December 10, 2004

#170: Head in the sand...

P. Krugman

In Borrow, Speculate and Hope (12/10/04) Paul Krugman commits a grievous logical error. The Bush initiative on Social Security does NOT increase the "deficit" if debt is properly and fully recognized. Right now we have a very large unfunded liability to future retirees that is a debt in every sense of the word. It is not officially recognized as such because there are no treasury bonds directly associated with it. Krugman's hatred of privatization leads him to pretend this liability is no big deal But the facts are otherwise.

Bush would fund private accounts by simply swapping treasury debt for this unfunded liability, i.e., raise the former and reduce the latter, dollar for dollar with no change in the total. If Krugman sticks his head any further in the sand we won't be able to see his shoulders.

[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 December 10, 2004 11:19 AM
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