Hoystory

According to New York Times columnist Paul Krugman’s latest tirade, the relatively modest Bush tax cuts (you know, the $300 rebate, elimination of the marriage penalty, etc.) are responsible for wreaking fiscal destruction like that created by anyone stupid enough to cast Pauly Shore in romantic comedy opposite J. Lo.

The new study, carried out by the Center on Budget and Policy Priorities, estimates the present value of the revenue that will be lost because of the Bush tax cuts — those that have already taken place, together with those that have been proposed — using the same economic assumptions that underlie those Medicare and Social Security projections. The total comes to $12 trillion to $14 trillion — more than the Social Security and Medicare shortfalls combined. What this means is that the revenue that will be sacrificed because of those tax cuts is not a minor concern. On the contrary, that revenue would have been more than enough to “top up” Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years.

I hate having to keep referring to this old post from just over one year ago, but here it is. There is no lockbox. There is no way in H-E-Double Hockey Sticks that a mere $12 to $14 trillion dollars could “top up” Social Security and Medicare for 75 years.

Check out this, somewhat old faq from the CATO institute.

Social Security is going bankrupt. The federal government’s largest spending program, accounting for nearly 22 percent of all federal spending, faces irresistible demographic and fiscal pressures that threaten the future retirement security of today’s young workers. According to the 2000 report of the Social Security system’s Board of Trustees, in 2015, just 15 years from now, the Social Security system will begin to run a deficit. [Editor's note: If you follow the link above to my post last year, you'll note that the 2002 figures had actually pushed the date back to 2017.] That is, it will begin to spend more on benefits than it brings in through taxes. Anyone who has ever run a business–or balanced a checkbook–understands that when you are spending more than you bring in, something has to give–you need to start either earning more money or spending less to keep things balanced. For Social Security, that means either higher taxes or lower benefits.

It’s the date that Social Security runs a deficit that’s the important one. When the government actually has to start redeeming those bonds in the “lockbox,” that money has to come from somewhere. Unfortunately for the American people, that somewhere is the general fund, which pays for interstate highways, the military, and various pork programs that keep the big spenders in Washington fat and happy.

Krugman’s economics system works on the old axiom about the weather, that when a butterfly flaps its wings in Shanghai, it rains in Seattle. Thus, a small (in the grand scheme of things) tax cut proposed by Bush equals big trouble 50 or 75 years down the road.

Unfortunately, history teaches us that that just isn’t true. It was that great conservative JFK who more than 40 years ago cut the top marginal rate from 91 percent to 70 percent — a huge giveaway to the rich. To follow Krugman’s logic, it should be another 2 billion or so years before the federal budget recovers from that debacle.

Oh, that JFK tax cut, and others that followed, spurred growth in the economy and eventually produced (albeit short-lived) budget surpluses? Wow! Quick, somebody alert Princeton!