Not that he needs it from me, and there have already been multiple comments about Brad DeLong's rant on Greg Mankiw and Phillip Swagel's Thursday Wall Street Journal commentary -- at Angry Bear, at MaxSpeaks, at New Economist, at Dead Parrot Society, at EconLog-- but I feel compelled to put in my two cents.

Apparently, IT'S THE HYPOCRISY that got Brad's dander up.

This morning he writes, giving free advice to Democrats like me: 

Mankiw and Swagel: Stop railing about the budget impact [of the Bush Social Security plan]. The introduction of personal accounts will involve some transition financing, but this increase in the budget deficit won't place a new burden on future generations. These deficits are just an acknowledgment of promises that were made long ago. And if you think that complaining about budget deficits will advance your career, just ask President Mondale.

Back in 1998 he wrote:

...the most basic lesson about budget deficits follows directly from their effects on the supply and demand for loanable funds: When the government reduces national saving by running a budget deficit, the interest rate rises, and investment falls. Because investment is important for long-run economic growth, government budget deficits reduce the economy's growth rate. (N. Gregory Mankiw (1998), Principles of Economics (New York: The Dryden Press/Harcourt Brace), p. 557.

If you read carefully, you will detect that DeLong knows these two statements are not necessarily inconsistent.  It is entirely reasonable to believe that deficit spending leads to lower national saving in general, while at the same time acknowledging that there some types of transactions that have Ricardian properties.  I have said it so many times before that I won't even bother to link to previous posts, but if there was ever a policy-driven transaction without consequences for national saving, it would have to be issuing explicit debt for already promised benefit payments.  (OK, I lied -- here's the link.)

It's bad enough that DeLong confused the issue with his largely irrelevant juxtaposition.  What's worse is that he ignores a real inconsistency in the debate.  Roland Patrick at Let's Fly Under the Bridge nails it:

With his pajamas down [DeLong] admits that Social Security's 'Trust Fund Bonds' aren't real assets and future generations will not collect their promised benefits.

At least that is the only logical argument that can be drawn from criticizing Greg Mankiw for saying transitioning to private accounts will simply be a matter of replacing implicit debt with explicit debt.

Right. DeLong goes on:

I am cranky, and annoyed. And I am not asking for very much. All I want is:

  • No more claims that we know that carving-out Social Security revenues to fund private accounts will have no damaging effect on national saving. It might work. It might not.

Fine.  But if your answer is "not" then you should also drop the argument that the trust fund is meaningful.

PROPHYLACTIC COMMENT: I have already conceded that the trust fund should be treated as a meaningful promise to pay future benefits.

SIDE NOTE: For some reason, thinking about the difficulty of pegging a particular policy as Ricardian or not reminded me of the results from this long-ago paper by Jim Poterba and Larry Summers:

Using a lifecycle simulation model, we show that even though deficit policies shift sizable tax burdens to future generations, individuals live long enough to make the assumption of an infinite horizon a good approximation for analyzing the short—run savings effects. In practice, periods of debt accumulation such as that in the United States during World War II are reversed sufficiently rapidly to make their short—run effects on consumption and national savings relatively small.