Friday, April 29, 2005
LINDA GORMAN ROCKS!
Why preferred-drug lists are a bummer.
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Thursday, April 28, 2005
MORE KRUGMAN AND HEALTH CARE
My latest at the Spectator.
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Tuesday, April 26, 2005
SOCIAL SECURITY OSTRICH: PAUL KRUGMAN
This is one award that is long overdue. What has finally lit the fire under me is Professor Paul “Yes-I-Can-Divide-By-Ten” Krugman’s excursion into health care:
Those of us who accuse the administration of inventing a Social Security crisis are often accused, in return, of do-nothingism, of refusing to face up to the nation's problems. I plead not guilty: America does face a real crisis - but it's in health care, not Social Security. 
Yes, the Princeton Ostrich is burying his head deep in the sand, and has been doing so for quite some time. From January:
Last week someone leaked a memo written by Peter Wehner, an aide to Karl Rove, about how to sell Social Security privatization. The public, says Mr. Wehner, must be convinced that "the current system is heading for an iceberg."
It's the standard Bush administration tactic: invent a fake crisis to bully people into doing what you want. "For the first time in six decades," the memo says, "the Social Security battle is one we can win." One thing I haven't seen pointed out, however, is the extent to which the White House expects the public and the media to believe two contradictory things.
Of course, the Princeton Ostrich’s case rests on the magical trust fund:
The short version is that the bonds in the Social Security trust fund are obligations of the federal government's general fund, the budget outside Social Security. They have the same status as U.S. bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.
Yes, it is legally obligated to pay off the bonds. The question that he never addresses is where will the government get the money to pay off the bonds?
In that same column, he also stated:
In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program. As Matthew Hoy points out, we’re still waiting. Perhaps the Princeton Ostrich buried his head so deep he can’t get it out?
Of course, back in 2003 the Princeton Ostrich had his head out of the sand and was yapping away about the Social Security crisis:
[W]hat's really scary…is the looming threat to the federal government's solvency.
That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 — make that 3, O.K., maybe 4 — percent of G.D.P. But that misses the point. "Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen." So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.
Of course, Mr. Fisher isn't allowed to draw the obvious implication: that his boss's push for big permanent tax cuts is completely crazy. But the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident — the fiscal train wreck — is already under way.
How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
(For more, see this good flash presentation.)
When there is a Bush tax cut to defeat, Krugman yells loudly about the Social Security crisis. But when Bush actually proposes doing something about that crisis, Krugman sticks his head into the sand. For that, Krugman wins a very well-deserved ostrich award.
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Monday, April 25, 2005
A FEW ARTICLES
I’ve been remiss in posting some of my articles at this blog, so here is an update:
Tax Day Revelations
Earth Day Birdcage Liner
Financing Social Security Reform With Pork (My First at Brainwash.)
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HAPPY ANIVERSARY, DON LUSKIN!
Well, Saturday was a very important two-year anniversary. On April 23, 2003, Don Luskin, Grand Poo Bah of the Krugman Truth Squad, nailed Paul Krugman in a brazen lie. Here was the relevant portion of the Krugman column:
. . . let's pretend that the Bush administration really thinks that its $726 billion tax-cut plan will create 1.4 million jobs. At what price would those jobs be created? . . . The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created?
Luskin exposed the lie in his NRO column:
Because $40,000 in earnings for the average worker is a one-year figure, and the tax-cost per job of $500,000 ($726 billion in tax cuts divided by 1.4 million new jobs) is a ten-year figure, you have to divide $500,000 by ten to make the figures comparable. So a $40,000 job is created with only $50,000 in tax cuts, not $500,000. Krugman is off by a factor of 10.
Luskin’s catch resulted in not one, not two, not three, not four, not five, not six, but seven explanations by Krugman on his personal website trying to confuse people into thinking that he wasn’t lying. The deception of the responses was evident from the tone of the first two paragraphs in the first response (all italics are mine):
Aha. It seems that I needed to explain something I took for granted in my piece "Jobs, jobs, jobs" in the NYT. I've gotten a fair bit of mail over the way I compared the annual cost of employing an average worker with the 10–year cost of the latest Bush tax cut. Some of the mail was in good faith, so here's the explanation.
No, I didn't forget to divide by 10. (For God's sake: whatever you think of my politics, I am a competent economist, and know how to use numbers.) What I foolishly assumed readers would know - this isn't condescension, I really was foolish - is that no serious economist thinks that a tax cut or spending increase will have any effect on employment more than a couple of years from now. The reason is straightforward: normally the economy is operating more or less at full employment, and any demand stimulus from a tax cut will be offset by an interest rate increase by the Fed. The Fed, of course, polices the economy to prevent inflationary pressures. And eventually we will return to normal circumstances.
It was enormous fun watching the lefty partisan hack masquerading as a Princeton economist twist in the wind. Luskin’s exposure of Krugman’s lie led to enormous blogosphere scrutiny of Krugman’s subsequent columns. Not surprisingly, a parade of inaccuracies and lies were exposed. Krugman’s reputation has never recovered. Indeed, Krugman has had to resort to finding sympathy among angry left-wing extremists like Atrios.
Apparently the second anniversary is “cotton”, although this website suggests that a modern gift would be “China.” Well, since it is still run by dictators, Don probably wouldn’t want China as a gift anyway. So I guess this will have to do:
Happy Anniversary, Don!
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