In one of the more remarkable examples of dissembling, Alicia Munnell uses the oldest trick in the book: belittle the accuser while ignoring the facts. The accuser is Prof. Laurence Kotlikoff, a professor at Boston University who is about to issue his 2013 estimate of the unfunded liability facing the US government. Currently it’s $222 trillion. Gary North thinks Kotlikoff’s updated number will be $235 trillion. A very large part of that is Social Security.
It won’t matter. It’s so large as to be essentially unmanageable. If Kotlikoff is right, and I think he is, the US government’s liabilities are fourteen times greater than the total economic output of the United States in one year. Say that again: fourteen times!
But when Paul Solman asked Munnell about Kotlikoff’s numbers, she dismissed them out of hand. She dissed his numbers and scorned his concerns. It was classic dissembling.
A little history about Kotlikoff: he presented a paper to the Federal Reserve Bank of St. Louis which was published in its Review for July/August 2006 in which he asked rhetorically, “Is the United States Bankrupt?” His answer was yes:
This partial-equilibrium analysis [of mine] strongly suggests that the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds…
There are 77 million baby boomers now ranging from age 41 to age 59. All are hoping to collect tens of thousands of dollars in pension and healthcare benefits from the next generation. These claimants aren’t going away. In three years, the oldest boomers will be eligible for early Social Security benefits. In six years, the boomer vanguard will start collecting Medicare.
Our nation has done nothing to prepare for this onslaught of obligation. Instead, it has … dramatically expanded the benefit levels being explicitly or implicitly promised to the baby boomers.
Notice, please, three things: it’s his analysis, but highly regarded enough to be published by the statistical branch of the Fed. Second, he counts “all promises” made by the U.S. government, even to generations yet unborn. Thirdly, this paper was published 7 years ago.
Now, on to Munnell: according to Wikipedia, she’s an expert on Social Security: “She … serves as the director of the Center for Retirement Research at Boston College. Munnell is a leading authority on retirement income policy, including Social Security…”
So we know two things: she is a defender of Social Security, and she knows about Kotlikoff and his numbers. Here’s the relevant part of Solman’s interview with Munnell:
I find the most useful way to think about the deficit to Social Security is in terms of the payroll tax. How much would the payroll tax have to be raised to solve the problem for 75 years, which is Social Security’s planning horizon, and how much would it have to be raised to solve it for infinity? For the 75-year time horizon, the number is 2.36 percent.
Do you see what she has done here? She neatly avoids taking on Kotlikoff directly. She instead limits the conversation to the next 75 years, “Social Security’s planning horizon.” She assumes that nothing matters after that. She doesn’t “solve it for infinity.”
And so by avoiding the issue, she “solves” the problem: just raise taxes a little bit.
But then she goes on to say:
I’m going to solve this whole problem just by raising the payroll tax. If you do anything else — raise the taxable wage base or do any number of things — the amount you need to raise from the payroll tax becomes smaller. I think that’s a more sensible way to think about Social Security’s finances than this $200 zillion trillion dollar shortfall.
See? No problem! Nothing to worry about here, just move along. And I like the “zinger” about “this $200 zillion trillion dollar shortfall.”
Here’s the rule: If you can’t dazzle them with your footwork, you can baffle them with your baloney. And belittle the critic in the process.
It’s estimated that Medicare will be broke in three years. It’ll be interesting to see what happens then and how Munnell responds to that. I can guess.
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