睇報學經濟 - Does Solvency Matter?

Paul Krugman, 2008 Nobel Laureate in Economic Science, wrote on Social Security in his NYT weekly column this Monday. He said that Social Security will remain solvent at least until 2030's and therefore it is illegitimate to support any proposal on Social Security cut (ibid).

The article is, of course, more than a strike back to Social Security cut proposer (actually the article is about fiscal austerity). Nevertheless, among the various arguments raised in his article, one issue pops up (and keeps popping up) in my mind, and that is "Does Solvency Matter" or better phrased as "Only Solvency Matter".

Yes, we "know" (I presume I know) Social Security is unlikely to go bankrupt until 2030's, but does that mean we shouldn't cut Social Security?

Again, the answer (for me at least) is "NO, NOT NECESSARY".

Argument 1:
Doesn't ECON101 say (social?) utility is maximized when marginal benefit equals to marginal cost, but not when the action's (net?) utility remains positive (or non-negative)?

Argument 2:
If so, does that mean to cut or not to cut, solvency is "a", but not "the sole", consideration?

Does that mean Mr. Krugman is wrong?

Ans: No, he doesn't, given that

1.
2.
... ...

Dear reader, I intentionally leave the conditions blank and make it a challenge to you to spot them out (hints: under what circumstance(s) does the condition of having non-negative utility an optimal? what happens when average cost equals to marginal cost? under what circumstances will that likely happen?). I also leave it to you to decide if the underlying Krugman philosophy is sound and followable.

To trust or not to trust, that's your own question.