Luskin’s Thesis: Putting Things into Perspective
Not to beat a “dead horse”, but AB is right about Luskin’s thesis, which by his own subtitle was “the truth about Social Security even eludes the supposed truth-seekers”. Luskin dares to say others were misleading the public and then he goes on to lie to them. OK, he corrected his lie and now his oped is pointless. But how is putting things into proper perspective misleading anyone?
Let me suggest the following analogy. Suppose a liberal rag decided to blast Halliburton for increasing its prices so much that its revenues rose by $150 million. That sounds like a lot but it would represent only a 1% increase in revenue. OK – with Halliburton’s profit margin being a mere 3%, this also represents a 50% increase in income. Oh wait, I’ve chosen figures akin to how Dick Cheney excused Halliburton’s accounting fraud, so if any rightwinger wishes to suggest I just called him a cheat and a liar – I did. But back to the Luskin thesis.
This $10.4 trillion infinite-horizon shortfall for the Social Security Trust Fund should be place in the context of the present value of GDP over the infinite-horizon to show the ratio is just over 1%. This should also be compared to the General Fund shortfall, which is four times as large over the infinite horizon. As far as Luskin’s:
That $10.4 trillion number represents the value of economic assets today that would have to be contributed to the Social Security system to assure its perpetual sustainability based on the best estimates we can make at this time. To set things right, then, we would have to contribute today virtually the entire market value of the S&P 500.
Two notes: (1) Max Sawicky is right about “Most of the future financing comes from labor, not capital. That’s why his comparison of the ten trillion to the value of the stock market is momentarily interesting but dumb”; and (2) my comments that the present value of the General Fund shortfall appoximates household wealth and that the Luskin-Michael Tanner math is an indication that they wish to transfer an amount equal to half of that away from worker’s retirements and towards the pockets of the ultrarich.
The real motivation for this post comes from the latest duel between Kudlow and DeLong:
Larry: The president’s goal is to restructure the American economy, Reagan-style. His plan is to reduce the demand for government services…
Brad: … federal spending went from 21.6% of GDP in 1980 to 21.2% in 1988.
Odd that Larry would try to tell his readers Reagan reduced government spending when most of his free-lunch supply-side buddies blame the Reagan deficits on runaway government spending and not the tax cuts. For example, on the eve of the 2000 Presidential election, the WSJ oped pages featured an endorsement of George W. Bush from Jack Kemp and Art Laffer who lied to the readers of the WSJ that the Reagan tax cuts led to faster growth and a doubling of tax revenues. Sure, Federal receipts were $500 billion in 1980 and $1 trillion in 1990 but much of this nominal increase was due to higher payroll contributions for our old-age retirement, which of course, the Bush-Kudlow-Luskin crowd now wishes to take away. Real Federal income taxes rose by a mere 17% over this decade whereas one would have thought that the increase would have been twice that since Larry keeps telling us that real GDP growth averaged 3.5% per year for the second half of last century. Of course, Larry never admits that this is only true because of the growth before Reagan-Bush41 and during the Clinton years with average annual real GDP growth for the Reagan-Bush41 era being only 3.0%. Larry and his buddies never admit that the Reagan-Bush41 era was one of lower savings and investment.
But then the free-lunch supply-side is not interested in growth no more than they are interested in an honest debate. They interest is in the CLASS WARFARE of Dooh Nibor (reverse Robin Hood), which requires that they engage in perpetual dishonesty.