Monday, April 08, 2013

Rumors of reponsibility

Obama might attack real problems in his budget. Social Security is on an unsustainable course. Worker contributions have been spent - pay as you go. But pay-as-you-go only works while the young population is much larger than the retirees. No longer.

Rumor has it that Obama will propose changing the cost-of-living calculation. As I understand it the CPI calculation assumes buyers don't accept product innovations - that they don't switch to the new substitute that is just as good but cheaper. And so it overstates the cost of living. If that is the case it is right to update the CPI calculation.

Go for it, President O. But the "bigger government is always better" people are livid. If political hack Paul Krugman is against it that's evidence in its favor. (There are recent examples where in his columns he ridicules economic idea A. But a search of the textbook he wrote explains why A is sound economics.)

Business Insider

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