tag:blogger.com,1999:blog-7334408760351487944.post5053646834030443802..comments2023-11-12T06:43:00.060-05:00Comments on Notes on Social Security Reform: Yglesias, Krugman get it wrong on Social Security reformAndrew G. Biggshttp://www.blogger.com/profile/16617460431856611873noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-7334408760351487944.post-37985493090776898982009-08-16T19:17:15.074-04:002009-08-16T19:17:15.074-04:00An odd thing about Krugman is that while he thinks...An odd thing about Krugman is that while he thinks cutting taxes on the rich is an outrage, he also thinks that raising taxes to make transfer payments <em>to the rich</em> is good.<br /><br />In a 2005 discussion <a href="http://www.harpers.org/archive/2005/06/0080592" rel="nofollow">in Harper's</a> about the Social Security reform proposal he puzzled Glenn Hubbard about this...<br />~~<br /><br />PETE PETERSON: Paul, I don't hear you saying much about what you would do on the benefit-reduction side. What about Social Security?<br /><br />KRUGMAN: I think we tinker at the edges with the benefits ... To do anything more drastic, such as switch the system to price indexing -- i.e., link benefit levels to growth in prices rather than wages, which grow more quickly -- it would turn Social Security into just a poverty program.<br /><br />HUBBARD: Here is what I don't understand. Moving to price indexing -- and then shoring up benefits for lower-income people -- would force the burden of the adjustment on high-income people without diminishing Social Security's role as a safety net. Presumably you would agree with that goal.<br /><br />And yet you reflexively gravitate toward raising taxes to fund the size of the existing system. Why do you want to restore fiscal balance by maintaining a large government share? Why not just reduce subsidies at the high end, which would encourage wealthier individuals to save more on their own?<br /><br />KRUGMAN: Switching to price indexing would not make a bit of difference to high-income people. We're talking about middle-income people. It would mean a gradual suffocating of middle-class and ordinary working people's Social Security program.<br /><br />HUBBARD: But your plan would require raising taxes on those same<br />people.<br /><br />KRUGMAN: I believe in the social-insurance paradigm ...<br /><br />[and then someone said "Medicare..."]<br />~~~<br /><br />I don't see anything at all that's "progressive" about raising taxes to make transfers to the rich, and suspect that when the day of decision comes PK will find most progressives don't see anything progressive about it either, they'll be the first ones to demand cutting payments to the rich one way or another. <br /><br />I sure don't see anything "efficient" about raising taxes to make transfers to the rich either.<br /><br />But tax increases just don't bother PK. A couple years ago he told <a href="http://www.atimes.com/atimes/Global_Economy/GE19Dj01.html" rel="nofollow">the Asia Times</a>, "We should be getting 28% of GDP in revenue. We are only collecting 17%." <br /><br />Adding 11 points of GDP to revenue today would be the equivalent of a 90% across-the-board income tax increase.<br /><br />What deadweight cost of taxes? (For that matter, what fiscal drag?)JGhttps://www.blogger.com/profile/11164150812219689611noreply@blogger.com