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Monday, May 09, 2005

The Krugman Follies

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``Hell hath no fury like a scammer foiled. The card shark caught marking the deck, the auto dealer caught resetting a used car's odometer, is rarely contrite. On the contrary, they're usually angry, and they lash out at their intended marks, crying hypocrisy.``

Who said this? Tom Delay? Rush Limbaugh? Phyllis Schlafley? Was this remark about Hillary Clinton? Bill? Ted Kennedy? Maybe Al Gore?

Nope and nope. This is how that king of hypocrisy, Paul Krookman, er, Krugman begins his latest column bashing those who seek to save Social Security. To quote the Bard ``Me thinks he doth protest too much!`` I think he (and the other hacks at the New Pork Times) must be writing in a hall of mirrors.

``If the plan really would do that, it would be worth discussing. It's possible - not certain, but possible - that 40 or 50 years from now Social Security won't have enough money coming in to pay full benefits. (If the economy grows as fast over the next 50 years as it did over the past half-century, Social Security will do just fine.) So there's a case for making small sacrifices now to avoid bigger sacrifices later.

But Mr. Bush isn't calling for small sacrifices now. Instead, he's calling for zero sacrifice now, but big benefit cuts decades from now - which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits.
This accomplishes nothing, except, possibly, to ensure that benefit cuts take place even if they aren't necessary.``

Is that so, Mr. Krugman? Douglas Holtz-Eakin, director of the CBO would disagree:

``By about 2020, Social Security will no longer be contributing any surpluses to the total budget, and after that, it will be drawing funds from the rest of the budget to make up the difference between the benefits promised and payable under current law and the system's revenues. Policymakers will have only three ways to make up for the declining Social Security surpluses and emerging Social Security deficits: reduce spending, raise taxes, or borrow more.

The Social Security actuaries project that in 2018, benefit payments will begin to exceed the combination of payroll tax revenues and the funds that Social Security receives from the taxation of a portion of the Social Security benefits received by higher-income beneficiaries. This is the least significant of the three dates because total Trust Fund income -- which also includes the interest earnings that the Social Security Trust Fund receives on the Treasury bonds it holds -- will continue to exceed benefit payments for a number of years after 2018....[the] most significant date is the year in which the Social Security Trust Fund reserves will be exhausted. After that, the only income to the Trust Fund will be payroll tax revenue and revenues from the partial taxation of Social Security benefits, and annual revenues will not be sufficient to pay full benefits. As noted, the trustees project this year to be 2042.

Social Security will soon begin to create problems for the rest of the budget. Right now, Social Security surpluses are still growing and contributing increasing amounts to the rest of the budget. But...those surpluses will begin to shrink shortly after 2008, when the baby boomers start to become eligible for early retirement benefits. As the rest of the budget receives declining amounts of funding from Social Security, the government will face a period of increasing budgetary stringency.``

Krugman harps ad-nauseum on the unfairness of the Bush plan, as he sees it. His argument is that those making $60,000/year are being cheated because the WEALTHY don`t really need the money. This borders on Marxism; from each according to his ability, to each according to his need. (Krugman`s marxist tendencies should come as no surprise to anyone.) He whines that those making under $20,000 didn`t get a sizable tax cut (he completely ignores the fact that tax cuts are for tax payers) and tries to tie these two issues together because he wants tax increases. He is afraid to come right out and say this, so he works his way in through the backdoor.

``I'm not being unfair. In fact, I've weighted the scales heavily in Mr. Bush's favor, because the tax cuts will cost much more than the benefit cuts would save.``

Here Krugman shows his complete lack of economic understanding. He considers tax cuts simply lost revenue. He doesn`t understand that Bush`s tax cut plan grows the economy (a point he shamelessly uses as an excuse not to act on Social Security reform, then discards when it suits him.) David Hogberg demolishes this particular theory in an article in the American Spectator Online.

The fact is, we will have to invest $3.7 trillion right now to make the system solvent.
In 75 years if we fail to act, the shortfall will be twenty six trillion dollars according to Michael Tanner of the Cato Institute! This is an incomprehensible number! If Krugman thinks getting rid of the Bush tax cut (and the subsequent slowing of economic growth accompanying such a tax increase) will solve the problem-he`s completely off his rocker. Oh, and Professor Krugman, did you realize that there is no social security ``trust fund``. There are a collection of I.O.U.`s which will have to be redeemed via government bonds-which will have to be paid off with interest.

``Sorry, but no. Mr. Bush likes to play dress-up, but his Robin Hood costume just doesn't fit.``

Neither does your Nero costume, Paul! Who is the scammer, and why are you so angry?

David Hogberg has written a series of definitive articles on this issue (I had hoped to see him roll up his sleeves and punch the lights of of old Kru, but since he didn`t I figured I could do it for him using his own previous works as my sources.) Go here and browse through his articles; he lays it all out brilliantly!



Blogger Gary B said...

Thanks for this post and thanks for the link, Tim. You are in my blogroll now.

6:57 AM  

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