U.S. special operations forces accused of abusing prisoners in Iraq warned defense intelligence personnel not to talk about the alleged mistreatment they saw, according to a government memo to a top adviser of Defense Secretary Donald H. Rumsfeld.

In the memo written June 25 after the Abu Ghraib prison abuse scandal had gone public, the head of the Defense Intelligence Agency complained about the harassment of DIA personnel, including one case where special forces confiscated photos of a prisoner they punched.

A massive airdrop of paper birds intended to promote peace failed to halt violence in Thailand's restive south, with a spate of new attacks Monday that targeted soldiers and local officials.

The bombings, shootings and arson attacks came hours after Prime Minister Thaksin Shinawatra said Sunday's airdrop of nearly 100 million Japanese-style origami cranes over the predominantly Muslim region had achieved an "enormous, positive psychological effect" toward peace.

After World War II, opinion was socialist while practice was free market; currently, opinion is free market while practice is heavily socialist. We have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course. We are still far from bringing practice into conformity with opinion. That is the overriding non-defense task for the second Bush term -- as President Bush clearly recognizes.

Once again, newspaper reporters score poorly in the annual Gallup Poll, released today, on "honesty and ethical standards" in various professions, as judged by the American public. They rank even lower than bankers, auto mechanics, elected officials, and nursing-home operators.

To put this in perspective: Newspaper reporters are even less respected than their TV counterparts.

Somehow, however, they top lawyers, car salesmen, and ad directors. And they also edge business executives and congressmen.

Nurses top the list as most honest and ethical.

What makes me so sure? Two reasons. First, I can see how much the liberal establishment fears it. And second, their arguments against it are utterly impotent.

Here's a case in point. On Tuesday, bellwether "angry liberal" pundit Paul Krugman dragged himself back from an urgently needed post-election mental health break to rail against Social Security reform in the op-ed pages of the New York Times. Krugman must see this as a battleground issue. But if this column is the best he can do, then he's not likely to be any more successful at using his column to turn back the tide of reform than using it to nominate Howard Dean, and when that failed, using it to elect John Kerry.

The core argument of Krugman's column is that Social Security is not in crisis, as he says the proponents of reform through private accounts claim it is. At most, Krugman argues, the system has small, distant and easily cured funding problems.

"Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. ...But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P."

Only a liberal could argue that raising taxes by more than half a percent of GDP for a hundred years is "modest." But even at that, Krugman strongly misrepresents what is actually a dire message in the Congressional Budget Office report. Yes, the report found that the system's shortfall between the present value of its revenues and the present value of its expenditures projected out a hundred years is indeed 0.54% of GDP. But the report states -- and Krugman ignores -- the fact that this very calculation means that, even with new revenues of 0.54% of GDP injected into the system, the system will end up exhausted: "at the end of the 100 years, the balance would be large enough to authorize paying one year's worth of benefits." After that, the report projects that there would be a mismatch between revenues and expenditures of more than 2% of GDP.

Even that is all based on the idea that the assets in the Social Security trust fund -- Treasury bonds being accumulated during the current years while system revenues exceed system expenditures -- will be there to pay retirement benefits in the future. Of course those Treasury bonds represent nothing but IOU's, in essence promises by the government to pay itself. The same CBO report that Krugman cites points out, correctly, that "Those trust funds are mainly accounting mechanisms and contain no economic resources."

As I was told by David John, Research Fellow at the Heritage Foundation, Krugman's belief in non-existent Social Security Trust Fund assets is typical of the unrealistic way academic economists approach real-world problems. "It's like the old joke: How does the economist escape from a desert island? First, assume a rowboat." It's worse than that, though: "Here, Krugman is assuming a luxury yacht."

Not a very rosy picture, is it? Yet Krugman chose to cite the CBO report because at least it paints a rosier picture than the Annual Report of the Trustees of the Social Security Trust Fund. The Trustees say the trust fund will run out in 2044 -- eight years sooner than the CBO estimates. New Krugman Truth Squad member Victor Davis, writing on the Dead Parrot Society blog, notes that according to the CBO, the difference between the two reports is mostly in their underlying economic assumptions -- and CBO's are far more optimistic. CBO uses higher estimates for real wage growth, and lower estimates for inflation and unemployment, than the Trustees. How remarkable that Krugman -- perhaps the world's most relentlessly pessimistic economist, who has written for years about our "age of diminished expectations" and "depression economics" and how America is turning into a "banana republic" -- now finds it "more realistic" to look beyond "cautious projections."

This burst of economic optimism is all the more surprising considering that Krugman himself, in the past, has argued -- in his typically shrill style -- that the Social Security system is in crisis. For example, he wrote in the New York Times in 1996,

"Where is the crisis? Just over the horizon, that's where... In 2010...the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits. The budgetary effects of this demographic tidal wave are straightforward to compute, but so huge as almost to defy comprehension."

If there is no crisis -- as Krugman claims now -- then what motivates those who seek Social Security reform through private accounts? Krugman says,

"They come to bury Social Security, not to save it. They aren't sincerely concerned about the possibility that the system will someday fail; they're disturbed by the system's historic success. For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make people's lives better and more secure. And that's why the right wants to destroy it."

But whom, exactly, are these destroyers that Krugman is talking about? As Krugman Truth Squad member Jon Henke points out on the Q and O blog, Krugman himself once wrote in his Times column, "There is a case for reforming Social Security; there is even a case for privatization."

Social security policy experts have even longer memories. Economist Eric Engen, resident scholar at the American Enterprise Institute, reminded me that President Clinton's hand-picked Advisory Council on Social Security spent three years investigating reform options, and in 1997 recommended to Health and Human Services Secretary Donna E. Shalala two different plans involving private accounts -- plans which received the endorsement of the majority of the Council's members.

The best Krugman can do is pretend there's no crisis -- and impugn the motives of anyone who disagrees with his deeply conventional liberal wisdom. Because he has no defense against the best arguments for Social Security reform with private accounts.

The reality is that, crisis or not, the present system is inadequate and unfair. It denies Americans choice, control, and property rights in their own retirement savings. It sucks up the entire savings and investment capacity of tens of millions of lower-income Americans. It has a terrible implicit rate of return, compared to even the worst market investments. And it is unfair to minority members whose life expectancies are lower, and thus can expect fewer payments over a lifetime.

Reform of Social Security with private accounts is an issue that shows compassionate conservatism at its best. And the more the angry liberals like Krugman sputter and fume about it, the more inevitable I am convinced that it is.

Correction [12/9/2004]... Reader David Rumney noted that in the original posting I had stated that the difference between the CBO's estimate of 2052 for trust fund exhaustion, and the SSA's estimate of 2004, was six years. In fact it is eight. The posting above has been corrected.

Posted by Donald L. Luskin at 11:22 AM | link  

Posted by Donald L. Luskin at 7:47 AM | link  

Tuesday, December 07, 2004

Posted by Donald L. Luskin at 6:22 PM | link