"What a tangled weave": Social Security in a time of crisis

Well this is going to take some time to unpack. We have a disturbance in the force. Up unto a couple of days ago we had two bloggers blissfully unaware of each other, one named Bruce Krasting and one named Bruce Webb. Krasting mostly being a finance guy who started out as a bond seller and Webb being a historian turned civil servant each of whom latched onto Social Security policy essentially as a hobby only to come into collission. Webb thinks Social Security is on the whole sound enough that a policy of doing "Nothing" is better than almost all proposals out there, while Krasting is convinced that we need to move on Social Security RIGHT NOW because the current recession has done unalterable harm to it. And bridging the gap between "Nothing" and "Something" is going to take some doing. So call this part one.

Let's set the stage. On January 13th Krasting published this piece as Zero Hedge: I'm no Chicken Little striking back by name at my and Dale Coberly's attacks in comments on his previous piece at his own blog SS Trust Fund-2009 Full Year Results-Ugh! where Krasting comes to a particular conclusion:

I think that the recession of 08 and 09 and the anticipated high unemployment (low employment) in 2010 has crippled the Fund. Nothing short of a major overhaul can turn it around at this point. The damage has been too great.

Well I believe this conclusion is offbase and itself based on a total misunderstanding of Social Security finance, and enough so that I accussed Mr. Krasting of essentially being a sock puppet for Andrew Biggs and Keven Hassett of the American Enterprise who argued the same case last March. This argument more or less started with this article by Hassett in Bloomberg Recession Bites Into Social Security’s Surplus: Kevin Hassett which got picked up in this article by Lori Montgomery in the WaPo a day latter Recession Puts a Major Strain On Social Security Trust Fund: As Payroll Tax Revenue Falls, So Does Surplus which sparked the following post at Angry Bear Vanishing Surpluses-Yet Again. If you really want to follow the story you would need to read the pieces in order and work back from there with the sequence being: Hassett, Montgomery, Vanishing Surplus, 2009 Full Results, Chicken Little.

Or perhaps you could cut to the chase and read the following article from some real experts Paul Van de Water and Kathy Ruffing: Social Security Does Not Face a Near-Term “Reckoning” Alarmists’ Claims Are Unjustified, But Action Is Needed to Restore Long-Term Solvency. Paul and Kathy's views remain their own and need no endorsement from me and what follows in the next few posts is entirely my own opinion, but for those who don't want to track down this particular dispute between the Bruce's could by-pass the whole thing and read Van de Water and Ruffing.