Wednesday, February 16, 2011

Krugman Misses the Big Point on Social Security

Paul Krugman pooh, poohs the Social Security crisis by essentially telling us that the system can be tweaked so that it survives. But what Krugman doesn't address is the fact that the SS system has gone cash flow negative.

The SS fund at one time purchased 25% of all Treasury securities issued, now it is a net liquidator. This means that the Treasury will have to go into the debt markets to pay to SS for an increasing amount of  Treasury security liquidations by SS.

At present, SS does not have enough Treasury obligations to pay off all its future commitments. When Krugman speaks of tweaking the system, he is calling for the Treasury securities held by SS to be equal to expected pay outs, but he does not addressing the elephant in the room, that being, where the hell is Treasury going to get the money to pay for the Treasury securities that will be liquidated by SS other than more outside borrowings, which will push rates even higher, do even more crowding out of the private sector borrowing and speed up the crash of the entire system.


  1. Gary North called it

  2. OK, so you claim SS is broke.

    Fine, publish a chart, for years 2000 thru 2100 showing funding currently available and expenses expected. Show us what the numbers look like on a yearly basis. WE THE PEOPLE, who will need SS to survive WANT some honesty on this issue.

    Show the same chart if the payroll tax is increased by 2 percentage points from the current 6.2% (or is it 6.7%?) to 8.2%, then another chart at 9.2%. Are we getting close to a solution? Show a chart with 10% reduction in payouts, and another with 20% reductions. Show a chart with payroll tax on income up to $250,000. With this type of data, maybe we can see who is telling the truth.

    Don't bother with BS statements like: "SS is 63 Trillion in debt" or other nonsense. That is meaningless without some context.

    I suspect Krugman may be correct, but I'd like some honesty from those who say he isn't. Perhaps he isn't. There isn't a more important topic for the 100,000,000 baby boomers.

    Thanks! We welcome data! Not just BS.

  3. @anonymous 2-18 7:39

    How's this for a start?

    There is no money in the SS trust fund at all.

    All they have is IOU's from the government and the government is broke.