Paul Krugman Tries to Explain “Facts” to Ron Johnson and ABC “Powerhouse Roundtable”


Are there stupider Senators than Ron Johnson (D-WI)? Maybe, but he has to be in the top five. Via Think Progress, this morning on ABC’s This Week, Johnson pulled out an old Republican canard, claiming that the Social Security Trust Fund is “a myth.” Nobel Prize-winning economics Paul Krugman attempted to set him straight. You can watch the partial video down below, but I decided to read the whole transcript of the interaction. Here’s how it went down.

Johnson and Krugman participated in the “Powerhouse Roundtable” with George Will, Bloomberg News White House Correspondent Julianna Goldman, and DNC Chair Rep. Debbie Wasserman Schultz. The group began by discussing President Obama’s supposed charm offensive of the past few days. Johnson rambled on about how Obama is doing the right thing by “reaching out” to the GOP and maybe something can come of it. I have to hand it to Krugman, because he immediately steered the discussion toward the GOP and Obama’s hopes for cutting earned benefit programs.

From the Transcript:

KRUGMAN: I’m really skeptical, because I — I mean this is not — this is not about bad personal relations. People are perfectly capable of being polite to each other, being nice, having a nice dinner. This is about a fundamental difference in visions about what America should be…One party really wants to take down the — the — the safety net we have. One party really wants….to privatize Medicare, wants to, you know roll back, wanted to try to privatize Social Security back in 2005. The other party wants it somewhat extended, wants Obamacare to go into place, would do more if it could. That’s not something you’re going to resolve with a few dinners.

Corporate media shill Juliana Goldman chimes in to state the village consensus:

Look, both sides understand what a grand bargain is going to look like. You’re going — Republicans are going to have to give on revenues, Democrats are going to have to give on entitlements. And so there is some case for optimism now that if the president, in trying to build trust…if Republicans see the president moving forward, putting Medicare savings on the table that doesn’t just hit providers, but also hits beneficiaries as well, then — and also going out and selling it to give Republicans some cover, then there could be a sense that you could get some Senate Republicans to — to help bring the House along.

George Will brings up raising the Medicare age and asks Debbie Wasserman Schultz if there’s any chance all those old codgers in Florida will ever see the light so that Democrats could go along with this brilliant idea? No real response from Schultz, so Krugman (he was on fire today!) jumped in again. From here on, I’ll just focus on the interaction between Johnson and Krugman and leave out the few remarks by others.

KRUGMAN: Is it a condition of any Republican support that you have to go for really terrible policies? Because raising the Medicare age is a terrible policy. It raises medical costs, it does very little to improve the budget. It introduces a lot of hardship. Means testing in Medicare is a better policy. I don’t particularly like it, but it’s a better policy. There are other things you can do. There are other ways you can cut. Even — I don’t like the business about changing, you know the price index for Social Security, but that’s not as bad…

JOHNSON: To say that the Republicans haven’t done anything, is just false. The House has actually passed budgets. You know with — with proposals to — to try and save Medicare, bipartisan proposals, quite honestly. The Senate hasn’t passed a budget in over four years. Listen, unless we do something, these programs are going broke. It drives me nuts. When I — when I hear people say that Social Security is solvent to the year 2035, it’s not….

Listen, if you — if you’re taking a look at, in a entitlement reform package, in term — you know actually bringing in revenue for those entitlement reforms, I might look at that. But the fact of the matter is — the fact of the matter is, we already have a $1 trillion in middle income tax increases hitting us in Obamacare. They’re hidden, but it’s middle-class….it’s certainly true, as well as another $600 billion. So, you’ve already got $1.6 trillion worth of tax increases hitting us in the next 10 years….

KRUGMAN: Just a question, you say let’s start with the facts, but there — we’ve just — we’ve just run aground right there….JOHNSON: You’ve made my point — you’ve made my point, we have to agree on the facts….But the facts are false.

JOHNSON: No they are not….They are not false.

KRUGMAN: The Social Security thing, Social Security is — there — it has a dedicated revenue base. It has a trust fund based on that dedicated revenue base. You can’t change the rules midstream and say, oh suddenly….

JOHNSON: …here’s the problem with the trust fund, the federal government owns U.S. Treasury bonds, it’s the same thing as if you have $20.00, you spend it. And by the way, that money is spent, it’s gone. You write yourself a note for $20.00, stick it in your pocket and say, I got 20-bucks…No, you don’t. You — you have a note that you have to sell in the open market. The trust fund is a fiction, it doesn’t — it’s…

KRUGMAN: If you — if you want to think of Social Security as not just being part of the government, then there’s no such thing as a Social Security problem, it’s just part of the general budget. You — you cannot say on the one hand….on — on the other hand we’re going to — we’re going to restrict it to only operating off of…it’s important to realize that the facts that are being brought out here are in fact, non-facts.

Here’s the video from Think Progress:

From a piece Kevin Drum wrote last fall in response to WaPo columnist Charles Krauthammer spouting the “Social Security Trust Fund is a fiction” meme. Like Johnson, Krauthammer was arguing that because Social Security funds are invested in Treasury bonds which it cashes in when current funds aren’t sufficient for immediate needs, that the Trust Funds is just “a bunch of useless IOU’s,” to quote George W. Bush.

Here’s Drum:

What Krauthammer means is that as Social Security draws down its trust fund, it sells bonds back to the Treasury. The money it gets for those bonds comes from the general fund, which means that it does indeed have an effect on the deficit.

That much is true. But the idea that the trust fund is a “fiction” is absolutely wrong….Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited….

As the baby boomers have started to retire, payroll taxes are less than they need to be to cover payments to retirees. To make up this shortfall, the Treasury is paying back the money it got over the past 30 years, and this means that income taxes need to be higher than they otherwise would be. For the next few decades, people who pay payroll taxes will benefit from this arrangement, while people who pay income taxes will suffer.

If payroll taxpayers and income taxpayers were the same people, none of this would matter. The trust fund really would be a fiction. But they aren’t. Payroll taxpayers tend to be the poor and the middle class. Income taxpayers tend to be the upper middle class and the rich. Long story short, for the past 30 years, the poor and the middle class overpaid and the rich benefited. For the next 30 years or so, the rich will overpay and the poor and the middle class will benefit.

The trust fund is the physical embodiment of that deal. It’s no surprise that the rich, who didn’t object to this arrangement when it was first made, are now having second thoughts. But make no mistake. When wealthy pundits like Krauthammer claim that the trust fund is a fiction, they’re trying to renege on a deal halfway through because they don’t want to pay back the loans they got.

It’s disgusting that this has to be explained over and over again to the willfully obtuse Republicans and the media talking heads, but I have to say that I’m glad Krugman was there  this morning to call attention to the stupidity of what the GOP–and Obama–are proposing.

Now, here’s a bonus for you that I found at Americablog this morning. Florida Rep. Alan Grayson is warning there will be “civil disobedience” if Social Security benefits are cut.

What are you hearing and seeing out there? This is an open thread.


23 Comments on “Paul Krugman Tries to Explain “Facts” to Ron Johnson and ABC “Powerhouse Roundtable””

  1. ecocatwoman says:

    I don’t know if Johnson wins the dumbest Republican award or not. IMHO, it’s pretty much a tie across the board, with all of them fighting for the title. Maybe the winner could get one of those fancy belts like the wrestling federation gives out.

    I LOVE Alan Grayson. He was my Congressman for awhile. I voted for him for re-election, but the idiot Daniel Webster won. Now Grayson represents a different district, which is mostly hispanic.

    I wish someone, anyone would ask these talking heads some pertinent questions: do you know what the average recipient of SS gets each month? Do you know what percentage of doctors accept Medicare? Do you know what percentage of retirees can still drive themselves to their doctor’s appts or to the grocery store? What percentage of retirees have income (pension/savings) in addition to their SS check? How many are alone with no family to help them in any way?

    Thanks for the post bb. I can’t force myself to watch the network Sunday morning shows. I would need to double or triple my daily blood pressure medicine.

    • RalphB says:

      I’m convinced that, with a few nutcase exceptions, the whole attempt to cut social security is happening because the wealthy do not want to pay back the trust fund which was spent primarily on their behalf. That includes the business community, the politicians, and the pundits. It’s greed at it’s worst.

  2. dakinikat says:

    I have no idea why these idiots don’t get the entire social security as a stand alone program thing. Some of them are just stupid—like this guy. Others just are deliberately obtuse because they want their grabby greedy hands on it–like Pete Peterson.

  3. RalphB says:


    Graham Hill, the author of the lead article in the Sunday Review section of today’s New York Times, thinks you have too much stuff. He thinks you have too much stuff because he used to have too much stuff: …

    He hired a personal shopper with the absurd name of Seven, who helped turn his life into a Bret Easton Ellis novel by buying him a bunch of gadgets. And then he developed a rash of First World problems: …

    This is a great post by Steve M. about the absurdity of the foolish young rich telling the rest of us how we should live. Massive foolishness on their part.

    • bostonboomer says:

      I really need to be lectured by a poor little rich boy about how he supposedly learned not to be so shallow. He still sounds pretty shallow.

      • RalphB says:

        Doesn’t he though? A waste of skin and oxygen.

      • Beata says:

        Amazingly, uber-rich Graham Hill’s life started to change when he met “Olga, an Andorran beauty” while in Europe. It was then that he discovered he didn’t need so many material things. Finding love ( with “Olga, an Andorran beauty” ) opened Hill’s eyes to this profound realization. Alas, Olga is gone now, as is a lot of other unnecessary stuff in Hill’s life ( except the 10 salad bowls ). There is much we can all learn about what is truly important in life from this fascinating tale. I have already filled several Hefty bags worth of my expensive gadgets to take to the Salvation Army after reading his article. I feel so free and light now! /s

        G-d, it sounds like a bad chick ( or Chuck ) lit novel. Spare me, please.

      • bostonboomer says:

        I wish I could afford 10 salad bowls. I used to have only three lunch plates, but my mom gave me four more.

        Besides, the guy still has millions in case he decides he doesn’t want to slum it any longer.

      • RalphB says:

        G-d, it sounds like a bad chick ( or Chuck ) lit novel. Spare me, please.

        Hoorah!!! Beata wins the Internet! 🙂