Canadian Cynic Takes Exception to My Calculations on Social SecurityI'll avoid
returning the nasty names he calls Tim Worstall and me, and get right to the point:
Why, yes, let's make some thoroughly unworldly assumptions, shall we? Let's first assume that, if Mr. $60K were to get a windfall of $1,000 per year, why, he'd be able to invest the whole thing -- every penny of it. It's not as if $60K is such a stunning salary that he wouldn't, perhaps, use that money to pay off credit card debts, maybe do a little home renovation, conceivably use it as a down payment on a larger family vehicle now that he has three kids and needs a second car or anything, or even for that unforeseen medical emergency for which he's almost certainly underinsured, medical insurance in the U.S. being outrageously expensive and all.Well, if he uses it to pay off credit card debts, he gets a heck of a lot better return than 5% (most credit cards carry a higher interest rate), so the analysis still holds. And this part is hilarious:
But let's simplify things to where even Mr. Worstall might be able to understand it. Ignore entirely the possible returns on investing. Look simply at the numbers. In the case of Mr. $60K, his $1,000 per year tax advantage is, on a yearly basis, more than offset by his reduction of $6,500 per year in Social Security benefits. Please tell me you understand that -- that $6,500 is a larger value than $1,000. Look, Mr Cynic, here's a deal I'll offer you, since $6,500 is a larger value than $1,000. If you give me $1000 a year for the next 40 years, I'll give you $6,500 per year for the next three years after that. What's that? You'd be giving me $40,000 and I'd only be giving you $19,500? But I thought $6,500 was a larger value? Or is there another variable in this equation, like the number of years? Very few people have a longer retirement than their working life. And that "ignore entirely the possible returns on investing," is a classic dodge. Yes, if you assume that the person puts the money under the mattress, you can disprove that just about anything that takes into account the time value of money.
As for this:
That's right -- Pat suggests that it's not fair to compare the reduction in SS benefits in light of the tax cuts since, well, the tax cuts already happened and the SS stuff is still pending, therefore they can have no relation to one another.
Ignore, of course, that that very same tax cut is being used as a defense of reductions in SS benefits. Ignore that Pat, in his very next paragraph, writes glowingly of Tim's analysis which used those very same tax cuts to show how Mr. $60K was getting a "pretty good" deal. And ignore the fact that Pat himself, over here, at the hideously-misnamed "Brainster" blog, produces his own table incorporating the very same tax cuts he just described as being irrelevant to the discussion. No, I am not making any of this up. Follow the links, and gaze in awe on mathematical stupidity and/or duplicity taken to a whole new level.I'd just like to see where he gets the impression that the tax cut is being used as a defense of the reductions in SS benefits. Anybody? Bueller? There's no link from this remarkable statement, it's just stated as settled fact.
Nobody is using the tax cut to defend the Social Security benefit cuts, because they're completely unrelated. Social Security is not funded with income tax receipts, it's funded with FICA taxes. Now it's true that I did some calculations as if they were related, but it was solely to prove that even granting Krugman's illogical point, the deal for the $60,000 worker was better than it might seem at first blush.
