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Interesting to find this out about the author of the Social Security article -
'Charles Blahous is a senior research fellow at the Mercatus Center at George Mason University. He currently serves as one of the two public trustees for the Social Security and Medicare Programs.'

Maybe he will be part of MRUniversity too? After all, he should already have the right e-mail address, and is undoubtedly pre-approved by those responsible for keeping the Mercatus Center afloat.

Such a small, small world on the world wide web.

Exactly how many strings do you suppose the puppetmaster can pull at one time before they start pulling him? I suspect I could mathematically disprove your implied hypothesis.

I also know how grants not in social sciences work. You get the money, then you basically do what you want. That is the problem, not the opposite of that which you are implying.

>You get the money, then you basically do what you want.

MKUltra made grant recipients think the same thing. /s

So are you going to flog this horse in every MR post from now on? If so, i can just write a script for you that insinuates insidious Koch influence automatically. It will save you a lot of time.

#6 - So GMU is ranked 47th in the first ranking and slightly lower in the impact adjusted ranking of economics departments. Perhaps the bloggers from GMU ought to focus more on scholarly research and get these rankings up towards the top 10. You might be getting a higher level of graduate students this way.

"Work Harder." With advice like that, you could be an advisor.

That's why we consultants get paid the big bucks. We provide well thought out advice to clients and non-clients alike!

I would also advise them to work smarter.

Just to be on the safe side, I'm going to go with work harder and smarter and get tenure. That ought to cover all the bases.

but they have moved up quite a lot since the rankings from the 70s.


How can a paper on journal rankings completely ignore the RePEc rankings?

Exactly what I was wondering. I don't know that these new-fangled ranking systems are superior, but their existence should at least be addressed by the article.

@5: Hamilton on the gold standard and Cowen's arguments: "There was indeed spectacular real economic growth in the nineteenth and early twentieth centuries. But it is unnatural to me to suggest that the monetary standard was the key cause of this. " - strawman argument--Cowen never said the gold standard was a CAUSE of 19th century growth, but rather did not deter it. Next Hamilton says panics were more frequent under the gold standard, and therefore bad, but he does not understand calculus: the area under a curve equals the amount of growth. Example: Google Dirac delta function (DDF): 100 DDFs over say 50 years equals 100 'boom and busts' but has a greater area under the curve (100) than a 'steady state, steady eddy, no panic' economy of say 1.0 amplitude over the same 50 years (100 > 50). Price stability is NOT a necessary condition for growth, as the 19th century shows. It's the area under the curve, not the amplitude.

But it's a double strawman. The critics of the gold standard are not saying that human progress is somehow impossible under the gold standard any more then TC is saying that the gold standard cause people to lay railroads and discover oil. They are saying that as part of human progress, we should realize that the gold standard condemns us to frequent and severe economic problems. There is a reason it was called the "great" depression... because within living memory at the time there had been several other depressions worse then anything the US has seen since 1950.

Here is a nice graph:

Look at the orange per capita log growth line. See how it is nice and smooth since we ditched gold? All those jags previous to 1930 can in large part be blamed on the gold standard. The gold standard didn't prevent the trend from going up, but it sure helped the jags wiggling around in the meantime. Each of those jags was thousands of ruined lives, shops closed, farms lost, families crushed.

If you use per capita real GDP rather than just real GDP, growth in the US was stronger in the 20th century than in the 19th century

Interestingly, in the US data there was an apparent break in the growth in real per capita GDP
about 1850 with growth after 1850 significantly stronger than before 1850. That suggest that growth accelerated after the California gold rush in 1849 and in turn this implies that the limited supply of gold was a constraint on growth before 1850. It goes back to the thought that gold worked fine when you only had a few percentage points of growth every century but that modern growth rates would not be possible under a gold system.

Can you separate out the impact of increased government spending funded in part by starting up a Federal income tax which involved lots of window breaking, in the South, and expropriation of private capital by the Federal government, mixed with population control?

Or the big government central planning industrial and land redistribution programs centered on the transcontinental railroad which transferred millions of acres from private brown skinned people to corporations, and transferred millions more to immigrants to Mexico which was forcibly annexed to the US?

#3 The Social Security shortfall is irrelevant if US health care cost growth is not controlled.

Health care costs can't be controlled until it is universal.

It could be universal if anyone who can't pay for the care they need is euthanized and their body parts sold to recover sunk costs.

Or the solution is a system like in any of three dozen nations that are universal, substantially cheaper, and as good or better than the US.

Obamacare is the first step - that is what the Swiss did in the mid-90s, and what Romney did in 2006 which is now undergoing the quality-efficiency work that the Swiss did circa 2000.

If the nation comes together on health reform like in Switzerland and Mass at about 60-75% support, then that unity will be able to address the smaller Social Security problem.

Except climate change is bigger and more important, and without action might make solving Social Security necessary.


Blahous says:

"If a financing solution cannot be reached, then Social Security’s self-financing construct would need to be abandoned. Assuming the program continues to pay benefits, it would have to permanently rely on subsidies from the general fund as Medicare now does."

But we're *already* in the situation where SS is not self-financing, since SS taxes are no longer sufficient to pay SS benefits (this happened several years ahead of expectations due to the financial crisis), and the annual gap that needs to be filled by general fund revenues will only continue to widen from here on out. Nothing will change in 2033 when the 'trust fund' is exhausted.

coberly at angry bear has a response to the blahous piece:

Coberly's response seems a little blithe. He says it's only a 4% shortage like that's a trivial amount. That we could easily increase SS taxes by 4% with no negative effects. But an effective 4% across the board tax raise is a very large substantial tax increase.

Currently, the median family of four has an effective income tax rate of under 6%. So 4% does seem to be a sizable amount and likely to be a very contentious political issue.

The difference in 2033 is that it will require a congressional vote every year to fund. Prior to that, the funding will flow through the "trust fund" automatically.

"If a financing solution cannot be reached, then Social Security’s self-financing construct would need to be abandoned." Do many other countries try to effect such self-sufficiency? Certainly Britain gave up ages ago; ours is funded out of general taxation rather than just our "National Insurance" contributions. Mind you, it's a much older scheme.

Social security became screwed when the Federal Reserve's inflation targets exceeded the US Treasury's interest payments to the SS Trust Fund. In other words when your retirement account earns less than inflation, you're in trouble.

I disagree. For two decades, excess Social Security taxes translated to lower income taxes and/or higher spending and/or lower deficits than otherwise would have ensued.

Drawing down the trust fund means we need higher income taxes and/or lower spending and/or higher deficits than otherwise would prevail.

How much of the $15 trillion in debt today is due to Social Security supposedly being "not self-financing". I dunno, but it starts with a minus sign.

"Drawing down the trust fund means we need higher income taxes and/or lower spending and/or higher deficits than otherwise would prevail."

Well, yes. But the point is that exactly the same thing will be true when the 'trust fund' is gone and we need higher taxes, lower spending, or greater deficits (or more QE) to cover the SS payments. The demands on the general fund will be just the same before and after all the IOUs have been redeemed and torn up.

This comment by Slocum is very insightful.

Nope. Increase the full retirement age to 70, index for future cohorts (1 month per year of birth is about right), bump up the tax rate 1%, increase the wage base 10%-20%, and Bob's your uncle. No trust fund, no inter-generational transfer (no Ponzi), depressed cat food sales.

Medicare is a mess but the math on Social Security is comparatively trivial.

In other words, the whole point of the trust fund was a way to deal with the baby boomer demographic bulge without creating a massive inter-generational subsidy. For maybe the first time in history, Western countries are now not looking at a demographic pyramid- it's more like a demographic cylinder, and threatens in some countries (Italy, Japan) to turn into an inverted pyramid.

Under a demographic cylinder, you can have a non-Ponzi, pay as you go benefit, which is where it looks like Social Security is headed.

With respect to #3, I heard somewhere that having more beneficiaries makes it easier to "bend the cost curve". Surely retiring Baby Boomers will only improve our chances of controlling the growth of Social Security benefits.

Brilliant snark!

Perhaps we could appoint a 15 officials who will make up the board will not only be empowered to make what is expected to be billions of dollars’ worth of cuts to SS every year, but will be required to do so when spending exceeds targeted rates. Just provider cuts mind you. ;)

I agree. Becoming economically more difficult just means becoming politically more easy.

Since I have no idea if the assumptions made in the 2012 Report are sensible ( They seem fine, although I doubt anyone knows who will be willing to pay what in the future. ), the main point seems to be to keep us talking about what we want to do with the program. I prefer a Guaranteed Income of some kind, but I have to say that compromise doesn't seem all that difficult to me. We also have a general habit in this country of deferring tough decisions as long as we can, so I'm not expecting anything to be done soon.

As for Cochrane's Post, I read it like Sumner & agree with Sumner about it. However, & I might be odd in this, in general, if I mention a person or post on a blog, it means I have a generally favorable view of this person or blog, as I do of Cochrane. If I consider someone a buffoon, I don't even waste my time with them.

#5 it would tie the monetary unit of account to an object whose real value can be quite volatile

The "real value" can be quite volatile? How come? And how is the "real value" determined? Maybe it's like the current US penny, which, if made out of pure copper as it once was, would be worth much more than 1 cent. So why should the volatility of the value of gold make it unusable as a medium of exchange? Well, of course it would be perfectly acceptable if it's value WASN'T specified by the state. After all, the sovereign dollar fluctuates in value itself. An ordinary dozen eggs can cost 90 cents one week and $1.75 the next.

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