March 5, 2004

#148: Vampire:hiss....Krugman:hissy-fit

P. Krugman

We had trouble today finding the focal points of Paul Krugman's column Social Security Scares (03/05/04). On a first quick reading he supported the Treasury view that Social Security is in pretty good shape:

"So does the Treasury report show a looming Social Security crisis? No."
and that Medicare is a problem for another day:
"When people issue ominous warnings about the cost of Medicare after 2077, my question is, Why should fiscal decisions today reflect the possible cost of providing generations not yet born with medical treatments not yet invented?"
We agree! So, can this be the Paul Krugman we all love to hate? Actually it can be. On a second reading we realized what was really bugging him. Privatization! Private Retirement Accounts and Medical Savings Accounts threaten to undermine government programs by allowing people to become more self-sufficient. To a socialist, talk of privatization is like waving a cross in front of a vampire. They hiss and turn away. In Krugman's case a hissy-fit is more descriptive.
"After Alan Greenspan's call for cuts in Social Security benefits, Republican members of Congress declared that the answer is to create private retirement accounts. It's amazing that they are still peddling this snake oil; it's even more amazing that journalists continue to let them get away with it�.Why is it so hard to say clearly that privatization would worsen, not improve, Social Security's finances?"
It's hard because any worsening would be temporary due only to transition funding and we would come out the other side with a system where each generation provides for itself privately rather than depending on the current intergenerational transfer system which is little more than a Ponzi scheme run by the government. What Krugman finds "scary" in Social Security Scares is the possibility that people will be depend less on the government in the future.

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]

Posted by John Weidner at March 5, 2004 9:16 AM
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