In today’s New York Times Paul Krugman points out that if you run the numbers the plan to privatize Social Security has contains a Catch 22. For it to work you need to have extremely healthy stock returns for 70 years. He’s an economist, he assumes strong economic growth would drive that. He then points out that if we’re having strong economic growth payroll tax revenue will rise too. Opps, wait, how embarrassing. Wouldn’t rising payroll taxes eliminate the “crisis.” Indeed they would.
But is this truly a Catch 22? It assumes that capital and labor will split the fruits of economic growth? That’s an old fashion idea; strong economic growth need not lead to rising payroll taxes. Consistently over the last 25 years the split between capital and labor has shifted sharply toward capital. Shifts in the tax system, shifts in the wealth/income distribution have worked to assure that. That’s what Republicans do. That’s their goal and they have been succeeding. There is no Catch 22 here, just another symptom of a consistent plan. Capital gains is most moral.