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On Senator Ron Johnson Vs Krugman

Bruce Krasting's picture




 

 

rjpk

 

Paul Krugman had another of his nasty moment on TV Sunday (ABC -Link) when he took on Senator Ron Johnson (R, WI). The topic was Social Security. I want to throw my two cents into this fray.

 

Senator Johnson made the comment:

 

Social Security is in danger of “going broke” unless action is taken. “When I hear people saying Social Security is solvent to the year 2035, it’s not.”

 

Krugman fired back with:

 

Your facts are false. The Social Security thing—Social Security, it has a dedicated revenue base, it has a trust fund based on that dedicated revenue base. You can’t change the rules midstream and say, ‘Oh well, suddenly the trust fund doesn’t count.’ ”

 

Is SS going broke as the Senator claims? Or is Krugman right, when he says that SS is solid because it has a big Trust Fund?

 

There is not much 'out-there' on this topic that could could convince either side. You have the vast majority of the conservative thinkers/writers who have concluded that the SSTF is a sham, and you have all of the progressives who see it in precisely the opposite light.

I would like to use two credible sources on this issue in an attempt to determine who's right. The Office and Management and Budget (OMB) has opined on this, so has the Congressional Research Service (CRS). I think these sources are as credible as can be had. The CRE is supposed to be apolitical, while the OMB is decidedly political. The following information from OMB comes from 2010, a period when Peter Orszag was the boss at OMB. Given that Pete was running the show, one would have anticipated a Populist 'spin' from OMB on the question of TFs; not the case at all.

CRS made the following observations regarding the Trust Fund for the Federal Employee Retirement Fund (FERS). I'm not going to spend a 1000 words convincing you that FERS = SS. (But if PK asks me to, I will). They are very similar entities, they collect revenues, they invest surpluses in Special Issue Treasury Securities and they make benefit payments to covered workers.

 

CRE had this to say about the TF for FERS (Link):

 

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, however, is not a store of wealth for the federal government.

 

Got that PK? The CRE says there is no wealth (aka money) in the TF:

 

The OMB provides more clarity on TFs. From the Budget of the United States Government, Fiscal Year 2010: Analytical Perspectives (Link)

 

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 CRE - 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.

Krugman, on the other hand, is claiming victory. He still believes that the SSTF has real fairy dust in it. He maintains that he alone has the facts. In his typically snarky manner:: (Link)

 

I have to say, it’s extremely telling that conservative Republicans don’t seem able to make their case without resorting, right from the beginning, to obviously dumb fallacies.

 

Who's right? PK or the Senator? Which side is suffering from "dumb fallacies?" This is a critically important point to resolve. Either we continue to live in PK's fantasy land, or we recognize that SS is a here-and-now issue. There is no middle ground. One side or the other is "right" on this one. For the US, it's a make-or-break issue.

 

Note:

Where did the 'money' go that PK thinks is available today? It was spent years ago.

The 'economic miracle' of Bill Clinton was bought with money looted from SS. Bill sucked out $565b in his eight years. No one even noticed.

George Bush really raided SS. A total of $1.5T leaked out during his years. Who 'paid' for Iraq and Afghanistan? SS did.

If anyone is upset about the status quo, they can point to either a Republican or a Democrat. They're equally to blame. But looking backward, and laying blame, is a fool's game. The fact is the money is gone and SS is Paygo today. It's running big annual deficits. SS will produce $75b of red ink in 2013 (equivalent to 10% of the deficit). The deficits will pass $100b in 2016 and explode from there on. The beast is howling - and Krugman thinks it's his cat purring.

 

Smear

 

The

 

Truth

 

 

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Mon, 03/11/2013 - 14:19 | 3319869 the grateful un...
the grateful unemployed's picture

people like to make fun of Al Gore, and his SSN lock box, and his early take on Global Warming, and his anti-Iraq war position. hmmm

Mon, 03/11/2013 - 14:04 | 3319786 Accounting101
Accounting101's picture

You are confusing SS with a pension system which decidedly it's not. That hypothetical worker you mentioned isn't having his $1,200 per year SS tax put into a box with his name on it for safe keeping. His SS tax is being used to provide benefits to current beneficiaries. When said worker retires and begins collecting SS, current workers will provide his benefits. That is how the entire system was set up from the beginning.

Please, no shit about worker to retiree ratios. The actuaries who set up the system knew full well the amount of workers relative to retirees would decrease. It was inevitable.

Mon, 03/11/2013 - 16:13 | 3320372 hootowl
hootowl's picture

Social Security was established nearly 40 years before SCOTUS decided it was OK to murder nearly 60 million of our future citizen workers before they were even born.  Great central planning!!!

STARVE THE BEAST!!!

Mon, 03/11/2013 - 15:50 | 3320247 daveO
daveO's picture

Not so much, if retirement age was risen. This too is politically un-doable. Beginning about 15 yrs ago, there are now millions drawing SSI(disability) who used to work and pay in.  

Mon, 03/11/2013 - 13:42 | 3319688 madcows
madcows's picture

I used to think that every paycheck I got had a little bit put into a special SS lock box, just for me, when I reached retirement age.  THEN, I learned that the "money" had already been given to retired folks, and all I had was promises.  Even worse, those promises were gobbled up for vote buying, and replaced with "Treasuries"... even worse promises.  Poor Paul, he still thinks that those treasuries are good, and if they happen to be not good, then the Gvmt can mint him a trillion dollar retirement coin.  I honestly think Kruggy isn't that stupid, and that he really just enjoys getting people fired up.  Either that, or he's like Michael Moore - The post office is the government, they don't need to be profitable.  This is all too Orwellian and Kafka-esque.

Mon, 03/11/2013 - 13:39 | 3319681 the grateful un...
the grateful unemployed's picture

well there you go again Bruce, Krugman said SSN is solid because it has a a dedicated revenue base, which is to say its the third rail in American politics. and furthermore among the wide and varied programs, the retirees payments is probably the most dedicated stream of payments. I know you have a little partisan angst going here, let me ask the question, should Bush have been allowed to privatize SSN, should Obama make it a priority as well. [my op is the event of a deflationary collapse that SSN retirees will hold their own, or actually gain, if the the politicians leave retiree payments alone, and the price of everything else falls dramatically, because these people sure as hell are losing their ass to stealth inflation, zero colas, and colas that go to medicare kickbacks. a bit of deflation is just what the working poor in this country need.]

Mon, 03/11/2013 - 14:08 | 3319802 Encroaching Darkness
Encroaching Darkness's picture

"Krugman said SSN is solid because it has a a dedicated revenue base, which is to say its the third rail in American politics."  (Agreed, politicians will never do what is necessary to reform it).

"should Bush have been allowed to privatize SSN, should Obama make it a priority as well."  See above; getting the government OUT of the retirement savings racket is about the only thing that could save retirement for the majority of Americans, should have been done long ago (SS never should have started). That FDR felt it necessary to lie to BOTH the public and the SCOTUS (insurance vs. welfare, maximum impact of taxation, etc.) says a lot about how deceptive the whole program has always been. That it cannot be reformed (as above) speaks volumes about how "dumbed down" the education cartel has made most Americans.

"my op is the event of a deflationary collapse that SSN retirees will hold their own, or actually gain, if the the politicians leave retiree payments alone," COLA? Chained CPI? Undercounting inflation by ignoring food and energy? You already have your answer.

"a bit of deflation is just what the working poor in this country need." Perhaps this is why Bernanke prints endlessly; the able-bodied and resourceful will somehow manage to survive, while the aged, infirm and unemployed will starve. Either way, Bernanke, Blankfein, Dimon, and the various Washington parasite class will not suffer. You think Adolf, Josef, Mao and Pol were evil?

They will be shown to be mere amateurs, pikers and wanna-be's on the Krugman / Bernanke / Summers / Geithner scale.

Mon, 03/11/2013 - 13:38 | 3319678 hooligan2009
hooligan2009's picture

the government raises cash by selling treasuries to fund its deficits

SS is part of the deficit that requires funding

the government will sell treasuries to fund the SS, whether these were issued and held as a book entry on the governments balance sheet or whether they will be issued in future.

SS holdings of US treasuries are a book entry and benefits represent a drawdown with a rate that pays beneficiaries of the SS. 

Mon, 03/11/2013 - 15:44 | 3320220 daveO
daveO's picture

From Bernanke's hand to the cashier at Wally World. Counterfeiting at it's finest. End the FED.

Mon, 03/11/2013 - 13:24 | 3319619 SillySalesmanQu...
SillySalesmanQuestion's picture

Krugman's brain is a delusional phallacy...

Mon, 03/11/2013 - 13:58 | 3319768 Herkimer Jerkimer
Herkimer Jerkimer's picture

'

'

'

'

Krugman is going to be remembered as one of the world's greatest stupid dinks in about 10 years.

 

Unfortunately, we'll all be in the poor house, laughing.

 

•J•
V-V

Mon, 03/11/2013 - 13:45 | 3319714 formadesika3
formadesika3's picture

Krugman's junk is a phallic fallacy.

Mon, 03/11/2013 - 13:22 | 3319614 steve from virginia
steve from virginia's picture

 

 

 

Good grief, more propaganda from @Krasting, why bring Krug Man into it?

 

Can't you come up with a better straw man?

 

Who pays your freight, Krasting? Pete Peterson? Just curious ...

 

Apparently, the Super Big Boss Man has signed onto slicing off Social just like he looks to have signed off on the Keystone Pipeline. The Business of America is Business ... of turning the entire United States of America into Detroit.

 

Social is on the chopping block, what is sacrosanct? Energy company subsidies and highway construction ... subsidies to the auto, FIRE and military industries ... all of the other petroleum/auto industry dependencies ... Who lives and who dies? Cars live for a few more weeks/months ... days. The rest can go to hell.

 

 ... for the good of the country, of course.

 

In a way it doesn't matter, the important choices were made decades ago, what is underway right now is the endgame, the rear guard actions ... by the central banks, the governments, the business 'interests' the bankers and their media propagandists. The game itself is called 'the swan song of capital', something not discussed here by super-swift finance analysts.

 

Right?

Mon, 03/11/2013 - 17:12 | 3320624 negative rates
negative rates's picture

Rrriight.

Mon, 03/11/2013 - 15:59 | 3320289 steelhead23
steelhead23's picture

I doubt that Bruce takes his marching orders from Pete Peterson and it is a tad amusing to see the assumption that just because the trust fund has the same likelihood of being paid in full as one of John Paulson's Aurora bonds, social security is a dead duck.  Remember this - politicians abhor political pain - so even though spending money you don't have would cause inflation - the U.S. Congress will ensure those checks go out.  But, if the U.S. makes the SS trust fund money-good, it would further harm the nation's credit rating and would increase inflation.  It is not that folks won't get their monthly grand, it is that that grand would then buy about three sacks of groceries and a 6-pack - while at the time you started contributing you could get a new VW bug for a grand.

Mon, 03/11/2013 - 15:07 | 3320049 Bastiat
Bastiat's picture

 

" . . .why bring Krug Man into it?"

Because that's exactly the topic isn't it?  Did you at least read the title?

Mon, 03/11/2013 - 14:32 | 3319935 Clowns on Acid
Clowns on Acid's picture

Switch to decaf.....and stop with your left wing knee jerk responses.

Mon, 03/11/2013 - 13:42 | 3319695 Bear
Bear's picture

I don't see any inconsistencies between you and BK ... his point is that we're screwed, your point is that we're fucked

Mon, 03/11/2013 - 13:19 | 3319606 Canadian Dirtlump
Canadian Dirtlump's picture

Paul Robin Krugman, portly self righteous member of the chosen people, dutifully serving his masters.

Mon, 03/11/2013 - 13:20 | 3319594 Mediocritas
Mediocritas's picture

PK thinks that the US is a Chartalism and that foreign holders of US debt and holders of eurodollars will always have faith in the future potential of the US economy to generate economic growth. If he was right on those things then yeah, the government writing cheques to itself is no big deal.

In a civilized world, PK has almost zero chance of being right, and that's what might actually end up making him right for reasons he's too thick to even understand.

Don't follow? This will help: http://m.youtube.com/#/watch?v=CdRo7okHCAc

Mon, 03/11/2013 - 13:51 | 3319734 Orly
Orly's picture

Financial alchemy at its finest.  I tried it myself and I feel much better.

You know, M, I have a check for $21MM in pocket.  Wanna go get a beer?

:D

Mon, 03/11/2013 - 13:13 | 3319587 kaiserhoff
kaiserhoff's picture

Welcome to reality, Bruce.  Better late than never.

I'll make this really simple.  How much is the "Trust Fund" worth?

Nothing, nada, zero, because it was a Ponzi fraud from the beginning.

Mon, 03/11/2013 - 12:51 | 3319525 cougar_w
cougar_w's picture

There is no money left anywhere. It was all given to the financial and defense sectors of the economy, and from one of these will arise our future king.

Mon, 03/11/2013 - 12:58 | 3319542 ElvisDog
ElvisDog's picture

Not quite true. All of the money will be given to finance /defense/health care/education. Those are the four horseman of the apocalypse that will win the game of special interest musical chairs. Everything else will be sacrificed to those four gods.

Mon, 03/11/2013 - 14:42 | 3319974 DoChenRollingBearing
DoChenRollingBearing's picture

King?  Gods?

Parasites!

Mon, 03/11/2013 - 12:54 | 3319514 ptoemmes
ptoemmes's picture

I'm gonna get my fully vested monthly when I am 65 (in a few short years), right?  ;-)

None of that autmatic cut stuff that Bruce keeps writing about when the well runs dry.

http://www.youtube.com/watch?v=eCss0kZXeyE (64 is close enough).

Maybe that should be a :-(

 

Pete

PS

Bruce,

Curious to hear your thoughts on this: http://www.cnn.com/SPECIALS/health/escape-fire-documentary/index.html

if you saw (or get a chance to see) it.  Maybe a dedicated post?  I thought it was very well done.  I suppose it could have made its points even more forcefully, but hey not bad for CNN IMHO.

Mon, 03/11/2013 - 12:47 | 3319513 Longing for the...
Longing for the old America's picture

Bruce,

 

One of your best written articles ever.

Krugman is a total azzhole.

Mon, 03/11/2013 - 12:44 | 3319504 Cognitive Dissonance
Cognitive Dissonance's picture

Many years from now it will finally come out that Paul Krugman was a paid asset tasked with promoting the status quo and the Ponzi machine.

<Operation Mockingbird was never closed down regardless of what we have been told.>

Mon, 03/11/2013 - 16:24 | 3320424 Hedgetard55
Hedgetard55's picture

Many years from now? It is obvious today. The Enron consultant Enroning the American public all over again.

Mon, 03/11/2013 - 13:15 | 3319589 knukles
knukles's picture

Closed down, Cog?
It's never been more evident than now, in the throws of the Internet Reformation, that the processes of Op Mockingbird are fully operational and employed in fact in an overwhelmingly ham handed sloppy manner.
That is clear to anybody listening, has had anything of an awakening.

That it was "closed down" is probably "da troof", my man.
It was "closed" for all intents and purposes, in name only.
Come on, we all know how "it" works.... the inequities of the selfish and  tyranny of evil men cannot be hidden.

Mon, 03/11/2013 - 13:28 | 3319626 Cognitive Dissonance
Cognitive Dissonance's picture

But....but....but one of the "findings" of the Church Committee was that while the CIA (FBI, NSA, DOD etc) may have done some bad things in the past they had all repented and would never ever do it again. 

<The Church Committee is the United States Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities. The pdf can be found here.>

Mon, 03/11/2013 - 14:38 | 3319961 Bastiat
Bastiat's picture

Yeah and we had 2 Oscar winner movies on CIA heroics this year, including the best pic winner.

Mon, 03/11/2013 - 13:02 | 3319553 The Limerick King
The Limerick King's picture

 

 

Paul Krugman is simply a tool

Who hails from an Ivy League school

A nerd fabrication

For disinformation

A moron, a jackass, A FOOL!

Mon, 03/11/2013 - 16:31 | 3320475 machineh
machineh's picture

Limerick King's five-line masterpiece applies equally to Bernanke, Greenspan, and dozens of other empty suits who have disgraced the marble halls of government.

WELL DONE SIR!

Mon, 03/11/2013 - 13:15 | 3319591 a growing concern
a growing concern's picture

Nice. I hereby challenge you to work in the word "splooge" in your next Krugman themed rhyme. Thanks in advance.

Mon, 03/11/2013 - 13:39 | 3319679 McMolotov
McMolotov's picture

Krugman's the tyrant's best stooge

His books on Keynes stained with splooge

The thought of more debt

Makes Paulie quite wet

I wish he'd get shot by the Nuge.

Mon, 03/11/2013 - 14:19 | 3319871 a growing concern
a growing concern's picture

Damn. That was awesome.

I really don't know of a place as cool as ZH. I get two splooge/Krugman themed limericks upon request, and I once engaged in a limerick insult battle with the Limerick King himself. Good times...

Mon, 03/11/2013 - 13:47 | 3319671 trichotil
trichotil's picture

krudman loves to shout down his foes

it adds extra length to his nose

a paid rothschild's stooge

who spews lots of splooge

the only chicks who'll touch him are 'ho's

Mon, 03/11/2013 - 14:51 | 3320002 trichotil
trichotil's picture

should've said: the jew spews pure splooge.

say that three times fast.

Mon, 03/11/2013 - 14:18 | 3319861 The Limerick King
The Limerick King's picture

Excellent "splooge" verses....there's no way I can touch these limericks. (They seem a bit sticky!)

Mon, 03/11/2013 - 14:38 | 3319963 Rogue Trooper
Rogue Trooper's picture

+1,000 brothers!

PK is the one I hope the zombie horde run down when the SNAP cards buy nothing more than hope and a cat food can once a month..... I can visualise the slimy weasel pleading in his characteristic 'high pitched' manner as he pisses in his pants while the mob cut the fucker down.

Now I'll buy that for a dollar Bitchez

 

Mon, 03/11/2013 - 15:36 | 3320202 A Nanny Moose
A Nanny Moose's picture

Zombies want brains. It is illogical that they would even touch Kruggybear.

Mon, 03/11/2013 - 14:37 | 3319958 DoChenRollingBearing
DoChenRollingBearing's picture

My finger aches from all the upticks!

Mon, 03/11/2013 - 12:42 | 3319499 Everybodys All ...
Everybodys All American's picture

It's not complicated. Krugman is delusional.

Mon, 03/11/2013 - 12:55 | 3319536 Jena
Jena's picture

I don't know that he's delusional as much as an outright liar.

Mon, 03/11/2013 - 17:59 | 3320787 Oldwood
Oldwood's picture

Anyone who is educated and still delusional must be a liar, especially to himself, but it is ultimately important that others believe the lie or the whole facade crumbles.

Mon, 03/11/2013 - 13:30 | 3319647 McMolotov
McMolotov's picture

Exactly. I used to think he was just a moron, but I recently concluded he's a parrot for the powers-that-be. His lefty credentials and faux populism mesmerize the left-leaning herd (especially the ones who fancy themselves "intellectuals") and get them to willingly submit themselves to servitude.

Mon, 03/11/2013 - 14:39 | 3319964 DoChenRollingBearing
DoChenRollingBearing's picture

Jena, McMolotov

That is my belief as well, a liar!

Mon, 03/11/2013 - 16:42 | 3320537 petolo
petolo's picture

PK deserves Nobel dynamite; one stick for each hand.

Mon, 03/11/2013 - 12:42 | 3319497 DOT
DOT's picture

Point, Game, Match !

Good stuff, Bruce, and very simply stated.

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