The New York Times columnist Paul Krugman blogs that, despite seeming similarities, the policy choices we face on Social Security’s aren’t similar to those on global warming. In a speech back in 2007, I argued that entitlements and global warming are similar in two important respects:
Both climate change and entitlements are a relatively benign issue for current generations but potentially severe for future ones, with considerable uncertainty regarding the potential effects.
I don’t find Krugman’s counter arguments all that persuasive. First, he says, Social Security might not turn out to be all that big a problem. Sure, but it also might turn out to be a REALLY big problem. People value bad outcomes more than good ones, which is why we take out insurance on everything from our homes to our TV sets. Early action on entitlements is like an insurance policy.
Second, Krugman says, if the risk is that Social Security will run out of money and force large benefit cuts, we won’t ameliorate that risk by cutting benefits today. But actually we do: Under current law, benefit cuts could be both large and focused on distinct groups of people, including the very poor and the very old. By implementing benefit cuts (or tax increases) gradually, we smooth the problem over a larger number of people and can impose larger cuts on those better able to handle them. One of the policy merits of pre-funding Social Security, such as through personal accounts, was a greater ability to smooth funding costs over time and among people.