From the New York Times, via everywhere:
“Over the objections of many of its own employees, the Social Security Administration is gearing up for a major effort to publicize the financial problems of Social Security and to convince the public that private accounts are needed as part of any solution.
The agency’s plans are set forth in internal documents, including a “tactical plan” for communications and marketing of the idea that Social Security faces dire financial problems requiring immediate action.
Social Security officials say the agency is carrying out its mission to educate the public, including more than 47 million beneficiaries, and to support President Bush’s agenda.
“The system is broken, and promises are being made that Social Security cannot keep,” Mr. Bush said in his Saturday radio address. He is expected to address the issue in his Inaugural Address.
But agency employees have complained to Social Security officials that they are being conscripted into a political battle over the future of the program. They question the accuracy of recent statements by the agency, and they say that money from the Social Security trust fund should not be used for such advocacy.
“Trust fund dollars should not be used to promote a political agenda,” said Dana C. Duggins, a vice president of the Social Security Council of the American Federation of Government Employees, which represents more than 50,000 of the agency’s 64,000 workers and has opposed private accounts.
Deborah C. Fredericksen of Minneapolis, who has worked for the Social Security Administration for 31 years, said, “Many employees believe that the president and this agency are using scare tactics to promote private accounts.”
This is our money, which is meant to be spent on legitimate government functions. If the President wants to get out his political message, he can continue to use the ample supply of free media at his disposal. Alternately, he can use his prodigious fundraising abilities. There is no reason to drag our tax dollars into it.
This is not the first time the Bush administration has used our tax dollars to promote his political agenda. They paid Armstrong Williams to promote No Child Left Behind. Under this administration, both the Department of Health and Human Services and the Office of National Drug Control Policy released videos that the GAO found (pdf, via Ignatz) to be in violation of the Congressional ban on using funds for propaganda not specifically authorized by Congress.
Let me say that again, just so it’s clear: it is against the law to use taxpayer money for propaganda. The HHS and ONDCP cases have already been found to have broken the law. The Armstrong Williams case fairly clearly does so as well*. Whether or not this particular episode counts as propaganda is less clear to me, but it surely violates the spirit of the law. And besides, it’s just plain wrong.
* The GAO again: “we also have interpreted the restriction on publicity or propaganda as prohibiting what we refer to as covert propaganda, that is, materials that “are misleading as to their origin.” B-223098, Oct. 10, 1986. In 1987, the State Department hired consultants to prepare newspaper articles and op-ed pieces in support of the Reagan Administration’s Central America policy. However, these pieces were published “as the ostensible position of persons not associated with the government . . .” 66 Comp. Gen. 707 (1987). We concluded that such activities violated the publicity or propaganda restriction because they were “misleading as to their origin.” Id.”
To summarize:
…
…
More to the point, the fact that using taxpayer money for propaganda is against the law will not prevent the administration from using taxpayer money for propaganda, nor will it lead to the prosecution of those who use taxpayer money for propaganda. We are not a nation of laws, you see.
Presumably, the next Attorney General will write a memo explaining that challenging the President’s right to use your tax dollars for political propaganda is tantamount to challenging the President’s right to free speech.
Strangely (from a legal perspective) this is far less of a problem than paying a media source for advocacy. This kind of thing is almost always considered a legitimate government function (surely you have seen the ads for other programs in the past).
But I agree with this for both the government and the analogous situation with unions:
“This is our money, which is meant to be spent on legitimate government functions. If the President wants to get out his political message, he can continue to use the ample supply of free media at his disposal.”
Or that laws against government funding of propaganda are quaint and outdated, Jes.
You Must Be Kidding
Adding on to Ron’s excellent post below about the new Bush plan to make Social Security employees shill for his scam, there are a number of other bloggers who are up in arms about this outrage.
But I agree with this for both the government and the analogous situation with unions:
“This is our money, which is meant to be spent on legitimate government functions. If the President wants to get out his political message, he can continue to use the ample supply of free media at his disposal.”
And why would this not apply to corporations also?
“This is the Shareholders money, which is meant to be spent on legitimate corporate functions. If the CEO wants to get out his political message, he can continue to use the ample supply of free media at his disposal.”
This reminds me of the growing corporate practice of making employees about to be laid off train their overseas replacments. The sheer gall of it begs for its own quarter in Hell.
Slightly off topic, but as I’m listening to Frist on “This Week” argue that the potential shortages SS faces are parallel to a patient who might need a heart transplant a decade down the road…calling both a “crisis”…it occurred to me that if privatization isn’t supposed to really pay off for 40 years, but benefit cuts are going happen before then, won’t an entire generation of Americans get screwed coming and going here? Namely me?
“Trust fund dollars should not be used to promote a political agenda”
But Congress has no problem using trust fund dollars to cover expenses in the federal budget, for appropriations that pay for politically motivated legislation, with the funds replaced by IOUs. Sheesh. It figures that such a stupid statement would come from some labor union flack.
While I agree, hilzoy, that the Bush administration should not break the law in the promotion of SS reform, your GAO link does not bolster your case:
Of course, the GAO investigation was instigated in the first place by intensely partisan and politically motivated Democrat senators.
Trust fund dollars SHOULDN’T be used to promote a political agenda, BD. In fact, the trust fund should be an actual trust fund – one that isn’t raided by any two-bit political hack looking to give his cronies a handout. Maybe we could put those dollars aside – in a sort of “lock box” that nobody would be able to touch. Oh, wait, but that idea would be responsible! Better to blow it all on tax cuts.
Charles: That’s why I expressed doubts about whether this case violated the law: because the GAO seems to have given a lot of latitude to agencies, including latitude about the accuracy of claims.
Congress uses money it has borrowed from the trust fund, and is legally obligated to repay from tax dollars, for whatever purposes it sees fit. If some of them are politically motivated, our recourse is obvious: elect different representatives. I don’t think this is parallel at all. Nor is it clear to me why it matters who asked for the investigation, as long as it was carried out by an impartial body (which I take the GAO to be.)
Of course, the GAO investigation was instigated in the first place by intensely partisan and politically motivated Democrat senators
Yeah. if there was real abuse the Republicans would have been all over it. Is that right?
And by the way, “Democrat” is a noun. The adjective is “Democratic.”
question:
If SS will be ok for a while, why do we have to do a big huge sudden change that will cost 2 trillion dollars? Can’t we do a gradual change to SS that’s maybe spread out over 20- 30 years so as to make any impact negligible, and also to observe how the subtle changes affect the performance giving us the opportunity to tweak as needed. Is this naive?
And by the way, “Democrat” is a noun. The adjective is “Democratic.”
There is, apparently, some coy use of ungrammatical English among the rabid right that’s meant to convey an insult to the party (See, they’re Democrats… but they’re not democratic. Why? Because they don’t want to privatize social security, like the founding fathers and the ancient Greeks wanted!). I believe it’s supposed to be roughly analogous to the use of “ReTHUGlicans!” or “SHRUBya!”
I’m assuming BD just got the grammar wrong, because ObWi wouldn’t pick some random hack doofus to be a poster.
“I’m assuming BD just got the grammar wrong, because ObWi wouldn’t pick some random hack doofus to be a poster.”
Absolutely not!
And by the way, “Democrat” is a noun. The adjective is “Democratic.”
A grammar nanny. I’ll accept your correction as and graciously and magnanimously as Count Olaf. FTR, nine times out of ten, I don’t hit the “preview” button. Typos and mistakes happen when typing hurriedly.
Charles,
If it was just a typo then I apologize for being a “grammar nanny.” I thought you were deliberately following the very annoying right-wing practice described by iron lungfish.
Bill: “Is this naive?”
Only if the non-partisan informed consensus is naive. See for example the last page or two of the NYT magazine article this week.
I apologize also if sounding like a grammar nanny, or if sounding like I was accusing you of using any of the dippy namecalling tactics I mentioned; I meant to do neither, just to have a little diatribe about their use in certain other forums.
Every time I run into the use of “aWol” or “Lurch” or any of their talk radio antecedents, I cringe – especially if it’s coming from someone whose view I agree with. And it’s not just that it’s insult-in-place-of-an-argument, it’s that the insults themselves are so very lame. Is playground-style really the best they can come up with?
As an exercise, I invite all such instances – “Hitlery,” “feminazi,” “rethuglicans,” “dumbocrats” – to be replaced with the word “booger,” which achieves the same end with far greater efficiency.
Every time I run into the use of “aWol” or “Lurch” or any of their talk radio antecedents, I cringe…
Amen to that, and your subsequent list. I’d also add “appointed pResident” and its variations; it’s vaguely useful when preaching to the choir but it’s just embarrassing in a wider audience.
I apologize for not being more computer savvy, for I have no idea of how to do a link. But here: http://www.talkingpointsmemo.com/archives/week_2005_01_02.php#004327
is an article by Josh Marshall in Talking Points that is a good description of what is going on as I have seen. Mr. Marshall’s contention is that the privatization of SS is really all about not having to repay the $3 trillion debt that the government owes the trust fund. He has lots of good information there to back up his contention. Do go read it.
If you care about the deficit, it might be nice not to have to scrounge up $3 Trillion, you know.
Whatev. The power to set aside the law is inherent in the booger, I mean president.
“If you care about the deficit, it might be nice not to have to scrounge up $3 Trillion, you know.”
Hahaha. we are going to have to scrounge this money up one way or the other, unless we not only default on the treasury bonds in the trust fund, but also rescind Social Security altogether. Or, I suppose, unless Santa Claus decides to take over paying out Social Security benefits. The President’s plan would only add more money to the amount we need to pay (those trillions in transition costs.)
Well, no. We could make SS work within the current or modified scope of payroll taxes and benefits. What the procedural details of those bonds are I couldn’t tell you, but I don’t think it’s a big deal to default on a loan to yourself.
Transition to what? Do we know what his lousy plan is yet?
Come to think of it, since Congress has no procedural reason why they can’t raid the trust fund, can’t they just pay off the bonds, then snatch the money right back? Maybe wait a year? It sounds absurd, but that’s what this situation is.
What the procedural details of those bonds are I couldn’t tell you, but I don’t think it’s a big deal to default on a loan to yourself.
The bonds are backed by the “full faith and credit” of the US Government. By law the money can only be used to pay benefits. Congress can change the law, of course, if it wants, just like it can decide to default on other treasury debt.
But I doubt that it would be “no big deal.” I suspect that the financial markets would consider it quite a big deal indeed.
You’re right, it would be best not to default. But as you said, you could change the law, and voila! Problem solved.
I think everyone who is perfectly content with Congress paying this off is way too laid back about taking $3 Trillion dollars out of the pockets of all working Americans.
Actually, while Congress could of course change the laws governing the SS trust fund, it cannot default without first amending the Constitution.
Jonas,
I was not suggesting that changing the law as a means of avoiding payment would be a clever way to avoid the consequences of defaulting. Even though, I suppose, it would technically not be considered a default, I doubt the markets would make the distinction.
Congress can change the law, of course, if it wants, just like it can decide to default on other treasury debt.
No, it can’t. That would be against the Constitution of the United States. Neither Congress nor the President can legally question the validity of the public debt.
it cannot default without first amending the Constitution.
Well, McCain was just on CNN suggesting (I think) that if Arnold ran, he’d support him (and presumably support amending the constitution to allow it) Where does the queue start?
Actually, while Congress could of course change the laws governing the SS trust fund, it cannot default without first amending the Constitution.
No, it can’t. That would be against the Constitution of the United States. Neither Congress nor the President can legally question the validity of the public debt.
Oops.
“Even though, I suppose, it would technically not be considered a default, I doubt the markets would make the distinction.”
You are quite right about it not technically being considered a default but further I don’t see why the market would care at all. A loan to yourself is already an accounting fiction. The market knows this. Getting rid of an accounting fiction shouldn’t be a big deal. It changes a zero asset balance into a a zero asset balance.
A loan to yourself is already an accounting fiction
I hope no one with your attitude ever becomes the CEO of a company with a defined benefits pension plan, as such a manifest failure to understand accounting will ensure that the workers would lose their pensions and that the CEO would go to prison.
Where did the meme come from that the SS Trust Fund is only a debt the government owes to itself, and therefore ‘default’ is a legal fiction?
I’d been under the impression that the SS Trust Fund was a debt owed to future recipients of SS benefits.
I don’t see why the market would care at all.
Because the markets will notice that the government failed to meet its financial obligations, however hard you or anyone else tries to argue that they are non-existent.
They will also note that a big part of the reason is the insane fiscal policies of the current Administration, which it shows every sign of expanding.
It has been pointed out to me by several commenters that a default on treasury debt would be unconstitutional. Fine. You learn something every day. But how much comfort is that in the event of a fiscal crisis? The government can refuse to pay, and I guess wait for the Supreme Court to order it to pay. More likely, it can simply print the needed dollars, causing a substantial inflation, etc.
I think the opposition could well call for the president’s impeachment…
“I hope no one with your attitude ever becomes the CEO of a company with a defined benefits pension plan, as such a manifest failure to understand accounting will ensure that the workers would lose their pensions and that the CEO would go to prison.”
My visceral reaction to you at this point is blah, blah, blah.
My considered reaction is to point out that Social Security is not now, and has never been a pension plan.
My other considered reaction is to point out that your point of view seems to assume that the government cannot ever make changes to benefits. That idea is frankly ridiculous.
Your second considered reaction is completely off topic and seems to be a straw man. The ball, remember?
Your first considered reaction does not address the argument either, which was, if you will recall, “A loan to yourself is already an accounting fiction”. That statement is simply false. This saves you from having to explain how Social Security differs from a “pension”, which the dictionary defines as, “money paid under given conditions to a person following retirement or to surviving dependents”.
The second follows DIRECTLY from your slam on me. I will quote:
“I hope no one with your attitude ever becomes the CEO of a company with a defined benefits pension plan, as such a manifest failure to understand accounting will ensure that the workers would lose their pensions and that the CEO would go to prison.”
In this quote you
A) Fail to understand the difference between social security and a pension plan.
B) Impugn my attitude.
C) Suggest that changing Social Security is like changing a pension plan
D) Pension Plans can’t be changed because they represent an earned and bargained for benefit.
E) Which you suggest can’t be changed because of your ridiculously poor analogy between SS and a pension
which
F) all knowledgable people are aware is wrong.
This leads to the especially amusing fact that you are attacking my basic understanding while revealing a complete lack of knowledge on your own part.
The gall of you suggesting that I need to keep my eye on the ball right after you posted that comment is well astonishing.
To sum up:
Social Security is not a pension plan.
Loans from one entity to the same entity are not assets. They may be promises, they may have other binding effects at law, but they are not assets which can help programs remain solvent to pick a non hypothetical.
The market is well aware that they aren’t assets, even if you are not.
As such, formally recognizing them as non-assests does not represent a change which would destroy market credibility.
Repudiating China’s holdings, on the other hand would be.
Sebastian: I thought that Felix’s point (which is, I think, from, or at least, very like, a post at Angry Bear) was that it is possible for an organization — a company, a government — to have two defined parts, such that the two parts’ funds are separate, and thus whatever one part owes the other part is not an accounting fiction but a genuine obligation. E.g., its pension fund and its operating budget.
Were this Felix’s point, the question whether SS is or is not a pension fund wouldn’t be relevant; the question would be, does the SS trust fund stand to the general fund in this sort of relationship? If so, then a person who ignored that fact and became the CFO of a company which had several such parts might be expected to transfer funds from one to another without noticing that s/he was doing anything significant, if the need arose, And if some such transfers (e.g., out of the pension fund and into the operating budget) were illegal, jail would follow.
That’s what I thought the point was, at any rate. I offer this bid for a Karnak award in the interests of peace.
Again, you are constructing a chain of argument which holds no relation whatsoever to the statement to which I objected. The statement to which I objected was, “A loan to yourself is already an accounting fiction”. This is simply a false statement, as has been shown.
As to your next evasion where you would like to discuss the difference between Social Security and a pension plan, fine. Here is the dictionary definition of a pension: “money paid under given conditions to a person following retirement or to surviving dependents”. Please tell me in what way Social Security payments differ from that definition.
The market is well aware that they aren’t assets, even if you are not.
A ridiculous argument, and another evasion. Suppose the trust fund were allowed to sell to the public the bonds it holds. Would the market exchange dollars for them? If so (and it is so), they are assets. To suggest that the bonds in the trust fund would not help the trust fund remain solvent is to suggest that dollars being put in the trust fund would not help it remain solvent, which is absurd.
The money in my wallet won’t help me remain solvent if it gets stolen…
Oh, and hilzoy had a fair assessment of my original argument, although I don’t recall whether its origin was AngryBear or one of the other econ blogs I read ( DeLong, Setser, Marginal Revolution, etc. ).
Hilzoy, sure but that is why it is important to note that it isn’t a pension fund. Pension funds hold assets to pay off benefits. Which is why you have to have assets in a pension fund. If you ‘fund’ with loans from yourself, you aren’t funding with assets. You are funding with accounting fictions. For purpose of solvency, they are ‘nothings’. And to the extent that people are relying on them to pay off liabilities they are worse than nothing because for planning purposes they are being treated as assets when they aren’t.
It would be as if you had decided that you needed $2 million to retire. You take an inventory and find that you have $1.9 million including a $1.1 million rental property in Hawaii. You then plan to earn the remaining $0.1 million and retire. 5 years later you realize that for some reason you had taken out a $1.0 million mortgage on the rental property and spent the money on worthy aid projects in Africa. In your accounting book you put a note–I owe $1 million to retirement fund. If you are counting on that rental property for your retirement, you had best count only the amount it is worth more than the mortgage. Otherwise your planning is going to be way off.
In your accounting book you put a note–I owe $1 million to retirement fund. If you are counting on that rental property for your retirement, you had best count only the amount it is worth more than the mortgage.
And what if the markets were willing to pay $1 million for the note? Why, it would be a completely different situation, wouldn’t it?
Sebastian: the SS trust fund wasn’t funded with imaginary IOUs, it was funded with very real payroll tax dollars. It then lent those dollars to the general fund, in exchange for legally enforceable IOUs. If the general fund, which is to say the US government, decides to default on those IOUs, it will have to violate the very same trust that undergirds all the other treasury bonds.
Can we PLEASE recognize that the government functions on some very different accounting principles than individuals? Like, for example, the govt has the power to tax? and legislate?
but if Sebastian insists on conflating the SSA with the Treasury, he should feel free to borrow from his 401K to send money to troops in Iraq. (Against the law? pshaw — laws can be changed.)
now, Sebastian and Cato Institute can insist that the bonds are mere fictions. maybe they’re right and a repudiation of that debt wouldn’t crash world markets. maybe they’re wrong. but even if they’re right, SO WHAT?
The american society still needs to take care of its elderly and disabled. If not through soc. sec., how?
Francis
“And what if the markets were willing to pay $1 million for the note? Why, it would be a completely different situation, wouldn’t it?”
Yup, in accounting terms if you sold that note on the market and owed it for repayment, it would be called a LIABILITY. Thanks for argeeing with me. 🙂
That has nothing to do with the fact that they are not assets. Furthermore the government could instruct the SSA not to cash them for exactly the same effect without ‘default’. The entity trust issue is not involved unless you retire debt to people other than yourself who owe it. The SSA ‘trust’ is an accounting device nothing more.
The market would be no less happy with ‘defaulted’ SSA treasuries than they would be with a large overall debt. It is financially identical to say that the 10 year National debt outlook is X trillion + SSA debt of Y trillion and that the National debt outlook including SSA benefits is X + Y trillion.
“The american society still needs to take care of its elderly and disabled. If not through soc. sec., how?”
Gosh, I wish I had been talking about that for oh maybe the last six freaking weeks! Sheesh. It isn’t as if social security is the only conceivable safety net structure.
Yup, in accounting terms if you sold that note on the market and owed it for repayment, it would be called a LIABILITY. Thanks for argeeing with me. 🙂
I most certainly do not agree with you and you are being nonsensical here. While the retirement fund held the note it would be an asset for the retirement fund, as evidenced by the fact that you could trade it for dollars. After the retirement fund sold it, it would be an asset for the entity that purchased it and a liability for the entity that issued it. The retirement fund is neither of those entities.
In the case of Social Security, the trust fund could (although it would take a change in law) sell its ASSETS, i.e., the bonds it holds, on the markets for dollars in order to fund PENSIONS, i.e., “money paid under given conditions to a person following retirement or to surviving dependents”, after the payroll tax takes in less than Social Security must pay out in order to satisfy its legal obligations. Alternatively, the general fund could exchange dollars to retire the public debt it issued, the validity of which can not be questioned.
In either case, the general fund has a problem. It is in deficit, and the deficit as a percentage of GDP is unsustainable. There are plenty of ways to correct this, the most obvious, moral, and sensible of them being repealing Bush’s tax cuts. What is not moral or sensible is to pretend that trashing a program that has ended poverty for the elderly and that takes in receipts greater than it pays out in benefits is the most immediate and pressing fiscal priority.
When the Social Security trust fund was established a promise was made and a legal obligation created to the taxpayers who agreed to a regressive tax increase in order to do precisely what I have described above. Now, we are told we must break those promises and rescind those obligations in order to pay for tax cuts for the rich. Since phrasing it that way doesn’t sound so good, we get a lot of poor argument claiming assets aren’t really assets. The situation could not be clearer – there is no Social Security crisis. There is a general fund crisis, and this crisis was caused by an incompetent administration’s fiscal policies. We need to fix what is broken, not break what is working.
“When the Social Security trust fund was established a promise was made and a legal obligation created to the taxpayers who agreed to a regressive tax increase in order to do precisely what I have described above. Now, we are told we must break those promises and rescind those obligations in order to pay for tax cuts for the rich. Since phrasing it that way doesn’t sound so good, we get a lot of poor argument claiming assets aren’t really assets.”
Would it be illegal to reduce benefits? No. Would it be illegal to zero out benefits? No. Would it be illegal to print money to pay the debts? No. I’m not proposing any of those perfectly legal things and neither is Bush.
My favorite part is this: “a legal obligation created to the taxpayers who agreed to a regressive tax increase in order to do precisely what I have described above…” Could these obligations be paid off by increasing payroll taxes and directing the proceeds to pay off the bills? Yes, in fact they could. Which pretty much brings us to the end of this exciting little game you are playing. The treasury bills are liabilities which have to be paid by taxes, thanks for noticing that. Again.
“What is not moral or sensible is to pretend that trashing a program that has ended poverty for the elderly and that takes in receipts greater than it pays out in benefits is the most immediate and pressing fiscal priority.”
Ahh, good. And when someone proposes trashing a program that has merely ended poverty for the elderly I’ll get back to you.
I am talking about (as is the administration via different proposed methods) about reforming a program which pays tens of billions of dollars to rich people while justifying itself through poverty concerns. It appears we are talking about different programs.
Would it be illegal to reduce benefits? No. Would it be illegal to zero out benefits?
Currently it would, yes.
The treasury bills are liabilities which have to be paid by taxes, thanks for noticing that.
Once again, the bonds are assets for the trust fund. They are liabilities for the general fund. This is the agreement reached when taxpayers agreed to an increase in the regressive payroll tax in order to fund Social Security. The agreement is working as planned, much to your apparent dismay.
I am talking about (as is the administration via different proposed methods) about reforming a program
You are talking about ignoring what is broken (the general fund) and breaking what is working. That is not reforming a system, that is trashing it. What you need to focus on is the fact that the Bush administration’s incompetent fiscal policies (also known as “tax cuts for the rich”) have created record deficits. Were the Social Security system and the taxes that fund it to disappear, the crisis in the general fund would be worse than it is today. One solution is to loot the money legally directed at providing pensions for the elderly and using it to fund tax cuts for the rich. I’m against that, and calling an asset a liability isn’t going to change that, no matter how many times you repeat the mantra.
In fact, if the growth assumptions being used by the administration in its projections of how its “reforms” will work are correct, we can raise the retirement age, lower Social Security payroll taxes, and raise Social Security benefits and still have a solvent Social Security system. That makes much more sense to me than breaking promises made to the elderly in order to fund tax cuts for the rich.
Oh, and I’m still waiting for you to explain how Social Security payments are different from “money paid under given conditions to a person following retirement or to surviving dependents”.