A couple of Krugman howlers – Krugman in Wonderland
Every once in a while, Paul Krugman gives us the Ultimate Howlers, and now he seems to have eaten his Wheaties.
First, on Social Security, he says this:
I’ve written about this repeatedly in the past, but here it is again: Social Security is a program that is part of the federal budget, but is by law supported by a dedicated source of revenue. This means that there are two ways to look at the program’s finances: in legal terms, or as part of the broader budget picture.
In legal terms, the program is funded not just by today’s payroll taxes, but by accumulated past surpluses — the trust fund. If there’s a year when payroll receipts fall short of benefits, but there are still trillions of dollars in the trust fund, what happens is, precisely, nothing — the program has the funds it needs to operate, without need for any Congressional action.
Alternatively, you can think about Social Security as just part of the federal budget. But in that case, it’s just part of the federal budget; it doesn’t have either surpluses or deficits, no more than the defense budget.
Both views are valid, depending on what questions you’re trying to answer.
What you can’t do is insist that the trust fund is meaningless, because SS is just part of the budget, then claim that some crisis arises when receipts fall short of payments, because SS is a standalone program. (Emphasis mine)
Despite the claims by Algore when he was running for president 11 years ago that he would put SS funds in a “lockbox,” there IS no “lockbox.” The “trust fund” of what Krugman writes are government bonds, IOUs that only can be redeemed either by selling more bonds or with future tax revenues.
The vaunted “trust fund” is no trust fund at all. It is a piece of a fictitious Rob-Peter-to-Pay-Paul scheme that any one can recognized to be a fraud.
On another post, one about “weaponized Keynesianism” (and I actually like the phrase, which apparently was coined by Barney Frank, Krugman writes this:
The first thing to say is that liberals shouldn’t engage in mirror-image thinking, and imagine that spending we dislike somehow lacks the job-creating virtues of spending we like. Economics, as I say often, is not a morality play. As far as creating aggregate demand is concerned, spending is spending – public spending is as good as but also no better than private spending, spending on bombs is as good as spending on public parks. As I pointed out not long ago, a perceived threat of alien invasion, by getting us to spend on anti-invasion measures, would quickly restore full employment, even though the spending would be on totally useless object.
While I realize that Krugman is writing from a pure Keynesian point of view that says it is the spending and ONLY the spending that matters, it seems to me that where resources are directed DOES matter. During WWII, Americans had jobs and pockets full of money, but there was little to buy and a huge portion of the workforce was in the trenches in Europe and Asia or being shot out of the skies. Yes, the GDP was high, but Americans were not manufacturing wealth; it was destruction of wealth.
Again, I realize that Keynesians see only aggregates and that GDP making bombs is as good as GDP making bread. Frankly, I’d rather eat bread.
William L. Anderson is an author and an associate professor of economics at Frostburg State University in Maryland. He is also an adjunct scholar with the Mackinac Center for Public Policy as well as for the Ludwig von Mises Institute in Alabama.
Read more at “Krugman-in-Wonderland”
