Krugman: Spend Now, Save Later

[mrstickball]

HappySqurriel said:

richardhutnik said:

HappySqurriel said:

Personally, I find the argument that cutting back on government services is necessarily going to have a negative impact on individuals to be bizarre. Most governments are horribly inefficient organizations that are plagued with debt, have significant corruption, are subject to widespread fraud, and spend a large portion of their money in areas they shouldn’t be involved in. If the government was reduced to its core functions and focused on doing those efficiently while reducing corruption and fraud (and staying out of debt) you could probably run the government on 5% to 10% of GDP while the typical citizen didn’t notice any reduction of services.

Until you throw out medicare, medicaid and social security.  I assure you that a bunch of seniors no longer getting social security will result in something really ugly going on. 

So, look over this pie chart and say what you are going to cut:

 

Being that the "Assets" backing Social Security are (essentially) a bunch of IOUs from a government which is rapidly approaching bankruptcy, what makes you think that Social Security isn't going to disappear? How does the return on investment of Social Security look compared to (pretty much) any private investment? In what way is Social Security any different than a Ponzie Scheme?

There are ways to achieve the goals of Social Security without having the government manage the program for everyone. While this wouldn’t be my first choice, the government could mandate that an individual must invest 5% of their income (through a payroll deduction) into a registered retirement fund, people would have a choice on where they invested it, there could be a default fund set up for people who didn’t want to manage their own money, and this investment could be tax-deductible up to a certain value (say $20,000 per household). While for low income earners this might not completely cover their living expenses, I’m positive for someone who worked for 40 years it would produce a larger payment than Social Security.

Medicare and Medicaid will be interesting to see, because by the 2016 (or 2020) election these systems will be facing a crisis because their expenses will have increased much more rapidly than government revenues; and the government will be collapsing under its own weight.

I worked for the State of Ohio, so I learned how atrocious Social Security is.

1) First off, every state employee is OPTED OUT of social security. How the heck is that fair that as a private citizen, I am forced in most jobs to pay in, yet am opted out of every government job?

2) I earned 7-10% APR for every year I was in OPERS. That is 2-3x greater than the IOUs by SS. Social Security was built to fail from the get go. You really can't blame the system for under-performing, when it was built to fail by FDR and those that built the system. You see, 0% of that money is invested into anything external that is interest bearing. Comparatively, OPERS is not that way...My money was invested in stocks, bonds, real estate, mutual funds, and all kinds of stuff. It's been earning 7-10% for decades, through busts and booms. Guess what? When my dad retired via SS, he got $1,000 a month. My buddy on OPERS earning similarly made $3,000. That is why social security needs to go.

3) You can solve the problem by allowing me and my generation to pay in a much smaller amount to SS to keep the sytem afloat for those getting benefits today, and within the next 10 years. Eventually, you can sunset the entire program without a loss of services. The truth is, I could spend about  4-5% on retirement, and get the same benefit as 8.5% through the government. That extra 3.5-4.5% of savings could be huge for a generation or two down the line.

4) Social security will be doomed, one way or the other, Richard. If we keep it the way it is today, 20 years from now,  we will have to make hard choices like reduction of benefits, or increasing the retirement age. These are things you argue will be 'bad' if government is reduced...The truth is, these are realities even if government is left to be large.