Yes, in more ways than you might think.
In a hot microphone moment the other day, President Obama told someone at the UN that he had not smoked for six years, which we know (from Michelle Obama for example) is false. The Daily Caller story below recounts the story.
We have often discussed how lying is such a prominent feature of a crony capitalist society, something that spreads and spreads until no one can count on anybody telling the truth. This is terribly important for an economy too, because a market system is based on trust. If buyers cannot trust sellers, everything slows down and eventually collapses.
The president’s statement might be characterized as a fib rather than a lie, but it actually has further economic implications. The sharp decline in smoking is leading to longer lifespans, but this is not factored into the Social Security Administration’s calculations. Indeed the Social Security Administration has barely updated its method of calculating future benefits since the 1930’s.
Think about this for a moment. The Clinton administration in particular revised the calculation of inflation and unemployment, and lo and behold the new numbers since have been significantly lower than they otherwise would have been. The Obama administration just revised the method of calculating GDP (which is already increased by the reduction in estimated inflation) and lo and behold GDP growth came out higher. It might be inferred from this that no administration wants to revise the calculation of future Social Security Benefits because to do so would mean larger projected deficits.
The effect of less smoking is explained in a useful New York Times article by Gary King and Samir S. Soneji (Jan 6, 2013). But this article also contains a lie, a fib, or at best a willful omission. It says that “… In 2010, Social Security…spent $49 billion more in benefits than it received in revenues and drew from its trust funds to cover the shortfall.” This omits the pertinent fact that the trust fund does not really exist, is a complete fiction, so that funds to cover the shortfall actually came out of either borrowing or creating new money.
When journalists and scholars write about Social Security and pretend that there is a trust fund, it is rather like journalists and scholars who keep writing about the US Federal Reserve’s “bond buying” while leaving out the essential fact that this “bond buying” is done with money created out of thin air, not with tax revenue.
We all really need to work on restoring an honest media, an honest White House and Congress, an honest economy, and an honest society. This is explained in more detail in ACC’s two new books, Free Prices Now! and Crony Capitalism in America 2008-2012.