Don Luskin nitpicks himself into a corner again with another attack on Paul Krugman that also goes after Peter Orszag. He notes that Krugman argued:
when you divert some of your Social Security payroll-tax dollars into a personal account of the kind that President Bush is proposing, the government is effectively making a loan to you so that you can buy stocks on margin — “speculation that no financial adviser would recommend.”… Peter Orszag of the Brookings Institution got it exactly right: “It’s not a nest egg. It’s a loan.”
So Luskin fires off:
Wrong, wrong, wrong. If it’s a loan at all, it’s a loan you make to yourself.
Odd – someone just forwarded this email from David “just IOUs” Frum to me:
If I have an IOU from you, I have an asset. If you have an IOU from you, you have an unenforceable intention. Likewise, if I own a US government bond vs. if the US government owns a US government bond. I thought John Maynard Keynes explained all this 70 years ago!
I doubt Mr. Frum ever read the General Theory but I do think he and Luskin should compare notes. Of course, neither would admit that this whole Social Security deform idea is to divert my retirement funds to pay for tax cuts for the rich. But then that is what Mitch Daniels was talking about with “plenty of money for a tax cut”, I guess.
Update: I got another email from a reader of Angrybear that commented on Luskin’s NRO oped in the most delightful way:
He’s forgetting (or more likely omitting) the trillions of dollars the government needs to borrow (a loan!) to cover the transition costs. It doesn’t matter much where the actual revenue is coming from for the private accounts, because there has be equal amount borrowed to cover current benefits. In honor of his amazing stupidity, can we call this specific topic the “Luskin Equivalency Theory”?
Of course, Barro’s Ricardian Equivalence theory should not be confused with Luskin’s.