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