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Saturday, February 05, 2005

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Paul Krugman has published a correction to his Friday New York Times column -- the one I nailed him on dead to rights, where he quoted material from an erroneous Washington Post story that had been deleted from the Post's corrected version of the story, and the one in which he incorrectly described President Bush's proposed Social Security benefit offset for personal account holders as a "loan."

Krugman wasn't man enough to do it in the pages of the New York Times, where the errors were made in the first place. Instead, he did it in the form of a semi-anonymous letter from "P.K." published on the Krugman-friendly website of the radical leftist blogger Atrios. We can be sure that Daniel Okrent won't be man enough to make Krugman repeat his correction in the Times. Why should this one be any different for "Figleaf Dan"?

And even on Atrios' website Krugman wasn't man enough to admit his errors, or even label his letter a correction. Instead, he said

"My column this morning wasn't the finest - sometimes the magic works, sometimes it doesn't."

In other words, "most of the time I get away with it, but every once in a while Luskin nails me so good I just have to say something about it."

And Krugman wasn't man enough to say what had been wrong in his column. He "didn't have to admit to a mistake; to do the right thing, all he had to do was 'clarify' his previous remarks. ...But isn't it worth accepting some brief personal embarrassment in order to head off a looming policy disaster that you yourself have helped create? Apparently not." That quote, by the way, comes from a 2001 Krugman column criticizing Alan Greenspan for endorsing the Bush tax cuts.

Thanks to reader Andrew Morton for the link.

Posted by Donald L. Luskin at 2:34 AM | link  

Friday, February 04, 2005

WEISMAN AGONISTES   Washington Post reporter Jonathan Weisman must be pretty upset about his monumental screw-up yesterday on the so-called "clawback" provision in proposed Social Security reform -- a misleading term that has now been picked up by the intellectually defunct, and will no doubt take months to purge from the public consciousness now that Weisman has put it into circulation. Why else would Weisman send me a defensive and haughty email like this, practically blaming the White House for not being more delighted by the journalistic integrity he thinks he showed in the face of his journalistic incompetence?

"I figured out my mistake before the White House contacted me and informed numerous White House officials first thing in the morning that I would correct the story on the web, in the paper the next day and offer up a correction. Several hours later, the White House sent a fact sheet saying it would demand a correction from the Post. That demand, of course, was never delivered because we offered it and posted it before they could issue their demand."

I emailed him back and told him that this is what happens when he lets liberal ideologues like Peter Orszag write his stories for him.

Posted by Donald L. Luskin at 1:43 PM | link  

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Can it really be that leftist economists don't know the difference between a margin account and an opportunity cost? It's basic economics. But for Paul Krugman and his acolytes and fellow travelers, it's really all about basic partisan politics.

According to Krugman's New York Times column today, when you divert some of your Social Security payroll tax dollars into a personal account of the kind that President Bush is proposing, the government is effectively making a loan to you so that you can buy stocks on margin -- "speculation that no financial adviser would recommend."

Huh? Excuse me Professor Krugman, but that's my money we're talking about -- my payroll tax dollars. My personal account. Nobody's loaning me anything.

Here's Krugman's tortured and deceptive logic that gets him to his "loan" characterization. He quotes a White House press briefing that explains how workers who opt for personal accounts would have to forgo some of their regular Social Security benefits:

"In return for the opportunity to get the benefits from the personal account, the person forgoes a certain amount of benefits from the traditional system. Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent rate of return" -- after inflation -- "which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent rate of return."

That's perfectly fair -- it's a simple trade-off. If it didn't work that way, then workers who elected personal accounts would be double dipping. But here's the way Krugman twists it:

Translation: If you put part of your payroll taxes into a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent.

Peter Orszag of the Brookings Institution got it exactly right: "It's not a nest egg. It's a loan."

Wrong, wrong, wrong. If it's a loan at all, it's a loan you make to yourself. And that's no loan at all. Real economists -- as opposed to Democratic apparatchiks like Krugman and Orszag -- call such a thing not a loan, but an "opportunity cost."

Here's an example. Suppose you have $1000 in a money market fund earning 3%, and you are considering investing that money in the stock market. The opportunity cost of that investment will be 3%, because you give up the 3% yield of the money market fund. That means you'll only come out net ahead on the stock investment if it returns more than 3% -- just as in proposed Social Security personal accounts. But there's no loan involved here. None.

In this case, your future benefits are analogous to the money market fund. In order to invest in stocks in your personal accounts, you have to give up the future benefits. A simple trade-off. An opportunity cost. Not a loan.

Here's what a real loan would look. You have that $1000 in the money market fund, but you want to invest $2000 in the stock market. So you borrow an additional $1000 from your stockbroker.

Or in the case of Social Security, suppose you are a struggling young African American working for minimum wage. You urgently want to own stocks, so you can start building a nest egg for your family. But you have no money to invest, because Social Security taxes have sucked up anything you could have set aside from your small earnings. So you manage to borrow some money, and you invest it in stocks. That's a loan. That's speculation. And that's what the opponents of personal accounts would prefer for America.

As a side note, that quote from Peter Orszag comes from a Washington Post story yesterday by liberal Washington reporter Jonathon Weisman. His story, based on that same press briefing that Krugman quoted, completely misstated the way Social Security benefits would be offset for personal account holders. He called it a "clawback," in which the government would confiscate earnings in your personal account below 3%. An array of spokesmen both liberal and conservative -- no doubt caught by surprise by Weisman's revelation of the non-existent "clawback" -- were quoted about how shocked and dismayed they were by it. Weisman loves to quote conservatives criticizing Bush; it's his specialty.

But, of course, it was all simply wrong. After the White House issued a statement noting the error, the Post published a substantially corrected version on its web site. One can only imagine how Krugman's column today -- which quoted the Post story, and I have no doubt originally quoted it more extensively --  had to be re-engineered at the last minute before deadline, in order to avoid more than the usual embarrassment that attends the typical Krugman column.

To give you some idea of how the left respects the truth in these matters, visit the blog of U. C. Berkeley professor Brad DeLong -- a Krugman acolyte and former Clinton administration official who once described himself as "more inclined toward 'Marxism' than anybody else on the Berkeley campus," which is saying quite a bit. When the Post story first came out, he applauded Weisman and delightedly dilated on the notion of the benefit trade-off as a loan. When the correction was issued, DeLong amended his posting to say "the Post has buckled... Glad to see such spine." You'd think he'd be glad to see the truth. But no.

Update... A reader points out the the Orszag quote cited by Krugman was removed from the corrected Post story! The Times' new motto: "all the news that others find unfit to print."

Posted by Donald L. Luskin at 3:12 AM | link  

Thursday, February 03, 2005


Posted by Donald L. Luskin at 11:36 PM | link  

LIFE WITHOUT BACKBONES    Longtime readers James Jarvis points to this morsel on Jabba the Economist's plate:
I periodically go over to DeLong's blog to see what the other side is saying, and I understand you probably are done with him, but this post takes the cake.

He starts with the obnoxious title "Well, Well, Well... We May Have a Press Corps... UPDATE: We May Not After All...", and then posts this morning's Jonathan Weisman article on Bush's Social Security plan from the Washington Post. Of course, Weisman gets the facts completely wrong in that article and the Post ends up having to write a correction. DeLong's response to such a correction? "Glad to see such spine".

So, here's our proof that a "real" press corps according to DeLong is one that lies in order to push ahead the liberal agenda.

Update... Check out William Beutler's account of the Post correction at the Washington Canard blog.

Posted by Donald L. Luskin at 10:48 PM | link  

CAN'T PAUL KRUGMAN TELL THE TRUTH ABOUT ANYTHING?    Can Paul Krugman really not understand how the federal government's Thrift Investment Plan works? Here he is in a Democracy Now! appearance this morning:

I mean, the description right now is that it's going to have very little to do with actually investing your own money. That what's actually going to happen is that the Social Security Administration is going to invest on your behalf in a mixture of stocks and bonds, and sort of end of story. The big question that everyone wants it to know is really, how are these accounts, if they exist, going to be managed. We didn't hear anything about that, except that Mr. Bush did insist that it was going to be run like the thrift savings plan which is for federal employees, which is something in which it is basically the government managing your money.

Hasn't Krugman read any of the many description of the TSP that have  been in the press lately (here's mine)? TSP offers a completely free choice of five fund options, only one of which is managed by the government. It's all completely up to the employee -- nothing even remotely like "basically the government managing your money."

Posted by Donald L. Luskin at 1:46 PM | link  


This just in from the National Conference of Editorial Writers, a nonprofit professional organization that exists to improve the quality of editorial pages and broadcast editorials, and to promote high standards among opinion writers and editors. It's all about how local newspapers can respond to the escalation of uncorrected errors and misinformation coming from syndicated columnists like Paul Krugman, Maureen Dowd and Molly Ivins -- and out-of-control cartoonists like Ted Rall. This is real progress.

I am pleased to announce that NCEW has set up a task force on syndicates to seek answers to our questions of ethics and corrections.

Heading up the panel is Jerry Ausband, retired editorial page editor of Myrtle Beach.

The task force will contact all of the syndicates to go over questions that have been raised on this groupserv and elsewhere. This will allow us to compare how syndicates are set up to deal with issues like those that have come to the forefront this year and also ascertain how we can be effective in correcting factual errors.

Among the questions:

  • How do you screen columnists and editorial cartoonists?

  • Do you have an ethics policy?

  • What policy do you follow if contracted columnists/cartoonists violate standard journalism ethics (regardless of where you have an individual ethics policy)?

  • Do you have a fact-checking process for columnists? How does it work?

  • When editorial writers or editors find a factual error in a column or cartoon, what effective means can be used to communicate that error and have a correction made?

Kay Semion
NCEW President

Correction [2/4/2005]... In the original posting I spelled Ted Rall's name "Rahl." It has been corrected above.

Posted by Donald L. Luskin at 1:09 PM | link  

DEAR ANN    Reader Carl Marsh says:

Personally, I think the Social Security story is best summed up in an Ann Landers letter:

Dear Ann,
My Uncle Samuel (also my employer) demanded years and years ago that I put some money aside. Finally he made it a condition of my employment: either put aside a savings plan for my retirement or look for another job. Now I just learned that he spent all the money. What should I do?

Worried in Wisconsin

Dear Worried,
Your uncle is a bum. Divorce him and get counseling. Good luck!

Posted by Donald L. Luskin at 8:20 AM | link  

ACCOUNTING BY AARPTHUR ANDERSON    USANext catches AARP cooking the books in a poll showing public opposition to Social Security reform. In a letter to Congress, USANext reports that "National pollster John McLaughlin has a devastating analysis of the methodology behind the recent survey released by the AARP. It shows how that organization is attempting to falsely frame the debate over reforming Social Security by manipulating the American people, Congress, and the media. ...The following are examples of the misleading methodology:

  • The survey includes no respondents under age 30 even though voters age 18 to 29 made up 17% of the 2004 electorate.
  • Those age 60+ constitute 34% of the sample, yet they were 24% of the 2004 electorate.
  • 20.7% of adults receive Social Security benefits. Yet 33% of AARP’s respondents report receiving benefits.  This biases results against plans to strengthen Social Security since all surveys show resistance to change among Social Security recipients.
  • AARP’s sample gives Democrats a six-point advantage over Republicans (37% to 31%). However, the parties made up equal percentages of the 2004 electorate (37% to 37%).
  • AARP finds a right direction/wrong track margin of 32% to 60%, far below those of other recent major surveys: 46% to 53% in January 3-5 Gallup survey; 44% to 51% in January 3-5 AP/Ipsos survey; and 40% to 54% in January 5-9 Pew survey. This indicates a sample far more Democrat than are American adults.
  • A 47% to 48% margin trust the President, similar to the Democratic party’s 48% to 43%.
  • AARP finds all those age 30+ holding a favorable view of Social Security.  Yet other national surveys have shown those under 55 hold a decidedly unfavorable view, again raising questions about the partisan composition of AARP’s survey.
  • AARP asks respondents whether they favor or oppose allowing workers to invest some of their Social Security payroll taxes in the stock market -- never mentioning other options, such as bonds, that are seen as safe and win higher support. Even with the slanted wording, a majority of those under 50 favor the idea, and even with the skewed sample composition, the idea only loses by a slim 43% to 48%.
  • AARP asks respondents whether they agree “Social Security should be protected as a guaranteed benefit, and should not be privatized.” Yet no one has proposed privatizing the Social Security system and Social Security benefits are not now “guaranteed.”
  • AARP also asks whether respondents agree “We have a responsibility to meet our obligation to people currently on Social Security to protect their benefits.” This clearly implies to respondents that personal account proposals threaten retirees’ benefits even though the President and others have emphasized that no proposal would affect retirees or those near retirement."

Posted by Donald L. Luskin at 8:05 AM | link  

KRUGMAN CALLS THE TOP    Reader William Freivogel takes me to task for ridiculing Paul Krugman for the allusion in his Tuesday column to sky-high equity valuations at the peak of the NASDAQ bubble. Freivogel says, "You cannot blame anyone for not calling the tech stock bust in 2000-2001." Fair enough. But you can blame someone who pretends he called it, when he really didn't. I already quoted what Krugman wrote in February 2000:

"I'm not sure that the current value of the Nasdaq is justified, but I’m not sure that it isn’t."

But in the introduction to his 2003 book The Great Unraveling, Krugman wrote:

"There were stock market skeptics; I was one of them."


"I...thought stock prices were way out of line."

It's typical Krugman. In that same introduction, he wrote,

"Who could have thought that famous companies, lauded in business schools as the very models of a major modern corporation, would turn out to be little more than Ponzi schemes?"

He failed to mention that he himself was doing the lauding. Here's in a 1998 article for Fortune, he used the same Gilbert and Sullivan reference:

I'm talking about the U.S. economy of the '50s and '60s, when General Motors was the very model of a modern major company.

By contrast, here is the concluding passage of a paragraph signing the praises of Enron:

"...the company's pride and joy is a room filled with hundreds of casually dressed men and women staring at computer screens and barking into telephones, where cubic feet and megawatts are traded and packaged as if they were financial derivatives. (Instead of CNBC, though, the television screens on the floor show the Weather Channel.) The whole scene looks as if it had been constructed to illustrate the end of the corporation as we knew it."

That "end of the corporation" turned out to be something very different than Krugman meant. Of course Krugman was on Enron's payroll when he wrote that, as a member of their "advisory board." As Krugman himself said in concluding a column last week,

"...I remember what Upton Sinclair wrote: 'It is difficult to get a man to understand something when his salary depends on his not understanding it.'"

Posted by Donald L. Luskin at 1:19 AM | link  

Wednesday, February 02, 2005

THE PREBUTTAL CODE    A Washington lobbyist friend sends this along -- Nancy Pelosi's "Prebuttal to State of the Union Address," as decoded by "an anonymous red vote in a blue state." He says "this is circulating all over Capitol Hill. It gets better as it goes. Nails Pelosi."

Washington, D.C. – This morning, House Democratic Leader Nancy Pelosi and Senate Democratic Leader Harry Reid delivered the pre-buttal to the State of the Union Address on the need to confront the urgent challenges facing our nation at home and abroad. Below are her remarks as prepared:

“Pre-buttal” is not a word. It is a gimmick to try to get noticed, like a child banging the pots and pans, interrupting the adults when they need to discuss something important.

“Thank you, Debra Silimeo, for the opportunity for the Democratic leadership to address the National Press Club today.

“It’s an honor to be here with the new Senate Democratic Leader, Harry Reid, who came to the leadership with the overwhelming support of his constituents, the full confidence of his Senate colleagues, and the respect of all who know him.

Of course, the real reason I’m here with Senator Reid is that he was standing in line behind Tom Daschle who was rejected by his own voters for ceaselessly obstructing President Bush in Washington while pretending to be the loyal opposition in South Dakota. Reid isn’t really the minority “leader.” The most powerful Democrats in the Senate are Kennedy and Clinton.

“At the start, let me say a word about this weekend’s elections in Iraq. Yesterday, because of the courage of the Iraqi people and the bravery of the American troops who provided security, Iraq took a significant step on the road to self-determination.

Had your policy choices prevailed, January 30 would be just another day under the brutal tyranny of Saddam & Sons.

“Now, it is time to take the additional steps that will improve Iraq’s economic and political stability, and allow our troops to come home.

So, are you now for the $87 Billion after you voted against it? Will you support the next round of financial assistance?

“That means changing our military focus from combat operations to training the Iraqi army.

Attention, Congresswoman Pelosi: that transition was made many months ago. Just because it’s hard and slow, doesn’t mean progress isn’t being made.

“It means intensifying our reconstruction efforts, with projects that give the Iraqi people hope for their future.

So, you’ll support new funding, without gimmicks or absurd conditions?

“And it means more aggressively pursuing diplomatic efforts with Iraq’s neighbors -- who have the greatest stake in Iraq’s security and stability.

Which are on-going, difficult as they are. What about Iran? Not all neighbors are nice.

“If those steps are taken, the elections scheduled for December can be held in a more secure atmosphere, with broader participation, and a much smaller American presence.

Is there an implied emphasis on “smaller” before “American?” Are we the problem? Are you aware that those Iraqis who voted are thanking us for the opportunity and hoping we stay until there is full democracy and security?

“Senator Reid will address the issues of Iraq and national security more fully. I will focus on domestic issues.


“On Wednesday evening, President Bush will deliver his State of the Union address to Congress.

Cue the ominous music.

“As the President begins his second term, it is fitting that we pause to look at where our nation stands, where we are headed, and what better course of action should be taken.

Get ready, pointing fingers.

“Today America faces the threat of terrorism, a war in Iraq, a ballooning budget deficit, and a society where too many people go without jobs, health care, educational opportunity, or retirement security.

How come the folks who poke holes in the bucket are the same ones who complain about the water level?

“To meet these challenges, the Democrats’ approach is based on America’s core values and the entrepreneurial spirit that is the legacy of our Party.

Please. First, you’re Chicken Little and then you’re Superwoman?

“Core values” and “entrepreneurial spirit” are not your “legacies.” Wearing the other team’s uniforms won’t win you games. Your legacies are regulating businesses into submission and then proceeding to tax and spend whatever earnings are still produced.

“On every issue our nation faces, our commitment is to see that the policies we pursue are consistent with the values we cherish.

That’s very Orwellian of you.

“To that end, House Democrats have put forward our New Partnership for America’s Future, which reaffirms our dedication to six core American values for a strong and secure middle class: national security, prosperity, opportunity, fairness, community, and accountability.

Oh, we can’t wait. We love those Democratic “Partnerships.” You get our money for your counter-productive programs. Or, did you mean that other kind of Partnership?

Hey, we can be in a Partnership if we didn’t sign, right? Or is “consent of the governed” not one of your “core values”?

“Our Partnership is with the American people, and honors the trust they have placed in us.

No, actually, we trust the other team…the team we voted for.

“Democrats are committed to a prosperity that includes many more Americans in the economic success of our country. By creating 10 million new jobs, we will advance the economic security of American families.

Ten million jobs! Wow, but, if it’s so easy for you, why not twenty million or seventy-nine gazillion!?

“Our sense of fairness demands that we expand access to health care, because health care is a right and not a privilege. And we can start by ensuring health care for all of America’s children.

Your first idea on creating jobs is to increase the cost of employing people. You guys know magic?

“We must expand opportunity, with a vibrant public education system which truly leaves no child behind, and with the chance for our young people to go to college without going deeply into debt.

Truly a vibrant sentence. Could you identify the problems with public education first? It might help if you came down off the soapbox and talked to the parents and students, not just to the union leaders who want more money for a broken system.

“We need to strengthen community – working to build safe neighborhoods free of crime and drugs, and by promoting a clean and healthy environment where polluters pay for the damage they cause, instead of children paying with their health.

News Flash! THIS JUST IN: Crime is caused by criminals. Criminals commit crime because that is what they do. Conservatives put them in jail longer than liberals do, a lot longer. UPDATE! Getting criminals off the street is linked to making the streets safer! For some heinous crimes, juries occasionally issue the death penalty. UPDATE! Dead criminals don’t commit crimes.

Pollution is bad and demands to be regulated. Pollution is sometimes a crime, but it deserves its own focus, doesn’t it, now? Don’t forget why pollution exists, if you really, really want to eradicate it--it is a by-product of economic activity. When you get yourself all fired up vigilante-style, you might forget your ten million job creation program, your core values and your legacy of entrepreneurial spirit and all. Besides, you need permits for torches and pitchforks these days.

How come you equated only pollution with killing kids? It does happen, but actually proving it is difficult. That pesky rule of law can sure slow you down!

Hmm, you got us thinking. What other policies kill kids, more directly – as in on purpose--by the hundreds of thousands? Clue: it begins with an “A.” Be sure to call us when you rethink that part of the “Partnership?”

“We must ensure accountability, by restoring fiscal discipline and holding those in power accountable for their actions. Democrats support pay-as-you-go budgeting that does not grow the deficit and heap decades of debt onto our children.

At least when Bill Clinton said stuff like that, he was winking.

"And, above all, we must guarantee national security, with a strong system of homeland security, a military that is second to none, and a commitment to stopping the spread of weapons of mass destruction. Democrats will never send our young people into harm’s way without the equipment they need.

Sigh. Please stop copying John Kerry’s redraft of Howard Dean’s speeches.

“Our New Partnership for America’s Future honors our commitment to make the future brighter for the next generation. America has always been about the responsibility of one generation to another.


“That tradition is embodied in the Democratic Party’s commitment to Social Security.


“Social Security is the most visionary example of what President Franklin Roosevelt called ‘bold, persistent experimentation.’ Its goal was to ensure that the prospect of retirement was not met with the specter of poverty.


“It has been an incredible success. It has enabled our seniors to enjoy independence. And it has enabled our country to obey the commandment: “honor thy father and thy mother.”

Hey, capitalize the word “Commandment,” so you can better pretend to mean it.


“Not only does Social Security improve the lives of the more than 33 million senior citizens who receive its benefits, it also provides a measure of independence for workers who have become disabled, and the children and spouses of those who have become disabled or passed away.


“Social Security does face problems down the road. We need to solve them. But we have the time to do it right.

At Ease!

“We can solve this long-term challenge without dismantling Social Security, and without allowing this Administration’s false declaration of a crisis to justify a privatization plan that is unnecessary, unaffordable, and unwise.

Sing it! “We can do it...but we don’t have to…because we care…about the Peoples!” Now, for our next number, “Oh yeah, take the money and run…”

“To be sustainable, any long-term solution must be bipartisan. And as a first step, we must work off the same set of numbers.

Nah-nah-nah, nah-nah-nah!

"The President talks about a crisis, but according to the nonpartisan Congressional Budget Office, Social Security will be solvent for nearly 50 years.

This is from the Comedian School of Economics: “I can’t be overdrawn! I still have checks left!”

“Democrats see strengthening Social Security as the cornerstone of independence for our seniors and people with disabilities. President Bush sees undermining Social Security as the cornerstone of his “ownership society.”

“Strengthening?” You mean setting up the young with huge taxes to pay for our retirements while pretending that magic will make the system “preserved” for them when they retire? Or, stopping any possible reform now which might countervail huge benefits cuts later? Or, what?

“Because so many people are touched by it, and so many resources are committed to it -- it is right that we are having a discussion about the future of Social Security.

Third Rail!

“It is also right that Democrats stand up for our values – the values that created, defended, and will strengthen Social Security.

Tell us against about how ole Uncle Claude Pepper got ta fixin’ ‘n’ confabbin’ with lanky ole Lyndon and Trusty Teddy and they added all those extra nice shiny benefits and all! And it’s all free! Free!

“First, Democrats insist that changes to Social Security not add to the deficit. Any plan for Social Security needs to begin by paying back the money that has been borrowed from the trust fund, just as President Clinton did in the late 1990s.

Democrats hate deficits ‘cause it’s made of red ink!

“To establish private accounts requires borrowing more than $2 trillion from foreign countries over the next 10 years, $6 trillion over the next 20, and $15 trillion over the next 40 years.


“That is a staggering price tag for privatization, and it will make the problem worse, not better.

Staggering? We thought you liked staggering.

“As the Concord Coalition stated, quote, “establishing personally owned accounts and funding them with borrowed money would, send a dangerous signal to the markets that we are not taking our fiscal problems seriously.”

Concord, as in Grapes? Oh, yeah, we remember the Concord Coalition folks now. You hang with them, OK? And don’t forget to floss!

“Increased debt also means increased interest rates, which makes mortgages, credit card payments and student loans more expensive.

…And lions and tigers and bears!

Of course it’s true that putting off paying for government programs only adds hugely to its ultimate cost. We are the ones who want to face up to it now while incremental changes can help in a big way twenty years hence. We hope to be alive and free then, by the way.

You can’t simultaneously claim there is no fire brewing and then tag the other guy as irresponsible for calling the fire department.

“Nor should we be mortgaging our future to foreign investors who would finance that debt.

Fereigners, again!

“That is why every American deserves to know the true cost – and necessary tradeoffs – of the President’s Social Security overhaul.

We like those overhaul shows on cable, ya know, the ones with the trucks, cars and motorcycles.

“If this is indeed one of his top priorities, it must be accounted for – without gimmicks – in the budget the Administration submits to Congress next week.

Ready with the whistles!

“Democrats insist upon fiscal discipline with budgets that pay as we go, and we want to strengthen Social Security for future generations. That cannot be done by increasing the debt we leave to those same future generations.

It can only be done by speaking in pretzel logic, doing nothing to help, offering no alternatives, pointing fingers and shouting loudly!

“Second, Democrats insist any changes not slash benefits. The average Social Security check today is $950 a month. That is not a great deal of money for those who depend on that check to pay for food, rent, heat, and medicine.

No to slashing benefits, not now! Not ev--er, that comes later when these voters get older and…forget!

“Under the leading privatization plan proposed by the President’s Social Security commission, the Social Security benefit could be cut by more than 40 percent.

Four out of five fibbers like quoting percentages!

"Even considering a cut of that magnitude is unconscionable.

“Magnitude is unconscionable.” What a bumper sticker!

“Workers who have paid into Social Security with every paycheck must receive the guaranteed benefit they were promised.

Guaranteed! Drive it off the lot!

“It is the knowledge of that guaranteed benefit that allows more people in our society to pursue the entrepreneurial dreams that fuel so much of our economy.

There’s that word “entrepreneurial” again! We love it when you speak French!

“The burst of the Internet bubble in 2000 wreaked havoc on private investments.

Bubble! Burst! Havoc! (And, please, ignore who was President then!)

“We won’t let a guaranteed benefit become a guaranteed gamble.

Leave that to the Democrats!

“Third and finally, any changes to Social Security must be fair.

By “fair” do you mean “time to tax again?”

“The president has suggested a two-tiered system that treats current retirees differently from younger workers.

Two tiers! Sounds like fereigners again!

“President Bush likes to say that young people have the most to gain under his plan, but the truth is that young people have the most to lose. Social Security will be there for today’s young people, unless the President gets his way.

Have you actually asked today’s young people? They might recall what Groucho Marx once said, ‘what are you going to believe? Me or your own two eyes?”

“According to the Center on Economic and Policy Research, under the leading privatization proposal, a young person entering the workforce today can expect to lose more than $150,000 in benefits over the course of a 20 year retirement.

Quotes from Centers with Words and Numbers! Your getting help making this stuff up, aren’t you?

“Incredibly, there was even a Republican suggestion to provide women and minority workers with a different level of benefits.

To the Lifeboats!

“Women are the majority of Social Security beneficiaries, and are less likely than men to have pensions or retirement savings to supplement their Social Security checks. And Social Security is extremely important for the millions of minority families who heavily rely on its survivor, disability, and retirement benefits.

We like women. Some of us are women. You like scaring them.

“Fairness demands that changes to Social Security not undermine entrepreneurial opportunity for our young people, and the independence of women and minorities.

Now that sentence is a big bee hive of buzz words!

“These standards: fiscal responsibility, fairness, and not slashing benefits, should guide us in the debate on Social Security.

Cue the song from Peter Pan!

“Democrats will not allow this Administration to turn this proud, entrepreneurial achievement of the New Deal into a raw deal for millions of Americans.

Do you prefer your books cooked medium-well?

“Let there be no doubt in anyone’s mind -- Democrats will fight to see Social Security strengthened, not destroyed.

We like that part in the film “You’ve Got Mail” when Meg Ryan says “Fight! Fight! Fight!”

“Further, strengthening Social Security must be viewed in the context of the larger retirement picture.

Retirement pictures are so much cheaper than actual retirements.

“We need to do more to promote pension portability, and to help people save and create wealth by strengthening and expanding access to 401(k)s, IRAs, and other types of pensions.

Yes, you’re known for creating wealth. I think you call it “taxes.”

“These measures are crucial to guaranteeing greater flexibility for our young people, and, again, greater independence for our seniors in retirement.

Crucial guarantees of greater flexibility! For the Young and the Seniors! Wow. You guys are so good at promising! So, what about those between the young and the senior, do they pay for everyone except themselves?

“Democrats believe that Social Security must form the foundation of a comprehensive plan for retirement security.

Comprehensive! Sounds so big it’s hard to comprehend what you mean.

“Social Security is a promise, kept from generation to generation, a guarantee of dignity and independence.

Where can the Today’s Young People cash their Promises of Dignity when it is their turn for the Retirement Picture?

By the way, did you accidentally hire some former Soviets as speechwriters? Or just reading them?

“Social Security is the closest thing our government has to a sacred trust. Mr. President, do not betray this trust.

It is an important program and it will fail one day – for this generation and all which follow -- if it is not fixed soon. It is devilish to play political games with Social Security. When you use the word “scared,” please refer to something bigger than a government program, even an important one.

“Truth and trust are essential to our democracy. Yet in President Bush’s Administration, we have seen a propensity to manufacture crises where none exist, and then turn to preordained ideas as the solutions to them.

“Words beginning with T for a thousand, Alex.”

“As a result, this Administration has often pursued solutions that only deepen the problems, and undermine the trust of the American people.

You lost a lot of elections saying things like this. Could it be that the American people have more trust in President Bush than in the Democrats?

“Right now, in so many of the areas where we should be making progress, we are either backsliding or simply holding the line. That is unacceptable in a country such as ours, where progress is our hallmark.

More Words!

“There are some people in Congress and across the country who see what we’re advocating – access to health care for all, a prosperity that creates good-paying jobs and lifts every child out of poverty, and the promise of higher education for all – as inconceivable. Democrats are optimists. We see them as inevitable.

Optimists usually act happier. Also, they are quieter and less self-absorbed.

“By embracing the “bold, persistent experimentation” that is the legacy of the Democratic Party and our country, we can bridge the gap between the inconceivable and the inevitable.

You said “inconceivable?” I do not think that word mean what you think it means.

“In so doing, we can build a future worthy of the trust of the American people, the sacrifices of our men and women in uniform, and the aspirations of all of America’s children. Thank you.”

Don’t stop thinking about tomorrow!!! Party like it’s 1999!!!

Of course, the bill usually comes in the mail the day after tomorrow.


Posted by Donald L. Luskin at 9:14 PM | link  

THE ROGUES GALLERY    The Joint Economic Committee of Congress has published a set of great charts showing all the basic economic and demographic realities of Social Security. If you're looking for a simple package that vividly illustrates all the most important issues, you'll find this a great resource:

Posted by Donald L. Luskin at 5:07 PM | link  

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Here's my National Review Online Krugman Truth Squad column for this morning. Testing, testing, one two three...

Take the Krugman 6.5% Challenge
It’s dirty work (not really), but someone has to do it.

Paul Krugman and Dean Baker have a challenge for those of us who advocate Social Security reform with personal accounts.

Krugman, of course, is America’s most dangerous liberal pundit — but maybe you’ve never heard of Baker. He’s co-director of the Center for Economic and Policy Research, a leftist think-tank funded by George Soros. Krugman and Baker were recently cited as “excellent sources” on Social Security reform by the Communist Party USA.

Here’s the challenge, from Krugman’s New York Times column Tuesday:

Mr. Baker has devised a test he calls “no economist left behind”: he challenges economists to make a projection of economic growth, dividends and capital gains that will yield a 6.5 percent rate of return over 75 years. Not one economist who supports privatization has been willing to take the test.

But the offer still stands. Ladies and gentlemen, would you care to explain your position?

Krugman is using Baker’s test to try to suggest that stocks can’t possibly have the kind of returns in the future that they’ve had in the past — so Social Security reform with personal accounts that could invest in stocks is bound to fail. And he’s suggesting that Baker’s brilliance has stunned the opponents of reform into silence. Hardly — it’s just that none of us would have bothered to pay attention to someone like Baker if Krugman hadn’t elevated him to the pages of America’s so-called “newspaper of record.”

It’s dirty work, but someone has to do it.

Actually, it isn’t especially difficult. But to make the exercise interesting, I’ll limit myself to data Krugman himself offers in his very same Times column. Stand back, everybody — here goes.

Krugman states that the return on stocks from dividends and share repurchases is 3 percent. He states that “profits grow at the same rate as the economy,” and notes that “economic growth ... averaged 3.4 percent per year over the last 75 years.” It’s simple arithmetic that if dividends grow at the rate of earnings growth, and earnings grow at the rate of GDP growth, and if the dividend and repurchase yield stays at 3 percent, then stock prices must rise each year by 3.4 percent.

That’s 3 percent per year in yield plus 3.4 percent in capital gains. Sounds like a 6.4 percent return, to me. Just a hair shy of the 6.5 percent Krugman and Baker asked for, but I am still going to declare victory.

Even without the arithmetic, there’s nothing so unusual about thinking that stocks could return something like 6.5 percent, after inflation, over the next 75 years. After all, they’ve returned exactly that over the last 75 years, according to Ibbotson Associates. Stocks are somewhat more highly valued today than they have been on average in the past, but that may well be nothing more sinister than a reflection of the risk-reduction opportunities in today’s globalized economy. Besides, today’s valuations are fully reflected in the 3 percent dividend and repurchase yield that Krugman himself posited.

What does the guru of long-term stock investing — celebrated Wharton professor Jeremy Siegel — have to say about it? According to a Krugman column two weeks ago, “even Jeremy Siegel, whose ‘Stocks for the Long Run’ is often cited by those who favor stocks over bonds, has conceded that ‘returns on stocks over bonds won’t be as large as in the past.’” The point being that Americans would be better off leaving their Social Security taxes invested in the bonds held by the system’s trust funds, rather than investing in stocks through personal accounts.

But Krugman Truth Squad member Jim Glass, on the blog, caught Krugman “Dowdifying” that quotation. What Siegel really said, after the sentence Krugman deceptively selected was, “I see a 5%-to-6% return on stocks, adjusted for inflation. I’m pessimistic about real bond returns.”

Okay, 5 to 6 percent isn’t quite 6.5 percent. But it’s close. And it’s a heck of a lot better than the rates of return offered by today’s Social Security system. According to the Congressional Budget Office, Social Security offers very poor returns for the median quintile of household earners — the present value of their payroll taxes is greater than the present value of their future benefits.

But Krugman does make one good point in Tuesday’s column. He states that stock returns in the neighborhood of 6.5 percent will not be possible over the coming 75 years if economic growth is as low as the 1.9 percent rate used by the actuaries of the Social Security Administration in their solvency estimates. He says that for that to occur, “you have to believe that half a century from now, the average stock will be priced like technology stocks at the height of the Internet bubble — and that stock prices will nonetheless keep on rising.”

How did Krugman figure that out? The Princeton economics professor — who some people think could someday win the Nobel Prize — had to ask Dean Baker to “help me out with that calculation (there are some technical details I won’t get into).” Indeed, Krugman probably needed the help — he never has had a very firm grasp of stock market valuation. During that “height of the Internet bubble,” Krugman wrote in his Times column that “I'm not sure that the current value of the Nasdaq is justified, but I’m not sure that it isn’t.”

Hmmm. That wasn’t exactly the unambiguous call to sell techstocks that Jeremy Siegel issued at the height of the bubble, when he wrote a piece titled “Big-Cap Tech Stocks Are a Sucker Bet.” No, as new ex officio Krugman Truth Squad member James Neel put it in an e-mail, “Krugman was for the bubble valuation of Nasdaq before he was against it.”

Today, once again, Krugman wants it both ways. He’s sure that stocks will perform poorly in the future, but he says, “if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.” But that’s simply not true.

Kent Smetters, the Wharton professor who has pioneered the analysis of Social Security’s solvency beyond the deceptively arbitrary 75-year timeframe most often cited, told me that faster economic growth amounts to “very little over the long term.” Krugman’s analysis — which focuses on the higher taxes collected in the near term — ignores the reality that correspondingly “higher benefits come outside the 75-year window.” So you collect more now, but you just pay it out later. That’s largely because a 1977 law, passed by a Democratic Congress and signed by Democratic President Jimmy Carter, indexed Social Security benefits to economy-wide wage growth.

I’d conclude by turning Krugman’s challenge back on him: “Ladies and gentlemen, would you care to explain your position?” But I can’t — I’ve been writing the Krugman Truth Squad column long enough to know that he’s no gentleman.

Correction: Reader Dean Jens pointed out that in the original text above I had spoken loosely of the "negative" returns implied by the fact that the the present value of payroll taxes is greater than the present value of future benefits. Such returns are only negative relative to the discount rate used in the calculation -- they may or may not be negative in absolute terms. The text above has been amended.

Posted by Donald L. Luskin at 1:02 PM | link  

INSIDE THE ANGRY LEFT'S BUNKER    Here's what the angry left is plotting. As a journalist, I get a lot of their emails like this. When I see this kind of thing, I wonder what kind of barren lives these people must have, to want to spend so much energy in robotic, thoughtless knee-jerk opposition to anything proposed (or, in this case, not yet proposed) by President Bush. I'm tempted to tell them "get a life!" But I suppose this is their life. Sad.


Groups In Cities Bush Will Visit To Wage Major Effort to Question Bush Plan

WASHINGTON - The Campaign for America's Future today outlined plans to counter President Bush's Social Security blitz this week, beginning with his State of the Union address tonight. The Campaign for America's Future is coordinating the efforts of labor unions and advocacy groups for civil rights, women, senior citizens and people with disabilities to fight the president's proposal to privatize Social Security.

The Campaign for America's Future has set up a war room a couple of blocks from the White House to provide real-time response to the president's State of the Union remarks tonight and to provide media representatives with dozens of spokespeople on Social Security from its partner groups. The war room is also feeding information to citizen groups in North Dakota, Montana, Nebraska, Arkansas and Florida to prepare for the president's visits to those states in the next two days.

State leaders and advocates will hold separate news conferences in Bismarck, N.D. and Helena, Mont. today to release a new report about how much President Bush's plan will cut benefits for a typical beneficiary. Leaders and advocates in Omaha, Neb., Little Rock, Ark. and Tampa, Fla. will hold news conferences Thursday. Hundreds of local residents will rally in Fargo and Bismarck, N.D. and Great Falls, Mont. on Thursday and Omaha, Neb., Little Rock, Ark. and Tampa, Fla. on Friday.

The Campaign for America's Future promotes and informs the efforts of more than 20 groups, including the Alliance for Retired Americans, USAction, ACORN, the American Federation of State, County and Municipal Employees, and others. The AFL-CIO organized thousands of activists to picket the offices of Charles Schwab & Co., Inc. in Boston and San Francisco last week and generated more than 400,000 e-mails to the company.

**NOTE: Producers and bookers interested in spokespeople on Social Security should contact Jon Romano at For local event planning details, please contact Andrea Miller at**

Posted by Donald L. Luskin at 11:50 AM | link  

THE VIRTUE OF PARTISANSHIP    Words of real wisdom for President Bush from Brendan Miniter in the Wall Street Journal. With Democrats doing nothing by nay-saying on Social Security reform,

President Bush is left with the reality that the only way to save Social Security is to pursue a partisan bill, while continuing to take his message to the people. By stirring up the voters, the president may get as many as two dozen Democrats to come along in the House and the half dozen he needs in the Senate. But he'll get that only if the doesn't cede ground on the fundamental reform--large personal accounts, funded and controlled by individuals. Partisanship gets a bad wrap, but sometimes it's essential.

He's right. Bipartisanship in this one means about the same thing as mixing in counterfeit money with the real thing. It didn't have to be that way -- but the Democrats have made it so.

Posted by Donald L. Luskin at 10:12 AM | link  

Tuesday, February 01, 2005

KRUGMAN'S FORECASTS    I'll have lots more in response to Paul Krugman's New York Times column today, in which is asserts that stock market returns cannot possibly be anywhere near as high in the future as they have been in the past (and thus, he argues, stocks must inevitably disappoint investors who hold them in Social Security personal accounts).

Krugman's argument is technical, and it will get a technical response. But first, let me point out that, on the face of it, there is very little reason why anyone should listen to Paul Krugman's forecasts about the future. He himself admitted to Tim Russert on CNBC that "Compare me … compare me, uh, with anyone else, and I think you’ll see that my forecasting record is not great." He's right to have been so modest. When he was an economist with the White House Council of Economic Advisors, he warned in 1982 of an "inflation time-bomb" -- just when inflation was about to fall to near zero over the next twenty years. In today's column he speaks of the prices of "technology stocks at the height of the Internet bubble" -- yet at that very height, in February 2000, he wrote "I'm not sure that the current value of the Nasdaq is justified, but I'm not sure that it isn't." And his books in the early 1990s contained forecasts -- then still quite fashionable among liberal economists -- of how America was certain to continue to lose ground to the economic juggernaut of Japan.

And in the column today, Krugman betrays a fundamental misunderstanding of the economics of Social Security itself. He write, "we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come." Krugman has forgotten -- or chosen to ignore -- that under current law Social Security benefits are indexed to wage growth. If the economy grows like Krugman is talking about, yes, payroll tax revenues will grow too -- but so will benefits, nearly perfectly proportionately. The sensitivity tables given by the Trustees of the Social Security Trust Funds don't show this -- because they arbitrarily cut off the calculation after 75 years. But the reality is that the early benefits of increased tax revenues are eventually offset by the higher cost of benefits. Gee -- think how good Krugman could make that look if he reduced the window of analysis to just 10 years.

More later!

Posted by Donald L. Luskin at 9:32 AM | link  


Reader Noel Sheppard sends in this smart email:

There is great consternation concerning the upfront transitions costs of Social Security reform. Frankly, what amazes me here is how folks like Nancy Pelosi, Harry Reid, and so-called economists like Krugman and others are missing a very simple analogy that has been transpiring rather frequently in our nation over the past three years -- mortgage refinancing.

Let me give you a real example. In 2003 as rates approached their lows, I bought down a 30-yr mortgage that had 26 years remaining on it and converted it to a 15-yr. fixed. Now, I wanted to drop this to a conforming note to get my new rate out of the typical premium that one pays for a jumbo. So, I included with all of my closing costs an amount of money that would accomplish this, thereby significantly reducing the size of the new note.

As such, similar to the upfront funds that are going to be required for us to reform Social Security, this process cost me money "today." However, when you add those costs to the remaining payments on the new note, it is hundreds of thousands of dollars less than if I had stuck with my old note.

Given this, I guess it is safe to say that Nancy Pelosi, Harry Reid, and Paul Krugman would disagree with me buying down my mortgage.

Posted by Donald L. Luskin at 9:11 AM | link  

Monday, January 31, 2005

EPSTEIN ON THE FLAT TAX    A lecture by Richard Epstein extolling the flat tax -- concluding on this amusing note:
It is ironic that the flat tax is popular in former communist countries. It was Karl Marx, in his Communist Manifesto of 1848, who was among the first to call for "a heavy progressive or graduated income tax" at a time when a flat rate was the norm in the early industrialising countries.

It is no accident that every strong defender of limited government has gravitated toward the flat tax. This is true of John Locke, Adam Smith and Friedrich Hayek.

Nobody would try to put themselves in that league, but I shall cast my vote with the giants and let those who dissent find some other champion - perhaps Karl Marx.

Thanks to Bruce Bartlett for the link.

Posted by Donald L. Luskin at 11:47 PM | link  

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Check out Benjamin Barber's op-ed in the Los Angeles Times. Setting aside all the claptrap about "there is no crisis" and "it's a windfall for Wall Street," Barber gets right to the bleeding heart of the matter, arguing that an antiquated, socialistic bankrupt Social Security system is essential for a modern, vibrant democracy.

" of this nation's greatest public goods has been its promise to give every working family a guarantee of support at retirement, or in case of disability or death. This promise, offered to all citizens, wipes away all the distorting traces of class, race and gender that often play out so dismayingly in the private realm. You cannot simply take justice out of the public realm and put it into the private realm without fundamentally weakening the democracy on which the very possibility of justice depends."

So now sucking savings capacity out of every American's life -- especially those for whom saving and investment are crucial for any hope of social mobility --is a "public good" on which "the very possibility of justice depends"?

"Private market liberty is not political liberty; it is only personal choice. It may generate private benefits ('I want an SUV!' or 'Give me 100 shares of EBay!') but offers nothing for the common good (a fuel conservation policy, for instance). It is as citizens that we pay our Social Security taxes, and it should be as citizens that we enjoy the fruits of our labor.

So the market generates no positive externalities? Only government coercion is capable of creating a common good -- defined, of course, as whatever it is that Benjamin Barber happens to think is good (fuel conservation, for example; it concerns him not that others may differ).

Privatization puts us back in the state of nature where we possess the natural power to get whatever we can but lose the common power to secure everything to which we have a natural right.

So we are born with a "natural right" to have an antiquated, socialistic, bankrupt welfare scheme that lays upon us like a succubus? Barber should go back and refresh his memory about what the natural rights philosophers were all about -- removing such impediments to liberty.

Thanks to reader Joe Wright for the link.

Posted by Donald L. Luskin at 3:09 PM | link  

ROCK ROCKS ON SOCIAL SECURITY    An anonymous reader sends this email, responding to my NRO Krugman Truth Squad column today, "Big Black Lies" --

Harold Ford isn't the first prominent African-American to notice that Social Security is a raw deal for minorities. Comedian Chris Rock riffed on Social Security all the way back in 1999, in his comedy special "Bigger & Blacker."

Here's a quote: "You start getting social security at age 65, meanwhile the average black man dies at 54! Black people should get Social Security at 29! Black people don't live that long - hypertension, high blood pressure, NYPD!"

Posted by Donald L. Luskin at 1:04 PM | link  

A LITTLE TRUTH FOR FIGLEAF DAN    Here's the kind of columnist correction that New York Times public figleaf Dan Okrent should be willing to run -- one where the facts are black-and-white wrong, and where confession won't embarrass the columnist too much by making it look as though he engaged in a deliberate falsification. In his Friday column Paul Krugman wrote,

This week, in a closed meeting with African-Americans, Mr. Bush asserted that Social Security was a bad deal for their race, repeating his earlier claim that "African-American males die sooner than other males do, which means the system is inherently unfair to a certain group of people."

Krugman is wrong -- Bush made that statement on January 11 in an open meeting with Americans of all races.

But I'm not even going to bother to send an email about it to Okrent. I'm tired of having him say "I'll look into it" and then nothing ever happens. Now he doesn't even bother to lie -- when I send emails to him, I get no response at all. So I'll help Okrent lie -- to himself and his "public" -- that "judging by the shrinking volume of complaints I receive from readers, columnists' errors have become much less frequent.

Posted by Donald L. Luskin at 9:46 AM | link  

AND NOW FOR SOMETHING COMPLETELY DIFFERENT    Okay, this takes the prize for simply the most bizarre analysis yet published about Social Security. It runs in the Ann Arbor News under the rather ironic headline "Expert tackles misconceptions about Social Security." It's a Q&A with James N. Morgan, who is said to be a research scientist and professor of economics emeritus at the University of Michigan. Morgan, among other things,  served on advisory committees to the Social Security Administration from 1966-69. It's possible, judging from this, that he is a bit past his prime.

If the government does have to use some general tax money to pay the legitimate benefits of the baby boomers, it's exactly the fiscal policy we need, to stifle what would otherwise be an inflation. You get a lot of baby boomers retiring and spending their legitimate money without earning anything, that's a big inflationary pressure. So the crisis is no crisis at all.

And you thought you'd heard every possible excuse for why there's no crisis. Now you've got a new one: the insolvency of Social Security will cure inflation!

The misconception is that the workers are paying for the benefits of the retired people. The fact that the government takes money from one group and gives it to another doesn't mean that they are paying for it, so the real economics of it is that every generation pays its own way.

Uh, when someone takes my money and gives it to someone else, I'd say I'm paying for it.

I would depend on Social Security's own people, and on Paul Krugman, who writes regularly in The New York Times. Krugman is a professional economist who knows his business, who checks his figures. I would trust his figures...

Nuff said.

Posted by Donald L. Luskin at 9:28 AM | link  

LIE EXPECTANCY    Jim Glass on the blog has factchecked Paul Krugman's New York Times column from Friday, and found it to be more full of lies fibs than facts.

His words...

It's true that the current life expectancy for black males at birth is only 68.8 years - but that doesn't mean that a black man who has worked all his life can expect to die after collecting only a few years' worth of Social Security benefits.

Blacks' low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years - not that far short of the 16.6-year figure for white men. [my emphasis]

Of course, if blacks die young at a high rate before starting to work, then those who do don't pay any payroll taxes that they fail to recover. Krugman is claiming that this is the case.

But is this claim true?

Going to the National Center for Health Statistics life expectancy data ...

We find that black males right in the middle of a working life, age 40, have a 30% chance of dying by age 65. (The corresponding chance for white males is 17%.)

Now let's go back and look at Krugman's purported "high death rates in childhood and young adulthood" for blacks.

Black males alive at age 5 have only a 3% chance of dying within the next 25 years of their childhood and young adulthood, by age 30. (For white makes the figure is 1.9%)

So their death rate during their past-age 40 working years is 10 times higher than "the high death rates in childhood and young adulthood" Krugman ascribes to them. And the risk that a black male age 40 will die before reaching the Social Security retirement age of 65 -- after paying most of working life of payroll taxes but still too young to recover any of them -- is 10 times higher than the risk that one will die as a child or young adult age 5 to 30. (And 77% higher than the risk that a white male age 40 will die by age 65.)

When Krugman sure seems to have claimed exactly the opposite.

It looks to me like Krugman lied fibbed, plain and simple.

Posted by Donald L. Luskin at 9:16 AM | link