Tuesday, September 13, 2011

Krugman: Social Security Is a Ponzi Scheme that Will Soon Be Over

A big tip of the hat to a Zero Hedge reader who has dug up a 1997 Boston Review column where Paul Krugman wrote:
Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).
This being Krugman, he has at other times defended Social Security:
So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count...having invented a crisis, what do Social Security’s attackers want to do? They don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. So think about it this way: In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.

What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.

And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.
Forget a Murphy-Krugman debate, maybe we can just have Krugman debate himself.


  1. Great idea to have Krugman debate himself. Although Steve Colbert has set the precedence in self debates.

  2. To call Krugman a donkey's ass is an insult to the ass of said donkey.

  3. That's the old Krugman, back when he wrote "Pop Internationalism". He wasn't openly socialist back then.

  4. If Krugman debated himself, does the Food Bank still get the money?

  5. Don't let Krugman debate himself. He may claim a "win", then we'd really be up sht creek.

  6. Where's the contradiction? Social Security has aspects of a Ponzi game, yes, but it cannot be considered a Ponzi scheme unless its purpose is to defraud investors. Furthermore, since Social Security is part of the federal budget, it can't actually run out of money unless it is deliberately de-funded.

  7. Also, the headline of this story — "Social Security Is a Ponzi Scheme that Will Soon Be Over" — mischaracterizes what Krugman actually said. He didn't say that Social Security would fail due to it being a Ponzi scheme. He said "the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in)", i.e. the Ponzi game aspect will no longer exist, which is the opposite of what the headline implies.

    Did any of you guys actually read this thing?

    1. Apparently not, but they never read for content, anyway. Lots of GOP noises of discontent, but not one instance of Krugman "debating" himself.
      This Nobel laureate in economics (2008) knows his subject, but if painting a transient social security benefits bias as a "Ponzi scheme" was Krugman writing in hyperbole for the sake of comparison, that went over the heads of the bozos looking for gotchas over a 13-year span.
      These are the people who love to parse statements for seeming contradictions, even if they still do not understand the comment.

      Here is a representative Krugman comnents on Social Security-- http://krugman.blogs.nytimes.com/2011/10/30/social-security-bait-and-switch-a-continuing-series/