David Brooks has been an embarrassment since the day he started writing for the New York Times op-ed page. He seems to think his job is to echo White House talking points (with an occasional stab at friendly advice), not to think and write about issues in any authentic sense. This means that he is a puppy dog, not a journalist.
Worse still is his ignorance, which reached a laughable level in today's Brooks column about Social Security.
Brooks claims that the idea of having the government issue debt to buy stock is supported by faith in markets, and seems ill-advised only if you don't trust markets.
But issuing $X billion of debt and buying $X billion of stock does not mean trusting markets - it means holding a position that financial markets value at zero. You own assets that the markets value at $X billion, and you issue debt that the markets value at $X billion. Yet you think, apparently, if you are as woebegone as Brooks, that you have stumbled on a bonanza - something that will do so well that you can wave your magic wand and evaporate $11 trillion of unfunded liabilities.
Brooks notes that stocks have a historic real return over some period of 4.6 percent, while the government can issue debt at a real interest rate of 2 percent. Voila, a big money bonanza from the difference between what you pay and what you earn. But this could only happen if markets are badly awry in how they value the two sides.
If he were minimally economically literate, he would have heard of something called a "risk premium." Riskier returns generally must offer a higher interest rate, because people don't like the risk. If you are long the riskier asset but short the safer asset, you have a positive expected return, but one that the market sensibly (given people's risk aversion) values at zero because the down side is nasty.
There actually is a plausible argument, although I don't buy it myself, for having the government issue debt and buy stock. It is based on what economists call the "equity premium puzzle," or the idea that stocks shouldn't offer quite so much of an extra return given their historical track record of fluctuation. But this is an argument for individual accounts based on the idea that markets have screwed up and that the government can therefore cleverly take advantage - not an argument based on faith that markets work.
David Brooks should go back to writing about tall skim no-whip frappuccinos with Madagascar cinnamon.