Blast From Paul Krugman's Past: "Social Security Is A Ponzi Scheme And Will Soon Be Over"

[stockholmer]

http://www.zerohedge.com/news/paul-krugman-social-security-ponzi-scheme-and-will-soon-be-over

It is one thing (what thing that is we are not sure, but we have heard others say it, so like all good lemmings we will say it too) for Rick Perry to call Social Security a ponzi scheme. After all he is some crazy, foaming in the mouth conservative, as uber-Keynesian liberal Paul Krugman may call him. And that's fine. What confuses us, however, is why Social Security would be called a ponzi by the same liberal noted previously: none other than Paul Krugman himself.

Exhibit A, from a distant 1997, which perhaps one would have expected to remain buried (source http://www.bostonreview.net/BR21.6/krugmann.html ):

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).

This coming from the same person who a year ago said the following much anticipated truism http://www.nytimes.com/2010/08/16/opinion/16krugman.html , and has in the interim become a caricature of himself:

snip

[pampango]

1. In fairness, he didn't say that Social Security "would be over soon", just that each generation

gets a worse return than the one before.

He seemed to be comparing the relatively high early returns the first generations received under Social Security (largely due to the number of Baby Boomer workers paying in but not yet receiving) to the relatively weak returns for those who join later (like when Baby Boomers start to receive benefits but relatively few workers are paying into it).

My take is that he was saying that the structure of returns ("its Ponzi game aspect"), i.e. high-early and low-late, to what happens in a Ponzi scheme. He didn't seem to say that Social Security would end soon, since he made predictions about what the current generation and those younger could expect to receive in the future.

[Luminous Animal]

5. Yes. The quote in the OP is a total fabrication.

[phantom power]

2. Krugman actually wrote a recent blog post about that:

Notice what I didn’t say. I didn’t say that the system was a fraud; I didn’t say that it would collapse. I said that in the past it had benefited from the fact that each generation paying in to the system was bigger than the generation that preceded it, and that this luxury would be ending in the years ahead.

So why did I use the P-word? Basically because Paul Samuelson had done the same; he was basically just being cute, and I was emulating him — which now turns out to be a mistake.

But anyway, anyone who uses my statement as some kind of defense of Rick Perry and all that is playing word games. I explained what I meant in that Boston Review article, and it was nothing at all like the claims that Social Security is a fraud, is destined to collapse, and all that. Social Security is and always has been mainly a pay-as-you-go system, which is nothing at all like a classic Ponzi scheme.

Of course, the usual suspects won’t pay any attention to what I’ve just said. But if anyone is actually listening …

http://krugman.blogs.nytimes.com/2011/09/14/the-ponzi-thing/

[Javaman]

13. it's sad, that no one responded to your post.

By you pointing out that Krugman responded to his first column, people just whistle past your post as if it doesn't exist.

For whatever bizarre reason, there are several people on DU who enjoy tearing down Krugman for one reason or another.

[Canuckistanian]

21. I knew there had to more to it

Krugman NEVER said it would fail and said it had "Ponzi-like" aspects only.

But it was a poor choice to use the same word as Perry is using on the campaign trail. Words are SO easily twisted by the media.

[Name removed]

22. Deleted message

Message removed by moderator. Click here to review the message board rules.

[n2doc]

26. However the Krugman haters don't want to read that

They only want to see what reenforces their beliefs. And that people can never admit mistakes, because you are never allowed to be wrong on anything (unless you are Obama, and then you are never wrong, by definition, to these folks).

[nomb]

3. Krugman is a polemicist who would never be able to reverse his journey:

To wit: He would not be able to rise above his decidedly pseudo-academic public incitement to gain tenure at Princeton if his life were lived in reverse.

[On the Road]

9. Reverse His Journey?

Life lived in reverse?

[Javaman]

14. I have no idea what you mean but did you even read the post just above yours?

regarding Krugmen talking about the article the op posted?

It appears not.

[Luminous Animal]

4. You put in quotes something that Krugman never said thus changing his meaning

entirely. Why?

[stockholmer]

8. ask the author, I just cut n pasted , and the general meaning is that is what he said

The rest is just word parsing.

I personally believe that the 'Ponzi' aspect lies in the very thing that many claim is Social Security's bulwark- ie the 'Trust Fund'. This fund is nothing but a special class of Treasury Note IOU's that have been completely borrowed against long ago. Even if they 'paid back' it will be in dollars that are so debased they will be basically worthless due to massive expansion (already long occurring) of the Fed's balance sheet and the over-arching monetary supply.

[Javaman]

15. Read post #2. nt

[Luminous Animal]

29. So, you are just an innocent bystander passing off a fake quote.

[Bluebear]

6. "the bill I sign must include the public option"- a REAL quote unlike this

[mn9driver]

7. Thomas Jefferson said, "Fake quotes undermine your credibility."

Or maybe that was George Washington or God or someone. Anyway, it agrees with what I believe, so someone important must have said it. :eyes:

[dkf]

10. Yet Social security is more like a ponzi scheme than a retirement account.

[stockholmer]

11. it shouldn't be, it's criminal that it is, but the way it's set up makes it so, here's a great mp3

Dr. Michael Hudson on the Guns & Butter Show (Debt Deflation, The Myth of Social Security,much more)

http://www.kpfa.org/archive/id/73344

http://archives.kpfa.org/data/20110914-Wed1300.mp3 (right click, save as)


"Debt Deflation in Europe and America" with Dr. Michael Hudson. European banking crisis causing a constitutional crisis of the European Central Bank; Germany; the myth of Social Security in the US.; bank balance sheet crisis; food, fuel and climate crisis; the super congress; debt deflation; FHA lawsuit against the banks; criminalization of the financial sector; Modern Monetary Theory; the coming lost decade; debt cancellation.


http://michael-hudson.com/

[dkf]

17. If it were invested in Gold or stocks or corporate bonds I would feel completely comfortable.

But a pay as you go system with demographic problems makes me queasy.

[banned from Kos]

18. hilarious! You're quoting that fool Hudson and pissing on Krugman?

Hudson hangs around Keiser - the Coke and silver flim-flam man.

Telling. "Fiat" dollars is a dead giveaway.

[stockholmer]

25. you call Dr. Michael Hudson 'a fool'? Truly laughable.

:thumbsdown:

[gratuitous]

12. Don't you love it?

Mental Lilliputians pretending to greater knowledge and expertise than a Nobel Prize winner, wrestling a quote of his and denuding it of context, then ignoring the explanation. As if it "proves" something. I'd say it does prove something, but hardly what the post intended.

[Javaman]

16. Did you read Post #2? it appears not. nt

[gratuitous]

23. I thought I had

But I've been mistaken in the past about what I've read and not read.

[sfpcjock]

19. OK, but I'm glad he grew up because his premise is in error, as follows:

Definition: A http://en.wikipedia.org/wiki/Ponzi_scheme">Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors,...

Social Security was never a "fraud" originally designed to take money and return nothing. So therefore it is not a Ponzi scheme. QED.

[Chorophyll]

20. I never un-rec but I un-rec'd this.

Seems to me that Krugman made a rather fair assessment about the structure of Social Security back in 1997, which is *eons* ago in political terms, and that it's been pasted here completely devoid of context.

What is your desired reaction for this post? To discredit Paul Krugman, or to convince DU that Social Security should go? :shrug:

[Life Long Dem]

24. Seems Krugman says a lot of things that later are mistakes.

[Bluebear]

28. He didn't say this, it's a total fabrication

[Luminous Animal]

30. And you assert this based on a fake quote?

[Fire Walk With Me]

27. And by "over", they mean "in our pockets."