Dean Baker vs. Murphy, Rematch
In our NPR radio debate (last Easter), Dean Baker held his own. I still think his Keynesian nostrums were wrong, of course, but I admit I didn’t deliver a knockout punch.
Things don’t look so good for Dean when we grapple in print. In my ledger, my record is 1-0-1 against Mr. Baker. An excerpt:
So I don’t really see how this history is supposed to reassure us. The people who are saying that Social Security is broke are warning the public that we will need to either suffer a payroll tax hike, or deal with a reduction in promised benefits, or both. Dean Baker then comes along and says that’s nonsense, because we’ve been in this situation before, and we solved it — by raising taxes and cutting benefits.
Before leaving the Baker quotation, let me make one last observation: He is simply wrong when he says that NPR’s Marketplace isn’t as solidly funded as Social Security. When the CBO report says that Social Security can continue making its scheduled benefits payments for the next 34 years “with no changes whatsoever,” that figure still assumes that the payroll taxes continue piling in.
When Dean Baker rhetorically asked his question, “Can Marketplace Radio pay all its expenses for the next 34 years?” he led the reader to believe that the trust fund has 34 years’ worth of benefit payments stockpiled. But of course it doesn’t have that much. To repeat, the CBO projections show that the annual shortfalls between outgoing benefit payments and incoming Social Security tax revenues will eventually whittle away the trust fund to nothing by the year 2043.
So the analog for Marketplace Radio is not, “Do you guys have 34 years’ worth of expenses saved up in the bank?” No, the proper analog would be, “Do you have enough assets right now to cover any projected operating deficits over the next 34 years?” Since I assume Marketplace Radio is not filing for bankruptcy anytime soon, their answer would be, “Yes, Mr. Baker, of course we do. That’s why we’re solvent and we’re allowed to stay in business.”
In contrast, the Social Security System as currently configured is insolvent. The present value of their expected revenue stream is less than the present value of their expected expenses. That’s what it means to be bankrupt.
