Paul Krugman at CSIS,
Copyright Melissa Waage. Use as desired but please cite antigravitas
as the source for these notes.
Contents:
I.
The lecture
II.
Q&A
III.
Random notes
THE LECTURE
How the
system works
-Social insurance
-Redistributive
-not a
means tested benefitàlow administrative costs
Problem
-aging of
the baby boomers + increased American life expectancy = problem
-Is the
system really going broke? to those who want to
overhaul Social Security, “a surplus doesn’t count, a deficit does.”
Hypothetical example of a dedicated tax designed to aid hurricane
victims—sometimes will run a surplus, which will be needed when a hurricane
actually does hit
-Compare
the ~$4.5 trillion gap predicted for Social Security
to other shortfalls, such as that produced by the big Bush tax cut
Privatization
-Term
coined by the Right. Cato’s 1995 “Project on Social Security
Privatization” later remade as “Project on Social Security Choice”; web
documents purged of the original title. Heh.
-Is a
better rate of return available through private investment as opposed to Social
Security? Yes, sometimes. “It’s also true that my wife and I would have
more money if we took my mother-in-law’s savings and let her starve.”
The Bush
Plan
-people who
take the gov’t up on the private accounts option
“essentially mortgage [their] guaranteed Social Security benefits”
-Stock
market investment would be a bad way to bail out the system because “any notion
that you can do better…is predicated on the belief that borrowing money to
invest in stocks is a sound retirement strategy”
Fees
-Fees can
get pretty high. In
-One way to
hold fees down would be to have everybody investing in the same giant index
fund…which sort of negates the whole idea of “choice”
Why
privatize?
-The
reasons are philosophical. One side simply believes that the
government should not provide social insurance. This side believes the
program is illegitimate—there’s no way for the sides to truly compromise.
-“This is
the first time Bush has asked for anything resembling sacrifice”—and people
know about, understand these benefits so they aren’t buying it. Contrast
to tax cuts. Research shows that people don’t have a solid understanding
of the sacrifices involved in such cuts.
-The
conservative think tanks are curiously “flat footed” on this issue in public
debate. Krugman calls this “the revenge of the
echo chamber.” These guys have been planning this for years, but are not
prepared to face up to people who disagree.
QUESTION
AND ANSWER
Q.
What’s the 30-second elevator speech about what’s good about Social Security?
A. “It
protects your mother or grandmother from living on dog food.”
Q. Should
we allow the Social Security trustees to invest in stock market?
A.
Possible—but once again, borrowing to buy stocks? Greenspan argument on
privatization: if the program runs a surplus, the government will just rob the
trust fund again. PK rewords this argument as “stop me before I kill
again”
Q. Solution?
A. Slight
benefit cuts, slight revenue increases is the
solution. In 2042, SS will be bringing in 73 cents for every
dollar. Right now, U.S. Gov’t brings in 68
cents for every dollar. “I can’t get excited about the fact that 50 years
from now, SS will be in better financial shape than the U.S. Gov’t”
RANDOM
NOTES
After the
talk, PK notes that SS could be a great red state wedge issue.
On the
Metro platform, he talks about how SS privatization was one of his big beefs
with Bush during the 2000 elections. [I did not realize that]