Monday, May 09, 2005

The talented Mr. Krugman.


Naturally, you should read the whole piece, if only to properly establish the context for this priceless gem:

But Mr. Bush isn't calling for small sacrifices now. Instead, he's calling for zero sacrifice now, but big benefit cuts decades from now - which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits.

Indeed.

3 comments:

Tim Worstall said...

Krugman’s middle example, the guy on $60k, is very odd. Do the math, the guy makes out like a bandit in hte example.
http://timworstall.typepad.com/timworstall/2005/05/krugmans_number.html

CC said...

I'm not sure I see the problem here, although I'm willing to be corrected. Consider the hypothetical middle example given in Krugman's article. This person (earning $60K per year) gets a tax cut of $1,000 per year (a good thing) but, once SS kicks in, he loses $6,500 per year in benefits.

In short, his loss in benefits dominates his tax cut by a factor of 6.5 so, even though he's been slowly getting ahead of the game with the tax cuts, once he goes on SS, he gets whacked hard by those cuts. Whatever gains he's made are lost six and a half times as fast.

Compare that with the millionaire, who gains at the rate of $50,000 per year, but loses only $9,400 per year once SS takes over. Quite the difference there, no?

Anonymous said...

all i can do is the math for myself: 50-99K (AGI) income earner under forty years old. I have logged in enough hours to qualify for SS benifits when i hit the target age. and i am still paying FICA even though it will make no more impact on the benifits i personally recieve.

so if there can be no agreement on any sort of plan to stop deficit spending to pay out current benifits (which we are doing now even though we have more than enough $$ going into the FICA line item in the budget) when we reach 2042 benifits will be paid out at a reduced rate. in 2042 i will be in my seventies and collecting SSN.

if we use the current parameters payouts in 2042 are reduced to approximately 78%. --look up greenstein for the math accpeted by all parties, political and think tank as a reliable basis for these policy calculations-- if we allow individuals to set aside funds into "private" accounts some folk will do it, some will not. those that do will receive 53% of benifits (so a further decrease of 25%)which includes the payout from even the investment vehicle. if we decide to price index then benifits pay out on a silding scale based on age at anywhere from 60% to 38%.

so, being the selfish money grubbing capitalist that I am I want a system that puts the most money in my pocket. that my friends is the system we have right now. don't touch my money!!!!

what i appreciate about krugman's article is that he places the entire SS conversation in the context of the tax cuts passed by this administration.

i received no tax cut. i am self employed and pay my own health insurance out of pocket. even with a spectacular CPA i still pay FICA at 7% AGI... go figure.
so following the example from the article, if my benifits are reduced i have no line item, even theoretical ones from previous years, to balance this loss.

no policy recommendation this white house is putting money in my pocket.