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To: Dr. Lawrence Hunter, Empower America

From: Jude Wanniski

Re: Thomas R. Saving, Ph.D.

As I recall, Larry, you know this fellow, who wrote an absolutely abysmal
op-ed column in the New York Times Sunday, “A Social Security Solution.” You need
to have a word with him.

I would not have bothered to write you, but Saving
is identified as “a professor of economics at Texas A&M University, [and] is
a Social Security public trustee and a member of President Bush’s Social
Security Reform Commission.” From what he has written, I don’t think he has
the foggiest idea of how the economy works and certainly doesn’t belong in
such high public positions.

I can hardly believe he actually believes that
“Saving more for tomorrow means consuming less today.” Can you? I mean this
is the kind of economics they teach in kindergarten about spendthrift
grasshoppers and frugal ants. The whole objective of economics is to
increase the efficiency of the economy so you can consume more today and
consume more tomorrow!

I’m afraid this fellow actually believes what he says, and that if we only
stop spending resources today on bread and wine and pepperoni pizzas, they
will be stacked up in giant warehouses dedicated to bread and wine and
pizzas – into which our old-timers can tap 20 years from now. Professor
Saving writes about how “In 2025, for instance, the federal government will
need $419 billion in extra revenue to pay for full benefits, regardless of
whether there is a trust fund. That revenue can only come from higher taxes,
lower spending on other programs or increases in publicly held debt.”

HEY
PROFESSOR, WHAT ABOUT INCREASED ECONOMIC GROWTH?

Larry, I do not have a Ph.D. in economics and you do. He would not even listen to me explain that the Social Security/Medicare problem does not have anything to do with
whether money deducted from your paycheck goes to buy U.S. government bonds
or stocks and bonds issued by General Motors or Microsoft. It has to do with
the efficiency of the economy in the year 2021 or 2025 and whether it will
be able to produce enough bread and wine and pizza to satisfy the retired
population and the working population. This is what we have to get started
on now, because it cannot be done all at once. Nobody is talking about this
imperative.

Is this Professor Saving the fellow who said buying U.S. bonds does not
constitute buying assets, but buying Deutschmark bonds would? I think he
is. The poor fellow does not know that both are just pieces of paper. They
cannot be consumed. If we would buy $100 billion worth of German/euro bonds
and put them in the Social Security lockbox, what guarantee do our seniors
have that the bonds will not be devalued to where they could not buy even a
plain pizza, no pepperoni, in 2025? Absolutely none.

Professor Saving would need police protection if his ideas were put into practice and we
hung out for the next 20 years, waiting to see how they turn out.

The only
way our Social Security/Medicare actuarial deficits can be solved is by
capital formation, and we can’t wait 20 years to get started. The
capital/labor ratio has to be increased by 50 percent, at least, so that two
workers can support one retiree, where now three do the job. Please explain
this to Professor Saving. It is not rocket science. It is not a
“prediction.” It is an absolute certainty. Even Paul Krugman, who writes a
lot of silly economics for the Times, will have to agree that if 2+2=4,
then the capital/labor ratio has to increase by 50 percent or senior citizens and
their children will all have to accept lower standards of living.

Now Paul Krugman cannot be trusted to give good advice through his column.
He is a partisan Democrat who is truly fearful of writing something that
President George W. Bush would read and decide to act upon that would
actually improve the lives and welfare of mankind in general and Americans
in particular. He is a zero-sum pundit, after all. But Larry, there are
Democrats who have the best interests of all people at heart and who
understand the Social Security imperatives.

One of them is Rep. Bill
Jefferson of Louisiana, a black Democrat. He understands everything I am
talking about here. Professor Saving should give him a phone call and offer
to take him to lunch. We might save your friend Saving and save Social
Security too.

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