Luskin’s Criticism of Obama’s Social Security Proposal Flunks Basic Arithmetic
I’m thinking of some positive number but I haven’t told you that number yet. Do you know whether my number is greater than or less than zero? Before you shout out, it must be greater than zero, realize rocket scientist Donald Luskin isn’t so sure:
Would it help Social Security’s financing problems? Mr. Obama has no idea. One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis. When one proposes an enormous tax increase, shouldn’t there at least be a spreadsheet somewhere?
An increase in revenues coming into the Trust Fund will not improve its financing – especially an enormous increase? Is Luskin really this stupid? Incidentally, notice all the claims below and yet Luskin has not provided us with his Microsoft Excel file:
And for all that, Mr. Obama’s proposal won’t help Social Security’s long-run solvency problems. According to the Social Security Administration actuaries, uncapping all wages subject to the payroll tax (not just those above $250,000) doesn’t make much difference to the system’s long-run solvency. If the increased payroll tax payments earn increased benefits, then only about one third of the system’s 75-year shortfall is addressed. Even if there is no corresponding benefit increase, only about half the shortfall is addressed. Remember, that inadequate result is what you get when all wages are subject to payroll taxes. Mr. Obama’s plan – even with his household definition of $250,000 income – would collect far less than that. No wonder Mr. Obama’s economic advisers aren’t interested in doing any detailed analysis. Worst of all, even the small contribution to Social Security solvency that Mr. Obama’s plan might make is entirely illusory. In fact, the more taxes his plan collects, the worse Social Security’s long-term situation gets. That’s because all plans based on collecting taxes and saving them in the Social Security Trust Fund for future benefit payments rely on the U.S. government being able to redeem the Treasury bonds that trust fund holds. There’s only one place that the money to redeem those bonds can come from: taxes. So ironically, any tax dollars collected today will have to be collected all over again – plus interest.
Let me get this straight – Luskin believes there is some gigantic long-run shortfall but when faced with the possibility that this shortfall will be cut in half, he sees no real reduction. Hmm – 10 billion divided by two equals zero according to the fuzzy math practiced by Luskin. Then again – Luskin had to fall back on his there is no Trust Fund nonsense. Maybe someone at the Wall Street Journal was doing back of the envelope arithmetic as he reviewed this nonsense and realized how dumb it really way. So why did they publish this stupidity?