More on Privatization
By Arnold Kling
Paul Krugman makes a generous concession to privatization supporters.
For the record, I don’t think giving financial corporations a huge windfall is the main motive for privatization; it’s mostly an ideological thing.
I don’t recall MIT having a course in the economics graduate program on discerning the true motives of one’s opponents. But most of the information that Paul imparts in his columns seems to be based on that skill set.
The question that I have for Krugman and other defenders of the status quo is this: how much of an increase in economic growth must privatization stimulate in order to make it worthwhile? What I thought that Kinsley was saying was that unless economic growth increases by enough to eliminate all of the unfunded liability of Social Security, then privatization does not “work.” To me, that sets the bar awfully high–in effect, you’re saying that unless privatization provides umpteen trillion in higher real GDP, you’d rather get nothing. But perhaps I misread Kinsley.
If I were given my choice of one policy change in Social Security, I would rather fall on my sword for a higher retirement age than for privatization. But I do believe that privatization would raise economic growth. Moreover, privatization likely would make Social Security less regressive. I would really like to know what is so precious about the status quo.
UPDATE: Business Week’s Michael Mandel thinks the way I do about the progressivity of privatization (and he cites me to boot). He also is the author of the book Rational Exuberance, which happens to be the title of a chapter in my own book.
For Discussion. How much economic growth would a reasonable person be willing to give up in order to maintain Social Security as it is without privatization?