"I support the idea of creating a personal saving account for younger workers," Mr. Bush told his audience.Okay, so Bush isn't going to stand on a campaign stump and announce that someone will have to pay for the transition costs. But neither is he going to spend valuable time on the campaign stump explaining that the 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.
The problem with that idea is finding the money to pay the current generation of retirees, if revenue from current workers is diverted into the workers' own accounts. As a leading proponent of creating private accounts from Social Security, South Carolina's Sen. Graham said he hopes Mr. Bush will promote the idea, which is the single biggest unfinished item from the 2000 campaign platform. But Mr. Graham has been willing to address the $1 trillion transition costs, whereas Mr. Bush has not. Mr. Graham would raise the amount of wages subject to payroll taxes to cover costs. But Mr. Bush has said he won't raise taxes or reduce benefits...
DeLong chooses to focus on the transition issue:
You cannot--not given current projections--"support" all three of (a) diverting Social Security revenue to young workers' private accounts, (b) maintaining benefits at their current levels, and (c) keeping payroll taxes from rising. One of the three must crack. Does Bush not know this? Or does he know this all too well?Does DeLong 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 DeLong an idiot or a liar? Well, DeLong 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.
