Ich bin ein Paul Krugmanner!

Writing an op-ed in The New York Times last Friday, Paul Krugman took Federal Reserve Board Chairman Alan Greenspan to task for his misguided support of George W. Bush's personalized Social Security system (please read about the system at Factcheck.org, in spite of what National Review may think of it).

I always thought Alan Greenspan was on our side. The Fed is a very independent body, usually immune to partisan politics. Yet, somehow, says Krugman, Greenspan "painted a dark (and seriously exaggerated) picture of the demographic problem, and said that what we need is a 'fully funded' system. He then conceded that Bush-style privatization would do nothing to improve the system's funding. [...] Mr. Greenspan went on to concede that the opponents of privatization are right to worry about the huge borrowing that Bush-style privatization would entail." And after all this, Greenspan still endorsed private retirement accounts! My old economics teacher, Mr. Allen, instilled in me a love for Greenspan and his objectivity. It has become increasingly apparent, however, that Greenspan is not as objective as Mr. Allen remembers him.

Okay, so the question is, why are we being told that the situation is so urgent that Social Security reform can't wait another second? In much the same way that we had to go to war with Iraq right now, we're being told that Social Security needs to be reformed right now. I'll buy that Social Security needs to be reformed, but does it have to be immediately? And if Greenspan is correct and Bush's privatization scheme won't do anything to solve Social Security's future insolvency problems, then why should we go along with the Bush plan?

To quote Hamlet, something is rotten in my refrigerator.

Or something like that.

First of all, private retirement accounts would only augment Social Security benefits, and only slightly at that. If everyone who could put money into private accounts did so, then the funds of the whole Social Security pool would decrease by that percentage, meaning that Social Security would be worse in the future for people without private investment accounts and slightly better for people with those accounts.

But let's pretend I don't care about other people. Screw them. They should have invested their money. But maybe I care about gigantic government budgets. It is estimated that $4.5 trillion will be required to finance the first twenty years of the privatization plan as funds are shifted around between the Social Security trust and private accounts. That's a lot of money to throw around for a project whose benefit is dubious at best. Let's be rational consumers, here: does marginal benefit equal marginal cost?

And then there's the timing. Why now? Why not last year? Wasn't it just as urgent then? Bush knows that this is his last four years (until they manage a constitutional amendment to give him four more years, leading us Where Many Dictatorships Have Gone Before), so he has to spend the "political capital" he made in the last election. Who stands to benefit the most from this privatization? The retiree who will get 4 or 5% more than he would without a private account? Where is his investment going? It's going into private corporations, of course. And as Americans buy stocks and mutual funds with their private investment dollars, the value of those stocks goes up. And the people who stand to gain the most from an increase in stock price are the people who have the most money invested in them: the executives of the corporations in question! So, under the Bush plan, Americans can only use their private investment money to purchase stocks in corporations A and B. The stock prices of corporations A and B go up as a result. The executives of corporations A and B see their portfolios increase in value tremendously thanks to an influx of the money from millions of Americans. And when Bush leaves office, where does he have a very cherry job waiting for him? Yes, that's right: corporations A and B are falling all over themselves to give him a position on their Boards of Directors, where he can earn millions of dollars to meet with a dozen other people in a posh conference room twice a month.

Cynical? Yes. It sounds like Bush is fabricating a crisis so as to fabricate a solution that benefits him and his friends at the end of the day.

And it's all for you.