Senator Obama's decision to make Social Security's long-term financial health an issue in last week's debate has generated some discussion among economists and pundits. As usual, Paul Krugman gets us going, claiming that Obama has been played for a "sucker:"
But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.
As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”
How has conventional wisdom gotten this so wrong? Well, in large part it’s the result of decades of scare-mongering about Social Security’s future from conservative ideologues, whose ultimate goal is to undermine the program.
For the record, Obama has not said that our country's financial health won't be determined primarily by the growth rate of per capita health care costs. He is merely not using that as an excuse to ignore the challenges to Social Security's long-term financial health.
Greg Mankiw takes Krugman to task for ignoring a few people who have pointed out Social Security's long-term financial challenges who would hardly qualify as conservative ideologues. We might also point out that Peter Orszag, who is quoted so approvingly by Krugman, is the co-author of the Diamond-Orszag plan for "Saving Social Security." Conservatives like myself who do understand the numbers readily praise the plan as one that Democrats should have proposed years ago.
Krugman concludes:
But Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders. And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want.
We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists — which is the case for many issues today — you end up being played for a fool. And that’s what has just happened to Mr. Obama.
I will agree with Krugman that there have been some cases where that's what bipartisanship has meant, substituting "President Bush" for "conservatives." Medicare Part D is the leading example. However, I have not met the conservative who wants what Obama has proposed: raising the maximum taxable earnings level and doing nothing else. Conservatives want something like this, which makes all of the adjustments on the benefit side. Conservatives will settle for something like this, which includes Obama's proposal plus some other changes, like gradual reductions in future benefits, small increases to the payroll tax and retirement ages, and personal accounts to absorb any new revenues to make sure they are saved rather than spent.
What is frustrating about Krugman's column is that he's given up on finding common ground and mocks those like Obama who haven't. There may be no common ground at the moment on the issues Paul thinks are relevant, and the President is as much to blame for that as anyone, but that doesn't mean that there can be none after the next election. Krugman seems to be looking for his turn to be in the majority of 50.1%. I'm looking for something better and something different.
Read more commentary from PGL at Econospeak, Don Boudreaux at Cafe Hayek, and Tom Redburn in the New York Times, who quotes some non-conservative, non-ideologues about the size of Social Security's financing problems.