March 11, 2005

#177: A hawk without a landing gear...


As we tried to point out in Squad Report #175 Paul Krugman has an interesting conundrum all his own. In Slanting Social Security (03/11/05) he unleashes yet another cover-the-waterfront attack on Social Security reform initiatives. This time he attacks the Social Security Administration (SSA) itself for hyping the problem and suggests, quite correctly, that the estimated date of bankruptcy (currently 2042) is a moving target that depends on economic performance. The SSA used an absurdly low US annual growth rate of 1.8 % to make its estimates whereas most economists (including Krugman, if you put a gun to his head) believe it is much higher, perhaps 3 to 4 %. A rate as high as 3.5% would push the bankruptcy date so far out that most voters would happily "kick the can down the road."

So why doesn't Krugman close the deal by making this crucial point? That's the conundrum; he can't do it without acknowledging that the Bush economy is in very good shape. Out the window would go all of his favorite straw men based on Bush's mismanagement. Remember the "great unraveling" or the "road to banana republic-hood" or the "Japanese-style deflation?" None of that could happen in an economy growing at 3.5%. Instead it would be something to celebrate, as a golden age.

So Krugman's now like a hawk without a landing gear circling his quarry. He sees it clearly, but dare not strike.

[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 11, 2005 8:05 AM
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