Monday, June 13, 2005

Paul Krugman advocates for personal trust funds in lieu of Social Security

Here is what Paul Krugman, one of the fiercest critics of President Bush's proposals to migrate Social Security toward a system of private accounts, wrote in 1997 (my emphasis):
I like Freeman's idea of providing each individual with a trust fund when young rather than retirement benefits when old, but we had better realize that this is a significant change in the character of the social insurance system. Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).
Of course in 1997, it was not Bush who was proposing personal accounts.

(Hat tip: Andrew Hofer.)