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Friday, April 10, 2015

Paul Krugman: Where Government Excels

Governments can and should step in when private markets fail to provide important goods and services:

Where Government Excels, by Paul Krugman, Commentary, NY Times: As Republican presidential hopefuls trot out their policy agendas — which always involve cutting taxes on the rich while slashing benefits for the poor and middle class — some real new thinking is happening on the other side of the aisle. Suddenly,... many Democrats have decided to break with Beltway orthodoxy, which always calls for cuts in “entitlements.” Instead, they’re proposing that Social Security benefits actually be expanded. ... Democrats finally seem to be standing up to antigovernment propaganda and recognizing ... there are some things the government does better than the private sector.
Like all advanced nations, America mainly relies on private markets ... to provide its citizens with the things they want and need, and hardly anyone ... would propose changing that. ...
Yet we also know that some things ... must be done by government. Every economics textbooks talks about “public goods” like national defense... But are public goods the only area where the government outperforms the private sector? By no means.
One classic example of government doing it better is health insurance. ... And there’s another major example...: providing retirement security. ...
In an idealized world, 25-year-old workers would base their decisions about how much to save on a realistic assessment of what they will need ... in their 70s. They’d also be smart ... in how they invested those savings...
In the real world, however, many and arguably most working Americans are saving much too little for their retirement. They’re also investing these savings badly. ...
And in the real world..., Social Security is a shining example of a system that works. ... It provides older Americans who worked hard all their lives with a chance of living decently in retirement... The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?
Needless to say, suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists..., calling for cuts to Social Security has long been seen inside the Beltway as a “badge of seriousness, a way of showing how statesmanlike and tough-minded you are.” ...
But true seriousness means looking at what works and what doesn’t. Privatized retirement schemes work very badly; Social Security works very well. And we should build on that success.

    Posted by on Friday, April 10, 2015 at 02:38 AM Permalink  Comments (118)


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