Paul Krugman says there is no Problem with Social Security showing why we shouldn’t listen to Keynesians

Posted by PITHOCRATES - March 16th, 2013

Week in Review

Paul Krugman is a Keynesian economist.  He even won a Nobel Prize.  And the Left loves him.  Because he says it’s okay for the government to spend money it doesn’t have.  In fact, government should be spending more.  The reason why the stimulus failed according to Krugman is that the $800 billion wasn’t enough.  Which is why the Left loves this guy.  Because he says things like spending $800 billion is not spending enough.  Giving them moral authority to spend more.  For, after all, this guy is a Nobel Prize winning economist.  So he must know what he’s talking about.

Then there are real economists. People who actually understand how business and the economy as a whole works.  People of the classical school of economics.  The Austrian School.  And the Chicago school.  Who don’t think much of Mr. Krugman.  Or Keynesian economics.  For all they see is a historical record littered with failure.  They know why those in government only listen to Keynesian economists.  Because they simply want to expand government spending.  For they like having all of that money flow through their hands.  While reputable economists want that money where it benefits the economy most.  In the private sector.

Krugman gets a lot of air time.  Because he advances the government’s agenda.  Which the mainstream media is helping the president pass.  So you see him on television a lot.  And sometimes someone with a real understanding of the economy will have a little dustup with him.  As someone did recently on ABC.  The topic was Social Security and the Social Security Trust Fund (SSTF).  Senator Ron Johnson (R, WI) said Social Security was going bankrupt.  Krugman said Johnson’s facts were all wrong.  That Social Security had a dedicated revenue stream.  And the SSTF was fat with investments not only earning interest but can be used to pay benefits.  Bruce Krasting does a little fact checking.  Here are some excerpts (note: this article appears to have missed the editing process and contains quite a few typos some of which we corrected) (see Paul Krugman Has Got His Social Security Facts Wrong by Bruce Krasting posted 3/11/2013 on Business Insider).

CR[S] [Congressional Research Service] had this to say about the TF for FERS [Federal Employees’ Retirement Service]

The assets in private-sector pension funds represent a “store of wealth” that firms can use to meet pension obligations as they come due. The CSRDF [Civil Service Retirement and Disability Fund], however, is not a store of wealth for the federal government.

Got that PK [Paul Krugman]? The CR[S] says there is no wealth (aka money) in the TF:

The OMB [Office and Management and Budget] provides more clarity on TFs. From the Budget of the United States Government, Fiscal Year 2010: Analytical Perspectives

Balances in the trust fund are available for future benefit payments and other trust fund expenditures, but only in a bookkeeping sense.

Ah! There is no money in the TFs. They are bookkeeping entries. OMB concurs with CR[S] – TFs are not a store of wealth. More:

The holdings of the trust funds are not assets of the Government as a whole that can be drawn down in the future to fund benefits.

How many ways does OMB have to say this to convince PK? Another:

The existence of large trust fund balances, therefore, does not, by itself, increase the Government’s ability to pay benefits.

Is this getting through to progressives like PK? This is not the tin hats talking PK. This is your “guys”.

Senator Johnson made the statement that the SSTF accounting was similar to a person who writes themselves an IOU for $20, and then somehow believes he actually has an asset. PK objected. This is what the OMB has to say about it; no wiggle room for PK with this:

These trust fund balances are assets of the program agencies and corresponding liabilities of the Treasury, netting to zero for the Government as a whole.

Got that PK? The Senator was correct. Writing an IOU to oneself nets to zero. If the OMB was the arbiter of the TV debate, it would have said that the Senator had the facts, and Krugman was blowing smoke.

Let me explain this in another way.  Remember the movie Dumb And Dumber with Jim Carrey and Jeff Daniels?  Where they drive to Colorado to return a women’s briefcase?  That briefcase was full of money and was supposed to pay a ransom to get that woman’s husband back.  Jim Carrey’s character picked it up before the kidnappers could because he had just driven the woman to the airport and was smitten with her and wanted to return it to her.  So she would marry him and they could live happily ever after.  And hence the road-trip to Colorado to return it.  Much hilarity ensued.  But then that briefcase opened.  And the boys saw all of that money.  These guys who had no money and no place to sleep.  In a cold Colorado winter.  And there was all that money.  So they did the only responsible thing.  They borrowed from that briefcase.  Leaving an IOU each time they did.  Then they bought some bare necessities.  The finest hotel suite.  A Lamborghini sports car.  New designer clothes.  Etc.  You know, bare necessities.  Near the end of the movie the briefcase is opened by the kidnapper who only sees slips of papers.  Their IOUs.  The kidnapper is enraged.  And Jim Carrey’s character reassures him that those IOUs are as good as gold.  Because they intend on repaying all of that money.  Even though each of them is dirt poor and unlikely to earn that amount of money in their remaining lifetime.

That briefcase is the Social Security Trust Fund.  All of that money poured into the Trust Fund.  While all those politicians looked at it.  And then thought about all the spending they wanted to do.  So they did the only responsible thing.  They spent the money in the Trust Fund and left IOUs in its place.  IOUs that they never will repay.  And everyone knows this.  Except, perhaps, Paul Krugman.  All rational people know how the government will replace those IOUs.  They will print money as they need it to pay benefits.  Causing even more inflation.  Raising prices further.  Forcing our retirees who paid into the Trust Fund to get by on less in their retirement.  Basically like what is happening right now.  And will only get worse.

You can’t loan money to yourself.  You can’t spend your personal savings and replace it with an IOU.  Because it nets out.  For if you borrow money you owe money.  Which means you’re doing stuff on both sides of the ledger.  And when you figure out your net worth (subtracting what you owe from what you have) you find there is little there.  The balance of your savings less the sum total of your IOUs is what you have to live on in retirement.  Nothing more.  For once you spent your savings they’re gone forever.  Just like that money in the Social Security Trust Fund.  They spent it.  And it’s gone forever.

Paul Krugman apparently doesn’t understand this.  As do few Keynesians.  For they keep spending money.  And running up more debt.  But never see any problem.  Unlike real economists.  Who, sadly, are not advising the government.  For they refuse to tell the government what they want to hear.  Like Paul Krugman and his fellow Keynesians.  Who say things like they’re just not spending enough.  Which is what every politician wants to hear.  No matter how ridiculous or asinine it may be.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , ,

Liberals are Exasperated by Republicans and their Responsible Governing

Posted by PITHOCRATES - July 2nd, 2011

If we can’t Afford Tax Cuts we can’t Afford more Spending

They’re still arguing about the budget.  And trying to strike a deal that will allow them to raise the debt limit.  Republicans are trying to get spending cuts from the Democrats.  The Democrats want to get the Republicans to say ‘yes’ to increasing taxes.  And President Obama is trying to broker a bipartisan deal where the Democrats get what they want.  And the Republicans let them get what they want (see Obama says ‘nothing can be off-limits’ in budget debate; Republicans say tax increases are by Associated Press posted 7/2/2011 on The Washington Post).

President Barack Obama said Saturday that “nothing can be off-limits” in the budget debate — even though Republicans have said tax increases are. The president said every tax break and federal program must come under scrutiny…

He also renewed his call for Congress to eliminate some tax breaks for the well-off as part of any agreement. Republicans want deep spending cuts without any tax increases while Obama and Democrats call for what they term a “balanced” approach. That means one that also includes new revenue in the form of higher taxes for some, though Democrats steer clear of using phrases like “tax increases” or “higher taxes.”

“Now, it would be nice if we could keep every tax break, but we can’t afford them,” Obama said. “Because if we choose to keep those tax breaks for millionaires and billionaires, or for hedge fund managers and corporate jet owners, or for oil and gas companies pulling in huge profits without our help — then we’ll have to make even deeper cuts somewhere else.”

Obama has a point.  The government can’t afford a lot of things.  So he should listen to his own advice.  And STOP spending so much.  It has a proven track record to cut deficits.  And it works every time.  Spending too much?  Well stop spending too much.  And presto, spending problem goes away.  Problem solved.  Without having to raise the debt limit.  Which would only make a bad situation worse.  Because if you’re spending too much spending more will only make your ‘spending too much’ problem worse.  Duh.  You don’t have to be an Ivy League trained economist to understand this.

Ignore the Man behind the Curtain

President Obama has had about enough of the Republicans’ obstructionism.  And their trying to govern responsibly.  Can’t the Republicans understand that he’s right?  And they’re wrong?  This representative government would be a whole lot easier if the Republicans would just shut up and do what they’re told.  To be good and mind their president (see Obama’s Risky Belittling Tactic by Lee Siegel posted 7/1/2011 on The Daily Beast).

The story of The One, the Messianic Figure, the Soulful Black Man Come to Redeem a Fallen America, the Quintessential Stranger Who Was Thus the Quintessential Figure of American Democracy—the thrilling, universal tale of Obama’s rise through a torn family with a world-wandering mother and an absent father had become tired and irrelevant. It was all used up.

Instead, you were left with the off-putting image of the dry, arrogant law professor, with his superior intellectual airs, that had occasionally appeared during the last presidential campaign. Back then, that unlovely side of the candidate was quickly eclipsed by The One’s universal tale. Now it has emerged as the only storyline the president can muster. Which means that Obama and the Democrats could be in big trouble.

I guess we should ignore the man behind the curtain.  For the president is no different that the Great and Powerful Oz.  More silly old man than messianic.  For he can play the role of philosopher king.  But he can’t be one.  And he sure doesn’t like when these young whippersnappers in the Republican Party play on his ideological lawn.

Or to frame it another way, imagine Obama as the right sees him, as a substitute teacher from another town who has no legitimacy in their classroom. He lectures, he scolds, he wants everyone to stay after school. He has no idea what the lives of his students are like: their parents looking for work; their early marriages and pregnancies and all the attendant difficulties and mishaps; the way they pour their frustrated ambitions into love and hope for their children. He sees them as kids who need the guidance of a grown-up. They see him as refusing to understand their grown-up problems.

So it is hardly surprising that so many of the current crop of Republican presidential hopefuls, or potential hopefuls, strike liberals as the equivalent of problem children. How many times have we read that Palin “didn’t do her homework” before a debate or a public appearance? Gingrich is portrayed as a juvenile delinquent. Herman Cain, we learn, is popular for speaking out of turn. With all her adopted children and her tragic pregnancy, Bachmann comes across like that teenage girl who dreamily draws hearts (and daggers) in her textbook while the teacher is talking. Even the more polished, informed, self-possessed Romney seems cursed with an Eddie Haskell air of insincerity and deceitfulness. “Hi, Ms. Obama! Don’t you look swell in that pretty new dress.”

Arrogant.  Condescending.  Professorial.  Elitist.  Ladies and gentlemen, I give you the president of the United States.  And his liberal base.

Tax Cuts are Recurring Stimulus

True liberals in America are only about 20% of the population.  But they have big mouths.  Or big bully pulpits.  So their politics seems more universally accepted than they really are.  Who are they?  College professors who live in a mystical fairyland outside the realm of reality (the college campus).  The guilty rich who’ve inherited their wealth.  Big Government politicians (liberal Democrats and RINO Republicans).  The mainstream media who yearn for Walter Cronkite celebrity.  Celebrities who haven’t a clue about economics, history or geopolitics but yearn to be seen as smart and enlightened.  (Just like those in the mainstream media who yearn for Walter Cronkite celebrity).  And most economists who bow down and worship John Maynard Keynes.  And his activist government policies to control the free market.  Because they’re smarter than the common, stupid masses.  At least they think they are.  Nay, in their minds they know they are.

Paul Krugman is a Keynesian.  And he likes to throw up a chart or graph on The New York Times to show how right he and Keynes are.  And how wrong the Keynesian-deniers are.  But it’s guys like him that Mark Twain had in mind when he said “figures don’t lie, but liars figure.”  For that’s something Krugman likes to do.  Use facts and figures to his advantage whenever he can.  No matter how wrong he is (see Cash Is Not the Problem by Paul Krugman posted 7/2/2011 on The New York Times).

These aren’t abstruse points. On the contrary, the fact that corporations aren’t investing as much as they could has become a major right-wing talking point, with repeated claims that companies are holding back because of political uncertainty. Actually, they’re holding back because they don’t see enough consumer demand — but in any case, cash is not the problem.

So it’s truly remarkable — an impressive case of doublethink — that the same people who decry the fact that firms and banks are sitting on cash insist that it’s totally vital that we give those firms and banks more cash, so that they can invest and create jobs.

Not investing as much as they could?  Give those firms and banks more money (by cutting taxes)?  Krugman is as much an arrogant, condescending, professorial elitist as Obama is.  I mean, who are they to deign to allow people to keep their own money?

Krugman is right about why they’re sitting on all that cash.  There is a lack of demand.  Because of the high unemployment and the depressing economic outlook.  But he’s wrong about the tax cuts.  As he always is.  As his type (Big Government Keynesians) always are.  They prefer federal stimulus spending.  Which always fails to stimulate.  Because it isn’t recurring.  Whereas tax cuts are.  Because they make bigger paychecks.  Week after week.  Whereas stimulus spending is more like a bonus check.  Once spent it’s gone.  So why would businesses invest in new capacity and hire more people for a temporary increase in consumer spending?  For after that stimulus is spent, what are they supposed to do then with all that excess capacity?

That’s why they’re sitting on all that cash.  Political uncertainty.  Especially about the government’s fiscal and regulatory policies.  Which determines what their costs will be.  And how much disposable cash consumers will have.  Because high taxes and costly regulations raise costs for businesses.  And prices for consumers.  Who ultimately always pay for the high cost of government.

The Laffer Curve gets the Last Laugh

Ronald Reagan wasn’t a Keynesian.  And he understood the power of tax cuts (see IBD’s Editorial: A Laffer Curve For Liberals posted 7/1/2011 on Investors.com).

Remember the left’s contempt for the Laffer Curve — which posited that certain tax cuts will pay for themselves by accelerating economic growth? Well, now they’re pushing their own version of voodoo economics.

Largely overlooked in the coverage of President Obama’s latest press conference was his call for another round of deficit-fueled stimulus spending as part of a debt reduction package.

Wait, what?  We can’t afford tax cuts but we can afford another round of deficit-fueled stimulus?  What kind of asinine logic is that?

Ronald Reagan based his economic policies on the Laffer Curve.  His Reaganomics cut tax rates.  The economy grew.  Federal tax receipts almost doubled.  Proving the Laffer Curve.  But because Congress spent money faster than Washington collected it, the deficit grew (which was a spending problem, not a revenue problem).  Because Big Government Keynesians hated that it worked, they belittled the policies as ‘trickle-down’ and ‘voodoo economics’.

That’s what the left’s favorite economist — Paul Krugman — argued in late 2009: “Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue.”

Krugman later wrote that “people like me have been hesitant to make this argument loudly, for fear of being cast as the left equivalent of Arthur Laffer.”

By spending more Krugman means that the government should spend more.  Tax and spend.  Borrow and spend.  Print and spend.  Just spend.  Run up huge deficits in the short term.  Because it will unleash a tsunami of economic activity that will rain money down on Washington.  Much like Reaganomics did with tax cuts.  And how has this worked?

Of course, this is the same Krugman who said that “the notion that tax cuts pay for themselves has no empirical support.”

Except there’s more evidence to support Laffer than Krugman. Reagan’s tax cuts helped power the ’80s boom, which eventually pushed down deficits. The cut in capital gains taxes under Clinton helped spark a market rally and a huge surge in tax revenues from investors.

And what do we have to show from Obama’s historic “pay for itself” stimulus spending spree? A recovery weaker than any since the Great Depression. A jobless rate that — two years after the recession ended — remains above 9%.  Three years of $1 trillion-plus deficits. A debt burden that’s climbed more than 40%. And no hope in sight of any of this getting much better.

Not well.  In fact, their policies have a track record of dismal failure.  But it’s never the fault of the policies.  It always because of some other misbehaving force.  Like employers who sit on piles of money instead of hiring.  Or consumers who sit on money instead of spending it with abandon.  For if they only would do what they’re supposed to do their policies would work.  So it’s not their fault.  It’s all these people who are just too stupid.

Apparently the people were smarter during the Eighties.  And the Nineties.  When there were economic booms.

Liberals are Arrogant, Condescending, Professorial Elitists

The problem with liberals is that they are arrogant, condescending, professorial elitists.  Whose idea of bipartisanship is for the Republicans to shut up and be their bitch.  They cannot conceive that they or their policies are wrong.  And when they are they blame everyone else.  Scolding American business and the American consumer for misbehaving.  They have had it up to here (hand under chin) with our impertinence and are this close (thumb and index finger about an inch apart) to taking away our toys.  And by toys I mean our wealth.  And our liberty.

The height of this audacity is their lecturing us on the irresponsibility of tax cuts while they argue for more spending.  That’s what the budget debate is all about.  To get the debt limit raised so they can spend more.  Talk about doublethink.  But this is what happens when your government is full of Keynesians.  And they listen to Keynesian economists.  They throw all reason out the window.  And double-down on bad ideology that has a track record of failure.  Because to do otherwise would diminish their power.  And return the government to the limited one envisioned by the Founding Fathers.  Which is something they could never have.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , ,