It looks like Krugman is back for good:
How, then, can privatizers claim that they could secure the future of Social Security without raising taxes or reducing the incomes of future retirees? By assuming that workers would invest most of their accounts in stocks, that these investments would make a lot of money and that, in effect, the government, not the workers, would reap most of those gains, because as personal accounts grew, the government could cut benefits.
We can argue at length about whether the high stock returns such schemes assume are realistic (they aren’t), but let’s cut to the chase: in essence, such schemes involve having the government borrow heavily and put the money in the stock market. That’s because the government would, in effect, confiscate workers’ gains in their personal accounts by cutting those workers’ benefits.
There is, by the way, a precedent for Bush-style privatization. One major reason for Argentina’s rapid debt buildup in the 1990’s was a pension reform involving a switch to individual accounts – a switch that President Carlos Menem, like President Bush, decided to finance with borrowing rather than taxes. So Mr. Bush intends to emulate a plan that helped set the stage for Argentina’s economic crisis.
If Mr. Bush were to say in plain English that his plan to solve our fiscal problems is to borrow trillions, put the money into stocks and hope for the best, everyone would denounce that plan as the height of irresponsibility. The fact that this plan has an elaborate disguise, one that would add considerably to its costs, makes it worse.
And maybe the fact that serious financial experts, the sort qualified to be Treasury secretary, understand all this is the reason why John Snow has just been reappointed.