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Sunday, December 30, 2012

On Krugman’s Epiphany

 

PKepiphany

 

Paul Krugman is one of the leading “names” in economics today. There are reasons for his stature. He’s got a Nobel Prize, he’s an academic at a leading University, he writes for the NY Times, and not a week goes by without him being on some TV show or another. If you asked the average guy on the street to name an economist, there’s a good chance the answer would be -  “Krugman”.

 

PK has been having a slow motion epiphany over the last month. He has posted four articles on a topic since December 8. (Link, Link, Link and Link) He has identified a “phenomenon” that is occurring in the US economy. This new, powerful force that he has stumbled upon, is keeping him awake at night. Clearly, PK is troubled by what he has uncovered. His words:

 

“It” has really uncomfortable implications. But I think we’d better start paying attention to those implications.

 

Are you worried yet?

 

PK drives home the point that what he has uncovered is not now in mainstream economic thinking. He admits that even he missed the signs that something was amiss in the world of modern economics:

 

Not enough people (me included!) have looked up to notice that things have changed.

 

Okay. What is it that PK has found hidden deep below the economic rocks that is causing him such fits? Grab onto your seats – this is big. PK has observed, for the first time in his economic career, the simple fact that technology has reduced the role of labor in the economy.

 

krugmanfinal

 

That’s PK’s epiphany? He just came to that conclusion in the last month? I’m thinking, “What planet has this guy been living on the past 10 years?” But then I realized PK has not been living on Mars, he’s been living in Princeton; amongst the Ivy.

 

Has PK not gone to a new mechanized distribution center like FedEx, UPS and Amazon have? Does he not know that it takes less printers to make the NYTs these days? Has he not been to a modern assembly plant that makes things with robots? How could he have missed the notion that technology was reducing the demand for human labor all these years? The only way that this could have been missed is if PK had his eyes covered and his head in the sand. He had this to say about his big new “find”.

 

Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.

 

pkrobots

Forget about why PK has not connected these very important dots over many years; focus on why he’s crapping in his pants over his new awareness. It’s simple math. Take two examples A) where Labor = 60% of GDP and B) Labor = 50% of GDP. If GDP = $16T, then A = 9.6T and B = 8T. 

 

The problem is that Social Security (SS) taxes Labor at 12%. The difference between A and B ($1.6T * 12.4%) means that SS ends up with $200 Billion less in annual revenue.

 

PK went off and pondered his “discovery”. He did the A and B math, then he wrote:

 

If payrolls lag behind overall national income, this will tend to leave those programs underfunded

 

Duh….

 

Then PK went on to really stir the pot by suggesting that the Congressional Budget Office (CBO) was using a rosy long-term estimate for the critical Labor/GDP percentage in its projections. PK says:

 

CBO could very easily be quite wrong here, and will indeed be very wrong if the rise of smart machines plays out

 

What’s dawning on PK is that his vision of the future does not take into proper consideration the role that technology has today, and will play in the future, on labor employment. What he’s looking at is a structural change; one that can’t be altered. He’s coming to the conclusion that Social Security doesn’t “work” when there are not enough workers paying into the scheme.  This is a remarkable conclusion from the most liberal economist out there.

 

Move on a few days and PK does some more deep thinking. He now realizes that the current expectations for future revenue for SS are unrealistic. He knows that the lines will cross more quickly than is now anticipated. He understands that this is a here-and-now problem, but he also has grasped that this is also a 75-year problem. So he comes up with a plan; simple yet elegant. He wants to tax the robots.

 

There would be no problem, at least in economic terms, by adding revenue (to SS) from dedicated taxes on capital income.

 

No problem? PK thinks it’s okay to charge 12% FICA taxes on a robot. OMG!

 

Actually, I don’t think that PK really believes that taxing investments in manufacturing technology is a good idea.  The fact is, it’s a terrible idea, and PK knows it. If you want an economy to grow, and be globally competitive, you create incentives (tax breaks) for capital investment; you don’t create disincentives. Period.

 

 

I suspect that PK is slowly recognizing that he has put himself in a box. He has come to conclude that SS, as it is currently configured, is not viable. The villain is technology that reduces the long-term demand for labor. His solution, not surprisingly, is more taxes. But there is not a chance in 100 of taxes on capital investments to support SS (nor should there be).

PK is walking a plank, he’s getting close to the edge. When he goes over, he will bring with him a bunch of other liberal economists that believe that the SS “miracle” can be sustained. In his latest missive on this topic PK promises:

 

I’ll be writing more about this in weeks to come

 

I can’t wait.

 

 

Notes:

 

- PK is quite right that the CBO’s assumptions regarding Labor’s share of future GDP are optimistic. I’m sure that the folks at the CBO read PK’s criticism. I doubt they were too happy about it. The question is, what will CBO do, now that a Nobel has challenged a basic assumption it uses? If the CBO were to re-gear its computers to reflect a lower long term role of labor in the economy, it would create a massive hole in America’s entitlement programs.

 

- It’s going on five years now that I’ve been writing about SS and the CBO. There must be a few hundred articles of mine in the ether on these two topics. Again and again I’ve said the same thing. The assumptions are not realistic, the numbers do not add up when realistic assumptions are used,  the outcome will not be what is now anticipated, and there will be a disappointment when reality sets in. Sorry PK.

 

 

Maybe I should get a Nobel, that, or maybe PK shouldn’t have one…..

 

bury 

 

Comments

  1. BK: “There are reasons for his stature. He’s got a Nobel Prize, he’s an academic at a leading University, he writes for the NY Times and not a week goes by without him being on some TV show or another. ”

    Nobel Prize — Alfred Nobel did not endow an economics prize; this is a faux award offered by the socialist government of Sweden

    “He’s an academic” — Not so. he ***WAS*** an academic many, many years ago. When Princeton shoved him out the door, he hadn’t taught an undergraduate course in many years. Yes, he was pushed out the door, because students who were paying $50K plus per year were filing lawsuits against their alma matter. Putting Krugman in the admissions brochures and advertising his classes, when he does not teach them and they are not offered, is false advertisement. Princeton lawyers told Krugman to teach or write op-ed columns, not both.

    “not a week goes by without him being on some TV show or another.” — those who can, do. Those who can’t, teach. Those who are totally clueless go on TV. … Put another way, those who know don’t say, and those who say don’t know.

    Krugman wrote some academic (aka not real world) research way back when LBJ was president — about labor economics. That is what got him the socialist prize in economics. That is the sum and total of his alleged economics expertise.

    And now we learn that Krugman was unaware of the biggest trend in labor of the last half century???

    That last picture should show Krugman with his head up his ass, not in the sand.

    Another huge embarrassment for the Swedish Nobel prize committee!!

  2. Krugmans role in society is to play Lysenko for the left. In other words, he is the shill that will provide the ‘heavyweight academic thought’ to back up the ridiculous, crackpot theories of the left. If they want to do something, there will always be some academic to provide the new theory that we are all supposed to accept. If we don’t accept it, then we are “anti science” or “anti knowledge” or some other such thing.

    Global warming, peak oil, “fossil” fuels, evolution, modern monetary theory, they got em all covered.

    They’re even moving into the movies. Even though the definitive works on Lincoln show that he was no friend of blacks and even wanted them deported after the congress took away budgetary funds for him to pursue this goal, they find the very “prestigeous” Doris Kearns Goodwin, LOL, to provide the academic cover for a movie that is the biggest bunch of bullshit ever on film.

  3. Conscience of a LIBERAL says:

    The “title/ by-line” for Krugman’s op-ed pieces is the most honest thing the NY Times has ever printed.

    Conscience of a ***LIBERAL***

    Doesn’t say conscience of an economist, or conscience of some other academic field., Doesn’t even conscience of a guy who once held a real job in the real world. It says conscience of a political belief.

    The guy is a political hack, not even a clueless academic. It says so in big, bold letters. Whether one agrees with his politics or not, he is self identified as a LIBERAL, not as an economics expert.

    An expert in a given field would emphasize credentials and experience, not political affiliation.

    As political loud-mouths go, good grief — the man actually didn’t know about automation? Maybe he should have asked one of the UAW workers that got replaced by a robot back in the 1980s? Are Princeton economics PhDs qualified to join a blue collar union?

    Now I understand why that other Princeton wanna-be economist can’t get the FOMC working… Is Princeton University still accredited?

    • Oh my. And how do you self-identify?

      • Conscience of a XXXXX says:

        @John — It doesn’t matter which political affiliation a person has, it is a political affiliation, not a field of expertise. Being liberal or conservative is an opinion; you are welcome to hold either one. But you cannot be an “expert opinion holder” (I am being deliberately ridiculous)

        Krugman self identifies as a political extremist — something the country has a surplus of already (some of us would say Washington DC is infested).

        • Eesshhh. If being liberal is extremist, what is being cnservative?

          • Roger Drew Williams says:

            Realistic. As far as Mr. Krugman’s recent revelation, Henry Hazlitt covered the topic fairly succinctly, in 1946, in his book “Economics in One Lesson”. I thought that nearly any well rounded economic education would have included that work fairly early on. John, it does have some conservative economic leanings, perhaps you might consider taking a peek (It is quite comprehensive for such a short book, is very enlightening, and comes highly reccommended).

  4. PhDs in Kracker-Jack Boxes says:

    I remember watching TV a day or two after the BP Gulf of Mexico oil spill. They had a college professor from University of Miami (Florida) who claimed to be an expert in oceanography.

    This mental patient with a PhD went off about how he had detected an oil slick covering 5000 square miles, located down current of the BP oil platform … at a depth of 3000 feet.

    Think about that for a minute.

    This lone academic claimed he had surveyedd 5000 square miles of open ocean, in under two days — a feat requiring more naval assets than the US Coast Guard and US Navy combined. But somehow Professor Quack and his fleet of rubber duckies had done it.

    Don’t strain yourself on that too much. Think about the second part. CRUDE OIL WAS FLOATING 3000 FEET BELOW THE SURFACE.

    I am quite certain that anyone who actually earned a PhD in oceanography, not to mention most of the adult human race, knows that OIL FLOATS.

    Yep, this school is still accredited, and this ding-bat still has a PhD, and still teaches there.

    The next time you are writing a check for your children’s tuition, wondering if they will ever get a job on graduation, wondering how come college tuition is rising three times faster than reported inflation (CPI) … remember the sorts of idiots with PhDs that are doing the teaching.

    Peter Theil is absolutely right: a college degree is a waste of time for most people. That doesn’t mean you shouldn’t get an education at all — but a piece of paper from a profession this clueless is not worth tens of thousands of dollars.

    Happy to see a more prominent academic like Krugman make a public ass of himself.

    • I live in Louisiana and I agree with everything you said here about the PhD nutcase. The only thing I want to point out is that TPTB dumped zillions of gallons of chemical dispersants into the Gulf. (I use the term zillions because nobody can/will give an accurate account of how much was actually used. If you read 10 different reports you’ll get 20 different amounts.) These dispersants are drastically more toxic and dangerous than the oil itself, and they don’t actually clean up anything. What these chemicals do is cause the oil to sink so that the surface looks cleaner. That way they can say they cleaned it up when what they really did was “sweep it under the rug” and make the Gulf more poisonous than if they had done nothing at all. So yes, to this day, there is crude oil “floating” at multiple depths in the Gulf.

  5. UChicago Rejects Krugman says:

    I seem to recall a very very old professor at my school (not Princeton thank God). Decades ago he was lecturing about Econ 101, mumbling about substituting capital for labor. He was reading this in what appeared to be an ancient textbook, first published in the early 1960s — before any of Krugman’s Nobel winning research. It wasn’t even close to “new” then.

    Actually, both Karl Marx and John Maynard Keynes discuss the substitution of capital for labor — and those guys were both long dead before Krugman started writing his PhD thesis.

    There have been a number of CEOs who were caught “embellishing” their resumes, claiming to have degrees from universities they didn’t attend. Has anyone checked if Krugman actually earned a PhD? Is the school accredited? Did Princeton University verify Krugman’s alleged credentials?

  6. Bruce:
    You may be aware of this link to Social Security.
    It looks at cash flows in and out of the SS trust fund.
    You pick a year, and it tells you the results.
    It backs out interest income from the positive cash flows to produce a deficit since 2010.
    It actually states “The net cash flow during any period is total non-interest income less total outgo.”
    Go to:
    http://www.ssa.gov/OACT/ProgData/allOps.html.
    Put in a year, and voila!
    Don Levit

  7. speaking of Princeton,I read a book long ago by a professor’s STUDENTS.He had taught at Princeton seems 40 years and never wrote a book on his therories on economics.Seems everyone at Princeton wanted to take his class.It had to do with the Cat and the Canary effect of gov’t.Us being the canary that the cats in DC are eating.Does anyone know of this book or professor at Princeton? thanks BK

  8. The old timers need to stop serving the blue koolaid or red koolaid and go play bingo. They are stuck in some 1950′s/60′s leave it to beaver / happy days time warp.

    America needs to reinvent itself for the 21st century, people eaten up with nostalgia for the past have no vision and babble about outdated theories that are irrelavent today.

    Stay tuned for another day of the old people yelling about who left the bathroom light on like it matters when we are in debt up the wazoo.

    America no longer has news, we now have crying channels staffed by cry babies. Host cry babies have on guest cry babies from business, academia, the poverty pimp suffering industry. People crying all over the nations airwaves, people crying in their keyboards, it’s really pathetic to watch.
    Tea Party tantrums.
    Occupy wall street tear parties.
    WI teacher tantrums.

    Good thing these people don’t have to storm the beaches of Normandy, they would cry they might break a nail or mess up their hair. America was once a proud nation, when the going got tough, people didn’t cry, they met the challanges thrown at them.

  9. First of all, labor share has been declining since 1960, nothing new here. The ‘Glory Days’ of US industry were over by 1973.

    Second: all of labor share is borrowed, we have a debt-money system in place, anything we ‘earn’ is borrowed.

    What we don’t earn is also borrowed. Either the workers borrow or have borrowed for them (by the state). The latter condition is what we have now … or did have before borrowing became counter-productive.

    Workers cannot borrow any more, they are insolvent. The companies they worked for are also insolvent but they can still borrow enough on the margins to ‘fake it’. The government can also borrow … but neither firms nor state can survive on loans forever. Loans plus energy subsidy have been supporting our ‘way of life’.

    As long as there is borrowing there is no earning.. perhaps the establishment can begin allow those at the bottom of the economic food chain to earn. This requires less credit not more. Credit allows those with access to it to pretend to outperform those without … who are consequently exposed to ruinous competition. By borrowing, the government competes with its own citizens: by doing so it gives cause to those who would purposefully become dependent upon the government and thereby destroy it … ”

    Loans not robots have undone us: we borrow to gain energy which really runs our economy. We — and our energy supplies — are tapped out.

  10. Mr. Krasting, are you claiming that our market capitalist economy is a failure and will never again approach full employment?

    • A failure? No. Flawed? Yes.

      I’m not sure what the term “full employment” means. It used to be 6%, but then the thinking was it should be closer to 5%, Now the Fed is trying desperately to get it under 7%. I’m not convince even that be attained.

      How’s this: What ever the equilibrium level was 10 years ago, it is higher today. Many factors have contributed to the increase. Aging is one, robots are another.

  11. Off shoring jobs to third world shitholes as you embrace illegal exploitable labor to drive wages down is technology?

  12. This answer to diminishing labor is job sharing. This dovetails nicely with Obamacare, because service industry employers are very busy hiring more workers, to keep total weekly hours worked below health insurance thresholds. Talk about dumb luck.

  13. ( http://www.bls.gov/bls/glossary.htm )
    === ===
    Nonfarm business sector (Productivity and Costs)
    The nonfarm business sector is a subset of the domestic economy and excludes the economic activities of the following: general government, private households, nonprofit organizations serving individuals, and farms. The nonfarm business sector accounted for about 77 percent of the value of gross domestic product (GDP) in 2000.
    === ===

    Production of goods and services is becoming more efficient, outside of government. Consider what happened to farming.

    ( http://seekingalpha.com/article/267218-the-decline-or-demise-of-u-s-farming ) [edited]
    === ===
    In the early 1800s, 80+% of both U.S. employment and output were directly tied to a relatively inefficient (by today’s standards), labor-intensive agriculture sector. Food products were very expensive and consumed a large part of a typical household’s income.
    Technology revolutionized farming, resulting in the same trends we observe today in manufacturing: huge increases in farm worker productivity, reduced farm employment, significantly lower and more affordable prices leading to a reduced share of food in both household income and national income (GDP).
    === ===

    The number of people needed to manufacture goods and do business is declining, both directly and to manufacture labor-saving machines (eg. robots and computers). The result is producing more stuff and services using less labor. This is good. It is not a problem.

    Non-farm business labor is becoming a smaller part of GDP because government is becoming larger.

    This observation is merely a distraction from the real problem with Social Security. The benefits promised are much more than the funding, as in any Ponzi scheme. Of course the government is flailing about, using any excuse to tax whatever is available. The government hopes that the people do not recognize where their money is going and why things will cost so much, despite increasing productivity.

    Ponzy Schemes Like Social Security

    ( http://www.politico.com/news/stories/0412/75603.html )
    Social Security trustees: We’re going broke
    04/25/12 – Politico by John C. Goodman
    What the current value of the unfunded liability means:
    === ===
    The latest report of the Social Security and Medicare trustees shows an unfunded liability for both programs of $63 trillion, about 4.5 times the U.S. gross domestic product GDP. [$20.5 trillion of that is from Social Security.]

    The unfunded liability is the amount we have promised in benefits, looking indefinitely into the future, minus the payroll taxes and premiums we expect to collect. It’s the amount we must have in the bank today, earning [3%] interest, for these entitlement programs to be solvent [fully funded].
    === ===

  14. How does the Hospital Insurance (HI) part of SS figure into this? The SS rate is 12.4% and the HI rate is 2.9% for a total rate of 15.3%. This is what I paid as a self employed person. I don’t know if it’s logical to include HI but, if it is, the numbers are even worse.

  15. This is a truly stunning revelation. He’s even more incompetent than I thought. And he’s apparently too stupid to realize how stupid he makes himself look by admitting this gargantuan level of ignorance of a very basic and quite apparent factor in our economy.

    Can we all just write him off as a political hack and NOT an economist? Please!?

    • Onlooker

      Agreed. 100%. Greenspan was the same and so is Bernanke. You simply do not get to the level of these people (Bush, Obama, Hillary, Pelosi, Boehner, Reid, etc.) without kissing all kinds of ass. Intelligence is NOT a requirement and wisdom is an immediate disqualification.

      Someone who is TRULY wise simply won’t do it. Thus, almost no one can rise to the upper echelon of any major system in America (academia, politics, economics, law, medicine, etc.) without putting personal advancement and expediency over principle and truth. It’s The Emperor’s New Clothes.

      We’re social animals and that fact dictates that ‘people skills’ will be rewarded much more readily than raw intellect. You and Mr. Krasting have raw intellect on your side (you saw that technology has been rapidly eliminating jobs for years) but PK and his ilk have the system on their side.

      Sadly, the American masses get exactly what they deserve. The rest of us are just steerage on the Titanic…

      • Steve: I think you nailed it regarding abandoning personal integrity to achieve high-level “success”. Fairly well describes the camel-through-the-eye-of-the-needle biblical admonition.

  16. Bruce, Krugman is just laying out the left’s position. Raise revenues (even a tax on capital) but don’t drop the equalitarian aspect of Social Security.

    The conservative position is to make Social Security a “wealth creator”. Use individual accounts to allow each participant to invest and grow their own retirement fund.

    Your position, means testing, is reasonable but doesn’t satisfy either philosophical view. Your efforts, and the efforts of people like you, are forcing the discussion that needs to happen.

  17. Excellent article. I have been developing computer systems for the last 40 years. In the beginning the primary goal was to make our employees more efficient so we could reduce staff.

    The first time we were able to move our systems outside of the organization was thru ATM’s. Now we had customers willing to work for free to do stuff we used to pay employees to do. Alas the ATM network was very expensive to install and maintain.

    Now we have the internet. It is easy to empower billions of people to work for free. Ask Amazon, the Banks, Google Maps, IRS……

    The two big labour killers are automation of the factory and empowerment of the consumer.

    I hardly have to get off the Lay Z Boy any more.

  18. ( http://www.bls.gov/bls/glossary. htm )
    === ===
    Nonfarm business sector (Productivity and Costs)
    The nonfarm business sector is a subset of the domestic economy and excludes the economic activities of the following: general government, private households, nonprofit organizations serving individuals, and farms. The nonfarm business sector accounted for about 77 percent of the value of gross domestic product (GDP) in 2000.
    === ===

    Production of goods and services is becoming more efficient, outside of government. Consider what happened to farming.

    ( seekingalpha.com/article/267218-the-decline-or-demise-of-u-s-farming ) [edited]
    === ===
    In the early 1800s, 80+% of both U.S. employment and output were directly tied to a relatively inefficient (by today’s standards), labor-intensive agriculture sector. Food products were very expensive and consumed a large part of a typical household’s income.
    Technology revolutionized farming, resulting in the same trends we observe today in manufacturing: huge increases in farm worker productivity, reduced farm employment, significantly lower and more affordable prices leading to a reduced share of food in both household income and national income (GDP).
    === ===

    The number of people needed to manufacture goods and do business is declining, both directly and to manufacture labor-saving machines (eg. robots and computers). The result is producing more stuff and services using less labor. This is good. It is not a problem.

    Non-farm business labor is becoming a smaller part of GDP because government is becoming larger.

    This observation is merely a distraction from the real problem with Social Security. The benefits promised are much more than the funding, as in any Ponzi scheme. Of course the government is flailing about, using any excuse to tax whatever is available. The government hopes that the people do not recognize where their money is going and why things will cost so much, despite increasing productivity.

    Ponzy Schemes Like Social Security

    ( politico.com/news/stories/0412/75603. html )
    Social Security trustees: We’re going broke
    04/25/12 – Politico by John C. Goodman
    What the current value of the unfunded liability means:
    === ===
    The latest report of the Social Security and Medicare trustees shows an unfunded liability for both programs of $63 trillion, about 4.5 times the U.S. gross domestic product GDP. [$20.5 trillion of that is from Social Security.]

    The unfunded liability is the amount we have promised in benefits, looking indefinitely into the future, minus the payroll taxes and premiums we expect to collect. It’s the amount we must have in the bank today, earning [3%] interest, for these entitlement programs to be solvent [fully funded].
    === ===

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  20. Are you serious?
    Tax Breaks for the no jobs created corporations.
    Dang right.
    Tax the robots.

  21. Tax all income including bonuses, no upper limits

  22. I think everyone on this reply board has missed the significance of what Krugman is saying. Don’t get me wrong, the denial of Austrian economics has created this disaster. But when Kurtzweil singularity occurs, we will all be out of jobs, including Krugman. There will be no need of human opinion, because the information processing superiority of silicon will make it irrelevant. Skynet is coming. No joke. I doubt we will be able to encode compassion on to the silicon, before the high-frequency trading systems blow us up completely. Technocracy is blind and self aggrandizing, convinced of its own superiority; ignorant of it’s own deficits on the other axes of human knowledge. All of the technocrats running the world are petty bourgeoisie, intellectually.

    • It’s Kurzweil, not Kurtzweil. And all computers have plugs that can be pulled and circuit breakers that can be tripped. And hasn’t the singularity already begun, not with a bang but with a gradual progression, with ATMs, traffic light cameras, auto-pilots, microwave timers, underwriting algorithms and all the millions of automation/augmentation things that came into existence after Kurzweil’s musical composer “computer” in 1965?

  23. You’re both wrong. Social Security, even though it is a socialisy idea, nevertheless is a great concept. It also would be well funded except our corrupt government leaders have been using that money for wars, pork barrel favorites and other stupid spending endeavors. JFL

    • No, @JohnnyL, Social Security could never be well-funded, and the government has never used the SS money that could have been saved.

      The government cannot save money. It is a physical impossibility. There was never a Social Security trust fund.

      If the government puts money in a “lock box”, that isn’t savings, it’s deflation. If the government, in later years, opens the lock box and disburses the “money”, that isn’t dipping into the savings, that’s inflation (exactly the same as printing the money).

      There never was a SS trust fund. Look at the picture of George W Bush visiting the SS Administration and inspecting the trust fund… IT’S A FEW PRETTY PIECES OF PAPER! (We promise to give old people some money, later. Cross our hearts.)

      Social Security was ever, and always, taking money from young workers and giving it to old people. Period. That’s all it ever was; and that’s all it is. Fewer births, no social security checks. End of story.

  24. I am no Nobel prize winner, economist, professor, etc. As you will realize after reading this, I am just a simple Joe; but if you ask me it doesn’t take one of these snobs to know SS is going down the toilet and how to fix the problem. We just need to know the roots of the problem and deal with them.

    First, this freaking country has bought into the fallacy of retirement at 65. Just think about it for a minute and you will see how absurd this is. You work 40+ years at a job you don’t like in the hope you can retire at 65 and you are not too old to do what you should have done all along. Why not work at something you love and do it till you die? Duh. It’s a much better way, isn’t it?

    Second, the insurance companies, pharmaceutical companies, electronic companies are raking in the money keeping the unproductive segment of the population (retirees) alive longer and longer. This surely puts more pressure on SS.

    Third, the unions have infiltrated the government and are reducing the retirement age. Name a city where the policemen, firemen do not retire with almost full pay benefits at age 55. In many of them even the administrators are retiring at the same age. Of course, our senators and congressmen, already beat them to the punch.

    Fourth, the people running this country are no better than PK, so why would we expect them to know how to fix the problem. After all, their predecessors are the ones that sold the country on the idea of retirement. They have no incentive to fix the problem because the companies that are raking in the billions want to continue raking, and these companies know how to get the creeps in government to go along.

    By now, the solution should be obvious. If not, I’ll tell you. The government isn’t going to fix anything. The insurance companies will keep insuring. The pharmaceutical companies will keep making drugs to keep you alive even if you have Alzheimer , and the electronic companies will keep making instruments to do likewise. There is only one fix. You have to opt out, and the way to do it is to discard the idea of retirement, do in life what you love to do, derive an adequate income from it, and do it till you die. Don’t let the government dictate at what age you should do what you love to do. My opinion is that if you do these things you will outlive most of those on retirement and enjoy life much more than they do.

    There is another option–you can keep at your crappy job, and wait until the government tells you it’s OK to retire; but you should know it’s only a matter of time before 80 is the normal retirement age. Good luck!

    See, it’s simple.

  25. There is no doubt that the SS scheme is one doomed to fail as the projections show. Nevertheless, the population will continue to grow and more under-skilled, under-employed, people will need to be supported by the government. Taxes are going up – it is the only way. However it should be noted that more housing, roads, other infrastructure, caregivers, social workers, restaurant cooks, servers, etc. will be needed. It is true that many skilled labor jobs will be replaced by automation, but there will be a need for human services until the SKYNET scenario is completed. It does seem like we are headed there, but it is quite a ways off and we have a lot of more urgent problems to deal with in the here and now. The fact that this is starting to dawn on Krugman and his species might be a good thing.

  26. Common Sense for 2013 says:

    There is an inherent conflict of interest in the non-working on government support to have an equal vote as the working public that is providing the support as taxpayers.

    Once over 50% of any population is on government support, the result will be a non-working majority voting to continue to be supported by the working minority.

    As the reasonable sounding “taxing the wealthy” can only cover 8% of the shortfall, it is clearly but a first step in “taxing the working”, by the continued elimination of more deductions already in discussion, and the further devaluation of the dollar through printing money and borrowing by the Federal Reserve in “stimulus funding”.

    Now at 47% and rapidly growing under Obama’s lowered requirements for Medicare and SS disability and elimination of working requirements for welfare, there is no other result likely or possible. Over 30 million have been added to these programs in the past few years.

    Without some dramatic action, the US is on the road to socialistic bankruptcy.

  27. “He’s got a Nobel Prize”….

    This is very unsophisticated prose. I believe “he has a Nobel Prize” would sound less like it was written by a highschool student and more like an economic blogger.

    I lament the decline in prose.

  28. Why is it always the case that Common Sense is never part of economic policy?

  29. Bruce,
    Since the facts you pointed out are obvious to even the most jaded of economists on the planet, I would add that the same black hole is the destination of the income tax also. Consider: If labor is becoming a smaller part of economic activity (as measured by the CBO), then income attributable to labor is also shrinking. The same effect should then be carrying over to the income tax system.
    My thought: Just another reason America should eliminate the income tax, and replace it with the Fair Tax.

  30. Common Sense for 2013 says:

    The reason that common sense is foreign to policy is that the only focus of politicians is votes, not economic success. That is why all government controlled programs are always financial failures.
    Social Security and Medicare are only being bankrupt by the addition of millions of non contributors.
    For example before the inclusion of millions now deemed eligible for SSDI (disability insurance) over 3 trillion of past excess SS funds were “borrowed” by other federal agencies, none of which ever repaid.
    Social Security was over funded, before millions of non contributers became eligible for payments.
    Obama has now made millions eligible for SSDI by lowering disability standards to “mood changes” and “neuromuscular” problems, easily claimed by anyone with little effort. His elimination of any work requirements for welfare has again made it an attractive effort alternate. His reward is millions of votes.
    Such vote buying has raised the US debt over a trillion every year which is many times the total wealth of all the wealthy. The only possible answer is increased taxes on all the working population disguised as Tax exemption eliminations now being discussed. As such pork barrel giveaways are common to all politicians, the only real answer is smaller government.