Thursday, November 15, 2007

Krugman v. Krugman

UPDATE 11/22/07: Based on new information and comments elsewhere, I think that my original implication of an inconsistency on Krugman's part was incorrect.

* * *
ORIGINAL POST

1. Paul Krugman, 2007:
The great Social Security debate of 2005 was a seminal moment for American progressives. Conventional fiscal wisdom in the Beltway was that the aging population is THE big problem — when the truth is that grim long-run fiscal projections mainly reflect projected health care costs. And conventional political wisdom was that the Bush administration’s fear-mongering on the issue would work.

But a determined defense by progressives in the media, on the blogs, and in Congress beat back one spurious argument after another, while the American people made it clear that they really want a program that guarantees a basic retirement income that doesn’t depend on the Dow. And Social Security survived.

All of which makes it just incredible that Barack Obama would make obeisance to fashionable but misguided Social Security crisis-mongering a centerpiece of his campaign. It’s a bad omen; it suggests that he is still, despite all that has happened, desperately seeking approval from Beltway insiders.
2. Paul Krugman, 1996, reviewing "WILL AMERICA GROW UP BEFORE IT GROWS OLD? How the Coming Social Security Crisis Threatens You, Your Family, and Your Country. By Peter G. Peterson."
Responsible adults are supposed to plan more than seven years ahead. Yet if you think even briefly about what the Federal budget will look like in 20 years, you immediately realize that we are drifting inexorably toward crisis; if you think 30 years ahead, you wonder whether the Republic can be saved.

* * *
In short, the Federal Government, however solid its finances may currently appear, is in fact living utterly beyond its means. While the present generation of retirees is doing very nicely, the promises that are being made to those now working cannot be honored.
As far as I can tell, Obama hasn't said anything about Social Security that even remotely approaches Krugman's speculation about the end of the Republic. I wonder whether the financial projections for Social Security have improved that drastically since 1996. [UPDATE: They apparently have.]

UPDATE: To be fair, Krugman in 1996 was talking about Social Security and Medicare together. But he didn't say anything to diminish the role of Social Security in leading to the end of the Republic, nor did he take issue with the title of one of the books he was reviewing ("How the Coming Social Security Crisis Threatens You, Your Family, and Your Country").

UPDATE: Krugman's column today -- "Played for a Sucker" -- is even more critical of Obama and of the notion that Social Security is in any kind of "crisis":
But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

* * *

How has conventional wisdom gotten this so wrong? Well, in large part it’s the result of decades of scare-mongering about Social Security’s future from conservative ideologues, whose ultimate goal is to undermine the program.

* * *

But Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders. And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want.

We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists — which is the case for many issues today — you end up being played for a fool. And that’s what has just happened to Mr. Obama.
Of course, perhaps the financial projections for Social Security have indeed improved drastically since 1996, but Krugman owes his readership an explanation.

UPDATE: Paul Krugman gives an explanation here: "
As for what I wrote in 1996: the world looked very different then. On one side, Social Security projections were much more pessimistic than they are now, basically because the projections assumed that the 1973-1995 era of very slow productivity growth would go on forever. On the other side, the 90s were the era of the great pause in health expenditures, the (it turned out) brief era in which the rise of managed care stabilized health spending as a share of GDP. So Medicare and Medicaid looked less important as sources of fiscal problems than they do now.
I'm trying to figure out exactly what changed about "productivity growth." In any event, I think any implication of an inconsistency on Krugman's part was wrong. If the projections now are that much more favorable than they were in 1996, then Krugman was quite right to change his mind.

UPDATE AGAIN: In comments, Drake points to a comment by Bloix on another blog, which also gives a pretty convincing explanation:
[Krugman's] point [in '96] is that all funding of all entitlements for the elderly - Social Security plus Medicare - is unsustainable and will cause a crisis. He doesn't separate out Social Security funding from Medicare funding.

But as he came to understand, it is a mistake to conflate Social Security and Medicare, because the funding sources are different and "reform" of one has no affect on the other. Nonetheless, people who want to privatize - that is, repeal - Social Security like to use the coming Medicare crisis to argue that Social Security is in crisis.

* * *

In 1996, Krugman was thinking about entitlements generally, because no one was trying to destroy Social Security. In this decade, he's been focused on the specific programs, because he's now participating in a political debate over privatisation that didn't exist in 1996.

So it's not that Social Security faces no challenges; it's that in the current situation, and given that Medicare is manifestly the more pressing problem, the focus on Social Security by its friends is misbegotten, and by its foes suspiciously artificial.

18 Comments:

Blogger Frontiers of Faith and Science said...

Krugman, like most liberals (now they want to ruin the term 'progressive' like they ruined 'liberal')is a man who is not only historically illiterate. He depends implicitly on the historical illiteracy of his audience.

7:51 AM  
Blogger John said...

Its all quite simple: Paul Krugman is a fool, a partisan fool, but still a fool.

7:56 AM  
Blogger John Thacker said...

The Professor also refers to the plans in the two books he reviews to cut benefits, raise the retirement age, and raise taxes "moderately now rather than massively later" as "sensible," albeit without any chance of being adopted.

Is he claiming that he was misled all this time? Or is he worried for political reasons, since he notes in that review that Social Security reform, however sensible, is always unpopular and stands not the slightest chance of being adopted until forced?

7:57 AM  
Blogger Andrew said...

To be fair he is also considering medicare in that article, which is certainly a much larger problem.

I guess he's assuming that away with healthcare reform.

It's amazing how people who constantly carp about rosy supply-side scenarios can turn around and spin even more rosy health cost savings scenarios.

10:21 AM  
Blogger Drake said...

I'm having a real hard time discerning a problem here, Stuart. Yes, Krugman 1996 differs* with Krugman 2007 about the nature of the fiscal problems stemming from Social Security.

But then, that's what we should expect, since the nature of the fiscal problems stemming from Social Security in 1996 differs from the nature of the fiscal problems stemming from Social Security in 2007.

Right?

*And, it must be said, "differs" not nearly in the degree to which you suggest. The remarks of Krugman 1996 are about Social Security and Medicare (along with federal pensions and veterans' benefits) jointly; the remarks of Krugman 2007 are about Social Security alone. The fact that he didn't take pains to disaggregate the issues in the earlier writing is irrelevant to this distinction.

11:58 AM  
Blogger Stuart Buck said...

Drake -- you say there is a difference between now and 1996. I'm not sure what to make of that without some specification of what that difference is; and that's what I ask in the post.

Also, Krugman in 1996 didn't restrict the "crisis" label just to the whole collection of federal entitlement programs taken together. At the beginning of his essay, he said that "if you think 30 years ahead, you wonder whether the Republic can be saved," and he immediately followed that remark with "Peter G. Peterson states the reason for this succinctly in his brief, scary new book." The subtitle of Peterson's book was "How the Coming Social Security Crisis Threatens You, Your Family, and Your Country."

I know this is parsing an essay that wasn't written with the precision of an analytical philosopher -- but isn't Krugman rather clearly stating here that a book on the "Social Security crisis" "states the reason" for Krugman's speculation about the end of the Republic?

3:30 PM  
Blogger Drake said...

First, this business of reading a book's subtitle (of all things) into a review of the book is, I don't know how else to say it, plum crazy. For all we know, the galley Krugman was looking at didn't even have the subtitle. But even if it did, Krugman never even mentions the subtitle, much less incorporates it into the substance of his review.

What Krugman does say, however, is that (my emphases):

"Well over half of Federal spending -- other than that on national defense and interest on the national debt -- goes in one way or another to retired people, mainly in the form of Social Security and Medicare [N.B.: not just SS], but also via Federal pensions and veterans' benefits [N.B.: not just SS]."

And:

"[T]he combined Federal cost of Social Security and Medicare [N.B.: not just SS], expressed as a share of workers' taxable payroll, is officially projected to rise from the already burdensome 17 percent in 1995 to between 35 and 55 percent in 2040. And this figure does not include the many other costs -- from nursing homes to civil service and military pensions -- that are destined to grow along with the age wave [N.B.: not just SS]."

And (rhetorically):

"But aren't Social Security and Medicare [N.B. not just SS] basically pension funds, in which workers' contributions are invested to provide for their retirement?"

And:

"[I]f Medicare and Social Security [i.e., not just SS] had to obey the same rules that apply to private pensions, the reported Federal deficit this year would be not its official $150 billion, but roughly $1.5 trillion.

Now, that's a pretty strikingly consistent conjunction of the two, and I just don't think it takes too fine a parsing to see the non sequitur looming in the move from those statements to the claim that Krugman '96 is saying that Social Security (simpliciter) is in crisis.

Now back to your first point, briefly (since by the above it is incidental): The material conditions that changed were (1) the long-run outlook from the Social Securities projections (better today than in 1996), and (2) the relative fiscal burden imposed by health care costs on Medicare and Medicaid (significantly higher now than in 1996). (Admittedly, I don't hold these opinions first hand, but I think they're pretty widely-accepted among economists as fact. Let me know if you have reason to disagree, though.)

5:07 PM  
Blogger Drake said...

Wow, had no idea how timely this discussion was. I see you're over at DeLong's too...

5:27 PM  
Blogger Stuart Buck said...

Fair point, I know Krugman discussed Medicare and Social Security in tandem much of the time.

But this seems wrong:

First, this business of reading a book's subtitle (of all things) into a review of the book is, I don't know how else to say it, plum crazy. For all we know, the galley Krugman was looking at didn't even have the subtitle. But even if it did, Krugman never even mentions the subtitle, much less incorporates it into the substance of his review.

That's a bit formalistic, don't you think? Whether or not Krugman specifically mentioned or even saw the subtitle, the subtitle is still relevant because it gives a pretty good idea of what Peterson's book was about. Right? Hence, even though I haven't read that book, I would bet that it argues that there is a "Social Security Crisis." And Krugman gave a positive review to the book.

In any event, Krugman's recent blog post says that he's changed his mind about Social Security since 1996. I take it there would be no need to do that unless he did, indeed, hold a different opinion about Social Security in 1996.

6:16 PM  
Blogger Stuart Buck said...

By the way, although Krugman himself cites this reason, it doesn't make sense to me:

(2) the relative fiscal burden imposed by health care costs on Medicare and Medicaid (significantly higher now than in 1996).

I don't see how this has any independent force. If at time 1 I think Social Security is a problem, and if at time 2 Medicare projections get much worse, then while the problems have certainly multiplied, that fact alone doesn't justify me in saying that anyone who mentions a Social Security problem is a "fool" (Krugman's word).

6:23 PM  
Blogger Drake said...

"[T]he subtitle is still relevant because it gives a pretty good idea of what Peterson's book was about. Right?"

Well, yeah, sure -- but only to a degree commensurate with the circumstances. In the current circumstances, there are maybe two dozen axes grinding, with partisan opponents looking to "catch" Krugman in a supposedly damning contradiction. Under those circumstances, I'd say it is spectacularly uncharitable to construe Krugman's serial statements about two consistently conjoined entitlements as in fact statements about only one of those two entitlements merely because the subtitle of the book being reviewed mentions only that one. The idea that one should so strenuously (I almost wanted to use your word "formalistically") read a book's subtitular material into the substance of reviews about that book in this way is so strange, it's hard to think of an analogy. I suppose it's a little like claiming to have caught someone doing a "complete 180" for having said whales are mammals (and not fish) when, earlier, that person had given a rave review to Moby Dick.

Anyway, "changing one's mind" isn't the same thing as "doing a complete 180." To me it looks like Krugman's doing a 35, maybe a 40. Or maybe using a different board. Bloix put it pretty well over at DeLong's:

"[Krugman's] point [in '96] is that all funding of all entitlements for the elderly - Social Security plus Medicare - is unsustainable and will cause a crisis. He doesn't separate out Social Security funding from Medicare funding.

"But as he came to understand, it is a mistake to conflate Social Security and Medicare, because the funding sources are different and "reform" of one has no affect on the other. Nonetheless, people who want to privatize - that is, repeal - Social Security like to use the coming Medicare crisis to argue that Social Security is in crisis.

"See this article from 2004, in which he says:

'It has become standard practice among privatizers to talk as if there is some program called Socialsecurityandmedicare. They hope to use scary numbers about future medical costs to panic us into abandoning a retirement program that's actually in pretty good shape.'

"http://query.nytimes.com/gst/fullpage.html?res=9A0DE4DF1330F935A157

"In 1996, Krugman was thinking about entitlements generally, because no one was trying to destory Social Security. In this decade, he's been focused on the specific programs, because he's now participating in a political debate over privatisation that didn't exist in 1996."

So it's not that Social Security faces no challenges; it's that in the current situation, and given that Medicare is manifestly the more pressing problem, the focus on Social Security by its friends is misbegotten, and by its foes suspiciously artificial.

7:32 PM  
Blogger Stuart Buck said...

I think maybe we're talking past each other. You say, "I'd say it is spectacularly uncharitable to construe Krugman's serial statements about two consistently conjoined entitlements as in fact statements about only one of those two entitlements merely because the subtitle of the book being reviewed mentions only that one."

It's not so much a matter of "construing" Krugman's actual "statements about two consistently conjoined entitlements." It's that Krugman reviewed a book that said, among other things, that "Social Security is a vast Ponzi scheme in which only the first people in are big winners." (quote from Amazon's webpage.) Far from disagreeing with that book, he cited it as support for his musings about the end of the Republic.

Maybe you're right, though -- the last two paragraphs (quoted from "Bloix") do make a lot of sense as an interpretation of what Krugman has been thinking.

Still, people have mentioned improvements in the "productivity" predictions. What are these numbers? How do we know that they are going to come true? (Productivity predictions have been wrong in the past, haven't they?) I do hope they are true; I'd like nothing more than for Social Security NOT to be a problem when I reach retirement age.

By the way, I'm losing a lot of respect for Brad DeLong. I've had three perfectly respectful comments deleted by him without warning. This is very irritating, because it means that I was just wasting my time. I don't delete your comments here, both because I think you're a good guy, and also because I think it would be cowardly. Deleting bombthrowing and flame-baiting comments is one thing, but when it's a respectful comment that just takes a different position or asks a good faith question -- there's no excuse for such behavior.

8:44 PM  
Blogger Drake said...

Doesn't the very quotation you use prove my point? To wit, you quote Peterson thus: "Social Security is a vast Ponzi scheme in which only the first people in are big winners." No way even the most dedicated Krugman critic is going to read into the fact that Krugman gave a positive review to a book that made that assertion as proof that he agrees with that assertion. Right?

Anyway, as to the productivity narrative, I really don't have a clue. You are way more wonkish than I am. I was more or less sticking to the evidence given and making a burden-shifting argument.

On DeLong's...editorial practices, I'd have to agree that at best he's misguided in deleting your posts. (I would be furious if it happened to me on a conservative blog.) Suffice it to say it's not the way I'd roll either. And this comment had better appear on your blog!

9:23 PM  
Blogger Stuart Buck said...

I should know better by now; DeLong has done this before. See http://stuartbuck.blogspot.com/2005/08/roberts.html

OK, OK, it's not fair to tag Krugman with every word that's in the Peterson book. That's right. And do note that I updated the post to say that Bloix's reasoning was pretty persuasive.

Still, I do have to point out that Krugman's blog today could easily have made the point that you (and this "PGL" character) make, but he doesn't. That is, Krugman could have said, "Oh, that 1996 essay was just about Social Security in combination with Medicare, but I always knew that Social Security was zero problem by itself." Instead, Krugman's post today explains that the SS projections were "more pessimistic" back then, and that he changes his mind when the facts change.

Clearly, then, Krugman must have once thought that SS was a more serious problem than he does now -- that's the only direction in which he could have conceivably changed his mind.

11:28 PM  
Blogger Stuart Buck said...

Forgot to say this as to the Peterson book -- the point is not that Krugman agreed with every last sentence in the Peterson book, but that he was reviewing a book that was warning of such a "crisis" in very polemical terms. Surely he could have found some way of signaling disagreement or disapproval of the book's polemicism (book reviewers do this all the time).

And again, if the facts have changed since 1996, then so be it -- that's a perfectly good explanation. There's no need to insist that Krugman's 1996 opinion somehow matched the 2007 facts rather than the 1996 facts.

11:39 PM  
Blogger Drake said...

"Krugman must have once thought that SS was a more serious problem than he does now -- that's the only direction in which he could have conceivably changed his mind."

Yeah, but he pretty much says as much in his blog post:

"As for what I wrote in 1996: the world looked very different then. On one side, Social Security projections were much more pessimistic than they are now, basically because the projections assumed that the 1973-1995 era of very slow productivity growth would go on forever."

Then (quoting Keynes): "When circumstances change, I change my opinion. What do you do?"

I think the reason Krugman didn't "signal" disagreement with Peterson's analysis was because on the substance he didn't disagree. Whatever his book's subtitle, Peterson gave an analysis based on the joint cost of entitlements, and Krugman reviewed it as such. Moreover, as has been explained by Krugman and others, the distinction between Social Security and Medicare just wasn't as salient then as it is now.

On DeLong: Agreed that his deleting your posts was mistaken or wrong-headed, particularly since your questions were generating good, relevant substantive commentary. But I'm not quite as quick to chalk it up to partisan or other illicit impulses, because DeLong frequently leaves up comments that trash him, and pretty routinely links to other blogs that do the same (they of the entertaining "DeLong Smackdown Watch" series). My take is that he's trying to keep the discussion "factual," but because (1) enforcement of any policy is perforce uneven and (2) anyone's factual judgment is bound to be imperfect, the result is (by my lights) something awfully close to arbitrary. Which is reason enough for him to cut it out.

11:07 AM  
Blogger Stuart Buck said...

As to DeLong -- he clearly has some objective in mind, but it seems to me that he is not trying to keep things "factual," at least not in this post. He left up posts from the anonymous PGL with unwarranted and undefended personal insults towards me. At the same time, DeLong twice deleted an entirely fact-based post wherein I looked up the tables that Bruce Webb had referenced, and then asked Bruce Webb (in perfectly polite and respectful terms) to explain which figures I should be looking at and what they meant.

I'd rather DeLong delete every last one of my comments, as opposed to what he did (which simply stacks the deck by blocking me from responding to arguments or insults directed at me).

1:00 PM  
Blogger Drake said...

Fair points all. And definitely not kosher that pgl's comments were given a pass.

1:13 PM  

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