James Kwak: Why Does Rick Perry Think He Can Get Away with It?
With Rick Perry's claiming that Ben Bernanke's attempts to stabilize nominal GDP are "almost treasonous" and that Social Security is a "Ponzi scheme", the natural question is: why is he doing this? The answer is that it gets him headlines and media oxygen, and that there is no downside at all--at boosts his standing with his primary audience, and by the time the general election rolls around it will be old news, he will be sounding more moderate and less like he wants to host a necktie party for Federal Reserve Chair Ben Bernanke, and the press will not cover it.
James Kwak has a more sophisticated view:
Ponzi Schemes for Beginners: On the theory that the best defense is a good offense, Rick Perry has been insisting to anyone who will listen that Social Security is a Ponzi scheme…. I think it’s important to be clear about why Rick Perry thinks it is—or, rather, why his political advisers think he can get away with it…. Social Security is… a pay-as-you-go system… different from a pre-funded pension system… [and] the trust funds will go bankrupt in about twenty-five years…
But:
There’s nothing wrong in principle with a pay-as-you-go system, as long as the future revenue stream is secure… saying that Congress underfunded Social Security is not a valid criticism of Social Security as a program: it’s a valid criticism of Congress…. [Y]ou can criticize our political leaders… for not fixing Social Security’s long-term funding problem, but you can’t use that fact to criticize the basic structure…
I think James is being much too sophisticated. I think Perry thinks he can get away with this because he can get away with it. Perry is doing this because there is no downside.
I haven't read Eddie Lazear or Greg Mankiw or Glenn Hubbard or John Taylor or Mike Boskin or Martin Feldstein pushing back against Perry and telling him that for Ben Bernanke to do his job is not "almost treasonous".
And about the "Ponzi scheme" meme: Reporters writing stories about Rick Perry will write: "Some economists say that Social Security is not a Ponzi scheme. But former Bush administration advisor and Harvard professor Greg Mankiw says that Democratic Nobel Prize-winning economist Paul Samuelson said that Social Security was a Ponzi scheme. Opinions of the shape of earth differ."
