Monday, January 03, 2005
Confusions About Social Security
Once again the amazing Paul Krugman serves up some much needed truth on the current Social Security debate. The Republicans once again are manufacturing a crisis, where there is none. Spread this article far and wide.
Confusions about Social Security
By Paul Krugman
The Economists' Voice
"There is a lot of confusion in the debate over Social Security privatization, much of it deliberate. This essay discusses the meaning of the trust fund, which privatizers declare either real or fictional at their convenience; the likely rate of return on private accounts, which has been greatly overstated; and the (ir)relevance of putative reductions in far future liabilities.
There are three main points of confusion in the Social Security debate (confusion that is deliberately created, for the most part, but never mind that for now). These are:
The meaning of the trust fund: in order to create a sense of crisis, proponents of privatization consider the trust fund either real or fictional, depending on what is convenient
The rate of return that can be expected on private accounts: privatizers claim that there is a huge free lunch from the creation of these accounts, a free lunch that is based on very dubious claims about future stock returns
How to think about implicit liabilities in the far future: privatizers brush aside the huge negative fiscal consequences of their plans in the short run, claiming that reductions in promised payments many decades in the future are an adequate offset"
Full Story Here
Confusions about Social Security
By Paul Krugman
The Economists' Voice
"There is a lot of confusion in the debate over Social Security privatization, much of it deliberate. This essay discusses the meaning of the trust fund, which privatizers declare either real or fictional at their convenience; the likely rate of return on private accounts, which has been greatly overstated; and the (ir)relevance of putative reductions in far future liabilities.
There are three main points of confusion in the Social Security debate (confusion that is deliberately created, for the most part, but never mind that for now). These are:
The meaning of the trust fund: in order to create a sense of crisis, proponents of privatization consider the trust fund either real or fictional, depending on what is convenient
The rate of return that can be expected on private accounts: privatizers claim that there is a huge free lunch from the creation of these accounts, a free lunch that is based on very dubious claims about future stock returns
How to think about implicit liabilities in the far future: privatizers brush aside the huge negative fiscal consequences of their plans in the short run, claiming that reductions in promised payments many decades in the future are an adequate offset"
Full Story Here
