Greg Mankiw commits an intellectual foul in my view as he graphs the ratio of the Federal government debt held by the public to GDP as if our payroll contributions to prefunding our Social Security benefits are really employment tax increases designed to pay for that tax cut for Bill Gates et al. I have written on this several times including this post:
Bush’s Social Security proposal cuts the benefits of young workers drastically but does not reduce the payroll tax rate. In other words, it is a backdoor tax increase on young workers. The Bush fiscal agenda does appear to be tax cuts for rich older people paid for by deferred employment tax increases on young workers.
Is Greg Mankiw recommending this backdoor employment tax increase? If he is, his graph makes sense. Otherwise, the comment from Greg’s reader Karl Smith is exactly the point I would raise.