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Joseph Stiglitz, Aaron Edlin, and J. Bradford DeLong

Print publication date: 2011

Print ISBN-13: 9780231143653

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231143653.001.0001

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Confusions About Social Security

Confusions About Social Security

Chapter:
(p.109) Chapter 13 Confusions About Social Security
Source:
The Economists' Voice
Author(s):

Paul Krugman

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231143653.003.0013

In response to the Bush administration's plan to privatize Social Security, this chapter addresses the three main points of confusion in the Social Security debate. These are: (i) the meaning of the trust fund: in order to create a sense of crisis, proponents of privatization consider the trust fund either real or fictional, depending on what is convenient; (ii) the rate of return that can be expected on private accounts: privatizers claim that there is a huge free lunch from the creation of these accounts, a free lunch that is based on very dubious claims about future stock returns; and (iii) how to think about implicit liabilities in the far future: privatizers brush aside the huge negative fiscal consequences of their plans in the short run, claiming that reductions in promised payments many de cades in the future are an adequate offset.

Keywords:   Social Security system, trust fund, privatization, private accounts, liabilities, Bush administration, public pension

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