Paul Krugman laments the current political discourse:
Faced with a major public issue, such as the future of Social Security, one might think that the crucial thing would be to ascertain the facts. If I say “there is no crisis,” and you think there is, well, produce the evidence that shows that my arithmetic is wrong - not something I once said that you think proves that I’ve changed my mind. Making this a game of gotcha is just childish. But here’s the thing: this childishness infects a lot of political discourse.
As I say AMEN, let me also back up from the food fight that Brad DeLong noted in the comments as well as extend on something I started to say about something Paul wrote back in October 1996. Fairness dictates we take the time machine back to October 1996.
Yes – our graph shows total Federal debt (TFD) and the debt held by the public (DHP) both as percentages of GDP from October 1980 to October 1996. What we knew in the fall of 1996 is that we had gone through 16 years of General Fund deficits that we so large that TFD grew as a percent of GDP from around 33% to around 67%. It is true that the growth in the DHP to GDP ratio has stopped after the 1993 tax increase – the one every Republican voted against. But that only says that the Trust Fund surpluses were mostly offsetting (not completely in absolute terms even after adjusting for inflation) the General Fund deficits.
At first, I was pleased that the GOP nominee to challenge President Clinton was Senator Robert Dole as Dole had historically been a fiscal hawk. Could it be that the 1996 Presidential race would avoid the free lunch crap we had heard from the tax-and-borrow Republicans and the do-more-for-you Democrats (yes the latter is a slap at how Al Gore campaigned in 2000). But then Dole picked Jack Kemp as his running mate and promised tax cuts. It was then that I decided I could not cross party lines and vote for the free lunch party.
With this back drop, could we take a real look at what Paul said on October 2, 1996:
In this silly season politicians are once again promising that we can have it all - that we can cut taxes, spare every popular spending program from even the smallest cut and still balance the budget. Nobody really believes them; if the public is willing to indulge such fantasies, it is because it does not, when all is said and done, really take the budget deficit seriously.
That captured my concern with the Dole-Kemp tax proposal. It is also consistent with what Paul was saying in 2000 about both Bush’s tax cut with promises of more spending as well as my concern with Gore’s do-more-for-you and a tax cut too. Something had changed between 1996 and 2000 – it seems that inflation-adjusted total Federal debt had flat lined during Clinton’s second term so the debt to GDP ratio had started to fall. But Paul argued in 2000 that the bit of goods news was not enough for tax cuts and more spending. He was right.
So why does everyone think he changed his mind about Social Security. They often point to this:
Where is the crisis? Just over the horizon, that's where. Through a kind of sound-bite numerology, the political debate over deficits became fixated last year on the seven-year prospect; each party insists that its economic program will balance the budget in the year 2002. Neither will, but that is beside the point. Responsible adults are supposed to plan more than seven years ahead. Yet if you think even briefly about what the Federal budget will look like in 20 years, you immediately realize that we are drifting inexorably toward crisis; if you think 30 years ahead, you wonder whether the Republic can be saved.
OK back in 1996, we may have thought that the Trust Fund reserves would eventually be depleted by some year such as 2032. The only real significance of this expected depletion date is that this is the date that DHP equals TFD. And Paul’s point was that if we kept running huge Federal deficits, that the debt to GDP ratio (however measured) might be much higher than 67%. Guess what, TFD is currently near 67% despite the good years in the late 1990’s. But that’s because of Bush43’s fiscal fiasco that Paul was warning about over seven years ago. OK, the date of Trust Fund depletion has now been pushed back to 2046. This is the big inconsistency that folks are hammering Paul about? I’m sorry, but the hammering is both stupid and childish at the same time – with all due respect to my kids who are much smarter than this.