Econoblog features this interesting dialogue between Arnold Kling and Max Sawicky. Arnold’s comments are interesting but I still preferred Max’s dialogue with Andrew Samwick (see link to Voxbaby over at the right). In several places, I wanted to take exception to Arnold’s comments and each case except one, Max made my point better than I could. But he let this go:
The way I would put it is that politicians have three credit cards — three ways of buying votes today and paying later. This involves making promises that will have to be redeemed by taxes collected in the future. Those three credit cards are the general budget, Social Security and Medicare. Changing Social Security from a transfer scheme to one with personal accounts serves to take away the politicians’ Social Security Credit Card. They no longer would have the authority to promise benefits out of future Social Security taxes. Incidentally, the tab that they already have run up would be moved over to the General Budget Credit Card, so that current benefits would wind up paid out of general revenues, which is something you said that you favor.
Three credit cards or just two? Let me suggest a hypothetical romance between some fun-loving lad named George who did have two credit cards (general budget and Medicare) and some frugal lass named Nell who had a bank account that she continually contributed to (Social Security). George has run up his credit cards and continues to spend more than he earns. Nell, on the other hand, plans to add to her bank account for the next fifteen years and then retire off of her savings. I would suspect privatization proponents such as Arnold and Robert Barro would consider it inappropriate for George to use Nell’s bank account to fund his lavish life style.
But there is a big difference between their versions of privatization and the Three-card Monte scheme of the Bush Republicans. This was Max’s point here. But does David Altig implicitly support this massive transfer of wealth when he writes this:
The gap between payroll tax receipts and benefits is presently scheduled for 2018, not 2042
Back to George and Nell. Suppose Nell wishes to marry George. Arnold’s point seems to be that such a marriage drags her bank account into George’s financial irresponsibility. But does it? The analogy to Al Gore’s “lockbox” would be a prenuptial stipulating that George could not tap Nell’s back account to pay off his credit cards and requiring George to end his financial irresponsibility. This might work out if George were President George Washington, but then the current President is named George W. Bush.