Social Security is, basically, a system in which each generation pays for the previous generation's retirement. If the payroll taxes of younger workers are diverted into private accounts, there will be a gaping financial hole: who will pay benefits to older Americans, who have spent their working lives paying into the current system? Unless you have a way to fill that multitrillion-dollar hole, privatization is an empty slogan, not a real proposal.Krugman conveniently ignores the same fact that DeLong ignores. I must, therefore, repeat what I said about DeLong:
[T]he cost of not privatizing Social Security will far exceed the transition costs. If Social Security isn't privatized, benefits will be cut and/or payroll taxes will rise -- and it will be forever, not just during a transition period....
Does Krugman not know that the transition costs argument is phony -- a diversionary tactic to scare people away from privatization -- or does he know this all too well?
In other words, is Krugman an idiot or a liar? Well, Krugman is a Ph.D. economist, so he's probably not an idiot (though I've known some Ph.D. economists who came close). I must conclude that he's a liar.