Some Links

by Don Boudreaux on September 14, 2011

in Budget Issues, Cuba, Data, Debt and Deficits, Seen and Unseen, Social Security, Trade, Video, Wal-Mart

David Henderson, with some help from Tim Worstall, weighs in on the new and much-trumpeted report on America’s current rate of poverty.

Cato’s Dan Mitchell weighs in on the same issue.

AEI resident scholar Andrew Biggs (formerly with the Social Security Adminstration) weighs in on the debate over whether or not Social Security is a Ponzi scheme.  (His answer: basically, yes it is in some real and relevant ways.)

Over at Forbes, Merrill Matthews weighs in on the same debate.

The Institute for Humane Studies’s LearnLiberty video project is churning out too many great, concise videos to keep up with!  Here, for example, is the great Steve Davies on government debt. Here’s philosopher Aeon Skoeble on “What are Rights?“  And here’s economist Art Carden on chain stores.

Finally, here’s a story on how Pres. Obama has just renewed Uncle Sam’s commitment – if protectionism is sound economic policy – to help Cubans continue to prosper.  Cubans don’t even have to pick up the tab to pay their own customs agents to search for and block wealth-destroying goods and services that might be imported from the U.S.  (HT Rick Lowe)

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{ 22 comments }

Frank33328 September 14, 2011 at 4:34 pm

Alas, Cubans must be enjoying some of the highest standards of living on the planet given the 100% barrier to US trade. Well….maybe not since it is only the US that is 100% restricted. If only the rest of the world would also place a trade embargo on Cuba then their wealth would truly soar. Well, in any case, things would have been worse for Cuba without the US embargo.

Jim September 14, 2011 at 7:42 pm

The insightful Dan Mitchell once again demonstrates what many of us have said for decades; imagine how much richer our citizens would be without the cold hearted, cynical, pitiless, welfare state.

It is one of the tragic stories of our time.

Craig September 14, 2011 at 8:06 pm

Trade with Cuba is not trade with Cubans.

Castro’s government intercepts all investment and all goods. It then decides who will have a chance at receiving them and at what price. The considerable difference is kept for the government and its loyal supporters.

There can be no comparison with free market economic principles and to claim that the embargo is protectionist is naive. Trading with Cuba only supports Fidel.

The Other Tim September 14, 2011 at 9:26 pm

Somehow I think you’ll have a very hard time proving that last claim.

Frank33328 September 14, 2011 at 9:28 pm

Craig, even if everything you say is true (and it may well be), so????

Invisible Backhand September 14, 2011 at 8:31 pm

“Well, I gather that a lot of right-wingers are quoting selectively from a piece I wrote 15 years ago in the Boston Review, in which I said that Social Security had a “Ponzi game aspect.” As always, you should read what I actually wrote. Here’s the passage:”

http://krugman.blogs.nytimes.com/2011/09/14/the-ponzi-thing/

HaywoodU September 14, 2011 at 9:22 pm

Are you having a problem getting readers?

The Other Tim September 14, 2011 at 9:22 pm

Paul Krugman wants to walk back something he said back when he was a respectable economist. Obviously we should take him at good faith and let him do so – it’s not like he’s developed a track record for doing this whenever his older writings are embarrassing for Democrats.

But seriously, that’s a pathetic defense he wrote, and I don’t see how anyone can be impressed by it. He comes straight out and says “today’s young may well get less than they put in.” That single line is as good as a confession that everything said against SS is basically true. My generation of “investors” is going to get screwed because our money is being used to pay benefits to earlier generations of “investors,” but later generations will not be big enough to even give us back what we put in.

The left wants to argue technicalities, but even if they’re right, all that means is that SS is a scheme similar to a ponzi scheme which rips people off like a ponzi scheme and is roughly as ethical as a ponzi scheme. Obviously their technicalities don’t really matter. If SS can’t pay me more than I pay it, it shouldn’t exist. End of story.

Nick September 14, 2011 at 9:42 pm

I know it is impossible to completely forecast the future of SS, but does anyone have a reasonable estimation of the type of returns that young middle class workers are going to get out of the SS system? I have seen estimate of something in the ball park of between 1.3-2.0 percent. That is an absolutely pathetic return on investment- I could make more even with record low t-bills or some selected mutual funds.

Even if theoretically the fund can stay solvent for a long period of time like its proponents claim, what is the point if the rate of return is so pathetic? Is just being justified on the basis that people are too irresponsible and stupid to properly invest for retirement, therefore the government must force people to “invest” in the SS ponzi scheme? Or do folks like Krugman like it because it radically redistributes wealth?

Invisible Backhand September 14, 2011 at 9:59 pm

Rate of return is directly related to risk, and Social Security is the safest investment ever, it has never once missed a payment.

Don’t forget times were different in 1996. The economy was booming and SS was the third rail* of American politics. What has changed since then is the Republicans have seriously screwed up America’s finances, and the well funded effort to seize SS trust fund has continued apace (they used to shut up about privatization every time the market crashed, now they don’t even bother because the foxnews rubes are too stupid to use google).

1.3 to 2%? That’s better than the stock market has done over the last ten years. Also, a lot of people have done worse on their investments than the market. And which mutual funds? Have you checked out their performance over the last ten years?

Social Security is an anti-poverty program, and a great one. Senior poverty is down to 9%. Stop swallowing everything you hear on foxnews without chewing.

*a term that means if you touch it, you die.

Ken September 14, 2011 at 10:19 pm

IB,

A return of 1.3%-2% IS pathetic. You note that for the last ten years, that’s all the stock market has offered, but this completely ignores the fact that no one works and saves for retirement for only ten years. The latest estimates I’ve seen for returns for social security is as low as -0.4% to as high as 2%, with the average being just 1.23% over the last 30 year period.

Any idea what the average yearly returns on the stock market has been over the last 30 years? It’s 6.6%. Any idea what that kind of difference translates to over a period of 30 years? Investing $1 in September 1971 yields $6.80 today at 6.6%, but only $1.44.

Now tell me, would you have rather invested in the stock market over the last 30 years or social security?

“Social Security is an anti-poverty program, and a great one. Senior poverty is down to 9%.”

Social security has NOTHING to do with seniors not living in poverty. The massive increase in American wealth due to the private sector is exclusively responsible for that.

Regards,
Ken

Ken September 14, 2011 at 10:21 pm

Edit: but only $1.44 at 1.23%.

Economic Freedom September 15, 2011 at 1:36 am

http://tinyurl.com/3okdobc

Democrat Congressman: Gov’t Has No Contractual Obligation to Pay Social Security Benefits

Democrat Rep. Jim Cooper (D-Tenn.) said that most Americans do not understand that federal entitlements are not “bank account” programs that hold their money, adding that Social Security is not even a legal guarantee.

“Are these vested benefits? Are these contractual benefits?” Cooper asked of Social Security benefits. “Well, it turns out they’re not. Legally, they’re not even promises. They’re scheduled benefits and most Americans are not even aware of that.”

Cooper noted one final misconception that Congress should correct–that most people believe that Social Security benefits are legal obligations of the federal government. In fact, he noted, they are nothing of the sort. Instead they are merely “scheduled benefits” that can be altered at any time.

Invisible Glad-Handing wrote:

Social Security is the safest investment ever, it has never once missed a payment.

You were saying . . .?

Invisible Backhand September 14, 2011 at 10:06 pm

Here’s a chart of senior poverty rates:

http://i.imgur.com/rjlfm.jpg

Economic Freedom September 14, 2011 at 10:33 pm

http://www.zerohedge.com/news/paul-krugman-social-security-ponzi-scheme-and-will-soon-be-over

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

http://www.bostonreview.net/BR21.6/krugmann.html

Economic Freedom September 14, 2011 at 10:34 pm

http://www.zerohedge.com/news/paul-krugman-social-security-ponzi-scheme-and-will-soon-be-over

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

http://www.bostonreview.net/BR21.6/krugmann.html

Economic Freedom September 14, 2011 at 10:36 pm

“Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

Paul Krugman, Boston Review, 1996

Invisible Backhand September 14, 2011 at 10:52 pm
The Other Tim September 15, 2011 at 12:39 am

And your point? As I said above, this is a confession, not a defense.

Invisible Backhand September 15, 2011 at 11:14 am

See my comment above about 1996 being different circumstances from 2011.

Ken September 15, 2011 at 11:29 am

So it’s possible for something to be a Ponzi scheme in 1996, but 15 years later when that same thing is being run the same way it may not be a Ponzi scheme? Huh!

Regards,
Ken

The Other Tim September 15, 2011 at 11:37 am

Your comment doesn’t contain an argument. The political differences between 1996 and 2011 don’t begin to address the fact that Krugman admitted SS could fail to make payments that even break even for my generation.

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