Andrew Biggs is at it again
Comic Demetri Martin has this advice: “Only people in glass houses should throw stones, provided they are trapped in the house with a stone.”
Feeling trapped might explain the American Enterprise Institute’s Andrew Biggs’ penchant for stone throwing, such as accusing public pensions of projecting rosy rates of return (in Biggs’ view, anything higher than Treasury bond yields) despite the fact that he once hyped Social Security private accounts with promises of riches galore.
His latest: charging the National Institute of Retirement Security with advocating stone throwing—or at least window breaking—in order to stimulate the economy (apologies for the colliding metaphors).
Specifically, Biggs says NIRS ignores the cost to taxpayers in its research on the economic impact of public pensions, likening this to advocating window breaking as a way to create jobs for glaziers. Aside from the fact that the report in question repeatedly cites taxpayer costs, author Ilana Boivie is straightforward about the fact that her study measures the gross (not net) economic impact, as even Biggs eventually acknowledges. Thus, the economic stimulus from pensions can be compared to other forms of saving or spending without being limited to a specific counter-factual.
Biggs seems to think the relevant comparison should be with cutting public pension benefits and refunding the cost to taxpayers, as if they could be cut without damaging employee recruitment or retention—and, by extension, public services. He also cites another potential counter-factual: What would happen to the economy if state and local governments switched from traditional defined benefit pensions to 401(k)-style defined contribution plans? In theory, contributions to retirement plans should increase to make up for these plans’ inefficiency due to high fees and a lack of risk pooling. In practice, 401(k) contributions tend to be grossly inadequate, since anxiety, it appears, is not a good motivator. So such a switch would more likely lead to a decline in saving, an increase in consumption spending, and a short-run boost to our economy, albeit for all the wrong reasons (in other words, it would be rather like breaking windows to boost the economy). In the long run, you’d have to factor in an upward redistribution of wealth to high-income households who benefit the most from these accounts and whose higher saving rate would be a drag on our demand-constrained economy.
You can see how it gets complicated. Not for Biggs, though. For him, increasing savings in private accounts would lead to an earthly paradise, making Americans “not only richer, but also happier, healthier, more familial, smarter, and more active citizens.”
He said this back in the day when he was promoting President George W. Bush’s plan to partially privatize Social Security. Of course, Biggs took into account the cost in the form of reduced guaranteed benefits…
Actually, he didn’t. Which gets back to Biggs’ habit of accusing others of sins he’s committed. Maybe he feels trapped by Dean Baker in a crystal palace of Social Security privatization, and this is the only way he can think of getting out?