NYTimes commentator Paul Krugman is an economist who tackles all sorts of issues beyond just the economy, and I’ve been reading him since the early 1990s when I first discovered the New York Times. While I find I agree with him on a great many issues, I cannot understand his recent downplaying of the problem of Social Security. Last week he ripped Senator Barak Obama a new orifice for having the audacity to suggest that the Social Security problem was actually a “crisis,” and while I agree that Sen. Obama could have chosen a better word, the fact of the matter is that it’s easier and cheaper to fix Social Security’s various problems sooner rather than later.
And, as the Washinton Post’s Ruth Marcus pointed out in her commentary today, even noted commentator and economist Paul Krugman agrees with me.
In a commentary that is a thing of beauty, Ms. Marcus fed Mr. Krugman his own words from prior commentaries going back to to 1996, and in the process she effectively points out that even he used to support:
“sensible proposals” to “slow the growth in benefit levels, gradually raise the retirement age . . . and — last but not least — raise taxes moderately now, rather than massively later.”
If Mr. Krugman has changed his mind for some reason, that’s fine. Everyone has a right to change their mind or refine their opinions over the course of a decade or so. But he should really come out and tell us which Paul Krugman we should listen to, the 1996-2001 version or the 2007 version.
In the process of fixing Social Security, we’ll probably figure out better how to fix the massive problems that are Medicare and Medicaid. And it’s an excellent development that most of the Democratic candidates for President have suggestions for how best to solve Social Security’s problems that differ not so much in degree but in approach – they have all accepted the basic tenant that Social Security needs to be fixed. I’ve been saying that we needed to fix Social Security with higher taxes, an older retirement age, and some version of reduced benefits ever since I was in college….
And I’m happy to see that Paul Krugman agrees with me.
Actually, this is exactly what Paul Krugman said about Marcus’ column:
The whole “Social Security needs fixing” thing just strikes me as a whole lot of woolgathering and an excuse to try and cut benefits to those who need them. I’ve never understood why people simply aren’t granted the option to “opt out”–get their SS savings to date refunded to them to invest in the market or spend as they wish.
Some folks are financially savvy enough to make better savings in the market than what SS would give them. Others are not. The option to
privatize one’s benefits should be there, but it shouldn’t be forced on those who can’t handle it.
Thanks for that blog entry, Martin. I’m not sure it’s an adequate response, but that’s just my personal opinion.
I never expected you to be a supporter of partial privatization, given your thoughts on other issues. I learned something new today.
Reduced benefits is necessary, and more importantly, it’s progressive and fair. Social Security isn’t really graduated today to account for people who have a lot of money saved up in private investments (401-ks, IRAs, stocks and bonds, mutual funds, etc.), so well-to-do folks are getting paid Social Security benefits that they don’t need. The same is true of Medicare, BTW.
So, in the process of cutting some benefits for well-off individuals, working-class and poor people can be guaranteed the benefits they were promised instead of punishing them for having the audacity to work in lower-paying jobs or not be born with a silver spoon jammed up their butts.
One of the major tenets of progressivism and liberalism is you don’t punish people for things outside their control, and pragmatism demand that you act in a way that benefits the most while hurting the fewest. Since benefit cuts (and increased taxes, and an increase in retirement age) will be necessary and across-the-board cuts wouldn’t be fair to anyone, pragmatism demands that cutting benefits to people who can afford the cuts most is the fairest thing to do.
Heh. I always like to keep ’em guessing. My rationale for partial privatization is always about choice–if someone truly wants to risk their retirement on the whims of the market, they should be free to do so, as long as they understand the risks. But I staunchly oppose forcing anyone into it who isn’t ready or able.
I would be content with reducing my benefits if it meant those who truly needed them in their golden years could get them. My mom, to use a wholly biased and anecdotal example, has been out of work for a long while now, and she relies on personal savings and her SS checks to stay afloat. Neither one or the other could do the trick, but both can.
I guess what I’m saying is that I strongly advocate making sure that SS stays solvent, but that people absolutely must build up their own retirement savings beyond that if they don’t want to be working well into their 80s.
Ruth Marcus, like many Democrats, has drunk the Kool-Aid of baseless fear. Medicare is in crisis. Medicaid is in crisis. Social Security is not in crisis. The program is currently salting away much more money than it’s paying out (in the SS Trust Fund), as it has been every year since it was “fixed” by Alan Greenspan in 1983. Under current law and with somewhat pessimistic assumptions, that will no longer be the case beginning about 2022, and it will then have to start tapping those 39 years of overpaymentsâ€”or, if you wish, of prudent savings. Using those same assumptions, sometime between 2042 and 2052 it will use up those savings, but even then (if there are no other changes), Social Security will not be “bankrupt”; continuing contributions would be sufficient to provide about 75% of promised benefits for many more decades.
The obvious fix, if we want to be prudent, is to remove the cap on FICA earnings. If that’s not prudent enough for you, include non-wage earnings. As long as some such fix is provided within the next few decades, promised Social Security benefits need not change. (Those benefits include disability and survivor benefits, by the way. It’s not just a retirement program, and that’s why even the savviest investors should not be allowed to opt out, Martin. It’s a program for social security.)
Republicans want you to think there’s a Social Security crisis because they want to wipe out the Trust Fund and steal the money we have all been putting into it since 1983. Marcus doesn’t know what she’s talking about. Krugman and Dean Baker and Mark Thoma do.
I generally agree with you about the doomsaying regarding SS, and you make an excellent point about the social safety net. Well played, sir. 😉
Thanks, Martin. These hard data, I think, sometimes get lost in the partisan rhetoric. I would add that with slightly more optimistic assumptions about long-term economic growth, SS would pay for itself forever, without changing the law at all.
And Brian, sorry I didn’t weigh in earlier on this matter when you wrote about it. It’s something I feel strongly about, and not just because at 67 I like getting my check every month. When FDR created SS, he included everyone (even those of us who could get along without it) because that created a broad constituency for the program. It was the smart thing to do politically: if it had been called Poor Assistance or Disability Welfare or Orphans’ Relief, it would have disappeared completely by now. The political calculation is unchanged, I think. If you don’t need it for yourself, your aged parents mayâ€”and then you won’t have to support them. That’s as true for the middle class as for the poor.
Thought-provoking post, as well as comments by Martin and Robert.
I’d take seriously the concerns of people like Ruth Marcus about Social Security if, in the same breath, they mentioned the real drain from entitlement programs.
Ron Paul (who I don’t support, but profess to a certain admiration for) hates them, but check out this answer to a question in the latest Rolling Stone:
He doesn’t even mention all the high-end weapons programs — often fanciful or even obsolete.
I know dismantlement of entitlement programs is not being discussed here — in fact, the opposite. But I’ll never understand those who’d like to see them dismantled.
What do you do with all the needy old people then? House them in armories like homeless people, just to keep them off the street and out of sight?
Won’t that be just as expensive, not to mention degrading to the American spirit?
If I sound like someone who hasn’t saved enough for retirement, that’s exactly what I — and millions of others — am.
If we put an end to those billion-dollar waste receptacles that are our military’s “high-end weapons programs,” we could put half that money into giving our troops the things they need–like body armor and properly protected vehicles, the other half into Social Security and Medicare, and never miss a cent.
People forget that the defense budget is governed by the foibles of people with agendas–some want to pay off their friends, others have “vanity projects” that they want to see completed at all costs–and our taxpayer dollars go down the drain as a result.
OK, I know I’m going to get flamed for this opinion but I can’t stay quiet on this. Russ, your comment on military spending being about “vanity projects” and paying off their friend I find insulting. While there is some of that present it is no where near as prevalent as many politicians want you to think. Back during the Regan era there was a senator on the defense over site committee who started wearing a gold plated cotter pin on his lapel when he found he was loosing his re-election race. He did this “in protest” of the military spending $500 per cotter pin on some contracts. While this was widely publicized on national news what the US public was never told was that he knew all about the charges as well as many others because they were LEGITIMATE military expenses. What was really happening was things like the stealth bomber and the SR71 that didn’t officially exist had to be paid for somehow. So a contractor would sell the Air Force a $1500 toilet seat and ship it along with a guidance gyro for a plane that wasn’t on the official books. This is how the military hides its Top Secret expenditures, and the one group that knows where all the hidden money is going is the congressional over site committee. I’m familiar with this because I was peripherally associated with one of the projects that got shut down when Mr. Golden Cotter Pin “Blew the whistle”. Now I agree pork belly spending needs to be trimmed but not at the expense of our national security, present or future.
Robert – I should have addressed this weeks ago, but better late than never, I guess:
Agreed totally. But Marcus suggests, reasonably in my opinion, that fixing Social Security will be easier than fixing the other two, and that the process of fixing Social Security will ease (if anything can) the process of fixing Medicare and Medicaid. Lessons learned on Social Security will theoretically be applied to the others, improving the probability of success.
And this isn’t a tax increase how exactly? If this is sufficient, great, but I simply don’t know if it will or not. And given the fact we can’t possibly anticipate the economic situation 75 years in the future (the future that the SSA is required to estimate), I don’t know that anyone knows.
I happen to agree that maybe it’ll be unnecessary, but that depends almost entirely on our ability to cut our national debt and keep our new recession from becoming a full out national depression. I have little faith in that, I’m afraid, which means that the “pessimistic assumptions” you mention are more likely than the “slight more optimistic assumptions” you also mention.
I understand that Social Security is a big deal, Robert, and as you say, not just because you like getting your check. Based on the overall economic weakness and changing demographics, something will have to be done (although I’d love to be wrong). And there’s no denying that the sooner you address a problem like this, the easier and cheaper it is to fix it. Believe it or not, I’m making a similar political calculation that FDR did – by both increasing public investment AND reducing payments in some graduated and incremental fashion, we’ll be able to keep Social Security from becoming a crisis.