On Krugman on Social Security

by Don Boudreaux on November 16, 2007

in Social Security

Paul Krugman thinks that it is plain silly — or, really and worse, an ideology-induced lie — to say that Social Security faces a financial crisis.  Here’s Krugman writing in today’s edition of the New York Times:

Inside the Beltway, doomsaying about Social Security — declaring that
the program as we know it can’t survive the onslaught of retiring baby
boomers — is regarded as a sort of badge of seriousness, a way of
showing how statesmanlike and tough-minded you are.
. . . .

But the “everyone” who knows that Social Security is doomed doesn’t
include anyone who actually understands the numbers. In fact, the whole
Beltway obsession with the fiscal burden of an aging population is
misguided.

As Peter Orszag, the director of the Congressional
Budget Office, put it in a recent article co-authored with senior
analyst Philip Ellis: “The long-term fiscal condition of the United
States has been largely misdiagnosed. Despite all the attention paid to
demographic challenges, such as the coming retirement of the baby-boom
generation, our country’s financial health will in fact be determined
primarily by the growth rate of per capita health care costs.”

How
has conventional wisdom gotten this so wrong? Well, in large part it’s
the result of decades of scare-mongering about Social Security’s future
from conservative ideologues, whose ultimate goal is to undermine the
program.

The only evidence that Krugman presents to support his case against the proposition that Social Security is headed for insolvency (unless it undergoes big changes) is simply that Medicare and Medicaid are headed for insolvency that’s even worse.

So Krugman’s case that Social Security presents no real problems to worry about is like, say, a lawyer advising client Jones that the grand-larceny charges against Jones are really nothing to worry about because client Smith is facing the more serious charge of murder.

It’s true that the fiscal problems looming for Medicare and Medicaid are worse that those that loom for Social Security.  That this fact is so is admitted by those who believe that Social Security faces real and serious problems.

For example, Texas A&M economist Thomas Saving, an eminent scholar and a Clinton-appointed Public Trustee of the Social Security and Medicare Trust Funds, testified to Congress in March 2005 that Social Security faces big fiscal problems.  Mr. Saving admitted explicitly that the problems confronting Medicare and Medicaid are larger than are the problems confronting Social Security — but he went on, quite correctly, to highlight the nevertheless large problems with the current Social Security system.  And in an essay that Mr. Saving published a few monts later, in July 2005, he said

The recent annual report issued by the Social Security Board of
Trustees demonstrates with undeniable clarity that Social Security
faces a looming financial crisis. Worse still, the report shows Social
Security’s lurch toward insolvency has accelerated.

In just a little more than a decade, Social Security will begin to
run a deficit, the study shows. Deficits will continue and amplify
every year well beyond the turn of the next century. Despite early
protestations from many on Capitol Hill that "there is no crisis," few
serious observers of the current state of Social Security hold out hope
the system can survive as presently constructed.

Comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: