James N. Morgan is professor of economics emeritus at the University of Michigan and served on advisory committees to the Social Security Administration from 1966-69. The Ann Arbor News interviewed Dr. Morgan this weekend. Highlights include:
Q. What do you think is the most important thing for people to know during the upcoming debate over the future of Social Security?
A. They should know that it’s not a pay-as-you-go system. Even it’s defenders get suckered into talking about it as though the working people are paying for the benefits of the retired people. If you think of it as a compulsory retirement scheme where every generation pays enough to justify its own benefits, then you look at it and you say, “Am I getting a decent rate of return on my savings?” And that’s true right now. But if there’s any difference between the flows in and out, that’s the government’s responsibility, not Social Security’s. The government paid some people during the Depression who hadn’t contributed much, using the pay-as-you-go logic to justify that, but that’s long since past.
Q. We hear a lot of conflicting numbers and dates about when Social Security will or won’t have a shortfall of funds. What is the most reliable source of numbers, and why?
A. 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, but I would also assume that Social Security would give you the right numbers.
STOP RIGHT THERE! We know Luskin had to find something to object to since Dr. Morgan said something nice about Dr. Krugman. So what does Luskin come up with?
“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!
Not exactly what Dr. Morgan said. But of course, the Federal Reserve is concerned that the Bush fiscal policy represents a long-term stimulus that might raise inflation unless the FED raises interest rates. Maybe Luskin could take a course in macroeconomics from Dr. Morgan and learn why the FED is so concerned.