Saving Professor Saving Jude Wanniski August 15, 2001

Memo 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 NYTimes 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 have to have 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%, 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 NYTimes, will have to agree that if 2+2=4, then the capital/labor ratio has to increase by 50% 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.