There is a worth-reading Paul Krugman piece in the current New York Review of Books. While it is nominally a review of Kotlikoff & Burns book “The Coming Generational Storm”, he devotes most of the piece to a reasonably successful attempt to debunk the current ardor for demographic alarm:
America in 2030 will be “a country whose collective population is older than that in Florida today.” It will be in “desperate trouble” because the expense of caring for all those old people will cause a fiscal crisis. The nation will be plagued by “political instability, unemployment, labor strikes, high and rising crime rates.” That’s the picture painted in The Coming Generational Storm by Laurence Kotlikoff and Scott Burns, a book that has helped to feed a rising tide of demographic alarm.
But is that picture right? Yes and no. America does have an aging population, and a responsible government would take preparatory action while the baby boomers are still in the labor force. America also has very serious long-run fiscal problems. But these issues aren’t nearly as closely linked as much of the discussion would lead you to believe. The view of demography as destiny is only a half-truth, and in some ways it’s as damaging as a lie.
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The problem with this kind of thing is that so much of the reality is in the caveat of details.
- I personally suspect that if parts of the current social security surplus were currently put into stocks (a mix of domestic and international) then if we started pulling them in a 20 or 30 year timeframe that the returns would exceed the bonds. In a sense we’d be taxing the market and collecting the strategic gains of long term exposure, eg. risk. Krugman’s remark that if stocks are so good why would anyone sell them is the kind of thing that needs to be avoided. If I wer risk adverse and told I must buy one or the other and not change for a short term frame I would go with bonds, longer term stocks.
I don’t think individual accounts are a good idea and the notion that equity investment requires provate accounts is like a simlar claim from the right that a simplified tax system requires a flat tax, the 2 are not required to be coupled. Quite simply the system needs to be able to supplement people if they live to a 103, a fixed account doesn’t do it. My own notion is that every employer be required to put at least 50 cents an hour in an untouchable (until) retirement fund of some type that does have ties to the market. To the vast majority of employers this is already done, though the untouchable minimum may require some shifting. I think employers paying at the bottom who don’t do this have been getting a free ride. They pay less than 3/4 of the real minimum wage of 20 years ago, their workers pay for inflation, we get lower prices, but also pay taxes to support their crisis. Employers who pay fair wages are hurt. A thousand a year for a full time worker is a trivial start and 35 years from now the accumalated sums will mean something.
- Krugman is too blithe about health care. We are spending twice the percentage of GNP as other industrial countries. While we have luxuries these countries lack we also have higher infant mortality and lower life expectancies. From a pragmatic competitive position the double amount we pay like the double amount we pay on energy is a real drag in a fierce world market. It’s hard to figure solutions, but one obvious area is the 35% we pay in administrative costs, double the amount of the other countries. This is over 300 billion dollars extra per year. There is also like it or not, the costs of malpractice suits. In a good system total payments may not increase because the vast majority don’t complain and typically unnecessary, uncalled for choices are still payed for by the consumers. but currently a lot of over payments are fraud and the system encourages coverup and refusal to face the problems. An open system which encourages reform and discourages defensive medicine (now estimated at over 100 billion a year, though numbers are flaky) could do a lot in the long term. Lots of other “little” things, such as frequent followups by nurse practioners, literally hundreds of experiments offer nice little chunks which add up. Bush is to be congratulated in his cries for computerization (which can reduce not only administrative costs, but the 10% of procedures estimated to be duplicates along with the redundant collecting of information) and attempts at malpractice reform. These are exceedingly complex issues and Democrats should be jumping in with complex proposals. As I start I would suggest at a minimum standardization of forms (at least XML wise ) and some date structure. I’d like to see some sort of open source project to create and offer the software.
I know of at least 3 county hospitals in California that have custom built software which was over cost and buggy and pushed them to the brink. Certainly doing something like offering VA software (and getting it right) to public entities, closing the trough to the types of hustling contractors who have targeted our schools and other public institutions would stretch our Medicaid and other dollars further. There are of course concerns about provate companies that do relatively good products, but some sort of cooridinaton scheme with the first open meetings next month is a way to go. This is a problem that does require some sort of national mobilization. Already we have a situation where fewer of the best and brightest want to go into medicine.
The international competitive situation is also getting interesting. India is hoping to sell billions of dollars in surgery and other procedures within the next 5 years. If that kind of revenue drain increases along with situations (eg. decline of insurance for employees, reduction of basic care for the poor) that increase catastrophic situations we are headed for trouble. One big thing that is already happening is more and more headed for the emergency rooms. What this means is that no matter how much money or insurance you have when you really need help the system may be clogged.
Keugman is wrong to downplay the potential crisis that might be developing.
First Flickr, now Krugman! I know you are a professor but seriously, isn’t your blog called ‘Infectious Greed’????
Krugman is a unrepentant anticapitalist. His viewpoints have been dismissed by just about EVERYBODY except fervent Bush-haters.
Would that describe you?
Sandy:
Successful capitalists are pragmatists. If you ever have responsibility and have to direct people you will find all of them are wrong in many significant places and that many of them even those you disagree in general do have important points. The process of getting good information often involves listening to things that go against what you wish.
There is no question that Krugman has gone into some silly diatribes in the partisan fervor he’s been pushed into, but this doesn’t mean that all he says is wrong or that he’s lost the capacity for economic reasoning.
In my previous post I happened to criticize Krugman based on specific facts. You criticized him on the basis that he is double plus ungood. You are at least as anti capitalist as he is because your economic approach is feudal, not one based on analysis, calculation, real economic force, but faith and the right of one point of view to absolute truth.
David,
What the hell are you talking about?
I simply said that EVERYONE knows that while Krugman may have had some good essays 20+ years ago, he is currently on the wrong side of history and making a complete ass of himself. He hates a man so much it is clouding his potentially good judgement or opinion – to which everyone is entitled.
Which brings us to your point, David Bennet. Sometimes there is an overwhelming evidence of that a person of school or thought is so lost and thus not worth listening to. While you may term this anticapitalist. I feel this is may be a shortcut that intelligent beings use to cut through bullsh*% and save time.
More simply put, would it be worth your time to discuss, say, recipes the third Reich came up with while in power????
Sandy:
“Wrong side of history” is a communist concept. In the United States we have tended to be more pragmatic. We know all sides can be total idiots, that no matter how brilliant we personally are that the cybernetic systems of markets (including elections) seem to balance out and select far better than we can as individuals. Within this concept we do not seriously put people on the “wrong side of history” or “enemies to be obliterated,” yes that is a political game we might play like in sports or professional wrestling, but when we get serious about analyzing politics our understanding is that our fellow citizens make points and assert positions that balance out our own. It is not a total victory, but a shifting.
It is true that some 13 year olds may believe the antagonism of professional wrestling are real, it is unfortunate that partisans ion both sides who are distinctly older in body seem to be really getting into this illusion, I’m all for virtual reality, however it’s getting tiresome.
In regards to social security Krugman made a number of points some valid, some questionable, but he did some up concerns and address a number of facts. To desire that these be excluded because he is “on the wrong side of history” is unAmerican.
The simple fact of the matter is that we know much of the rightist argument on social security is simply a playing of the game. For example we talk about crisis, but as krugman may or may not have pointed out the *unfunded* portion of the president’s medicare drug bill alone far exceed that of social security and it will start being due within a few years. Yet the president has claimed he will veto any changes.
This is not an appropiate response even if George Bush is on the “right side of history.” We spent fifty years facing down a society that based it’s decisions on such logic, the place remains a mess and a threat.
David,
Your meanderings, while long, are not cohesive.
You sound like a drunk xpolitician…wait is this Gray Davis????
Best of Luck with your utopian liberal eat-the-rich idiocy. Really.
S
Sandy:
While my meanderings may be quickly written and filled with all sorts of flaws they are at least attempts at arguments, logics and statements of example. Your point is this is a person proved not to “worth listening to” and you find it necessary to protest if someone (the author of this blog disagrees.)
I find the attitude not uncommon and it is an example of magical, pre modern thinking. If we cut out the kind of statements we don’t like, then bad things won’t happen.
The problem comes up when one actually has to do things in this world. For example from your position you would probably find Kudlow an example of someone on the “right side of history” who should be listened to. But many serious investors, even politically conservative ones, believe his notions on the stock market might be taken with some salt. There is risk. You can’t afford to risk just because the source is double plus good.
Kudlow’s position on the value of the dollar demonstrates an attitude that is increasingly popular in your political circle. He has openly said a number of times that it is “liberals” (those dastardly cads) who are trying to talk it down, the implication being that if it falls it’s because bad people said bad things.
This same attitude is spreading to Iraq. It is increasingly said that the MSM (main stream media) giving bad news is the source of our problems, in many places it is argued that this is treason. The problems of this mind set can be seen in a recent debate. A soldier asked Rumsfeld about armor in vehicles and it was quickly claimed that the story was planted. This remains unproved, but the reaction of the right was to shift all attention to this story (which deserved to be covered) but ignore several facts: armor was lacking, the facilities which produced it were unutilized, more could be produced.
By ignoring this set of facts some lives may have been lost, but in magical realities this doesn’t matter, the main goal is to shut out anything that is unpleasant. From a pragmatic perspective this has probably greatly increased our costs in Iraq and made a risky situation more risky. Many problems and issues were spotted, many before the invasion, but they were not addressed, their was all sorts of pressures not to adddress, therefore the system did not respond and reform as well as it could.
This may be all meandering and muddling, but a look at history will show that it is common to systems with a feudal structure of beliefs, systems like the old USSR. In these aproaches the messeenger is the message, if messanger good tmessage good, if messenger bad then message must not be read no! no! no! bad things happen if read message!
The point is that while you have written much less than me you have said less than anyone of your paragraphs. Your message has been Krugman no good, and that I’m incoherant. Possibly, but you have refused to wrestle with ideas or facts or anything beyond faith.
And what is so fascinating is that “history” was the god of Lenin and the communists, any historically aware conservative would know this.
>Best of Luck with your utopian liberal eat-the-rich > idiocy. Really.
Would you care to provide some examples that this is his position?
Demographic mushroom cloud or not, the unbelievable greed of the baby boomer generation will doubtlessly echo back in many ways for decades to come. From gutted schools (see: prop 13 in California) to wealth confiscation to climate change, the boomers have much to account for. Don’t be surprised if in the future society tells these people to starve (or, maybe try eating that rolex). The fact that they will have the “votes” presumes an election will be held at all – a society on the brink of collapse dispenses with luxuries like democracy in round one.
One more point, sorry for double posting (bad form to be sure) – I believe the current “crisis” talk is definitely part of a government plan to legislate a rising stock market. Its quite obvious that valuations are still very high, and that it will take more than good intentions to keep this market afloat. Greenspan has helped by creating a credit bubble that has allowed homeowners to refi themselves into a consumptive frenzy…but that hand has been played out. Before the housing bubble takes down the market again, its time to engineer another “assured” rise in markets, and redirecting retirement contributions into stocks is as about as direct as you can make it.
People have become obsessed with the closing prices of major indexes as a new personal and social barometer, and governments understand they live or die by that closing ticker over time. Hence the premise of the free market itself is being replaced by a legislated gain.
Paul,
You seen to bring out a ‘Very Interesting’ demographic. Small but intense.
cheers, s