Monday, August 04, 2014

Thinking about Social Security

Social Security's main problem right now is not the state of the trust funds, but a toxic political climate that is being manipulated by people who would like to do away with the program entirely. Much of this is coming from Wall Street, which covets the commissions that would come from a privatized Social Security. Some of the manipulation is coming from people who have some kind of "philosophical" objection to any government program. There are other groups with agendas that have nothing to do with preserving Social Security, but all the groups love to couch their agenda in sober, adult-sounding words of concern about the national debt.

The essential selfishness of those groups' motives makes it difficult for people of good will to make their arguments, especially if their argument is that we need to reduce Social Security benefits. Why should anyone believe they are honestly trying to think this through, when they are making the same argument as groups who are not being honest (even, for that matter, sometimes citing them as authorities)?

Last week the Social Security Trustees released their annual assessment of the trust funds, which resulted (as always) in a rash of obligatory, thinly thought out op-eds and editorials.  Predictably, some of these were by people with agendas other than providing financial security for older Americans.

A prominent example is an op-ed by Laurence Kotlikoff in the New York Times. Mr. Kotlikoff is a professor of economics at Boston University who in 2012 offered himself as a presidential candidate to an ambitious group called "Americans Elect" (after which Americans Elect decided not to field a presidential candidate). He is also a proponent of a weird little field of economics called "generational accounting."

In his NY Times op-ed, Mr. Kotlikoff chose to buttress his argument by citing a segment of the Trustee's Report which predicts the anticipated trust fund shortfall "through the infinite horizon." The "infinite horizon" concept was introduced to the Trustee's Report in the George W. Bush administration, as part of its unsuccessful attempt to dismantle Social Security.  At the time, an alarmed open letter from The American Academy of Actuaries warned:
The new measures provide little if any useful information about the program’s long-range finances and indeed are likely to mislead anyone lacking technical expertise in the demographic, economic and actuarial aspects of the program’s finances into believing the program is in far worse financial condition than is actually indicated. [My emphasis]
As an economist, Mr. Kotlikoff surely knows this, so we now have to be suspicious of his motives.

Good for us.

Postscript: If you're interested in a refutation of Mr. Kotlikoff's op-ed,  I point you to Dean Baker, who is isn't scared. 

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