Krugman vs. Krugman
Greg Mankiw presents a quote and article by Paul Krugman that, if you didn’t know any better you’d swear were written by different people.
Krugman on This Week:
Paul Krugman: Social Security, if you go through the federal government, piece-by-piece, and see which programs are seriously underfunded and which are close to being completely funded, social security is one of the best. It’s not for certain that social security has a problem. And it’s something that the right has always wanted to kill, not because it doesn’t work but because it does. And Obama to go after this program, at this time, you have to wonder. All of my progressive friends are saying what on earth is going through his mind to raise this
Krugman from the New York Times:
Generous benefits for the elderly are feasible as long as there are relatively few retirees compared with the number of taxpaying workers — which is the current situation, because the baby boomers swell the workforce. In 2010, however, the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits.
The budgetary effects of this demographic tidal wave are straightforward to compute, but so huge as almost to defy comprehension. Mr. Peterson, the chairman of the Blackstone Group, a private investment bank, informs us that ”the combined Federal cost of Social Security and Medicare, expressed as a share of workers’ taxable payroll, is officially projected to rise from the already burdensome 17 percent in 1995 to between 35 and 55 percent in 2040. And this figure does not include the many other costs — from nursing homes to civil service and military pensions — that are destined to grow along with the age wave.”
Must be tough living with such schizophrenia.
However, all snarkiness aside, In the New York Times article Krugman is discussing both Social Security and Medicare. The problems facing Social Security aren’t all that serious. Some moderate policies could bring that program back into balance at least for awhile. And while I think this is the less desirable solution1, it isn’t that horrible. Medicare is indeed the 5,000 pound gorilla that could end up crippling the economy.
1My view is that Social Security is “fixed” periodically but that these fixes never work for very long. A more permanent solution might be some sort of forced savings that has everyone putting money into a diversified investment fund and manages disbursements to avoid market fluctuations.