Monday, April 04, 2005

More Rational Action

He said this is his "final defense" of Krugman, but we'll see. There's really no need for him to worry about Godwin's law coming into play (which I find a silly thing to think about at all).
So the first question, now that Mr. Eidelbus has provided me with a transcript of the debate, is over PK's "rambling." I've now looked at the comments in question. The first paragraph of Krugman's answer has little to do with the point he ends up making — it is a response to Tanner's point, and Krugman is only saying that redeeming Trust Fund bonds will necessitate tax increases if the rest of government runs a deficit financed by those bonds.

If, when Eidelbus says that "Krugman's reply was as meandering as a sine curve along the x-axis, until he finally got to the crux of his argument," he is only referring to this paragraph, then I apologize for my claims that he wasn't paying attention.
By George, I think he's starting to get it. That's what set the tone for the rest of Krugman's reply, which as a whole I still found meandering. But let's face it, Krugman has a tendency to babble, and a sentence like this is just not clear when he starts on one point and tries to move to another:
If you want to say that doesn't matter, because Social Security is just part of the Federal government, well, that's another point of view, but in that case it's just part of the Federal government.
When someone speaks in an excited manner and repeats himself, couldn't a statement like this one above sound confusing?
So does Krugman actually want to throw the Payroll Tax in with the rest of government? Or is he just making a point about the two differing ways of conceptualizing government, without pledging allegiance to either?
Knowing Krugman's ideology, it was obvious to me that he offered the "lumping" option because that's precisely what he believes. Look at his remarks throughout the debate. Notice that he called the payroll tax "regressive," and he said rolling back "half" of the "Bush tax cuts" would pay for Social Security. He's not talking about increasing the payroll tax, or cutting benefits, so what could he possibly be talking about? Think about it.
...he did not make this point in order to say that the Payroll Tax should be mixed in with general revenue in a normative sense. Period.
Oh, Krugman wouldn't say that directly, but he's made his beliefs abundantly clear. Again, think about it. Rolling back "half" of the "Bush tax cuts" to shore up Social Security means what? It means Krugman wants to use income taxes (and perhaps capital gains taxes) when payroll taxes are insufficient. Well, so much for a system supposedly funded by a "dedicated tax." Don't take my word for it, or the SSA's -- that's what Krugman said himself. So if we need to rely on other tax revenues, why are we lying to ourselves about the "dedicated tax"? That's my entire point. Let's be honest about what we're doing.
Eidelbus says that claiming Social Security is solvent in this case is "like saying my maxed-out Visa is no problem, because I'll meet the payments with cash advances from my Discover." This comparison is painfully inadequate. The Social Security system is not a maxed-out Visa — it took in real money from real people which was then invested in the rest of the government. The rest of the government then ran deficits, spending this saved Social Security income.
At least this time isn't blatant misrepresentation, but I said a bit more than that which clarified my point. Then again, he's emulating his idol with an eery preciseness. He's a Columbia student...maybe he's in the journalism school, with a bright future at the Times? Or CBS?

What I said was, "Claiming it's solvent because it holds bonds is like saying my maxed-out Visa is no problem, because I'll meet the payments with cash advances from my Discover. What happens when I have to pay back the Discover?" [emphasis added this time]

Social Security may have taken in "real money" from people, but it was borrowed by Congress. It's therefore just a loan to ourselves, a very simple point that seems to confuse a lot of people. Furthermore, my comparison does not deal with the nature of the loan, but how it's repaid. If I pay one credit card using cash advances from another, obviously it's still the same person paying. So what's so different about one branch of government paying the other (i.e. the Social Security "trust fund" redeeming all its Treasury holdings), when the money still has to come from the same group (i.e. taxpayers)?
It is now the duty of the rest of government to pay back these deficits, not the duty of Social Security. Since the General Fund lacks any plan for making these payments, we could say that government as a whole is insolvent (and not Social Security specifically.) Or we could say that Social Security is solvent until 2041, and the General Fund is not solvent now. Simple enough.
All along, this young man doesn't seem to "get it" that we are going to repay ourselves, plus interest. When the Social Security "trust fund" has to redeem the first bonds, just who will the Treasury get the money from? It sure won't be a fat, jolly guy in a red suit. It certainly won't come out of Congress' and the President's paychecks. It'll come from our taxes.

It's very simple for the Treasury to pay back the bonds, plus interest: Congress and the President agree to raise taxes, and/or they cut spending. End of story. What's so hard to understand?
If you can sense my frustration with the Economics end of this argument, good for you. I don't think I've said much new in this round.
That much is true. I must admit being dismayed that this young man doesn't realize the nature of the "trust fund" and how it's going to be paid back. Certain taxpayer advocacy groups have warned since the early 1990s (and probably before then, I first took notice in the early 1990s) about the legislated looting of the trust fund.

What's so hard to understand? We've been told for two decades about a "trust fund," and most Americans aren't even cognizant that it was loaned to Congress. In 2027, we'll have to redeem $200 billion worth of the bonds, which comes straight from us. Like I said, had we done this in the private sector with a company's pension fund, we'd be going to jail.

He revealed a little more about himself, and I guess he expected me to be psychic and realize the nature of his domain name? My own surname isn't exactly common, either, and I don't expect people to recognize "Eidelbus" as a proper name. (Coincidentally, I know of only nine Eidelbus in the world. There's a Zach Eidelbus somewhere, but my knowledge of him is limited to search engine results.)


Blogger Brad Warbiany said...

Wow. This guy is truly maddening. It's like he's saying "Well he and I are saying the same thing, but because I call it a trust fund it really is one, even though we'll be the ones to pay it back later, but we can just call it a trust fund because that means that Social Security itself isn't insolvent, if you assume that the trust fund was actually a real trust fund, which it isn't, but in a bookkeeping sense, it sort of is."

Sorry for the rambling, but that's the most sense I could make of him.

What this guy fails to understand is that we are all working with the same math. And what he's saying is 100% accurate, in that if you assume SS is solvent (i.e. assuming the trust fund has to be treated as if it exists), it's the rest of the government that's is insolvent. So does he suggest massive slashing of general revenue spending to shore up the rest of government? I'll bet not, I think he'd support raising income taxes to suit. Which doesn't change Social Security's solvency, it just means you get the money from a different pocket.

What we're arguing, on the other hand, is that this is a bookkeeping trick, specifically designed to be deceptive. We simply believe that if the actual explanation of the real situation is laid out, it will result in people advocating change. We believe that the average taxpayer doesn't understand the issue, because they've been led to believe, incorrectly, that there is some "trust fund" somewhere that will pay this back, not their own pockets.

And THAT is why these lefties are so adamant about characterizing the debate their way. They know the answer is "raise taxes". But they don't want to let the people know that, because the people don't like high taxes. It's that simple. If they're honest, they lose. If they keep up the same rhetoric, however, and people believe incorrectly in a "lock box" for the "trust fund", then they don't have to accept any real change.


Monday, April 04, 2005 7:46:00 PM  
Blogger Perry Eidelbus said...

Precisely. It all comes down to the incidence of the new tax. I could accept that Social Security will start depending on other tax revenue. I just want us to be honest about it, and admit that we're still raising taxes.

Krugman said more than once that reversing "half" of "the Bush tax cuts" would pay for Social Security's funding. And his own numbers over the "infinite horizon" are big. Very big. He just won't come out and say it: we need a huge tax increase to keep Social Security going as it is.

Tuesday, April 05, 2005 12:10:00 AM  

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