Tuesday, December 18, 2012

Math Without Numbers

I had a thermodynamics instructor in Nuclear Power school who would set up a heat transfer problem on the blackboard, cross out the numbers, and then proceed to solve the problem with nothing but the units of measure. He claimed that numbers didn’t matter. No, his name was not Paul Krugman.

Krugman has a blog post today that discusses the merits of the “budget deal” that appears to be on the table at the moment. Read it and see if you can point out the huge glaring error that pervades the whole thing. It’s an elephant, sitting so squarely in the middle that you cannot miss it. Give up?

He makes almost no mention whatever of the effect that any aspect of the deal will have on the federal budget or the deficit. He posits initially that “the question is whether the end justifies the means,” and then he discusses the means and never weighs them against the end.

This is supposed to be about federal deficit reduction, but only once does he talk about how effectively any part of the deal will actually reduce the federal deficit, and even then only nonspecifically, when he says that “there’s more revenue in this deal than you get from letting the high-end tax cuts expire after the cliff.” Other than that his discussion is about the social fairness of one tax cut versus another, without evaluating which one will have more impact on the budget.

There’s also a rather high degree of idiocy in that “letting the high-end tax cuts expire after the cliff” thing. Those “high end” tax cuts cannot expire without all the rest of the Bush tax cuts expiring along with them, so Obama cannot, as Krugman suggests, simply “let the high-end tax cuts expire after the cliff.”

And when Krugman gets to Social Security he fails to observe that it should not even be part of this discussion because Social Security is not part of the federal budget and has no impact on the federal deficit at all. Cutting Social Security to reduce the deficit is like saying that you are going to mow your lawn in order to save electricity, or buy a car to save water in your home. Paul Krugman fails to say that, he merely says that switching to the “chained CPI” for cost of living increases for Social Security “doesn’t affect benefits immediately after retirement.”

He does go on to advocate against this suggestion “because the savings won’t have any significant impact on the underlying budget issues,” whatever the hell that means. The proper argument is not some mealy mouthed economic gibberish, but rather a clear statement that “Social Security has nothing whatever to do with the federal deficit.”

Paul Krugman does know that fact, right?

Few people remember that when the Simpson-Bowles commission was formed to come up with ways to balance the federal budget, Social Security was specifically excluded from their purview because it is not part of the federal budget. They decided to include it in their report anyway; the reasons for that are a whole different subject, but their report was not supposed to include the Social Security program.

So Krugman’s position is that the budget negotiations should be conducted based on how socially fair the components are, and not on how effectively they serve the purpose for which the discussions are being held. Yes, Krugman would think that.

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