His post, “-The Myth of the Social Security Shortfall”-, here, but if you don’-t want to defer thinking, read Mish Shedlock on pension underfunding instead. Yes, taxes will have to go up, but it’-s not as though sunsetting the Bush cuts and tacking on a couple percent here or there will stem the entitlement spiral, of which social security is a single piece. Thoma is quoting Michael Hiltzik, whose message, when you strip away the authoritative tone is basically, “-don’-t worry so much, it’-s in the future and stuff.”- That strategy hasn’-t worked out so far.
Deferral, abetted by private and public conflicts of interest, is the essence of the problem and is at the root of both the corporate and sovereign credit crises. Now, it’-s one thing when you have an impaired balance sheet propped up by good cash flow, but there are reasons to believe that prospective growth and public income will also be lacking relative to the 20th century. These reasons of course are swept under the rug by at least one liberal economist. Paul Krugman chides someone for rambling on about demographics one day, and tells us we are turning Japanese the next. Why are we turning Japanese? Krugman sees this, but thinks we must defer that issue to deal with unemployment and deflation. To what extent, however, are unemployment, deflation, and the series of booms and busts over the last 30 years symptoms of demographics? If that’-s the case, if pension rate of return assumptions are off for this or other reasons, things could get late early.
– out of your titles if you aren’-t going to have any real discussion. If everything is quoted, the quotes lose their meaning and everything is implicitly endorsed.
How Much Do Election Shakeups Affect the Nation’-s Economy? – [US politics &- financial markets] – by Justin Wolfers and Mark Thoma – 2006-11-03
[Justin Wolfers] And the major puzzle that I currently see? The past two years have clearly been terrible for Republicans, with Iraq deteriorating, Katrina undermining the public trust, and corruption scandals aplenty. And consequently their chances of keeping control of the House have fallen precipitously (Intrade.com charts here). But the real surprise? Prediction markets tell us that the odds of Republicans winning the White House in 2008 remain virtually unchanged. Neither the incumbency advantage coming from victory in the 2004 elections, nor the subsequent declines in Republican fortunes have shifted the odds (chart: here), and the 2008 Presidential election remains a coin flip. Stay tuned: It looks like Tuesday will be a long night. And when the counting ends, the two-year campaign for the White House begins.
My Take: Our good doctor Justin Wolfers takes his Democratic dreams for the reality (all that said in all due respect for this bright researcher). We’-re two years away from the November 2008 presidential election. The margin of error is still enormous, so today’-s market-generated probabilities (Dems: 48.6% – GOP: 48%) for the 2008 presidential race mean strictly nothing. Plus, at times, a US presidential candidate can get substantial votes from the other camp (e.g., Ronald Reagan seducing many Democratic voters, etc.).
Addendum: Mike Linksvayer has an interesting comment, attached below this blog post.
Addendum 2 (November 04): Professor Justin Wolfers has responded, in the comment area, below this blog post. (And his paper is excerpted here, on Midas Oracle.)