal income tax revenue, Krugman is tacitly admitting that neither Social Security nor Medicare are sustainable and in their current form, both can only continue with an infusion of outside cash.

>>What Krugman wrote was perfectly true when he wrote it and remains true now.

Denial ain't just that river in Egypt, we see yet again. ;-)

It was NEVER true that "$12 trillion to $14 trillion" PV was "more than the Social Security and Medicare shortfalls combined" and it most assuredly is not now.

And it also was NEVER true that ...

"the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

If you think it was, go back the GAO analysis of the situation *before* the tax cuts -- I'll provide the link yet again, http://www.gao.gov/new.items/d01385t.pdf -- and look at figures 2, 3, & 4.

Then come back year here and tell us how these figures show the revenue that had *not* been lost to the Bush tax cuts as of then "topping off" these programs for the next 75 years. ;-)

>>The article he quoted says exactly what he claims it says.

The article says "Medicare Part A", which excludes most of Medicare, while Krugman said "Medicare". That's "exactly" the same to you?

>>As the CBPP says, estimates of actuarial deficits for Medicare "B" make little sense unless it is calculated for all federal programs taken together, relative to all projected general revenues...."

Really?? Then how did Gohkale and Smetters compute $16.1 trillion for Medicare B? Alone, compared to Krugman's $12-14T for *everything*. And how did GAO calculate Medicare's total cost going forward -- at so *much* more than Krugman's number -- in the analysis I linked to? How did the Treasury's Analytical Perspectives on the Budget do it? How have academics and private groups like the Concord Coalition being doing it for 20 years?

Oh, and how did your friends at CBPP estimate that the total cost of these programs will rise from 7.5% of GDP today "to 15 percent by 2040 and 21 percent by 2075" -- giving a shortfall of $59 T, even larger than Gohkale & Smetters -- while *also* saying the cost of the Bush tax cuts would be at most a permanent 2.4% of GDP?

And how does Krugman stretch a restoration of 2.4% of revenue to fully cover the shortfall-created by the increase in spending of 7.5%-to-13.5% of GDP -- that existed *before* the 2.4% was cut -- to "top off" these programs without benefit cuts for 75 years???

Face it, the kindest thing one can say about PK here is that he made a "mistake".

>>The only argument you can make against Krugman's article is that it was incomplete, that it did not distinguish between Medicare "A" and "B".

You mean, um, that he misrepresented the cost of one part of Medicare as the cost of "Medicare", thus understating the true cost of "Medicare" by a dollar figure with 14 digits, not including cents. Yes, yes, he did that.

Now GT, try this thought experiment: Suppose a year ago it had been the Bush Administration that had excluded Medicare Part B from the "shortfall" on some excuse in order to make its proposed tax cuts look more affordable by knocking down the future shortfall from Gale & CBPP's $59 trillion or Gohkale & Smetters $44 trillion to something like a mere $12-14 trillion? How loudly do you think Krugman would have been shouting "Liars! Liars! Liars!"

Or do you suppose PK would have said, "That's cool, that extra unfunded $32-$47 trillion that all we professionals know about doesn't really matter. After all, it's a pretty big range there, we can hardly be specific about the future -- so none of that counts!!" ;-)

"...if Krugman and others are trying to imply that the Bush Tax Cuts are somehow endangering these programs’ future, then it must be because he and others SS/MC supporters were expecting a large infusion of cash from the federal income tax to prop up these programs."

Absolutely. How else are they going to have these programs consuming 15% of GDP by 2040 and 21% of GDP by 2075 (by Gale's projections)? That's roughly double and triple the percentages of today -- the entire federal gov't is about 20% of GDP today.

"In other words, by blaming the Bush Tax Cuts for lowering future federal income tax revenue, Krugman is tacitly admitting that neither Social Security nor Medicare are sustainable and in their current form..."

Re the Bush tax cuts of 2% of GDP, they quickly come out with study after study computing how the future financing cost will be "bad the for economy", impairing growth, reducing employment, etc.

But re the *five times larger* increases in the future financing costs of these programs, they come out with no studies at all on the economic effects.

Why the difference? It would seem because they take the true purpose of the economy and the government to be to finance these programs, unchanged and unreformed from what they are now.

Thus, only economic costs incurred for other purposes are criticized, as they will make it harder to mobilize additional resources for the true purpose. Economic costs incurred for the true purpose aren't, no matter how much larger they are.

Jim,

I never pretended, nor do I do now that Krugman is more honest or impartial than other columnists or commentators. He simply isn't less so.

It was NEVER true that "$12 trillion to $14 trillion" PV was "more than the Social Security and Medicare shortfalls combined" and it most assuredly is not now.

I should have been more specific. My bad. I meant that it was always true that that was what CBPP was claiming. And CBPP (but not Krugman) made clear they did not include Medicare part B, as already explained.

And it also was NEVER true that ...

"the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

No. If you use CBPP's model (which is the relevant one here) it IS true that Bush's tax cuts would be enough to cover both SS and Medicare Part A.

The article says "Medicare Part A", which excludes most of Medicare, while Krugman said "Medicare". That's "exactly" the same to you?

No. You are correct on this. But I already gave you my view on it.

Then how did Gohkale and Smetters compute $16.1 trillion for Medicare B?

I did not read the whole paper and don't have to do so but they certainly can't have used the same methods used to calculate the SS shortfall since SS has BOTH specific revenues and expenditures while Medicare Part B has ONLY specific expenditures just like defense or education. That means they probably came up with some estimate of the total government revenues, in turn based on expected GDP growth. They, of course, have no idea what GDP growth will be in the next 75 years which means they have no idea what total revenues will be. If the economy grows as fast as some think possible most of the problem will disappear. After all higher GDP growth increases Medicare B revenues (meaning general revenues) while it should not, to the best of my knowledge, increase expenses proportionatelly.

Now GT, try this thought experiment: Suppose a year ago it had been the Bush Administration that had excluded Medicare Part B from the "shortfall" on some excuse in order to make its proposed tax cuts look more affordable by knocking down the future shortfall from Gale & CBPP's $59 trillion or Gohkale & Smetters $44 trillion to something like a mere $12-14 trillion? How loudly do you think Krugman would have been shouting "Liars! Liars! Liars!"

Yes, I assume you are right. That's why I accept that it's perfectly valid for someone to respond to PK's article by saying "But the CBPP report did not include Medicare B". That's how any knowledge advances. What is completely wrong is to say he made things up. He did not.

My view is that opinion columns can only expect to advance one point at a time and that (IIRC) The Economist's policy of "simplify, and then exaggerate" is quite useful. I think PK wanted to get a perfectly valid point across, the relative size of the Bush tax cuts. Personally, I would have simply used the SS comparison (Bush tax cuts 3 times bigger than SS shortfall) and left out any reference to Medicare since most people don't know the difference between A and B.

Just my view.

TW

If you're going to write an article comparing the actuarial deficits of Medicare/Social Security to future decreases in revenue from a series of tax cuts and you omit a huge portion of the actuarial deficit from Medicare, it's a pretty glaring omission that calls into question the entire argument he's making.

But, as the CBPP made very clear, it is meaningless to talk of an actuarial deficit for Medicare part B. That's because they are paid from GENERAL revenues. The only thing you can do is an actuarial analysis of the whole govt (which is what one of the quoted reports does). I've already explained why I find that highly suspect, even if it is necessary.

Something else about Krugman's argument struck me and I don't think anyone else has brought this up (my apologies if anyone did and I missed it). Krugman appears to be arguing that Medicare and Social Security would be just fine if not for the tax cuts passed by Congress and the POTUS (hereinafter referred to as the "Bush Tax Cuts").

Not exactly. He says that the tax cut monies would be sufficient to cover SS and Medicare, accepting they need topping up. Nowhere does he say they are fine on their own.

Jim

Where I wrote I did not read the whole paper and don't have to do so I meant I don't have THE TIME to do so. It reads very differently.

(1) Jim Glass (Aug. 4, 1:07 PM): "Seniors aren't the poorest group in America any more like they were in the '30s even up to the '60s. They are the richest group now and are getting richer, pulling away from everyone else, as time passes.

"The irony of the class warriors like Krugman (and to a lesser extant DeLong, Gale, etc.) is that they think it's just awful to cut taxes to let 'the rich' keep more of their money today -- but they want to base today's entire fiscal policy on the need to raise taxes to make transfers *to* the rich in the future. I'd think that making trasfers *to* the rich would be even less "progressive" than just letting them keep the rich keep their own money, but go figure."

Krugman (in "The Lost Fig Leaf", his essay on Bob Dole's acceptance speech in his book "The Accidental Theorist", which can also be found in the Sept. 27, 1996 "Slate"): "Aside from defense and interest payments, the US government is now mainly -- yes, mainly -- in the business of taxing the young and giving money to the old.. Consider how utterly shameless Dole was in imagining a grandmother who couldn't afford to call her granddaughter because she pays too much in taxes. That grandmother almost surely lives better than people of her age ever lived before, supported by Social Security checks that will greatly exceed the value of the contributions she and her husband paid into the system. And her children could easily have sent her the money for phone calls, except that their Medicare contributions had to cover her hip replacement. There is a good case to be made that America's gerontocracy has gone too far, that we are too generous to our retirees, especially to those who could afford to do without some of those benefits. But that is not a case the Right has ever made." Or, at any rate, the elected Right.

(2) Glass (Aug. 4, 11:15 PM): "...You might note the difference between making howlers outside one's area of expertise while writing in one's spare moments on a blog, and making howlers when being paid quite a substantial sum of money to be an authoritative voice on the editorial pages of the New York Times with the world's greatest assembly of fact checkers at your disposal."

Well, shucks, Sullivan is not exactly amateur night himself -- he's the former editor of the New Republic, a former contributor to the NY Times, and a man who presents himself (and his blogsite) as a major authority on every subject he happens to mention. Which means that it is decidedly ridiculous to attack Krugman for factual sloppiness in areas that HE (to quote Glass) "knows nothing about", and to take a fondly tolerant attitude toward Sullivan doing exactly the same thing. Glass' complaint ends up boiling down to the statement that the REAL sin lies in those Times fact-checkers who didn't catch Krugman's errors.

(3) Usurer (Aug. 4, 10:50 PM): "...The *eventual* shutdown of all aspects of the welfare state is a non-negotiable moral requirement... I don't buy the 'compassion' argument that the care and concern we have for family and friends ought equally be extended to total strangers and without any consent on our part beyond a nanoscopic influence at the ballot box."

Equally, maybe not. Very substantially, yes. (Which is also my reply to E. Nough [Aug. 4, 6:08 PM]). Rand said that we have NO moral obligation to ever provide active aid to anyone but ourselves, and Usurer says exactly the same thing -- explicitly -- on that URL I quoted (http://usurer.ubersportingpundit.com/archives/001859.html): "The Objectivist arguments for freedom are primarily moral in nature, and are focussed upon how the individual should act. The right way to act in society and the subsequent nature of the proper economic system and thereafter the role of government are built up from there...The primary argument for freedom - economic or otherwise - is that the proper morality is one based on rational self-interest...This moral code gives the real reason why the welfare state and regulation are wrong - they require that physical force be used against others, and in the context of the ordinary civil society that is just NOT morally acceptable, neither by individuals nor by the representatives thereof. No amount of neediness overrides that code..." Looks pretty definitive to me. Also breathtakingly cold-blooded and vicious (which Usurer should take as a compliment; after all, Rand would have). If you can find a "logical fallacy" in my interpretation of Usurer, David Perron (Aug. 4, 12:05 PM), you have much sharper eyes than I have.

Bruce quoted the old "good" PK of 1996 before he went over to the Dark Side...
~~
There is a good case to be made that America's gerontocracy has gone too far, that we are too generous to our retirees, especially to those who could afford to do without some of those benefits. But that is not a case the Right has ever made. Or, at any rate, the elected Right.
~~

Heck, I can quote *that* Krugman calling the financing of Social Security a "Ponzi game".

But now we have the new, improved, NY Times Krugman slurring persons who make just such criticisms of SS's financing (including the late Sen. Moynihan, who did more to protect Social Security with his little finger than Krugman will ever do in his entire life) as "Orwellian doublethinkers".

See, this is what irritates many people who used to be big fans or PK. He used to be rigorous, fair, and critical even of his political allies when honesty called for it. He didn't used to be Molly Ivins. He has chosen to become Molly Ivins. He even explains on his web site why he has thrown out the old Krugman to become partisan.

An academic economist I know e-mailed me a little while back that the 1996 Krugman is lying tied up in a basement in Princeton and the Times columns are being written by Lester Thruow and William Greider.

Now Bob Dole isn't the issue. If you can find the new, NY Times Krugman -- or DeLong, or any other of the class warriors -- today criticizing the idea of giving a prescription drug benefit to Warren Buffett, or even better encouraging the *reduction* of entitlement spending in any other common sense way to close the future budget gaps that they purport to be *so* upset about, please let me know and I'll be glad to give whomever it is full credit for it.

As to Sully, no matter how much you may want to think otherwise, his blog is a blog, not the editorial pages of the NY Times (nor even the New Republic); it is paid for by PayPal not by Sulzberger, corporate shareholders and paying readers; and it doesn't have an army of fact checkers on call.

Even so, if you want to compare the howlers the two of them have committed you can be my guest. Sully for one has never had to publish a "please don't sue me" formal apology to the finance minister of another nation whom he had slurred on the basis of hearsay he didn't bother to verify. We can start from there. ;-)

Ah, but Sullivan did (cretinously) smear Krugman himself with that absurd accusation (which he spun out for weeks) that PK was -- so help me God -- a pawn of Enron.

And PK isn't writing "the editorial pages" of the NY Times; he's writing exactly one of its Op-Ed columns. Like Safire. Presumably, since the Times prints both of them, its editors are foul and untrustworthy hypocrites? (It's also amusing to consider what would happen if the Times' fact-checkers started trying to monitor Safire's accuracy.)

Nor do I quite understand why Krugman is to blame for his errors because the Times has "an army of fact-checkers" to check out his columns, while Sullivan isn't to blame for his errors because he doesn't.

Finally, if you can see why the Krugman of "The Accidental Theorist" would have been one bit less critical of Bush than the Krugman of the Times columns, you have -- once again -- sharper eyes than I have. Take a look at his essays on supply-siders in that book. (I should add, though, that the sentence -- "Or, at any rate, the elected Right" -- was MY sentence, not PK's. There! See? Another howler he made, by God!)

>> [Krugman] says that the tax cut monies would be sufficient to cover SS and Medicare, accepting they need topping up.

Let's look again at what Krugman said:

"the revenue that will be lost because of the Bush tax cuts ... would have been MORE THAN ENOUGH to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years." My emphasis.

Now lets look at those GAO projections again, in which there are NO tax cuts, and in which government comes to an end around 2035-40 -- only half way through Krugman's 75 years -- because annual deficits alone exceed 20% of GDP, because spending on Social Security and Medicare have risen by more than *10 points of GDP* by then.

And now lets ask a very simple math question:

Being that the "revenue lost because of the Bush tax cuts" is exactly $0 in this projection, how does Krugman figure this $0 is MORE THAN ENOUGH to "top off" 10 points of GDP in spending in 2035???

>> Ah, but Sullivan did (cretinously) smear Krugman himself with that absurd accusation (which he spun out for weeks) that PK was -- so help me God -- a pawn of Enron.

Did Sully have to publish a written "please don't sue me" apology when the lawyers called? No? One point for Sully.

And you may find if you look back that he didn't exactly call PK a "pawn of Enron".

Rather, you may remember that PK himself was at the time blasting others left and right who had taken money from Enron as being manipulated and bought and pawns of Enron.

Then when it became known that PK himself had taken what, $50,000, from Enron and while doing so had written a wonderful laudatory puff piece about Enron in Fortune, Sully opined: What a hypocrite, he did the exact same thing that he's damning everyone else for!

To which PK had a two-stage self-contradicting response:

First came denial. What I did was valueless to Enron. I didn't help it. I was "just a brick in the wall" (his words).

Then came defiance: So what? I was worth it! I get $50,000 for a day's work all the time! Just for speaking. I can't be bought like that because I'm worth it!

All of which was totally specious misdirection, because the issue wasn't whether PK was "worth it" or not, or "bought" or not -- the issue was his outrageous *hypocrisy* about it all.

Because if PK really was justified in being righteously indignant at the idea that he could be bought by Enron, then why the hell was he running around charging that *everyone else* who had been paid by Enron just like him had been bought???

A little double standard there, eh? When you take money you're selling out, being bought, influenced. When I take money I'm an expert, immune from influence, because I'm worth it!!! ;-)

Then the two of them descended into name-calling. But Sully was right, PK was a total self-righteous hypocrite about the whole thing, IMHO.

But Krugman was right too. The way Enron was leveraged, if that article he wrote for Fortune kept its stock price up a quarter point for a day, it made a heck of a lot more than the $50k it paid him. He was worth it! ;-)

Of course, Krugman did this during what you described a couple of messages earlier as his Fair-Minded, Moderate Golden Age. Also, if memory serves (although I'll have to double-check on this), the people he was blasting for taking payoffs from Enron had taken them much later in the game, and were also in a position to know very well when they spoke in its defense that the company was fraudulent. Krugman, whatever else one says about that incident, spoke in favor of Enron only at the very start of its career, when virtually nobody smelled a rat.

Glass: "The irony of the class warriors like Krugman (and to a lesser extent DeLong, Gale, etc.) is that they think it's just awful to cut taxes to let 'the rich' keep more of their money today -- but they want to base today's entire fiscal policy on the need to raise taxes to make transfers *to* the rich in the future. I'd think that making transfers *to* the rich would be even less "progressive" than just letting them keep the rich keep own money, but go figure...If you can find the new, NY Times Krugman -- or DeLong, or any other of the class warriors -- today criticizing the idea of giving a prescription drug benefit to Warren Buffett, or even better encouraging the *reduction* of entitlement spending in any other common sense way to close the future budget gaps that they purport to be *so* upset about, please let me know and I'll be glad to give whomever it is full credit for it."

In other words, Glass is saying that the "new" Krugman is actually farther to the Right, where the matter of income redistribution from the wealthy to the less wealthy is concerned, than he was before. This seems a wee bit implausible, but I'll check with the Source himself on this (as well as finding out his response to the other points Glass has mentioned).

Bruce, this is childish.

Andrew Sullivan didn't "smear" Krugman by accusing him taking money to write hit pieces. He said repeatedly that he doubted Krugman's writing had been affected -- and indeed, his writing looks to me like the sort of millenial blather everyone was putting out. He said it was intensely hypocritical, which it was.

He has repeatedly made statements about Social Security in order to bash the Bush administration on tax cuts which egregiously misrepresent the documents he claims to be quoting, such as arguing that the trustee's report says that SS is "fine" until 2040 without mentioning that the next year it shows a big deficit. The journalistic standard for a blog is very different than for an article. The last article I wrote involved 300 pages worth of academic papers which I re-read four or five times before putting the article to bed just to make sure I hadn't inadvertently implied something incorrect. (And in several places I had -- it's easy to confuse three or four reports if you read them at the same time.) Then I fact-checked it again three times after it was edited to make sure that the editing process hadn't caused us to state something new and untrue. That is the level of care with facts that the NYT is expected to deliver. Krugman is careful to hedge so that technically what he is saying can't be called a lie, even though his readers are likely to walk away with misimpressions -- but that's a shoddy journalistic trick unworthy of a man who might once have been in contention for the Nobel.

Jim and Jane-- Your recollections of the Sullivan affair are different from my own, which is that Sullivan started out making only the (valid) hypocrisy charge, but somewhere along the way lost the thread and convinced himself that Krugman really was bought and paid for.

Ridiculous, of course. Krugman didn't sell his soul to Enron in 1999; he gave it away to the DNC the following year.

Let's not reinvent history here.

Andrew Sullivan very much 'smeared' PK, to the point of calling him "Enron" Paul for several months. He kept implying, over and over, that PK had been bought. Sullivan quoted Virginia Postrel during his rant to try to prove that the $50,000 that Enron paid him (actually $37,500) was way too much and Krugman should have known that. After Postrel made clear on her site that, in fact, the $50,000 was perfectly in line with what someone like Krugman got paid for (turns out Postrel had originally not understood what PK was paid for), Sullivan never linked to that or ever mentioned it.

So ignorant is Sullivan that, in trying to show that the $50K was too much, he provided, as a comparison, Cornel West's speaking fees not realizing that he was comparing PK's fees for 4 days of work vs Cornel West's fee for 1 day (not to mention the HUGE difference in how a business would view the contributrions of an economist vs a philosopher or whatever West is supposed to be).

Jane once again brings out the discredited "PK misrepresented what the SS Trustee's report says" argument. I have repeatedly asked for her, or anybody else, to please show me where PK ever misrepresented what the report says. I have waited for months and I suspect I will continue waiting.

BTW Jane, I'm surprised you claim to know that he's not in the Nobel running when only a few months ago you told me you didn't even know he had written Nobel-quality material. (Your exact words on December 2002 were I can't think of a single piece of nobel caliber work he's done. I guess you read more since then?)

Also, if he was a contender some time ago, as you now seem to have accepted, what, according to you, has happened to change that? Surely you know that if he wins the Nobel Prize it will be for work he did 10-15 years ago (strategic trade theory, currency and Balance of payments fluctuations). How did that change?

Jim,

The GAO report is irrelevant in this context. Krugman quoted another article. He has no obligation to address every possible counterpoint. PK made clear he was basing his analysis on what the CBPP wrote, not what GAO wrote 3 years ago (which used different methodology, had diferent assumptions, and was done for a different reason). It's not even clear that GAO's and CBPP's numbers are directly comparable. Do they even use the same growth asssumptions? if not, it's apple and oranges.

I think this is where you and I differ. You judge PK by a standard that I neither judge him nor anyone else. I don't look in PK, or any other columnist, for a perfectly balanced opinion. I know he has his views and will try to push them. That is true of PK, as well as Safire, Novak, Cohen, Will, Instapundit, and our very own host. They all have a worldview and will choose selectively what to highlight and comment on. I simply look for interesting and thought provoking articles. I don't expect that they will be perfect or complete in any way.

Was PK wrong in talking about Medicare without explaining the difference between Medicare A and B? Sure. I accept that. Just like the Economist article linked above is wrong in not telling us how dependent those projections are to the underlying assumptions. Today came out news of very high 2Q productivity growth. If this continues into the future most of the problem will go away. Did The Economist say that? Nope.

Who is your favorite columnist? How long would it take to search the archives and find they did much the same you accuse PK of?

I still can't think of a single piece of Nobel caliber work he's done, GT. But he was once considered to be on the Nobel track.

As for the rest of it, GT, I've shown it repeatedly. Krugman implies a great deal, but doesn't get caught actually lying, by stringing a number of facts together in an extremely misleading way. It is, for example, technically true that the social security trustees said that the program would not run into deficit until 2035 or so. It is not, however, true, as Krugman ardently implies, that this means the program is "fine". Or that anyone in their right mind thinks that a 25% deficit is a relatively small adjustment. Or that the Bush tax cut is the primary cause of the problem. I think this is, to put it kindly, unworthy. You're welcome to think whatever you like. But since you've clearly already arrived at the conclusion that Paul Krugman is the finest, most honest and trustworthy commenter since Socrates, and are not going to change your mind about it, I see no point in arguing the matter further.

And GT, for a professional economist to eschew the GAO report in favor of a position paper from a liberal think tank dedicated to taxing the bejeesus out of the rich in order to redistribute their wealth is hardly defensible. Do I get a pass on being wildly incorrect if I can dig up some hack job from some think tank, somewhere, defending whatever partisan political position I take? Not from you, I don't think. For you to turn around and demand that those of us who disagree with him allow Krugman to say things we believe to be misleading in the extreme, simply because someone else on the planet has published a paper saying so, is. . . er. . . odd. And while I'm not going to pay the Times to dig it up, my memory is that he didn't mention that he got those figures from the CBPP -- I did. He said he got it from reading the report -- it's just that his reading was curiously identical to the CBPP executive summary. He may have mentioned it on his website, but while I could be mistaken, I'm fairly sure he didn't apprise the readers of the New York times that he was giving them a lobbying report rather than his carefully-thought-out professional opinion.

You are in fact mistaken. He made clear that it was from the CBPP. No need to go to the Times. You can read it here.

I never claimed, nor do I believe, that Krugman is the greatest ever. He is a very smart guy who makes very good points. I always give the example of the CA energy crisis of how he was ahead of everyone else.

He is wrong on many things. I disagree with him on the keeping SS as it is, for example. It's just that when I look at what the PK bashers say of him it turns out it's something that applies to every other columnist or commentator.

As for CBPP vs GAO I have a lot of respect for GAO but I think the quality of the people working at CBPP is top notch, maybe even better. The idea that CBPP is simply some hack liberal think tank is silly.

Yes, you would and do get a pass if you did what Krugman did. In fact, you do that practically every day. You link to or comment on some news or research but you don't present every other possible view. You present it based on your own biases. That's why people have different opinions or offer alternative evidence on the comments section.

As for Nobel, if you still don't know why PK is Nobel material I would refer you to the JEP article (by A. Dixit, IIRC) when PK won the Clark Medal. I still wonder how you know he is no longer in the running.

Finally, on the SS thing I have yet to see what, exactly, it is that you claim Krugman wrote that is so wrong.

>>Glass is saying that the "new" Krugman is actually farther to the Right, where the matter of income redistribution from the wealthy to the less wealthy is concerned, than he was before.

This is incoherent to me. Since when is defending SS and Medicare as is of the political Right? Did Krugman call the Moynihan SS Commission study "Orwellian doublethink" because it's conclusions were too far *to the left* for him? ;-)

OTOH, if you are saying I criticize the class-warrior knee-jerk defenders of SS and Medicare for, um, inconsistency in defending programs that stand to transfer many billions from the poorer to the richer -- as per Medicare and an expanded drug benefit for Warren Buffet, paid for with payroll taxes taken out of the wages of his workers at Dairy Queen -- that's true enough.
~~~~

>> Jim and Jane-- Your recollections of the Sullivan affair are different from my own, which is that Sullivan started out making only the (valid) hypocrisy charge, but somewhere along the way lost the thread and convinced himself that Krugman really was bought and paid for.

I said that "it descended into name calling".

If the other guy is objecting that he was never, never influenced, how better to get him pissed than to call him bought? Opinionjournal.com constantly describes Krugman as "Enron Consultant". And Krugman said the WSJ is in favor of raising taxes on the poor. It's the course of true love. ;-)

>> Ridiculous, of course. Krugman didn't sell his soul to Enron in 1999; he gave it away to the DNC the following year.

Of course. ;-)
~~~~~~

>> The GAO report is irrelevant in this context. Krugman quoted another article....

He *misquoted* another article -- as you have acknowleged, "Medicare" is not "Medicare Part A" -- and did it in a way that his conclusion contradicted reams worth of analysis published by every imaginable credible source for 20 years. And he did it without thinking "How can this be so different, am I missing something here? (Like Medicare Part B?) Maybe I should read this more closely before writing it up?"

You know, he's not Molly Ivins or Bob Herbert who might not understand an econ synopsis and be unfamiliar with all the other reams that have been published on the subject. He's supposed to be a Nobel-caliber professional on this.

Now, I'm a lawyer. If I misread a paper as saying "Contrary to what so many think, it is impossible to amend the US Constitution and it's never been done", am I supposed to write that in the NY Times as if it is *true* despite all of my professional knowledge -- that'd be OK to do because I'd be quoting a paper?

>> ...not what GAO wrote 3 years ago (which used different methodology, had diferent assumptions

If you actually read the last Gale/CPBB paper which puts the funding gap at $59 T -- see, they were able to factor in Medicare Part B! -- you will see it is based on the GAO's analysis. So try again.

And try again to answer the question I asked above -- how $0 revenue lost to the Bush tax cuts as of 2000 was supposed to be MORE THAN ENOUGH to "top off" a spending gap of 10+points of GDP by 2040, as predicted by ... *GALE and CBPP* as well as GAO??
~~~

>>Krugman implies a great deal, but doesn't get caught actually lying, by stringing a number of facts together in an extremely misleading way..

Bah, Krugman has told, um, *flat untruths* -- unambiguous overt falsehoods, things what he would certainly call "lies" if told by a Republican -- since very near after he first landed at the Times.

I won't call them "lies" though, like he would. They seem like howlers made when the urge to bash enemies overcomes one's duty to check and see if the words one is publishing are true.

Here's his #1 at the NY Times: February 2000, right after he arrived, PK rushes to bash John McCain, Conservatives and Republicans for trying to give unjustified sales tax exemption to internet sales, through the Internet Tax Freedom Act -- "pandering to crude anti-tax conservatives" he called it.
http://www.pkarchive.org/column/21300.html

Of course, PK ends each column with a personal shot whenever possible: "I'd like to think that Mr. McCain isn't engaged in that kind of pandering. So let's hope he's just confused."

Ah, but who was confused?? The ITFA in fact had *nothing*, zip, nada, to do with sales taxes or protecting internet sales from them. The whole column, from beginning to end, was a bogus howler. Krugman *didn't have a clue* what he was talking about.

He didn't bother to look at the Act! He just proceeded right to the name calling. Another reputable economist on this: http://www.ncpa.org/oped/bartlett/mar0100.html

How could someone be *so* wrong?? A social scientist of all people, who is supposed to be empirically oriented?? Because -- revealed preferences -- it is more important for him to rush out and bash his enemies than to check whether what he is saying is *true*.

Ironically in this case, PK was not only totally wrong, he was *backwards*. His whole argument against the purported sales tax break was that businesses should be taxed alike -- there should *no discrimination* against some and in favor of others.

And what *was* the purpose of the ITFA? "To prohibit discriminatory taxes from being imposed on Internet and electronic commerce".

The purpose of the ITFA was to do what Krugman argued *for* during the whole column! Isn't that amusing? He really should have checked his facts there. ;-)

In the three years since Fraga and the ITFA & sales taxes to "topping off" Medicare and SS, he hasn't stopped. Cato consultants, limited partnerships, "evil" White and the famous e-mail PK didn't bother to verify -- he's based columns on *wrong facts* time and again.

BTW, did Krugman apologize to McCain for falsely calling him either a "panderer or confused"?

Of course not. The morally superior have no need to apologize. ;-)

Me: "Glass is saying that the "new" Krugman is actually farther to the Right, where the matter of income redistribution from the wealthy to the less wealthy is concerned, than he was before."

Glass: "This is incoherent to me. Since when is defending SS and Medicare as is of the political Right? Did Krugman call the Moynihan SS Commission study "Orwellian doublethink" because its conclusions were too far *to the left* for him?"

James, YOU were the one who said a few columns ago that Krugman didn't used to defend allowing SS and Medicare to transfer money from the poor to the rich, and that now he does. Personally, that falls into my definition of a move toward the Right on that particular issue.
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