I should never forget about Dean Baker. He and Paul Krugman are in the same corner, constantly taking a numerical hatchet to conservative presumptions about the economy. In [book: Social Security: The Phony Crisis], Baker and Weisbrot show conclusively that conservative ideas about privatizing Social Security just don’t make numerical sense. The stock market, for one, won’t guarantee huge returns unless the economy as a whole is growing at a stellar rate; and if the economy is growing at a stellar rate, then each of our pocketbooks will be engorged; and if each of our pocketbooks is engorged, then we should have no trouble funding Social Security far into the future.
I learned about Baker and Weisbrot’s book when Diamond and Orszag cited it. They devoted literally just one footnote to Baker and Weisbrot, and referred to them in the body of the text (not by name) as liberals who reject all efforts at privatization. They did this so that they could then position themselves as the reasonable centrists. I understand why they might have done this — they were writing during the Bush Administration, after all, when maybe they hoped they could placate their enemies by giving them half a loaf — but it turns out, having read Baker and Weisbrot, that Diamond and Orszag got it all wrong. Reading Baker and Weisbrot, the conclusion seems inescapable that there really is no Social Security problem at all. I really wonder what the four authors, put together in a room, would say to each other. I wonder if Diamond and Orszag would say, “Yeah, we know, but we had to say what we said when we said it.”
I want to buy copies of [book: Social Security: The Phony Crisis] for everyone I know. We’ve had the same ideas hammered into our brains for 30+ years by now: Social Security is going broke; we can’t afford the good life for all our citizens; taxes are too high. It’s important that someone occasionally step up and remind us that these aren’t facts; they were ideas invented by people who have an agenda that they’re trying to sell.
Most every page in [book: Phony Crisis] contains at least one idea that’s so clear, and so well-supported numerically, that I felt dumb for not having thought of it myself. How about this, for instance: people get so concerned that the country will have an intolerable burden on its hands as the Baby Boom generation ages, and the ratio of retirees to workers increases. But no one seems to be concerned about another population that contributes nothing to the GDP, namely children. We invest lots of money in children in the form of schooling, yet no one seems concerned that they’re going to bankrupt the country; we rightly believe that investing in children will make the country wealthier in the future.
So the number we ought to be looking at is the so-called “dependency ratio” — the size of the population that contributes nothing to GDP (retirees plus children, basically), divided by the overall population. FRED, my favorite source of data, comes to the rescue:
You can juggle various indicators of what we’re trying to measure (namely: how much of a problem is the aging of the population?), but that’s kind of the point: these things can be measured, at least in a back-of-the-envelope way; and the more back-of-the-envelope counterexamples each of us has in our heads, the more immunized we’ll be against nonsense.
There’s another broad point that this book tackles: when we argue over seemingly abstruse accounting problems, such as whether to use chained CPI to measure inflation, we’re not just talking about arcane math; we’re talking about people’s real lives. You might think that someone else is engaging in a technical discussion, but there are real ethical choices buried in those numbers. The main ethical question is: are we in this together, as a society, or are we instead just libertarian billiard balls engaging in market transactions with each other? This really isn’t just accounting; it’s about nothing more or less than how a 21st-century democracy cares for its citizens over the industrial life-cycle. If you choose to tune out, and choose not to learn math, that’s your right, but the other side is making different choices.
Baker and Weisbrot are happy warriors in this battle. Their book ought to be in everyone’s coat pocket.