I came out early in favor of Social Security reform, but gave into despair when I saw Bush’s initial salesmanship. It’s a crisis, you say? You mean like Medicare? The Deficit? Iraqi WMDs? Persuasive this line of argument from you is not.
Today, however, Hindrocket of PowerLine provides reason to believe that Bush has settled on a winning strategy — and that the Democratic leadership is playing into his hands.
So far, the Democratic leadership in Congress has taken the position that they need not come up with a proposal for Social Security reform. ….
There are two basic reasons, I think, why the Dems’ preferred strategy of stonewalling and scare-mongering might not work. The first is that they, as much as Republicans, have been issuing warnings about Social Security for years. Americans under 40, especially, have grown up with predictions of Social Security insolvency, and are not hard to persuade that something must be done. In this regard, the effort by many in the mainstream media to help the Democrats by emphasizing the distinction between "crisis"–President Bush’s word–and "serious problems"–the Democrats’ words–has been misguided. The belief that Social Security has "serious problems" is hardly a ground for inaction, and in his State of the Union speech, President Bush happily abandoned "crisis" and used milder formulas.
So the Democrats might find that there is less patience with a "do nothing" approach than they expect.
The second problem for the Democrats, I believe, is that the only proposal for real change in the system is the President’s. Allowing employees to save their own money, own their own accounts, and pass their accumulated wealth on to their heirs has powerful appeal. Everything else–tinkering with the retirement age, extending the income level on which the Social Security tax applies, etc.–is merely accounting. And distasteful accounting at that, since at bottom, all such proposals translate into higher taxes or lower benefits.
The Democrats will try to argue that there is a disconnect between the program’s fiscal problems and the President’s proposed solution, individual accounts, which will worsen, not improve, the fiscal picture. In the short term, they’re right. But in the (only slightly) longer term, we are moving rapidly toward a demographic environment in which there will be only two workers for each retiree. At that point, a "pay as you go" system that relies on current income to support retirees will be untenable. Either the two workers will pay exorbitant taxes, or the one retiree will get a very meagre pension. There is no way out of this dilemma, except replacing "pay as you go"–a euphemism for income transfer payments–with a savings program. If each worker saves for his or her own retirement, the ratio between workers and retirees becomes immaterial.
Now, if we can find reasonable ways to pay for the transition, we’ll be in business. ( … Even Reagan let some tax cuts expire … I’m jus’ sayin’ ….)
Incidentally, to our left-leaning readers: Take a careful look at Hindrocket’s strategic arguments, rather than his and my premise (reform is good). Do you think that the Democrats have chosen poor ground for battle?
Do you think that the Democrats have chosen poor ground for battle?
Morally? Politically? Strategically? Not really sure in what sense you meant this.
No, I don’t. The Democrats’ position is two-fold. First, any problems with funding the system are far enough down the road that there’s no imperative need to fix them now (Heck, look what happened when we tried to fix far-future problems back in 1983. Raised regressive payroll taxes to build up a surplus, lent it back to the general fund, allowing progressive income taxes to be cut, and now the administration is talking lightly about defaulting on that debt.) Second, every concrete policy proposal that the administration has made in this regard makes the funding problem worse rather than better.
So we’ve got a beloved and effective system that isn’t particularly in trouble right now, and all the administration’s proposals are going to do is mess it up. What part of this strikes you as either false or politically ineffective?
I’m not sure why it’s confusing, given the context, but I mean politically (Incidentally, I’m not sure how “political” concerns differ from “strategic” concerns in this context). All the morals in the world won’t pass a bill through Congress (or stop passage of a bill). One could say.
I have no idea what he’s talking about or you’re talking about. The plan is already DOA.
DOA? “The plan” perhaps. Big changes to Social Security? I wouldn’t be so sure.
At the moment, Dems are sitting pretty. Increasingly, it looks like a battle of fearmongers. Dems fearmonger the over-40 set, Pubs fearmonger the under-40 set; guess which group is easier to scare?
Moreover, if Dem leadership had any sense at all (it doesn’t), they would make a “principled” stand on the argument that this Administration is simply too corrupt to trust with big changes. They’d then point two post down and note that this Administration didn’t just vastly underestimate the costs of the drug bill, they threatened to fire someone for passing on better information.
Ultimately, I don’t think it matters. Bush is flooding the channel with ideas. If he doesn’t get this one, he’ll some others; my leadership is simply to craven to stop him.
The first is that they, as much as Republicans, have been issuing warnings about Social Security for years.
In politics, claiming your opponent is a hypocrite is pretty quaint. This argument goes nowhere.
His second point has some merit but only in that “it sure sounds nice until you read the details” way most Bush policies fall under.
“If each worker saves for his or her own retirement, the ratio between workers and retirees becomes immaterial.”
This gibberish deserves a Luskin award for sheer cluelessness about the facts of economic life. Retirees cannot eat their pension-plan prospectuses. Either the economy produces enough goods and services for workers and retirees or it does not. If it does then either a paygo system or a system whereby retirees spend dividends can work. If it does not then there is a problem under either system.
In the last analysis the only questions that matter are:
(a) Whether productivity growth is sufficient to enable a smaller workforce to supply the needs of the population, and
(b) Whether the workforce is willing to transfer resources to retirees, via taxes or via dividends.
In other words, either system can break down because of low productivity or because of social strife. There are steps which can reduce these risks but the mere accumulation of paper claims accomplishes nothing.
No. The record shows that attempts at bipartisanship with this administration result in date rape and noting more. This is definitely a time to not do something, but to just sit there.
Moreover, Hindrocket’s (and possibly yours?) framing of the issue is hilarious. (I especially like the mau mauing about transfer payments in the context of a plan that steals the not-rich’s Social Security overpayments in the trust fund.) It’s akin to saying “the president has announced his plan for Americans to eat their own excrement. It’s a bold plan. And yet the cowardly Democrats refuse to introduce their own plan for Americans to eat their own excrement.”
I don’t believe there are any circumstances under which the President’s “plan” (such as it can be divined) would produce a favorable rate of return when compared to traditional Social Security that do not also result in Social Security remaining solvent if no “reforms” were implemented. I also think that there are many more possible worlds where the total returns under “deform”, err, “reform” are substantially less than the traditional benefits.
The Democrats offering their own excrement eating plan simply concedes that excrement eating is necessary. I can see the attraction to Hindrocket for Dems to take that position. Harder to imagine the attraction for actual Democrats.
the Dems’ preferred strategy of stonewalling and scare-mongering…
click.
dunno. this could be Bush’s HilaryCare. and the AARP is a powerful ally.
a couple of years back the energy bill had great momentum, then just died under its own weight. the bad news pouring out of the newest budget will likely make any congressperson, conservative or liberal, reluctant to sign onto multiple billions of new borrowing. SS reform could, like hilarycare or the energy bill, die of its own weight.
sometimes simple obstruction is a better political move. alternatively, if the rules committee allows, the dems could propose a major lifting of the tax-deferred cap on 401Ks. That should split the rich/poor gap nicely.
Francis
p.s. why, despite checking the personal info box, does this website not remember me anymore? IE 6.0, if that helps any of the tech gurus.
I agree with JDC on the effects of cooperation with the Republicans. The Bullmoose had comments in the same vein (See Feb. 9th’s post entitled Mad about Max).
why, despite checking the personal info box, does this website not remember me anymore?
does the same thing to me, at home. at work, it works OK.
(Incidentally, I’m not sure how “political” concerns differ from “strategic” concerns in this context).
To be honest, I’m not sure either; made sense when I wrote it, though.
Added in proof: Ah, that’s it. By “strategically” I meant in the localized context of the presumed Democratic objective of protecting Social Security. By “politically” I meant in the broader political arena; will, for example, committing political resources to this fight detract from the Dems ability to oppose, say, a White House call for war against Iran.
I’m not sure why it’s confusing, given the context, but I mean politically.
[Which is, I think, what I meant by “strategically”. If I’m wrong, let me know and I’ll amend my answer.]
Then no, not particularly. I think the Dems have a lock on this particular issue. The interesting question — it’s been floated by Kevin Drum among others — is whether Bush’s insistence on trying to push through his current proposal is simply a result of stubbornness (perhaps coupled with a deliberate failure to understand the limits of his “mandate”) or whether it’s a complicated piece of political jiujitsu designed to trap the Dems in their overblown rhetoric. I’m not sure whether the Bush Administration is light enough on its feet to try this kind of bait-and-switch without signalling to the Senate Republicans, but that is a possibility that deserves some consideration.
Incidentally, in re this from Hindrocket:
There are two basic reasons, I think, why the Dems’ preferred strategy of stonewalling and scare-mongering might not work.
What he fails to appreciate is that stonewalling and scare-mongering (assuming arguendo that that’s an accurate descriptor) trump outright lying pretty much any day of the week. If Bush were honestly laying forth a case for private accounts I think you’d be correct to imply that the Dems are on shaky ground. Given that he isn’t — and given the near-pathological level of mendacity with which his plan is put forth — I think the Dems can probably ride this issue till Kingdom Come.
Do you think that the Democrats have chosen poor ground for battle?
Offhand, I’d say no. For the Dems to propose a plan would be to concede that SS needs to be changed now, and that puts all the power into Bush’s hands — there’s no way they’ll win an argument over details, and it would give nervous Republican congressmen more political cover for voting for change. The Dems’ only political leverage is to stand in the middle of the road and yell Stop!, and be prepared to scream “We told you so” if/when the plan sours in the public’s eyes. That puts all the risk squarely in the Repubs’ laps.
On stonewalling and obstructionism: the administration hasn’t yet offered up an actual plan for its opponents to stonewall and obstruct. Has it?
Von wrote:
That and they were out-maneuvered from the beginning:
On the private investment/mandatory savings portion of Social Security reform Bush has a clear advantage in that those most affected by it, tend to support it by two-to-one margins while those who oppose it, are also those least likely to be affected by it. Democrats will certainly demagogue and try stonewall but the fact is that you cannot beat something with nothing.
JDC wrote:
So being a Congressional Democrat is morally equivalent to being a rapist. Got it.
Thorley,
Right sentiment, wrong party.
So being a Congressional Democrat is morally equivalent to being a rapist. Got it.
Wow, that was a truly impressive misreading; takes a real pro to foul it up that badly. Not to mention the fact that the quote on which this is based is Grover Norquist’s, hardly a Democratic icon.
Anarch wrote:
Not at all, the analogy is far more accurate the way I phrased it.
“Not at all, the analogy is far more accurate the way I phrased it.”
What color is the sky where you live?
For the Dems to propose a plan would be to concede that SS needs to be changed now, and that puts all the power into Bush’s hands — there’s no way they’ll win an argument over details, and it would give nervous Republican congressmen more political cover for voting for change.
I hope to get to the other comments, but this one (by KenB, though also suggested by Anarch and others) seems to me to be best strategic reason for Democrats to “hold back” their counterproposals. Indeed, maybe that’s the best strategy for them to play — some even suggest it’s their only possible strategy given Bush’s (alleged) past behavior.
Still, I’m pretty much with Thorley. The Democratic leadership concedes, as it must, that Social Security is a “problem.” That concession gives the lie to the Democrats’ obstructionism.* If Social Security is a problem, you cannot stand athwart history and shout: stop! You have to fix it.**
By the way, I’m not so sure Bush’s plan is DOA, because Bush’s plan has not yet been fully revealed. By intention, I’m sure: Get the Democrats to let loose the sturm and drang against a shadow.
von
*See how I can frame the issue in order to make it play into the Republican’s theme-du-jour? These are traps you want to avoid.
**Kevin Drum, to his enormous credit, almost always implicitly makes this point in his posts — he always paints it as “SS is a minor problem, which can be solved by doing X.” I’ve said it before, but I’ll say it again: I don’t always agree with Drum (I don’t on SS, f’instance), but he gets the tone and strategy consistently right. He thoroughly understands that framing the issue correctly is vital to winning.
Not at all, the analogy is far more accurate the way I phrased it.
So you think Congressional Democrats are morally equivalent to rapists? Charming.
Look, I’m hardly an language cop, but I’d mildly suggest that we not use the word “rape” too loosely, lest it also lose its meaning.
Thorley wrote:
Democrats will certainly demagogue and try stonewall but the fact is that you cannot beat something with nothing.
This is, in fact, incorrect. The Clinton Healthcare plan was basically beaten with nothing.
The Democratic leadership concedes, as it must, that Social Security is a “problem.”
The trouble here is that it presumes that all “problems” are created equal, as if (metaphorically speaking) the security “problems” in Iraq are equal to the “problem” that I can’t find my toe-nail clippers. I agree with you that framing is key but, in all seriousness: at what point do you presume some intelligence on the part of the American people such that they can make these distinctions?
[Although I’m excessively amused by the thought of von et al. standing athwart history and shouting “Stop! Anarch needs his toe-nail clippers!”. Sometimes the best way to combat framing is to laugh at it.]
By the way, I’m not so sure Bush’s plan is DOA, because Bush’s plan has not yet been fully revealed. By intention, I’m sure: Get the Democrats to let loose the sturm and drang against a shadow.
That and it’s another example of Bush’s governance through obscurity: by never properly providing details you can keep a unified base because people will willingly deceive themselves into believing the rhetoric without scrutinizing the reality.
Von wrote:
The problem for them is that too many prominent Democrats have already gone on the record that Social Security is a problem and that investing a portion of FICA is part of the solution. President Bush demonstrated this last week when he touted a number of potential reforms that had been suggested by popular Democrats, thereby further cutting the knees out from Congressional Democrats.
On stonewalling and obstructionism: the administration hasn’t yet offered up an actual plan for its opponents to stonewall and obstruct. Has it?
Its offerings have been planesque.
I’ve been under the impression that this administrations preferred method for agenda promotion is to monotonously repeat the concept until a majority of the America public tends to believe that Bush is right. And it works. Well. In fact I find it to be frighteningly effective.
That said – the Dems are caught between a rock and a hard spot in almost every fight. As a number of people have pointed out – If the Dems propose SS reforms and they confirm the administrations stance and Bush will wink, smirk, and thank the other side for providing valuable momentum in advancing his cause.
Or stand there and argue that now is not the time to make changes, look standoffish as hell, and hope that SS reform dies under its own weight. That may very well happen. Unfortunately that will most likely happen after the administrations PR machine has the American public concerned about the crisis state of SS and criticizing the Dems for being the group that essentially caused SS reform agenda to die.
I think the administration’s bush league tactics are extremely effective and they have been making my side of the aisle look silly….even when further investigation has shown the reasons the Dems have been standoffish are correct – like Medicare’s new prescription drug program.
What social security plan?
http://story.news.yahoo.com/news?tmpl=story&cid=584&ncid=584&e=17&u=/nm/20050209/pl_nm/retirement_bush_dc
He’s waiting for the democrats to come up with a plan, which they shouldn’t. They should sit tight. Republicans hold the keys, make them responsible.
Pollster Scott Rasmussen reports that support for private investment skews dramatically by age group. Those aged 18 to 29 back it by 65 percent to 22 percent. Thirtysomething voters support it by 63-28; those in their 40s, 59-30. But voters between the ages of 50 and 64 oppose the private-investment option by 49-41, and those over 65, by 63-27.
Hmm I wonder which demographic votes in higher numbers than any other….
John Biles wrote:
Actually that’s not true. There were about half a dozen different major health care reform proposals in Congress at the time that the Clinton administration had offered their plan.
The very premise is wrong. Plenty of Dems have offered options including uncapping the income levels for SS tax which, IIRC, would solve the crisis by itself. And many Dems favor private accounts as add-ons, simply not as replacements for SS.
Then again in Hindrockets’ world the Dems are responsible for massive voting fraud in 2000 and 2004 so maybe it’s correct to say that in his mind the Dems have made no offers.
To the extent that Democrats have stated that SS is in trouble, they’ve offered the simple, obvious solutions: (a) wait and see if it is actually in trouble — after all, under the optimistic forecast, which has historically been the most accurate, there isn’t any problem at all IIRC; and (b) move the payroll tax cap up to whatever extent is necessary, decreasing the regressivity of SS funding. They’ve also suggested investing some of the trust fund in securities, but have drawn the distinction between investing part the trust fund, and linking an individual’s SS benefits to the performance of that individual’s investments.
I don’t think much, if any, of what prominent Democrats have actually said can be construed as support for the administration’s plan (to the extent that we’ve been told what it is, it’s a shift from defined benefit to defined contribution) without a great deal of distortion.
TW, I will be nice and pretend you didn’t know that he was referring to the famous quote of Grover Norquist, “Bipartisanship is another name for date rape,” as a means of making a valid point about how the GOP leadership tends to view true bipartisanship (and I assume you would agree with them that they shouldn’t aim for the muddled middle.) Otherwise, five points, obscurantism.
oops, point long since over. *looks angrily at refresh button*
I’m with praktike: the plan is DOA.
Frankly, the whole discussion puzzles me. IIRC, the Clinton Administration proposed investing a portion of FICA receipts in something other than Treasury bonds back in ’98 or ’99 (when it looked a lot more sensible). The proposal was criticized on the grounds that investing FICA receipts in stocks or funds selected by the President and Congress it was undue government meddling in the markets. In the private accounts plan, individuals get to direct some of their FICA payments to stocks or funds selected by the President and Congress. Why isn’t this undue government meddling in the markets?
In addition the argument in favor of the private accounts plan includes the observation that as it stands Social Security is actuarially unsound. Unfortunately, the private accounts plan doesn’t solve that problem which makes it a solution to some other problem.
So, as I say, I’m puzzled.
Sheesh. I thought the “date rape” reference was blindingly obvious. Thorley is correct that his analogy is more accurate. However, it would be still better to say that Congressional Democrats are morally equivalent to mutant liberal undead Nazis made of bombs that use their reproductive organs to hollow out the chest cavities of live infants for use as decorative, self-fertilizing planters in blue state gay bars. Plus, they’re obstructionists.
GT wrote:
Lizard Breath wrote:
By all means, let them campaign on an alternative that says “we deny there is a problem, but if there is one, we’ll just raise taxes and make it an even worse deal for younger workers.”
If the 2004 elections showed the Democrats anything, it’s that the public needs simple.
Therefore:
“There were no WMDs in Iraq.”
“There is no Social Security crisis.”
The End.
See also “The boy who cried ‘Wolf!'”
No Democrat, now or in the past, has proposed changing Social Security from a ‘defined benefit’ plan to a ‘defined contribution’ plan. To the extent one can discern any particular plan in GWB’s mush and murk, that’s what he is doing.
It is a bad idea driven by ideology, not economics. The proper Democratic response is to note that the Republicans control both Houses of Congress, chair all the relevant committees for writing legislation, and that when the Republicans actually write a bill, Democratic amendments will be offered to fix it.
In the meantime, we’ll demagogue the hell out of those granny-starvin’, workin’-man-robbin’, evil Republican sons-a-bitches.
Carpeicthus wrote:
If Nordquist has said that, he’s pretty close to the truth. The last time that we had “true bipartisanship” on Social Security reform in the 1980’s; we go stuck with higher taxes and no personal savings accounts. End result, less freedom for individuals and more dependency on government which is pretty much the formula Democrats have relied on to remain in power for so long.
If President Bush can enact reforms that transform this ponzi scheme into a sort of mandatory savings plan that lets workers have an ownership in their retirement accounts and move towards self-sufficiency, this could change the dynamics of the entire political landscape. Hence Democrats need to pull out all of the stops to stonewall anything that might lessen people’s dependency on them.
Somehow Thorley I doubt that proposing that millionaires pay SS taxes on their whole income, as every middle class family already does, is going to be bad for the Dems.
In any case they don’t need to do anything now. They can sit back and watch for the time being.
So Bush has succeeded in anesthetizing the Social Security debate: His proposed changes will stir passion only in the breasts of ideologues of each stripe, but not in the voters most affected.
I think this underestimates the lightning-rod properties of SS. Just because Bush says he’ll leave benefits alone for the older voters doesn’t mean Dems can’t still make hay out of it, whether legitimately or not. And eventually he has to provide the details, which will certainly provide plenty of targets. And this isn’t like Iraq — Dems can attack all they want without being labelled unpatriotic.
But personally I suspect Bush will get more fight from Republicans than Democrats, just because of the tremendous amount of debt being racked up. I’d be willing to bet an amount equal to my FICA for this pay period that Bush will not get all three of ( making the tax cuts permanent, retaining Medicare part D, SS private accounts). Something’s gotta give.
KenB wrote:
I think you’re actually correct about this. For the last couple of weeks we had been hearing from House and Senate Republicans that they want to reign the cost of the Medicare Prescription Drug benefit back to the original $400 Billion (which is now at $720 Billion and still less than the proposed Democrat alternative). It goes without saying that I’m in favor of scaling back that benefit but preferably in the context of larger Medicare and Medicaid reform. The recent budget proposal that block grants Medicaid payments takes us part of the way on the latter.
As far as the tax cuts go, I’m not as concerned about that for two reasons. First, it’s become clear that the administration wants to deal with Social Security first which suits me fine. If we had to have one but not the other, I’d opt for reforming Social Security and whichever we take on first is the one more likely to happen. Second, in last week’s SOTU address, the administration continued its rhetorical shift from “making the tax cuts permanent” to “overall tax reform.” By putting this in the hands of a bipartisan commission rather than supporting actual legislation, this is further going to delay any action on tax cuts.
Right now it’s a race as to which issue gets before Congress first and the momentum seems to be with reforming entitlement programs.
I think you’re actually correct about this.
You don’t have to sound so surprised about it. 😛
In the abstract, I’m in favor of an SS overhaul as well — the current program is a clumsy mix of pension and safety net, with the result that part of my paycheck goes to people who really don’t need it. However, I’m extremely skeptical that the political process will be able to produce anything more sensible. Just look at what happened to the drug benefit.
“ponzi scheme”
this, again? TW, if you actually have ANY interest in arguing fairly (ie, based on a set of commonly agreed facts and assumptions), you’re really going to have to change your vocabulary.
ss is not a ponzi scheme because, as you yourself noted, it promises ever POORER rates of return for later investors (if growth rates are below a certain level).
here’s some really basic questions for the hard righties:
1. should there be a federally funded public pension?
2. if not, should there be a federally funded anti-elder-poverty program?
3. what’s the difference between 1 & 2? just how intrusive should the SSA be in determining eligibility? can SSA for example require someone who is property-rich and cash-poor to sell/mortgage their house, sell family heirlooms, become destitute?
Francis
Lots and lots of question-begging here, von.
Why is arguing that no major changes are needed in any case, and critcizing Bush’s proposal in particular “stonewalling and scaremongering,” as hindrocket puts it? That really does give his game away. Once again, I am skeptical of conservatives who offer Democrats supposedly well-meaning advice on strategy.
And if I have to accept your premise that reform (by which I take it you mean major overhaul rather than the many suggestions for improvements that have come from Democrats) is highly desirable, then of course it’s bad strategy to block Bush’s proposal without offering an alternative. But you’re setting up the question to make only one answer possible. It is in fact wholly reasonable to suggest that while an oil change is needed the engine is fine.
As far as the worker/retiree ratio problem, gee wasn’t that the whole point of accumulating a big surplus in the trust fund?
FDL wrote:
Actually you’re confusing what Social Security has “promised” with what it will probably be able actually to deliver. Social Security hasn’t on the aggregate “promised” lower rates of returns for workers (it has “promised” them pretty much the same level as for current recipients) but rather it won’t be able to actually pay them the same level of benefits. Which is why we hear defenders of the Status quo pique that “there is no problem because we’ll ‘only’ have to cut our promised benefits by about 25% percent when the “trust fund” is exhausted.”
Social Security is however a ponzi or pyramid scheme in how it is financed by using current “contributions” to pay current benefits rather than investing those “contributions” productively to earn a higher rate of return and use that return to pay out benefits as does legitimate insurance and pension plans.
TW – mature pension plans are, in fact, quite like SS. They pay out benefits to current retirees, collect contributions from current employees, and when the contributions exceed the payouts, stash the surplus somewhere that will hopefully have a positive rate of return. Without the ongoing contributions, they fail. I guess they’re all Ponzi schemes.
Bernard Yomtov wrote:
The projections as to when Social Security goes bankrupt assume that the “trust fund” will be available pay out benefits until then. Hence everyone who proposes reforming the system has made the distinction between when it begins to pay out more in benefits than it takes in revenue and the date when the “trust fund” is exhausted and the program is no longer able to pay out all of the “promised” benefits. The whole “we wouldn’t have the problem if Congress didn’t raid the ‘trust fund’” argument is simply disingenuous.
Social Security is however a ponzi or pyramid scheme in how it is financed by using current “contributions” to pay current benefits rather than investing those “contributions” productively to earn a higher rate of return and use that return to pay out benefits…
Errr… that’s not a ponzi or pyramid scheme; to be the latter, you have to receive your income purely from the entry fees of those who enter after you. For the former, the wealth has to concentrate in the hands of a central collection agency (usually by siphoning off monies in transfer fees that are not then distributed back into the system). I don’t recall SSA racking up the big bucks except after the Reagan/Greenspan tinkering in the ’80s, which is a qualitatively different matter.
[As a side note, both are distinguished by claiming that more money comes out of the system than goes in, which AFAIK is not claimed of Social Security.]
SS is an ongoing, pay-as-you-go system* with a continual revenue stream that consists of more than merely entrance fees. [If you want to throw in the word “redistributional”, feel free.] It’s not a pyramid scheme by any stretch of the imagination, nor have you established that it’s a ponzi scheme. You can criticize SS if you choose but please do so with the correct terminology.
* Or should be. God only knows what’s happening nowadays.
Thorley, a ponzi scheme collapses inevitably and catastrophically when the con man can’t find a constant influx of new suckers. Social security, on the other hand, is in fine shape until the 2040’s at which point if the economy has been consistently terrible it may need adjustments to payroll taxes or benefits, but will still be able to continue functioning in substantially the same manner.
While you may choose not to acknowledge the difference, I’m reasonably confident the voters will.
…at which point if the economy has been consistently terrible it may need adjustments to payroll taxes or benefits
and of course if the economy is terrible in 2042, any private accounts are likely to be a bit thin, too.
I agree that the Dems are in a weak position and that Bush is far from done with SS Reform, but I believe that his rush to “reform” SS is due more to keeping permanent the tax cuts than to create any meaningful changes.
The Dems have little choice – if there was widespread public support, the Reps would come out and pass a plan and let the Dems try to filibuster. But, since we don’t have a plan yet that passes muster, the Reps are trying to get “bipartisan” support. Which means – reach across the aisle and pull my finger.
It will be an interesting next few months – I don’t expect Bush to give it up just yet – but don’t pretend this is about SS reform.
JerryN wrote:
The distinguishing feature which you tried to minimize is the one that I made earlier, namely in that the “contributions” in a mature pension plan are invested productively to earn revenue to pay benefits rather than just using current “contributions” to pay for current benefits. Mature pension plans for example over the long term pay out about 80 percent of their benefits using the income they earn from investing the contributions which is a pretty significant distinction from a ponzi scheme.
It’s really not about SS reform. It’s really about looting the SS trust fund when deficits/falling dollar/rising interest rates ‘force’ Bush to loot the trust fund (or not pay the IOUs to the trust fund) in order to keep the US economy from imploding.
TW – I would have responded by saying that the SS surplus is being invested in T-bills, but according to the President I’m wrong:
I’m going to go have many drinks now.
we deny there is a problem, but if there is one, we’ll just raise taxes and make it an even worse deal for younger workers.
Raising the FICA cap is not “raising taxes,” unless you think there’s some good reason that Warren Buffet should have to pay lower FICA as a proportion of his income than I should.
JerryN beat me to it, but here’s more of the quote:
“Some in our country think that Social Security is a trust fund — in other words, there’s a pile of money being accumulated. That’s just simply not true.
The money — payroll taxes going into the Social Security are spent. They’re spent on benefits and they’re spent on government programs. There is no trust.
We’re on the ultimate pay-as-you-go system — what goes in comes out. And so, starting in 2018, what’s going in — what’s coming out is greater than what’s going in. It says we’ve got a problem. And we’d better start dealing with it now. The longer we wait, the harder it is to fix the problem.”
Yup. He’s using “SS Reform” as cover for looting SS altogether. It will be, as some have said, the single biggest transfer of wealth from the middle class to the wealthy in US history.
von : I basically agree with what others have already said. First, SS is not obviously in bad shape, and if it turns out that it needs fixing, we have several decades to do it in. This would not be a good argument for doing nothing if we didn’t have any other urgent problems that needed solving more, but we do.
Second, as I noted here, when Democrats “issued warnings about Social Security, it seemed to be in worse shape than it does now. Repeating these warnings while disregarding the fact that they were made in response to a situation that has changed is just disingenuous: it’s as though someone who was trying to convince people that my career is in trouble were to cite things I said when I was on the job market and worried about whether anyone, anywhere would ever want to hire me, and say: see? Even she agrees! — without mentioning the fact that I did, in fact, get a job, and my fears turned out to be groundless. Thorley: this applies to the quotes on the website you linked to.
Third, I see no reason for us to propose a plan before Bush does, and no reason why, if we do, we should not propose one that amounts to ‘mere accounting’ but accounting that (unlike the President’s plan) actually makes SS solvent in perpetuity (or at least: does so as far as we can tell. I place no confidence in our ability to correctly guess the shape of the future to infinity.) — Note: by ‘our proposing a plan’ I mean ‘introducing legislation’. It is of course true that Democrats have all sorts of interesting proposals out there.
Fourth, the reason I think this is that, as I said, we have other, more urgent problems. About the taxes you mention: we now need to let the tax cuts expire in order to fix the deficit. We are running structural deficits that extend as far as the eye can see, and that are absolutely ruinous. We need to fix that problem, urgently. We need to fix Medicare. We absolutely do not need to start borrowing trillions of dollars in order to change SS in ways that, as the administration admits, will not make it sounder financially, but will lead to cuts in benefits and greater economic insecurity for senior citizens. Why anyone would think that we need to jump on board that particular bandwagon is a mystery to me.
Thorley,
The projections as to when Social Security goes bankrupt assume that the “trust fund” will be available pay out benefits until then. Hence everyone who proposes reforming the system has made the distinction between when it begins to pay out more in benefits than it takes in revenue and the date when the “trust fund” is exhausted and the program is no longer able to pay out all of the “promised” benefits. The whole “we wouldn’t have the problem if Congress didn’t raid the ‘trust fund’” argument is simply disingenuous.
Yes. I’m aware of all that. That was partly my point. My impression, perhaps incorrect, is that supporters of Bush’s proposal were adherents to the equally disingenuous “there is no trust fund” argument.
By the way, those who accuse others of “scaremongering” shouldn’t be throwing around words like “bankrupt,” which is hardly accurate.
Phil wrote:
Sure it is, just as eliminating the personal exemption would be raising taxes. The fact that you somehow think you have a moral claim on someone else’s income doesn’t negate the fact that you are proposing to take away more of their own money.
A better question might be why do so many on the Left think that I should be paying more of my paltry salary to send Warren Buffet a Social Security check and help pay for his prescription drugs?
re: ss’s failure to invest in “productive” assets.
First, when Clinton was president and we had a budget surplus (“Those were the days my friend . . .”), Republicans vigorously rejected the idea of the US govt become a direct investor in US financial markets. Oddly enough i agree. i think that both parties would succumb to temptation to use those funds for political purposes.
second, not every tax dollar goes to waste and fraud. Investments in infrastructure, for example, can generate a substantial “return”. No, I’m not saying that investing in a road is the same as investing in IBM. I am saying, however, that many kinds of federal tax dollars, including infrastrucure, education, environment, national defense, and basic research can lead to increased tax revenues, as the federal investment leads to a more productive tax force generating increased income.
Great Britain tried its own version of the Bush plan, has had to bail it out a couple of times already, and is looking to go more in the direction of SS. Are we as a country completely incapable of learning from our allies?
Francis
Thorley, are you saying that raising the FICA cap would be raising taxes on you personally? If that’s the case, then I really have to wonder why you would call a salary of $90K+ “paltry.” If not, what are you talking about?
fdl, is not exactly the case that money that goes to the gov’t simply disappears, anyway. I mean, that money goes to buy supplies, pay salaries … a good percentage of it does go back into the private economy.
“They’re spent on benefits and they’re spent on government programs. There is no trust.”
Did Bush really say this? An obvious Bushism, but the dude got it right for once.
I suggest out old clips of Ronald Reagan and Greenspan justifying and explaining the 83-84 actions and playing them in conjunction with “There is no Trust Fund.”
Oh, and I think most Democrats have seen, or should have seen this coming for twenty years. Mark Schmitt at the Decembrist:
Days of Wine and Reagan
explains that the Cato Institute had it all mapped out by 83. Default was always the intention.
If you get to the absolute basics here, FICA and income taxes, along with most other federal revenue, are all revenue in to the federal coffers. Social Security, defense, medicare, etc. are all money out. The deficit is the diffence, expect that it is really higher than what is reported, because of the accounting games they play with it.
Here is the question: if the system is out of balance by a massive amount each year, how do you improve it by taking money out and siphoning it into private (sorry, “personal”) accounts? You are just adding a couple trillion to the imbalance! It makes no sense.
The emperor is naked again, only this time even some of the R’s are admitting it.
Bush’s ‘reform’ ideas make no sense if ‘reform’ is what he has in mind. That’s the consensus among economists who actually know about this stuff.
Bush’s ‘reform’ ideas only make sense if ‘default’ is what he has in mind.
That being the case, the only responsibility Democrats have is to point this out, repeatedly, with graphs and pie charts and, if necessary, interpretive dances. Until it sinks into even the thickest skull.
The whole “we wouldn’t have the problem if Congress didn’t raid the ‘trust fund’” argument is simply disingenuous.
As noted, I agree. But Bush apparently doesn’t. Here I always thought you just mindlessly parroted the Adminstration line on everything, Thorley. My apologies, and I’m glad to know I was wrong.
I’m just wondering if FDL keeps up with what is going on with the “Big Dig”. Someone also mentioned rising interest rates, please take a look at the “yield curve” (it is flattening).
As for Democrats and SS having cried “wolf” for such a long period, the “just kidding” won’t play well for the Democrats on “Main Street. That is, how many democratic senators are up for reelection from “Red States” in the next midterm election? Politics is hardball.
TtWD: As I’m sure you know, what we’re saying is not ‘just kidding’; it’s ‘projections change over time. These projections have changed. Specifically, they have gotten a lot more positive. So while things looked dodgy in 1997/8, they now look as though any problems there are are minor.’ There’s a difference.
hilzoy, have the projections changed, some analysis if you don’t mind.
Timmy, you may wish to read upthread without skimming, as some of the analysis you seek may be found there.
Actually Catsy, I was thinking of something more substantial (actually I was thinking of some real analysis). And playing games (making them sing) with longtail projections, well my profession. I did find this interesting, better description it was amusing but certainly the analysis was sound if not bittersweet.
Phil wrote:
Raising the FICA cap is not “raising taxes,”
Sure it is, just as eliminating the personal exemption would be raising taxes. The fact that you somehow think you have a moral claim on someone else’s income doesn’t negate the fact that you are proposing to take away more of their own money.
First off, little man, don’t presume you know anything about my position on the idea of taxation generally simply because I understand something that you don’t. Suffice to say that you’re so far off base that it’s ludicrous. I voted for a party that’s to your right on the issue of taxes, so bite me.
Second, given that there’s going to be a FICA tax for the foreseeable future, do you want it to be a) progressive, b) regressive, or c) flat? If your answer is “c,” which I suspect it is, then why wouldn’t you support lifting the FICA cap?
Phil
Tarbaby alert! Don’t fall for it.
Well LJ, maybe we should change the equation of cutting benefits and/or raising SS taxes. Think outside of the box for a change.
I prefer putting “trusts” into the equation like the Ford Foundation or the Heinz Foundation. I also like foreign corporation paying a portion, thus put VAT into the equation. Maybe we could even cut the “payroll tax”.
Thorley Winston has pointed out, among other canards, that the Trust Fund, if it exists, has been spent on other government programs, which are not to be characterized as investments.
He has further stipulated that taxes are a moral claim on my income for which there is no justification.
He’s convinced me. I want the money stolen from the non-existent Trust Fund to conduct the war in Iraq returned by noon tomorrow. If the money is in the form of little chits of flyblown paper as the liars in the Bush Administration claim, hey, I’ll take them.
Further, I hereby declare that the moral claim on my property to finance the investment in Iraq with my tax dollars is defunct.
Noon tomorrow. Or else.
Actually, I’ll settle for Von and Sebastian and Hilzoy and Katherine and Edward and Charles, if he’s a good boy, negotiating at the table… with everything on the table.
One further point, which is rarely mentioned. The reason higher income folks are included in the Social Security system is because a grand political compromise was reached years ago. Why? Because without them in the system, the word (think Luntz) “welfare” will be applied, and then folks like Thorley will be back later to argue “why should I pay.. etc” His ideology demands it.
Sebastian called this a bribe some time ago. He recieved heat for it. The terminology is fine by me. Social Security is a great system.
Also, apropos of nothing, and I mean Nothing, Timmy:
Tag. You’re it.
here’s some really basic questions for the hard righties:
1. should there be a federally funded public pension?
2. if not, should there be a federally funded anti-elder-poverty program?
3. what’s the difference between 1 & 2? just how intrusive should the SSA be in determining eligibility? can SSA for example require someone who is property-rich and cash-poor to sell/mortgage their house, sell family heirlooms, become destitute?
I am not really qualified to answer since I am a fairly hard lefty, but judging from their rethoric over the years and taking their rethoric seriously I would have to say:
1. No, if you can’t afford to feed, clothe or house yourself though cookies.
2. That’s what poor houses are for.
3. Yeah, Fire sale!!! Bargains to be had!!! I have no obligation my fellow man, if they can’t take care of themselves, though cookies, I have got mine!!!
Actually, SS is paid to wealthy because they paid into the system, a pretty simple construct.
I’m all for taxing wealth (we should go after the Ford Foundation et al) and consumption (VAT).
John, tag you’re it.
can SSA for example require someone who is property-rich and cash-poor to sell/mortgage their house, sell family heirlooms, become destitute
Read up on Medicare program, we certainly don’t want both Agencies fighting over the same assets.
Timmy: if you want to know something, like for instance how big China’s GDP is, or whether the SS trustees’ projections have changed, you could try looking it up yourself. Or, in the case at hand, you could try reading the post I wrote about this less than 24 hours ago, which contains links. But because I’m in a good mood, you can check out all the trustees’ reports here.
Kevin Drum
hilzoy, I know how big China’s GDP is? And I’ve seen the SS projections but I still haven’t seen any analysis which remains the critical driver in this overall conversation.
Timmy — then why did you ask whether the predictions changed, since if you looked at the reports you must have known they did? I mean, it’s not as though my original statement was in need of correction or anything.
There’s some good analysis — too brief, but good — in this article (see especially the section ‘Are Actuaries Too Gloomy?’)
Important things, we must discuss.
“Persuasive this line of argument from you is not.”
Yoda talking, you are. Hmmm?
OK, cards on the table: who here thinks that the Bush Administration is maneuvering to default on the debt?
I don’t — I can’t believe that even the Bush Administration could do something so ludicrously stupid and devastating. I would, however, feel a whole lot more peace of mind if that thought had not been proven wrong several times before…
Timmy: I don’t think it’s that simple. It’s doubtful the Social Security system would have become law if the wealthy had not been included, both on the tax and the income end. Actually, I can’t wait until my income rises to $140,000 annually, the new upper limit on Social Security taxation.
Tax burden’s are good, particularly if they slide into a bogus trust Fund which is then raided to buy ink for Iraqi fingers. A good cause, despite the lies. Wait until the Iraqis find out their oil revenues will be repaying chits into the Trust Fund. I don’t think they’ll mind. You know, if they’re told.
I’ll take you up on the taxation of the Ford Foundation. Let’s do it. Scaife and company should be a good source of Federal tax receipts as well.
Now, I’m going to close my eyes and count to one hundred. Go hide. No fair hiding up on the roof, or under Mom’s bed.
Anarch: Well, Josh Marshall does.
And Newt and the Jacobins threatened default on all the debt back in the day.
Newt was a loudmouthed coward. I’m not a liberal who believes Bush to be stupid. He’s smart and crafty in a Texas sort of way. Which is to say, don’t doubt anything, especially if a smirk accompanies a coded statement. There is a plan. It is being implemented. If Stephen Moore of Cato and Grover Norquist, the government-hating impresario, believe there is a plan, who am I to doubt it?
Like someone said upthread, or was it on another site,
The Cato Institute planned default since 1983.
If default is not an option, why the loading up on debt?
Probably because, then, when the market ultimately enforces its discipline, nobody can be blamed. There will be no personal responsibility. Like history was to Marx, thus the market is to Moore, Kudlow, Rove et al. We must obey.
These are ruthless people. I mean, have you seen any compromise forthcoming on torture? Other than words?
I am undecided as to whether Bush would actually default on the debt to the trust fund. For one thing, he won’t be in office when the bonds start having to be repaid, so unless he would do it preemptively, well before it has to happen, I don’t see it. I am sure he’s willing to scare people with this thought, and/or try to convince some of his base that the trust fund is a myth, and there is no money. I am also undecided about whether he thinks this himself. He may be crafty, but he is not well-informed.
Whenever I start thinking of Bush et al as too subtle, I just repeat to myself: planning for the occupation of Iraq; planning for the occupation of Iraq. Then I go read what little is known of his actual plan, And then, oddly enough, that thought just goes away.
Ruthless, though, no question.
Anarch – I’m utterly convinced he wants to and intends to: his remarks about the SS trust fund removed any doubt. The only question is whether he’ll be able to.
On the one hand, he’s gotten everything else he’s wanted, and is accountable to no one under the current system.
On the other, there might just be enough public heat to put some spine in our eclair-vertebrated Congresspersons. I have hope that Reid will whip the Senate Dems into shape – he’s no Daschle, bless his heart – and Pelosi might be up for a fight in the House.
W and the rest say there is no Trust,
And i believe him.
For he is an honorable man.
So are they all,
All honorable men.
W and the rest say there is no Trust,
the T-bonds all have turned to dust
like vampires once filled with lust
to drain the treasury and rust
our battleships until a gust
of eastern wind lays bust
our navies. Eat a crust
of wonderbread now, grandma, just
choke it down because you must.
You will adjust.
Slightly OT, but relevant to the last two: anyone else find that Megadeth’s “Hook in Mouth” works remarkably well if you substitute “PNAC” for “PMRC”?
Great song, but the PNAC isn’t messing with poetry that I know of. More on topic would be an even better song off that album, “In My Darkest Hour”:
In my hour of need/Ha you’re not there/And though I reached out for you/Wouldn’t lend a hand
[…]
My whole life is work built on the past/But the time has come when all things shall pass/This good thing passed away
Back off topic, one of my favorite rock and roll images is Mustaine in The Decline and Fall of Western Civilization, dragging on a cigarette for about a minute over the opening chords of IMDH and exhaling all the smoke with the opening lyrics, an embodiment of his contempt.
I was thinking more of the chorus. The individual verses are more theocon than neocon, I agree.
Hm. There really ought to be a thread on political allegories (intentional and otherwise) in modern music. Dream Theater’s “In The Name Of God”, for instance.
DeLong had the sketch of a solution not long ago.
Which begs one to ask: how, precisely, does Bush plan on dealing with these “unfunded liabilities”?
When you have a deficit, there are only two ways of reducing it: cut spending, or raise revenue. With the deficit we already have from everything else, I find the notion that economic growth alone will make up for it quite ridiculous. And I’d be really interested to see Bush try to argue that a whole bunch of little “entitlement” programs need to go in order to pay for one big one, so spending cuts–since he’s already nixed any cuts at all to Medicare–would seem to be out.
Which leaves raising taxes. The huge, irresponsible ones enacted at the beginning of Bush’s term would seem to be a good start.
Hey, if you’ve got other ideas, I’m open to it. But cutting other spending and economic growth won’t hack it, and Bush has taken cutting Medicare off the table, so I’m wondering what that really leaves.
“Which begs one to ask”
Way to avoid an incorrect “begs the question”, keeping me and Gary happy.
As someone recently noted, if the point in time when SS’s outflows are greater than its inflows marks a crisis, then what does our general budget situation mark?
Way to avoid an incorrect “begs the question”, keeping me and Gary happy.
I never got a higher education, so I’m slowly cleansing myself of bad grammatical habits over the years. I’ve done a pretty good job with dangling prepositions, although I’m not draconian about it.
For what it’s worth, the left-blogosphere seems to be coming to the conclusion that the Bush reforms are a bad idea – with numbers, too.
Kevin Drum is the latest liberal with a private accounts plan to save SS which the Bush admin will ignore.