Saturday, August 14, 2010

Krugman on Social Security

Paul Krugman weighs in on the Social Security program, and I actually kind of hate to point out how full of crap he is because he is saying that the program actually does not pose the kind of problem that alarmists are claiming. He’s right, but not for the reasons, or not in the manner, that he’s claiming. I’m hoping that at some point Krugman will write another piece telling us that this one was a parody of some sort, because it is one of the most nonsensical things I have ever read.

First he says that Social Security is “government program supported by a dedicated tax,” comparing it to the gasoline tax, which is incorrect but is closer to being accurate than what follows. Then he says,

“Of course, it’s also part of the general federal budget. This means that Congress always has the option either of undedicating the revenue from the payroll tax (or seizing the trust fund, which is basically undedicating past revenues), or of topping up Social Security by adding more funds.”

What planet does Krugman live on? He actually seems to have bought into the government game playing nonsense of lumping the Social Security Administration and the Federal Government cash flow reporting together to make the deficit smaller. It’s sort of like two public banks combining their bookkeeping to conceal the fact that one of them is losing money, which would be illegal. Paul Krugman, a respected economist with a Nobel prize in the subject, has actually fallen for that.

That “option of undedicating the revenue from Social Security” that he claims Congress has? If they had that option they would have used it many years ago, decades ago. They don’t have it. They have never had it. They never will have it. That money is a trust fund; does Paul Krugman know what a trust fund is?

Has Paul Krugman, perhaps, ever looked at his payroll check stub? Has he ever examined his W-2 form or looked at his Federal Income Tax return? If he did, he would note that the deductions for federal tax and Social Security are listed separately. The reason that they are listed separately is that they are different programs and the money goes different places.

So there are two ways to look at Social Security. You can view it as a stand alone program, in which case payroll tax revenues and the trust fund accumulated out of those revenues are at the center of the story; or you can view it as just part of the federal budget…

Well, you can certainly look at it two ways if you like, but only one of them bears any relationship to reality. Social Security is in fact a stand alone program and if you want to pretend that it’s not then have at it; you can pretend until you are blue in the face and play all of the mind games in that pretend world that you want and, guess what, Social Security is still going to be a stand alone program.

These views aren’t contradictory; which one you want to emphasize depends on what question you’re trying to answer.

Well, these views certainly are contradictory; reality almost always is at odds with illusion. And which one you hold might depend on your contact with reality. Or the honesty of your purpose.

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