February 10, 2005
Why Oh Why Can't We Have a Better Press Corps? (National Review Edition)
The National Review enters the Black Hole of total and irreversible stupidity:
The Editors on Social Security on National Review Online: The press is not making his job any easier. The Washington Post ran a misleading story.... Paul Krugman then repeated the original misstatements. Under Bush's proposal, workers will have a choice about whether to open a personal account.... In return for the opportunity to build a nest egg in the account, in other words, workers would have to accept smaller checks from the government. People who choose the accounts will come out ahead if their investments get a return that averages above 3 percent a year. From this fact, the Post somehow concluded that Bush was going to let workers get only the returns above 3 percent, while the government would take everything up to 3 percent. That would make the proposal a very bad deal for workers. But it's not true....
So: the National Review agrees that you come out behind if your personal account makes less than inflation + 3%, and come out exactly the same if your personal account makes inflation + 3%. Your personal account is "yours" only in the sense that a highly-mortgaged house is yours. When you sell the house, you get the money--but the mortgage-holding bank snarfs it back before you leave the closing room. When you retire, you get your entire 3%-earning personal account--but the government snarfs back the exact same sum by deducting it from your defined-benefit Social Security annuity. So what, exactly, is "not true"? Nothing. We have left the logic zone entirely.
Where I disagree with the National Review is its claim that the system it (correctly) describes is "a very bad deal for workers." It is, I think, a bad deal for older workers, and a bad deal for poor workers who have no business running risks with their baseline retirement income tranche, but it can be quite a good deal for young rich workers.
But who needs to be told that you don't go to National Review for financial advice or economic wisdom?
Posted by DeLong at February 10, 2005 06:28 PM