The Airing of Grievances
Friday, December 10, 2004
Krugman Laying Some Smack Down
Enging off Cozmo Day (all Cozmo, all the time) on the AofG - the Grey Lady's resident sourpuss, Paul Krugman, puts another turd in the President's economic punch bowl. Seems Bush's plan to save social security, without raising payroll taxes or doring the politically difficult but RIGHT thing and adjusting the retirement age up to reflect today's longer life-spans, doesn't fall too far from his West Texas wild-catter legacy.
Also, in a deftly worded closing line worthy of "Positively 4th St.", Krugman drops this on John Snow:
And maybe the fact that serious financial experts, the sort qualified to be Treasury secretary, understand all this is the reason why John Snow has just been reappointed.That's some cold-ass shit Paul, but true.
Worse than that, the policy would constitute a sea-change in how money is invested in the United States. That said, this plan would probably looks as if it "works" for a brief period of time, as money would flow into the stock market at record levels (think an incremental 10-15% of GNP a year) as the average retirement investor goes for the largest possible risk adjusted return - that is - the largest risk adusted reurn until, coupled with 11 trillion (or so) in new public debt the Bush administration would need to issue to fund what the Treasury is currently calling an "unfunded liability", the risk-free (read: inflation) rates goes significantly higher and the equity hurdle rate goes down. Also, as a final insult to the AofG generation, when our parents start retiring and removing their money from the market, volitlity will likely be even higher than it will be when the boomers liquidate their 401k and IRA accounts.
To Cozmo, this is nothing short of a national lottery.
I know some keenly trained macro minds (and some tree farmers) read the AofG. What do you all think of Krugman's (or Cozmo's) point? Let us know in the Comments.