April 21, 2007
|The Nightmare Of Socialized Medicine||Social Security|
Jerome-a-Paris tells the story of his family's experience with French socialized medicine. His two-and-a-half year old son had a brain tumor. Here's the story. Americans, eat your hearts out:
[My son] was first diagnosed by our pediatrician, a private sector doctor, who sent us to the (public) specialised pediatric hospital in Paris for additional exams. We did a scan and a MRI the same day, and that brought the diagnosis we know. He was hospitalised the same day, with surgery immediately scheduled for two days later. At that point, we only had to provide our social security number.
Surgery [was performed by] one of the world's top specialists in his field...After a few days at the hospital, we went home. At that point, we had spent no money, and done little more than filling up a simple form with name and social security number.
Meetings with the doctor in charge of his long term treatment, and with a specialised re-education hospital, were immediately set up, and chemiotherapy and physical therapy were scheduled for the next full year.
Physical therapy included a few hours each day in a specialised hospital, with a varied team of specialists (kinesitherapy, ergotherapy, phychologist, orthophonist) and, had we needed it, schooling. As we lived not too far away, we tried to keep our son at his pre-school for half the day, and at the hospital the other half. Again, apart from filling up a few forms, we had nothing to do.
My wife pretty much stopped working to take my son to the hospital every day (either for reeducation or treatment) - and was allocated a stipend by the government as caregiver, for a full year (equal to just under the minimum wage). Had we needed it, transport by ambulance would have been taken care of, free of charge for us (as it were, car commutes to the hospital could also be reimbursed).
During the chemiotherapy, if he had any side effects (his immune system being weakened, any normal children's disease basically required him to be hospitalised to be given full anti-biotic treatment), we'd call up the hospital and just come around. Either of us could spend the night with him as needed. We never spent a dime.
After a year at the specialised hospital, ongoing re-education was moved to another institution specialised in home and school interventions. In practice, a full team of 5 doctors or specialists come to see him over the week, either at home or at school, to continue his treatment (such follow up, possibly less intense than at the beginning, will be needed until he reaches his adult size). Of course, they manufacture braces and other specialised equipment for him and provide it free of charge to us.
Check up exams take place every 3 months, with all the appropriate exams (usually including a MRI), and we've never had to wait for the appointments. Again, no cost for us, no funds to be fronted.
When he relapsed, our doctors considered all available options. In the end, the most promising technology was in another Paris hospital. Such technology, linked to nuclear research, exists only in 3 places in the world, one in Boston and one in Switzerland, so the French system itself was able to provide a cutting edge option. But had we needed to go to Germany, the UK or even the USA for treatment because that's where the best hope was, the costs of that would have been covered too by French social security.
Now that our son is in first grade, he has the right to special help for handicapped children at school (a fairly recent law), and he now benefits from part time help - a person who is around about 20 hours per week to help him do his work and catch up when he is absent for his therapy. This is paid by the city of Paris and the ministry of education. [...]
So, we did not have to spend a single cent. We got support to be available for him. He gets top notch treatment. We never had to wait for anything. And this is available to absolutely everybody in France, irrespective of your job, age or family situation. If you are badly sick or injured, you simply do not have to worry about money at any time, nor about lack of care. [Emphasis added]
Whenever the local NPR station carries a discussion of single-payer health care systems, there's always some belligerent guy (it's always a guy) who calls in and goes on about the how the US has "the greatest health care system in the world." It never fails. So clueless.
Pass the Freedom Fries.
May 23, 2005
|White House Casting Call||Politics Social Security|
Ever wonder how the White House picks the shills who appear on stage with Bush during his Social Security "town meetings"? The LA Times reports on a White House memo that lays out exactly what they're looking for. Excerpt:
As President Bush resumes his cross-country campaign to promote his vision of Social Security restructuring, it's no secret that he is relying on outside organizations to help provide the supporting cast.
Yet a memo circulated this week among members of one group, Women Impacting Public Policy, illustrates the lengths to which the White House has gone to make sure the right points are made at the president's public appearances.
"President Bush will be in Rochester, N.Y., for an upcoming event and has called on WIPP for help," said the memo to New York-area members, from one of the group's leaders. "He would like to visit with local workers about their views on Social Security."
The memo went on to solicit several types of people "who he would like to visit with" — including a young worker who "knows that [Social Security] could run out before they retire," a young couple with children who like "the idea of leaving something behind to the family" and a single parent who believes Bush's proposal for individual investment accounts "would provide more retirement options and security" than the current system. [...]
The women's group memo said the White House was seeking only people younger than 29. It reflected the latest refinement of the White House strategy for promoting its Social Security plan: highlighting the benefits Bush sees for younger workers.
The theme was on full display Thursday as Bush took his campaign to Wisconsin, the 26th state he has visited to promote Social Security restructuring.
"You got any thoughts about Social Security?" Bush asked 22-year-old Concordia University senior Christy Paavola, one of five younger workers who appeared on stage with him at the Milwaukee Art Museum.
"Yes," Paavola said. "I don't think it's going to be there when I retire, which is really scary."
Many young people, the president commented, think they are paying into a retirement system that will never pay them back. He asked Paavola: "Got anything else you want to say?"
"I really like the idea of personal savings accounts," Paavola said.
"You did a heck of a job," Bush told her. "You deserve an A." [My emphasis]
Pardon me while I retch.
Is there anything that comes out of this White House that isn't a made-for-TV lie?
April 06, 2005
|DeFazio Rebukes Bush||Politics Social Security|
[T]he President did say today something extraordinary, in Parkersburg, West Virginia, and suggested something unconscionable. The President said, "There is no trust fund." And then he went on to suggest that our Nation might not honor its debt to Social Security. This is what the President said does not exist.
Let me read from this [bond I hold in my hand]. This is a Social Security Trust Fund bond, considered the best investment in the world, a U.S. Treasury Bond. This is the most privileged of Treasury bonds, issued to Social Security, redeemable at any time at full face value, unlike any other bond that they issue. These are the most privileged of their bonds. The President says it is nothing but an IOU. Well, here is what it [a Social Security Trust Fund bond] says:This bond is incontestable in the hands of the Federal Old Age and Survivors Insurance Trust Fund. The bond is supported by the full faith and credit of the United States. And the United States is pledged to the payment of the bond with respect to both principal and interest.
The President questions that? He is questioning whether we are going to repay our most privileged debt to Social Security. We have $7.9 trillion of debt. He is adding to it at a record rate, borrowing $1.3 million a minute. Who is he saying we are going to repay and not repay?
Are we going to repay the Chinese but not the Social Security Trust Fund? Are we going to repay President Bush, he happens to have some U.S. Treasury Bonds in his personal portfolio, but not the Social Security Trust Fund? Are we going to repay other wealthy investors around the world and in the U.S., but not the Social Security Trust Fund? [...]
This year Social Security will collect $170 billion more than it needs to pay Social Security benefits, and they are invested in the trust fund. If what the President said is true, there is no trust fund, and we are not going to honor it, then Congress and the President are perpetrating a fraud of extraordinary magnitude on the working people of America, extorting through taxes $170 billion more than they need to pay current benefits that this President has no intention of repaying. That is unbelievable.
Every minute, every minute, this President and this Congress are borrowing $320,000 of Social Security taxes and spending it on something else. And the President says he is replacing it with worthless IOUs; they are not bonds, they are not investments. He questions whether they will be repaid. He questions the full faith and credit of the Government of the United States of America and its willingness, our willingness, to meet our obligations and our debt.
If what the President says is true, then we ought to give the working people of America, instead of the rich people of America, the biggest tax cut in history. Reduce the Social Security tax, which falls more heavily on working people. [Most] working Americans pay more in Social Security taxes than they do income taxes to the Federal Government.
If he has no intention of repaying that $170 billion that he is borrowing this year of excess Social Security taxes, then we should not collect it under false pretenses. We should give people a big tax break. That would stimulate small business, employment, and put a lot of money in the pockets of working people. I am not advocating that.
But if he does not repay it, he should be advocating it, and instead of trying to switch the game and having an irrelevant debate over a so-called privatization plan which actually makes the funding problems of Social Security worse and would require another few trillion dollars of borrowing, in which I guess [bond investors] would get these worthless bonds that the President questions. [My emphasis]
The endgame that Bush and his backers are shooting for is an eventual default on the bonds held by Social Security. That's why they need to drum it into everyone's head that the Trust Fund consists of "IOUs", not US Treasury Bonds. By 2018, if they have their way, we will all have heard this lie so many times that we will think a default is an inevitability, instead of the multi-trillion dollar ripoff that it would be in reality. Bastards.
|IOUs||Politics Social Security|
CBS MarketWatch yesterday:
President Bush on Tuesday said the Social Security trust fund doesn't exist, and that the Treasury bonds held by the program are "just IOUs"...
The remarks, which followed a visit to the federal facility in West Virginia that physically houses copies of the special-interest Treasury bonds held on behalf of the Social Security system, drew immediate denunciations from Democrats.
They charged that Bush was dangerously close to implying that the federal government won't stand behind trillions of dollars in debt held by creditors around the globe.
US Constitution, Amendment XIV, Section 4:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions..., shall not be questioned.
Presidential Oath of Office:
I do solemnly swear (or affirm) that I will...to the best of my ability, preserve, protect, and defend the Constitution of the United States.
March 27, 2005
|Cheney Grilled On Social Security||Social Security|
First Draft has an interesting post about Dick Cheney's Social Security road show. Unlike Bush, Cheney actually takes questions from some genuine, non-shill voters, and it's not going so well. Read it here.
March 07, 2005
|News Flash: Boomers To Retire (Greenspan)||Social Security|
Is he kidding?
That's the only possible reaction to Federal Reserve Board Chairman Alan Greenspan's conclusion last week that the massive federal budget deficit accumulated under President Bush was "unsustainable." Declared Greenspan: "The principle that I think is involved here...[is] that you cannot continuously introduce legislation which tends to expand the budget deficit."
That would be an entirely reasonable — even urgent — warning from someone who didn't bear so much responsibility for the problem he's describing. Greenspan lamenting higher deficits is like New York Yankees owner George Steinbrenner complaining about inflated baseball salaries.
Let's recap. When Bush was elected, the nation had enjoyed three consecutive years of federal budget surpluses under President Clinton. The Congressional Budget Office projected that the government was on track to amass surpluses large enough to pay off the publicly held national debt by 2008. That would make the nation debt free for the first time since the presidency of Andrew Jackson.
Greenspan had reliably supported this fiscal discipline under Clinton. But after Bush's election, Greenspan bent to the prevailing wind. Within days of Bush's inauguration, he gave his seigniorial blessing to tax cuts in testimony before the Senate Budget Committee.
As Bruce Bartlett, a leading conservative economist, wrote at the time: "With Greenspan's support...the last substantive barrier to tax reduction has evaporated." And Congress, with Greenspan's critical reassurance, passed the largest of Bush's massive tax cuts that year.
Greenspan built his argument for tax cuts in 2001 largely on his concern that the projected surpluses would be too large, allowing the government not only to extinguish the debt but also to accumulate financial assets, such as stocks and bonds.
That always seemed a dubious notion. But if that concern was legitimate, it seemed to be pretty well resolved by the time Bush came back for another tax reduction in 2003. The federal budget had already fallen back deeply into deficit...
Against that backdrop, surely the great voice of fiscal restraint would counsel caution about burdening future generations with more debt through more tax cuts.
Well, sort of. Greenspan, to his credit, said the second round of tax cuts shouldn't be passed without offsetting spending reductions. But he never seriously pushed Congress to reconsider the initial tax cuts passed on the obsolete assumption of vast surpluses.
Even today, Greenspan endorses even more borrowing for Bush's Social Security private investment accounts (if not quite as much as Bush wants), and points at spending cuts as the principal answer to the debt trap that he helped to create. Taken together, Greenspan's advice paints him more as an activist committed to shrinking government than a dispassionate banker counseling fiscal prudence. [...]
The best estimate is that over the next 75 years, Bush's tax cuts will cost $11 trillion — about triple the projected Social Security shortfall over the same period that Bush has labeled a crisis.
Greenspan really earned a place in the annals of chutzpah when he raised the impending costs of baby boom retirements as a principal reason why Washington should tackle its deficits. It isn't exactly a news bulletin that large numbers of baby boomers will be retiring at the end of this decade, or that this will swell the costs of Medicare and Social Security.
These trends were well known when Greenspan endorsed tax cuts in 2001. And yet by doing so, he helped sabotage America's best chance to reduce the burden of those costs for future generations.
Let's recap again. Clinton's plan was to use the projected federal surpluses to pay down the national debt. That would have significantly reduced, and eventually eliminated, federal interest payments on that debt (now running just under $180 billion annually). Then he proposed to use those savings to help fund Social Security. [...]
Greenspan last week described this slow-motion crisis as if he were some concerned bystander. But in the federal government's financial crackup, Greenspan's more like the guy at the party who handed the car keys to a drunk. Now, after the wreckage, he's sad. But we'd all be better off if he had spoken up when it could have done some good. [My emphasis]
To summarize, quoting Atrios:
Greenspan supported 11 trillion in tax cuts and then woke up and discovered the baby boomers would retire and cost $3.5 trillion — and the retiring boomers are the fiscal problem.
What is absolutely dumb-founding — and infuriating — is that Greenspan gets away with this sort of mendacity. It's the Emperor's New Clothes, and the guy's bare-assed naked.
March 05, 2005
|Ideology Versus Empathy||Musings Politics Social Security|
A conservative reader sent me a WSJ op-ed (Socialism's Last Redoubt) by former Delaware Governor Pete duPont, in which DuPont argues that the reason people on the left oppose wrecking Social Security is that we're socialists. I.e., it's really the ideology of socialism that we're defending; that's what motivates us. There's much in the piece that's wrong on factual grounds (he argues for a plan that exists only in his imagination; it's not the White House plan at all), but here's the portion I want to comment on:
Ultimately the argument isn't about investment accounts, or stocks or bonds or "gambling" or "insecurity." It is about socialism versus individualism, about Attlee's social justice and Hillary's common good and Chomsky's economic solidarity. [...]
When you increase an individual's wealth, he becomes less dependent on government, and his attitude towards government changes. Socialists can't allow that, for it erodes their fundamental principle that social justice can only be achieved when important segments of the economy are under government control.
And that is why today's very liberal Democratic Party is so vehemently arguing against personal ownership of Social Security market accounts. The government's Social Security system is socialism's last redoubt, and must be preserved at all costs. [My emphasis]
DuPont, of course, was born a multimillionaire, so worrying about retirement is not exactly his area of expertise. That aside, his claim that opponents of Social Security rollbacks are motivated by ideology — that it's not Social Security they're defending, but the larger, abstract idea of socialism itself — struck me at first as sophistry: just a way to make the argument. After all, I oppose wrecking Social Security, and it has never crossed my mind that what was at stake was some ideological conception of socialism in the large. I just don't want to see a lot of poor and middle class people get screwed.
But maybe duPont really believes ideology motivates the left. Why? Because ideology is what motivates him and many of his fellows on the right. Mostly, they want to destroy Social Security for ideological reasons, not out of a sincere concern for the welfare of the many people down here in the real world who depend on Social Security to make the difference between an old age spent eating cat food and one where they're at least getting by. If you see the world in ideological terms, you assume other people do, too. But those other people may actually be looking at the world through a different lens altogether: a lens of empathy, not ideology.
It's empathy that leads us to the conclusion that there are certain things that need to get done, things that government can do but capitalism will never do. So it's not that we love government. It's that government is the means to an end — an end motivated by empathy. Digby:
Capitalism cannot substitute for a democratic government that answers to all the people. The invisible hand doesn’t give a shit if children starve or old people have to work until they are eighty or if half the country has to work at slave wages to support the other half. Only government can guarantee its citizens the equal right to life, liberty and the pursuit of happiness. We believe that progress toward that end requires that the government be active and engaged in delivering those things.
The reason we support Social Security is that it performs a necessary function for which there is no substitute, and it works. And because we care what happens to our fellow citizens. For us, it's not a question of ideology. It's a question of empathy.
March 04, 2005
|Greenspan The Hack||Economy Politics Social Security|
From Paul Krugman:
Four years ago, Alan Greenspan urged Congress to cut taxes, asserting that the federal government was in imminent danger of paying off too much debt.
On Wednesday the Fed chairman warned Congress of the opposite fiscal danger: he asserted that there would be large budget deficits for the foreseeable future, leading to an unsustainable rise in federal debt. But he counseled against reversing the tax cuts, calling instead for cuts in Social Security, Medicare and Medicaid.
Does anyone still take Mr. Greenspan's pose as a nonpartisan font of wisdom seriously? [...]
To put Mr. Greenspan's game of fiscal three-card monte in perspective, remember that the push for Social Security privatization is only part of the right's strategy for dismantling the New Deal and the Great Society. The other big piece of that strategy is the use of tax cuts to "starve the beast." [...]
[C]onservative intellectuals proposed a bait-and-switch strategy: First, advocate tax cuts, using whatever tactics you think may work - supply-side economics, inflated budget projections, whatever. Then use the resulting deficits to argue for slashing government spending.
And that's the story of the last four years. In 2001, President Bush and Mr. Greenspan justified tax cuts with sunny predictions that the budget would remain comfortably in surplus. But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect.
In fact, Mr. Bush celebrated the budget's initial slide into deficit. In the summer of 2001 he called plunging federal revenue "incredibly positive news" because it would "put a straitjacket" on federal spending.
To keep that straitjacket on, however, those who sold tax cuts with the assurance that they were easily affordable must convince the public that the cuts can't be reversed now that those assurances have proved false. And Mr. Greenspan has once again tried to come to the president's aid, insisting this week that we should deal with deficits "primarily, if not wholly," by slashing Social Security and Medicare because tax increases would "pose significant risks to economic growth."
Really? America prospered for half a century under a level of federal taxes higher than the one we face today. According to the administration's own estimates, Mr. Bush's second term will see the lowest tax take as a percentage of GDP since the Truman administration. And don't forget that President Clinton's 1993 tax increase ushered in an economic boom. Why, exactly, are tax increases out of the question? [My emphasis]
And let's not forget that it was Greenspan who, in the early 80s, convinced Congress to raise the Social Security payroll tax and stash the resulting Social Security surplus in a trust fund that Greenspan said would finance the coming baby boom retirement — the same trust fund that he and others on the right now claim to be an illusion and a fraud.
What these people are up to is a multi-trillion dollar transfer of wealth from the low and middle classes to the wealthiest sectors of society. They get tax cuts, we get program cuts. They get us to pay trillions into the Social Security trust fund, we get benefit cuts when they eventually declare the trust fund's holdings null and void (which is where this is headed). And Greenspan's their mouthpiece.
And now I read that the Democrats' leader in the Senate, Harry Reid, agrees. WaPo:
Federal Reserve Chairman Alan Greenspan generally gets accolades for his public pronouncements. Yesterday he got a brickbat from Senate Minority Leader Harry M. Reid (D-Nev.), who blasted Greenspan as "one of the biggest political hacks we have here in Washington."
Reid ripped Greenspan during an interview on CNN's "Inside Politics." He said the Fed chairman has given President Bush a pass on deficits that have built up in the past four years and should be challenging Republicans on their fiscal policies, rather than promoting Bush's plan to introduce personal accounts into Social Security.
"I'm not a big Greenspan fan -- Alan Greenspan fan," Reid said when asked about the Fed chairman's testimony this week urging Congress to deal quickly with the financial problems facing Social Security and Medicare. "I voted against him the last two times. I think he's one of the biggest political hacks we have in Washington."
Reid said that when Bill Clinton was president, Democrats had confronted the deficit problem by enacting a tax increase in 1993, which helped bring about a balanced budget and strong economic growth later in the decade.
"Why doesn't he respond to the Republicans and tell them the big problem here is the debt that this administration [has] created?" he said. "We had a $7 trillion-dollar surplus when Bush took office. Now we have a $3 or $4 trillion-dollar deficit. That's, in fact, what Greenspan should be telling people." [My emphasis]
Right on, Harry.
Update: [4 Mar 5:11PM] James Wolcott sums it up: "Alan Greenspan, pompous hack. Harry Reid, blunt hero."
March 03, 2005
|Social Security Pledge||Social Security|
Senate Democrats are asking people to sign their Pledge to Protect Social Security. This simple pledge lays out the reasons why George Bush's privatization plan is not the answer:
- It would cut Social Security’s funding and weaken the program.
- It would cut benefits by one-third or more, even for those who choose not to risk their money in a privatized account.
- It would require even deeper benefit cuts for those who do choose a privatized account.
- It would require borrowing nearly $5 trillion, much of which from foreign countries like China and Japan.
Sign the pledge today: http://democrats.senate.gov/ss/pledge.html.
Pass it on!
February 28, 2005
|Constituents Are Pissed||Social Security|
Republican lawmakers are finding their constituents don't want Bush to mess with Social Security. Josh Marshall yesterday:
There are two important and telling articles on the Social Security debate in [Sunday's] papers, one in the Times and another in the Post, both looking at two sides of the same coin: the collapse of the president's initial effort to phase out Social Security.
The Times piece, by Sheryl Gay Stolberg and Robin Toner, confirms what you could glean if you've been reading the papers closely for the last week: the Republicans' townhall meetings on Social Security have ranged from so-so to terrible, with a few cases that were little short of riots. And they're coming back to DC with an even worse case of the phase-out-willies than they left with.
Sen. Chuck Grassley (R) of Iowa tells the Times, in so many words, that unless the president can pull off a major turnaround in public opinion on this issue, it's over. He goes on to say: "I think 90 percent of the lifting is with the president. That process is starting, but it's starting very slow because too many Republicans and Democrats — how would you say it? — don't have the confidence that this issue is ever going to come up."
There you go right there. And Grassley has also inadvertantly touched on one of the reasons [keeping track of where lawmakers stand] has become more difficult in recent days. Folks just don't want to say anything because they're not at all sure this thing's ever even going to come to a vote. [My emphasis]
Democrats need to stand firm. No deals that touch Social Security itself. Don't throw Bush a life-line; throw him an anchor.
February 27, 2005
|What's The Matter With AARP?||Politics Social Security|
The slime campaign has begun against AARP, which opposes Social Security privatization. There's no hard evidence that the people involved — some of them also responsible for the "Swift Boat" election smear — are taking orders from the White House. So you're free to believe that this is an independent venture. You're also free to believe in the tooth fairy. [...]
The message of Mr. Frank's book is that the right has been able to win elections, despite the fact that its economic policies hurt workers, by portraying itself as the defender of mainstream values against a malevolent cultural elite. The right "mobilizes voters with explosive social issues, summoning public outrage ... which it then marries to pro-business economic policies. Cultural anger is marshaled to achieve economic ends."
In Mr. Frank's view, this is a confidence trick: politicians like Mr. Santorum trumpet their defense of traditional values, but their true loyalty is to elitist economic policies. "Vote to stop abortion; receive a rollback in capital gains taxes. ... Vote to stand tall against terrorists; receive Social Security privatization." But it keeps working.
And this week we saw Mr. Frank's thesis acted out so crudely that it was as if someone had deliberately staged it. The right wants to dismantle Social Security, a successful program that is a pillar of stability for working Americans. AARP stands in the way. So without a moment's hesitation, the usual suspects declared that this organization of staid seniors is actually an anti-soldier, pro-gay-marriage leftist front.
It's tempting to dismiss this as an exceptional case in which right-wingers, unable to come up with a real cultural grievance to exploit, fabricated one out of thin air. But such fabrications are the rule, not the exception.
For example, for much of December viewers of Fox News were treated to a series of ominous warnings about "Christmas under siege" - the plot by secular humanists to take Christ out of America's favorite holiday. The evidence for such a plot consisted largely of occasions when someone in an official capacity said, "Happy holidays," instead of, "Merry Christmas."
So it doesn't matter that Social Security is a pro-family program that was created by and for America's greatest generation - and that it is especially crucial in poor but conservative states like Alabama and Arkansas, where it's the only thing keeping a majority of seniors above the poverty line. Right-wingers will still find ways to claim that anyone who opposes privatization supports terrorists and hates family values.
Their first attack may have missed the mark, but it's the shape of smears to come. [My emphasis]
The right's propaganda grows increasingly cartoonish and crude. More obvious — to you and me, anyway. When will red-state America finally catch on to the fact that they're being played for suckers? How much cognitive dissonance will finally be enough?
When, for example, will it dawn on them that Good Old Boy Dubya is really Mr. Andover-Yale-Harvard/son of a President/grandson of a Senator/millionaire from birth/dynastic heir of the Connecticut Yankee Bushes? Are people so completely hypnotized by television that they can no longer see right through even something so blatant as that — or this?
February 26, 2005
|How To Fix Social Security — Forever||Social Security|
Incomes above a certain level — the "cap," currently $90,000 — are not subject to the Social Security payroll tax. This makes the payroll tax an extraordinarily regressive tax. The payroll tax hits everyone at the same rate — up to the cap — but because of the cap, people with incomes above $90,000 pay a lower rate on their overall income than poor people do. The higher the income, the lower the rate. That alone makes the cap bad policy.
But a new actuarial memo [link via Josh Marshall] from the Social Security Administration ups the ante. According to the actuaries, eliminating the cap would make the Social Security system solvent through 2079 (their estimates have a 75-year horizon).
Moreover, in 2079 the Social Security trust fund, "as a percentage of the annual budget of Social Security...would be slightly larger than it is now." (Marshall)
In other words, the system would be solvent through 2079, at which point it would be in better shape than it is currently.
It's a simple fix, and a fair one. Why shouldn't everybody pay the same rate?
Of course, wealthy "conservatives" will fight tooth and nail to avoid paying the same rate as poor folks. It's just such a burden, being rich.
February 22, 2005
|Why SS Privatization Can't Possibly Work||Economy Politics Social Security|
In an earlier post, I argued that assertions that Social Security privatization will yield higher rates of return are based on a violation of the principle of "no free lunch".
Michael Kinsley expands the argument, in beautifully clear fashion. Here's his reasoning, paraphrased:
Higher returns can come from only two sources: 1) greater economic growth, or 2) other people. Let's take them one at a time.
1) Greater economic growth could come from: a) more capital investment, or b) smarter capital investment. Privatization, however, will accomplish neither.
a) More capital investment: For every dollar diverted from the Federal treasury into private accounts, the government (whose budget hasn't changed, and which has to get funds from somewhere) will have to borrow a dollar by selling bonds. A dollar spent buying bonds is a private investment dollar that cannot be spent on stocks. Net result: investment in stocks is unchanged.
b) Smarter capital investment: There is no reason to think privatization will result in smarter capital allocation. If anything, privatization is likely to lead to less intelligent allocation of capital, as millions of inexperienced investors enter the market.
2) If privatization doesn't cause greater economic growth, higher returns must come from other people. I.e., other people have to get lower returns.
a) Proponents of privatization assume that stocks will outperform bonds. If that's true, stocks' better long-term returns must come from fools who sell stocks (you can only buy stocks from someone who's selling them) — so they can buy bonds, for example.
b) "In other words, [Kinsley says,] privatization means betting the nation's most important social program on a theory that cannot be true unless many people are convinced that it's false."
c) And even if stocks do initially yield a higher return, the market will adjust. I.e., if stocks are a bargain, people will bid up their price until they are no longer a bargain. It's Econ 101, what I called the principle of "no free lunch."
Social Security privatization is smoke and mirrors. Snake oil. You can't create something out of nothing.
There's no free lunch.
February 11, 2005
|Social Security Killing Bush's Numbers||Politics Social Security|
Social Security is killing Bush's numbers. AP:
The public's confidence in President Bush's job performance and the nation's direction has slipped in the opening weeks of his second term, particularly among people 50 and older, according to an Associated Press poll.
Adults were evenly divided on Bush's job performance in January, but now 54 percent disapprove and 45 percent approve. The number who think the country is headed down the wrong track increased from 51 percent to 58 percent in the past month. [...]
The poll, conducted for the AP by Ipsos-Public Affairs, was taken after the president's State of the Union address and the elections in Iraq and at the start of a heated debate over creating personal Social Security accounts.
Older Americans, especially those 65 and above, were most responsible for the declining confidence and approval numbers.
Time to manufacture a new crisis.
February 08, 2005
|It's All About Ideology||Social Security|
Why are right-wingers so intent on dismantling Social Security? It's all about ideology. I think that's obvious (does anyone seriously believe the right-wing's zeal is based on an urgent desire to help the lower and middle classes?), but you don't have to take my word for it. Here's Stephen Moore of the Club for Growth and the Cato Institute:
Social Security is the soft underbelly of the welfare state. If you can jab your spear through that, you can undermine the whole welfare state.
Social Security first. Medicare/Medicaid next.
|Lying About Race||Social Security|
The White House and their flacks in the media have been pushing the idea that Social Security is a bad deal for African-Americans because African-Americans have a shorter life expectancy. This argument is an out-and-out lie.
African-Americans have a shorter life expectancy at birth because of much higher infant and childhood mortality and higher death rates for young adults. African-Americans who reach retirement age have almost the same life expectancy as whites. For this and other reasons, Social Security actually treats African-Americans as well as or somewhat better than whites. Paul Krugman explains (NYT, 28 Jan 2005):
This week, in a closed meeting with African-Americans, Mr. Bush asserted that Social Security was a bad deal for their race, repeating his earlier claim that "African-American males die sooner than other males do, which means the system is inherently unfair to a certain group of people." In other words, blacks don't live long enough to collect their fair share of benefits.
This isn't a new argument; privatizers have been making it for years. But the claim that blacks get a bad deal from Social Security is false. And Mr. Bush's use of that false argument is doubly shameful, because he's exploiting the tragedy of high black mortality for political gain instead of treating it as a problem we should solve.
Let's start with the facts. Mr. Bush's argument goes back at least seven years, to a report issued by the Heritage Foundation — a report so badly misleading that the deputy chief actuary (now the chief actuary) of the Social Security Administration wrote a memo pointing out "major errors in the methodology." That's actuary-speak for "damned lies."
In fact, the actuary said, "careful research reflecting actual work histories for workers by race indicate that the nonwhite population actually enjoys the same or better expected rates of return from Social Security" as whites.
Here's why. First, Mr. Bush's remarks on African-Americans perpetuate a crude misunderstanding about what life expectancy means. It's true that the current life expectancy for black males at birth is only 68.8 years - but that doesn't mean that a black man who has worked all his life can expect to die after collecting only a few years' worth of Social Security benefits. Blacks' low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years - not that far short of the 16.6-year figure for white men.
Second, the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers. Since African-Americans are paid much less, on average, than whites, this works to their advantage.
Finally, Social Security isn't just a retirement program; it's also a disability insurance program. And blacks are much more likely than whites to receive disability benefits.
Put it all together, and the deal African-Americans get from Social Security turns out, according to various calculations, to be either about the same as that for whites or somewhat better. Hispanics, by the way, clearly do better than either.
So the claim that Social Security is unfair to blacks is just false. And the fact that privatizers keep making that claim, after their calculations have repeatedly been shown to be wrong, is yet another indicator of the fundamental dishonesty of their sales pitch. [My emphasis]
February 07, 2005
|Bait And Switch||Social Security|
For months, conservatives have been arguing for Social Security privatization on the basis that investments in stocks and bonds will yield greater returns. I.e., they've been basing their arguments on an imagined Social Security plan in which people just get to take some portion of their Social Security taxes, invest them, and reap the proceeds. The White House has stood by and allowed the argument to proceed on those grounds.
Well, guess what. It turns out that is not the White House plan. Under the White House plan private account gains will be offset by reductions in benefits, leaving private account investors actually considerably worse off.
An editorial in the Minneapolis Star Tribune summarizes it nicely:
There are so many deceptions to discuss in President Bush's plan for dismantling Social Security, and many of them require complex explanations to show just how deceptive they are. For now, let's take on a couple. Please pay attention, young workers, because you get taken to the cleaners by his plan.
The structure of Bush's private accounts isn't new; it was offered as "Plan 2" by the 2004 President's Commission to Strengthen Social Security, so it has been pretty well studied.
In addition to the private accounts, the Bush plan envisions future benefit cuts for everyone. The line being peddled by the White House is that private accounts would more than offset the cuts, leaving younger people better off. That is simply not the case.
Using figures and economic assumptions from the Congressional Budget Office, the Center on Budget and Policy Priorities, a highly regarded liberal think tank in Washington, did the calculations. Here's what they found for first-year benefits for a worker now 25, of median income, who retires at age 65:
• If nothing is done to Social Security, some time between 2042 and 2052 (opinions differ) there would not be enough revenue flowing into the program from payroll taxes and its trust fund to cover the benefits flowing out. If benefits then were cut just enough to make up the difference, our hypothetical worker's annual benefits at retirement would decline $800, from $20,500 to $19,700.
• If the Bush plan is enacted, our worker puts the maximum allowable amount into a private account and the economy performs as the CBO expects, our worker would get only $13,097. Who wants to sign up?
Bush also says you own your private account and that you can pass it on to your heirs. Neither is true. In effect, the government loans you part of your Social Security tax to invest in a private account. But through a mechanism called "benefit offsets" that loan must be repaid at retirement, with interest (starting at 3 percent but adjusted for inflation).
What does that mean? Let's say you put $1,000 in your private account annually for 40 years, and you get a pretty-good 4 percent annual earnings on your investment. The value of your account would grow to $99,800. But the government would deduct $78,700 from your Social Security benefits, leaving you only $21,100, about 20 percent of what your account had accrued. If you earn only 3 percent on your investments, you don't come out a dime ahead from the private account, but you still suffer cuts in your guaranteed benefits.
In addition, most of the money in your private account could be passed to your heirs only if you die before you retire. The government would convert most of the value of your account into an annuity and give it to your heirs. If you live to retirement, the annuity goes to you, and when you die, whether one day or 20 years after retirement, the remaining value of the annuity reverts to Uncle Sam.
Younger workers should not be bamboozled. Something must be done to ensure Social Security pays them the benefits they deserve, but the system is in no danger of "bankruptcy." Bush's plan would make the existing problem worse rather than better, and younger people would bear the resulting financial pain. [My emphasis]
My conservative readers: stop arguing in favor of a plan that doesn't exist. Realize that you have been used. The White House wants to dismantle Social Security. Privatization will not leave people better off. Come clean.
|Bush Explains His Social Security Plan||Social Security|
Because the — all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those — changing those with personal accounts, the idea is to get what has been promised more likely to be — or closer delivered to what has been promised.
Does that make any sense to you? It's kind of muddled. Look, there's a series of things that cause the — like, for example, benefits are calculated based upon the increase of wages, as opposed to the increase of prices. Some have suggested that we calculate — the benefits will rise based upon inflation, as opposed to wage increases. There is a reform that would help solve the red if that were put into effect. In other words, how fast benefits grow, how fast the promised benefits grow, if those — if that growth is affected, it will help on the red.
Okay, better? I'll keep working on it. (Laughter.)
I guess it really does matter if you elect a guy who's spent his whole life running away from studying and reading. Bush groupies think this kind of incoherence is endearing and cute, but an explanation this garbled indicates a garbled mind. The guy doesn't understand his own plan. Scary.
February 05, 2005
|Why Isn't This Front Page News?||Social Security|
Some Republicans have even gone so far as to suggest the one approach Mr. Bush did not mention in his speech, raising the ceiling on income subject to payroll taxes, which is now about $90,000 a year. The idea appeals to some politicians because only about 6 percent of Americans earn more than $90,000 a year. Imposing Social Security taxes on incomes of up to $200,000 would come close to eliminating the entire deficit. [My emphasis]
Let that sink in. If we just raise the ceiling on the amount of income that is subject to the payroll tax, the whole problem is solved.
This little fact demonstrates just how completely dishonest all of the hysterical White House rhetoric has been. Why honest conservatives don't distance themselves from this kind of dishonesty is beyond me. And the fact that it's buried at the very end of a very long article, where hardly any readers will ever see it — just business as usual in the so-called liberal media.
Update: [5 Feb, 6:55 PM] Perhaps I should add: the payroll tax currently is an extraordinarily regressive tax. As it stands now, upper-income people are taxed at a lower rate than lower-income people, because only part of their income is taxed. Raising the ceiling is not a radical idea. Far from making the payroll tax a progressive tax, it will just make it a flat tax — at least, for people whose incomes don't exceed the new ceiling; they will still pay a lower rate. If the ceiling were removed altogether, the result would still only be a flat tax. Upper-income people who whine about paying the same percentage as poor folks should be ashamed of themselves.
February 04, 2005
|A Bit Of Fact-Checking||Social Security|
A juicy tidbit courtesy of Josh Marshall. In his State of the Union speech, Bush said:
Our society has changed in ways the founders of Social Security could not have foreseen. In today's world, people are living longer and therefore drawing benefits longer — and those benefits are scheduled to rise dramatically over the next few decades.
Sounds plausible, and sounds like a problem. Except it ain't true. Roger Lowenstein, NYT:
In 1934, when Franklin Roosevelt formed the Committee on Economic Security to design what was in effect the first federal safety net, the committee hired three actuaries to stargaze into the future. The actuaries predicted that the proportion of Americans over 65 — then only 5.4 percent — would rise to 12.65 percent in 1990, meaning that retiree costs would soar. They were just a tad high; the actual figure would be 12.49 percent. [My emphasis]
So, the founders of Social Security not only anticipated the demographic changes, they planned for an age distribution slightly worse than what has occurred. Not that anyone in this White House lets facts get in the way of a good sound-bite.
February 03, 2005
|Priorities||Politics Social Security|
Don't believe the hype. If Bush et al really cared about fixing Social Security (as opposed to dismantling it for ideological reasons), they wouldn't have pushed the Medicare drug benefit giveaway to the drug companies, nor would they be pushing to make Bush's tax cuts permanent.
In fact, Social Security is on a sounder footing now than it has been for most of its 70-year history. Without altering any of its particulars, its trustees say, it can pay full benefits straight through 2042. Over the next 75 years its shortfall will amount to just 0.7 percent of national income, according to the trustees, or 0.4 percent, according to the Congressional Budget Office. That still amounts to a real chunk of change, but it pales alongside the 75-year cost of Bush's Medicare drug benefit, which is more than twice its size, or Bush's tax cuts if permanently extended, which would be nearly four times its size.
In short, Social Security is not facing a financial crisis at all. It is facing a need for some distinctly sub-cataclysmic adjustments over the next few decades that would increase its revenue and diminish its benefits. [My emphasis]
Ignore their words. Watch what they do.
There is no crisis in Social Security.
|Think Progress||Politics Social Security|
Items are color-coded by category. It's got a number of points of rebuttal to Bush's SOTU speech. Check it out.
|Benefit Offset||Politics Social Security|
Yesterday, a "senior administration official" gave a Social Security briefing on "background" to reporters in Washington. You'll be hearing more about this briefing in the days to come. It provided a few peeks at the actual details of what the White House has in mind. Short version: it's not what they've been selling. It's way worse. WaPo:
[A] "senior administration official" who briefed reporters on the Social Security proposal earlier today disclosed details of the White House plan that I don't think will play well in Peoria. Most significantly, this official revealed that most or all of the earnings from new "personal" or privatized accounts will be paid not to the holder of the account, but to the government. The senior official called this a "benefit offset." It's one way to finance the creation of these private accounts, but it's going to cause quite a political stir, I think. [My emphasis]
WTF? That's your Ownership Society? Atrios:
But, this shouldn't be a big surprise. Benefit offsets have always been part of the whispered plans.
A lot or even most of the money in your private account is just going to deducted from your benefits. Zero sum game.
A lot or even most of the money in your private account is not going to be able to be left as an inheritance — you'll be required to buy an annuity upon retirement, and if you die one day later the money will be all gone.
Small wonder that Bush refuses to provide any details of the actual plan. If people understand what the White House is up to, the plan will be DOA. The only way they can get it passed is via massive disinformation. Think WMD.
February 02, 2005
|SOTU Rapid Response||Politics Social Security|
They'll be "live blogging" the speech (i.e., blogging on the speech in real time during the speech itself). Following the speech, they'll debunk it and provide links to media polls, tools for letters to the editor, etc. They also have a list of other blogs that will be "live blogging" the speech.
Personally, I don't have the stomach for tuning in to the speech, but I'll be joining a conference call for bloggers sponsored by thereisnocrisis.com following the speech, and I'll try to report back on that.
January 28, 2005
|Social Security Cartoon||Humor & Fun Social Security|
January 20, 2005
|Newt: Social Security Not A Crisis||Politics Social Security|
Americans are having more babies. The trend, combined with an annual inflow of immigrants that is more than the rest of the developed world combined, may undercut a key argument behind President George W. Bush's plan to allow private Social Security accounts: that the current system faces an emergency because of a sharp decline in the size of the future U.S. workforce.
Even Newt Gingrich, the Republican former speaker of the House of Representatives and a supporter of private accounts, says, "The combination of higher birth rates and more immigration makes the United States the healthiest of developed nations. This is not a crisis." [My emphasis]
January 19, 2005
|NYT: There Is No Crisis In Social Security||Politics Social Security|
The NYT Sunday published a lengthy analysis by Roger Lowenstein on the Social Security "crisis" – or, rather, the lack thereof. It's a long article, running to nine pages on the web (of which the first three are the most important). What follows are some highlights. Short version: it confirms everything I wrote in my recent series on Social Security.
After Bush's re-election, I carefully read the 225-page annual report of the Social Security trustees. I also talked to actuaries and economists, inside and outside the agency, who are expert in the peculiar science of long-term Social Security forecasting. The actuarial view is that the system is probably in need of a small adjustment of the sort that Congress has approved in the past. But there is a strong argument, which the agency acknowledges as a possibility, that the system is solvent as is.
Although prudence argues for making a fix sooner rather than later, the program is not in crisis, nor is its potential shortfall irresolvable. Ideology aside, the scale of the fixes would not require Social Security to abandon the role that was conceived for it in 1935, and that it still performs today — as an insurance fail-safe for the aged and others and as a complement to people's private market savings. [...]
What's more, there is a strong case to be made that the agency is erring on the side of being overly pessimistic. If its more optimistic projection turns out to be correct, then there will be no need for any benefit cuts or payroll-tax increases over the full 75 years.
No one can definitively predict that outcome, either, of course, but David Langer, an independentactuary who made a study of Social Security's previous projections compared with the actual results in 2003, thinks the "optimistic" case is its most accurate. Over a recent 10-year span, the trustees' intermediate guesses turned out to be quite pessimistic. Its optimistic guesses were dead on, and its pessimistic case — sort of a doomsday situation — was wildly inaccurate.
And, contrary to widespread belief, recent demographic trends have been modestly better (from an actuary's gloomy standpoint) than anticipated. For instance, longevity hasn't increased as much as expected. Partly as a result, since 1997 the agency has pushed back, by 13 years, the date at which it projects its reserves will be exhausted. In other words, as the cries of impending doom started to crescendo, the guardians of the system have grown more optimistic. [...]
The second debate concerning solvency is over whether the securities in the trust fund will be honored or whether, in Moore's pointed imagery, the fund will resemble a bank "after it's been robbed by Bonnie and Clyde." This seems an odd preoccupation. Social Security does not own junk bonds or third-world debt; it invests in U.S. Treasuries, considered the safest investment on the planet. Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss. Goss, the agency's actuary, says he has no doubt it will be able to do so again. "Absolutely," he said when asked if the trust-fund bonds are sound.
This isn't what some conservatives have said. Paul O'Neill, the former treasury secretary, went so far as to say that Social Security has no assets. In anti-Social Security literature, the "no assets" contention isn't even debated; it's treated as gospel. According to Michael Tanner, head of the Cato Institute Project on Social Security Choice, the agency's pauperism has turned America's seniors into "supplicants": after working and paying taxes their entire lives, "they earn the privilege of going hat in hand to the government and hoping that politicians decide to give them some money for retirement." The implication is that the money isn't there: graybeards will have to beg for it. […]
Such hyperbolic claims aside, there is a serious issue at the heart of what worries critics. It isn't that the trust fund is broken; it's that the existence of the fund is seducing the government to spend more than it otherwise would, thus brooking larger deficits in the future. Since Social Security lends its surplus to the Treasury (that's what it means to be investing in Treasuries), it is parking its surplus cash with the government. And just as lending money to a child outside a candy store may impose an impossible temptation, so the government may feel tempted while it holds onto Social Security's purse. [...]
To quote the report of [a] Social Security advisory panel, this one from the mid 90's, "It is pointed out that while today there are 3.3 workers paying into the system for every beneficiary drawing benefits, over time this ratio will change to two workers per beneficiary.... However, this has almost nothing to do with why there is a ... deficit." The report continued, "The ratio was fully taken into account in the 1983 financing provisions." [...]
About half of Americans...have private pension plans, but for two-thirds of the elderly, Social Security supplies the majority of day-to-day income. For the poorest 20 percent, about seven million, Social Security is all they have. Even those figures understate the program's importance. According to an agency publication, "Income of the Population 55 or Older: 2000," 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security. [...]
One rationale for privatization is that workers would get a better return on their money in Wall Street securities than with Social Security's dowdy old Treasuries. This notion, which has Wall Street investment banks salivating, was especially in vogue during the 90's, when the stock market was soaring. When the bubble burst, advocates reined in their sales pitch, but they still are unrealistically sanguine. Last year, Tanner of the Cato Institute wrote that "over the worst 20-year period of market performance in U.S. history . . . the stock market produced a positive real return of more than 3 percent." Actually, the market has done worse than 3 percent per annum in nine different 20-year periods.
In any case, Social Security could capture the return on stocks, without putting individuals at risk, by investing in equities directly. This would also achieve another frequently stated objective: keeping the government's hands off the Social Security trust fund. That option would be far more efficient, in economic terms, than separating the money into 150 million disparate accounts. Costs are much lower for one big investor. And more important, in a system of individual accounts, benefits will vary with individual choices, and some people will make poor ones. In Sweden, where the retirement system has included private accounts since 2000, the majority of Swedes made excessively risky investment choices by putting money into stocks at the market top, according to Richard Thaler, a University of Chicago behavioral economist. Finally, pooling the investment pools the risk, and thus reduces the danger of retiring at the wrong time. In a system of personal accounts, someone who retired after a market crash would be out of luck.
So it is notable that all the current proposals to privatize involve the economically inferior option of individual accounts. But privatization advocates aren't motivated solely, and perhaps not even primarily, by economics. Glenn Hubbard, Bush's former top economic adviser, wrote in Newsweek that an "obvious objective" of privatization is "to advance the president's ownership society agenda." [...] Peter Ferrara, a former White House staff member under Reagan and now senior fellow at the Institute for Policy Innovation, who has been proposing Social Security privatization plans since the late 1970's, told me that economics "was not my primary motivation. It was ideological. We don't want the government controlling that much investment." [...] [My emphasis]
Repeat after me: There is no crisis in Social Security. There is no crisis in Social Security. There is no crisis in Social Security.
Conservatives seek to dismantle Social Security because they oppose it on ideological grounds, as the more honest among them admit. It escapes me how anyone can believe that this one time, on this one issue, Republicans are running around like their hair's on fire because they are just frantic with worry over the well-being of the average American. As if the zebra had suddenly shed its stripes.
It also escapes me how, after the administration lied through their teeth to drum up a phony crisis based on the imaginary threat of non-existent WMD in Iraq, anyone can be ready to simply take their word for anything. They are employing the same marketing strategy, once again, to convince us there's a critical, urgent crisis that can only be met with an immediate, drastic, emergency response. But just as there were no WMD in Iraq, there is no crisis in Social Security.
Fool me once, shame on you...
January 13, 2005
|President of Fabricated Crises||Politics Social Security|
This WaPo column is so good I have to quote it at length:
Some presidents make the history books by managing crises. [...] But when historians look back at the Bush presidency, they're more likely to note that what sets Bush apart is not the crises he managed but the crises he fabricated. The fabricated crisis is the hallmark of the Bush presidency. To attain goals that he had set for himself before he took office — the overthrow of Saddam Hussein, the privatization of Social Security — he concocted crises where there were none.
So Iraq became a clear and present danger to American hearths and homes, bristling with weapons of mass destruction, a nuclear attack just waiting to happen. And now, this week, the president is embarking on his second great scare campaign, this one to convince the American people that Social Security will collapse and that the only remedy is to cut benefits and redirect resources into private accounts.
In fact, Social Security is on a sounder footing now than it has been for most of its 70-year history. Without altering any of its particulars, its trustees say, it can pay full benefits straight through 2042. Over the next 75 years its shortfall will amount to just 0.7 percent of national income, according to the trustees, or 0.4 percent, according to the Congressional Budget Office. That still amounts to a real chunk of change, but it pales alongside the 75-year cost of Bush's Medicare drug benefit, which is more than twice its size, or Bush's tax cuts if permanently extended, which would be nearly four times its size.
In short, Social Security is not facing a financial crisis at all. It is facing a need for some distinctly sub-cataclysmic adjustments over the next few decades that would increase its revenue and diminish its benefits.
Politically, however, Social Security is facing the gravest crisis it has ever known. For the first time in its history, it is confronted by a president, and just possibly by a working congressional majority, who are opposed to the program on ideological grounds, who view the New Deal as a repealable aberration in U.S. history, who would have voted against establishing the program had they been in Congress in 1935. But Bush doesn't need Karl Rove's counsel to know that repealing Social Security for reasons of ideology is a non-starter.
So it's time once more to fabricate a crisis. [...]
We've had plenty of presidents, Richard Nixon most notoriously, who divided the media into friendly and enemy camps. I can't think of one, however, so fundamentally invested in the spread of disinformation — and so fundamentally indifferent to the corrosive effect of propaganda on democracy — as Bush. [My emphasis]
The corrosive effect on democracy is enormous. This White House seems to feel no need for its utterances to bear any relationship, however tenuous, to the truth. It's all about making the sale today, future consequences be damned. It's just advertising, and false advertising at that. How public discourse returns to any sort of honest debate after this, I have no idea.
January 09, 2005
|Social Security, Postscript||Politics Social Security|
A postscript to the series on Social Security.
As Atrios points out, there's a glaring, dishonest contradiction at the heart of conservative arguments regarding Social Security private accounts.
On the one hand, conservatives tell us that private accounts would yield returns of 6.5%-7%. Such estimates are based on highly optimistic assumptions about economic growth. As Brad DeLong says, to achieve such yields:
means that the profits of currently existing and traded companies (not aggregate profits!) have to grow at 3.5%-4% per year... That means that the economy as a whole has to grow at 4.5%-5% per year forever.
On the other hand (here's the contradiction), the projections of a shortfall in Social Security starting in 2042 are based on highly pessimistic assumptions about economic growth: "productivity growth of about 1% per year and very low population growth by 2050 [DeLong]." Under the optimistic growth assumptions used to sell the idea of private accounts, Social Security would actually remain solvent indefinitely.
Let's recap. Social Security's in trouble because the economy is going to perform so poorly; private accounts are the answer because the economy is going to perform so well. Not exactly an honest argument.
January 08, 2005
|Social Security, Part 5||Politics Social Security|
[Final installment in a series about Social Security. Previous.]
The Social Security hype is completely reminiscent of the pre-war hype about Iraq. In both cases, a low-grade, chronic issue suddenly became an acute, oh-my-god-our-hair's-on-fire emergency demanding an immediate, drastic, no-time-for-discussion response. In both cases, we woke up one day to discover that the sky was falling. In both cases, it was bull.
The conservative campaign to corporatize Social Security is about "saving" Social Security like the war in Iraq is about finding WMD. In other words: it ain't. It's a justification, not a reason. Ideology is the reason. Ideology and greed. Conservatives don't want to "save" Social Security; they want to end it. Social Security is an enormously successful government program, created by Democrats, that has helped four generations of Americans and paid its own way in the process. How are you going to convince people that government's their enemy when it's doing them so much good? And it doesn't hurt that Republican allies are going to make billions if Social Security is corporatized.
I think it's obvious that Republican motives in this have nothing to do with helping people like you and me — one just has to look at everything else they do. But, as it happens, in this case we don't have to guess. A strategy memo by Peter H. Wehner, deputy to Karl Rove, was leaked recently. It says, in part:
Let me tell you first what our plans are in terms of sequencing and political strategy. We will focus on Social Security immediately in this new year. Our strategy will probably include speeches early this month to establish an important premise: the current system is heading for an iceberg. The notion that younger workers will receive anything like the benefits they have been promised is fiction, unless significant reforms are undertaken. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. That reality needs to be seared into the public consciousness; it is the pre-condition to authentic reform. [My emphasis]
Hence, the hype. The most important sentence, though, is probably this:
For the first time in six decades, the Social Security battle is one we can win – and in doing so, we can help transform the political and philosophical landscape of the country. [My emphasis]
There. He said it. It’s about transforming the political and philosophical landscape of the country.
Josh Marshall's comments on this sentence of Wehner's were so good that I'd like to quote them at length:
In other words, this isn't about the fiscal soundness of Social Security or the babyboomers moving toward retirement or anything else. As Wehner himself says, this is the best chance the opponents of Social Security have had in six decades of trying to phase-out the program.
And this allows us to see the whole matter clearly. Social Security has been around for seventy years. How many people do you know who really don't like Social Security? Back when I was younger I'd go spend part of my summer at the subsidized retirement community where my grandparents lived. And I don't remember many people who lived there bad-mouthing Social Security. And those folks had lived under the program for pretty much all of their adults lives.
Or, the more relevant question, how about people today? How many people think Social Security is a bad thing? A program that never should have existed? I'm not saying how many worry that the program may not be there when they retire. How many people don't even like the whole concept?
I think they're in a distinct minority.
So now you can see from memos emerging from the White House itself that this isn't about "saving" Social Security. If it were, what would that sentence mean — ("For the first time in six decades, the Social Security battle is one we can win")? The first time in six decades they can save it?
Clearly, this isn't about "saving" Social Security. It is a battle to end Social Security and replace with something that Wehner clearly understands is very different, indeed the antithesis of Social Security.
This entire debate is about ideology — between people who believe in the benefits Social Security has brought America in the last three-quarters of a century and those who think it was a bad idea from the start. There is an honest debate to have on this point, a values debate. Only, the White House understands that the belief that Social Security was always a bad program isn't widely shared by Americans. So they have to wrap their effort in a package of lies, harnessing Americans' desire to save Social Security in their own effort to destroy it. [My emphasis]
Pretty much everything the right-wing's doing, they're doing by stealth, lying about their motives, lying about their goals. As Josh Marshall says, there's an honest debate to be had. They choose not to have that debate, however. They choose instead to hoodwink as many people as they can. What could be more undemocratic? What could be more dishonest? Why don't honest conservatives object to what's being done in their name?
January 06, 2005
|Social Security, Part 4||Politics Social Security|
[Fourth in a series on Social Security. Previous.]
Returns On Private Accounts
Another phony aspect of the current Social Security hype is the notion that stock market investments are guaranteed to produce a higher rate of return than investments in bonds, even when corrected for the additional risk incurred. It is true that stocks have historically outperformed bonds, returning about 7% in real terms (minus commissions and fees), but, as Paul Krugman points out, the idea that this will continue indefinitely is just bad economics. If stocks outperform bonds, after correcting for risk, that just means stocks have been under-priced. The market will adjust. I.e., if stocks are a bargain, more people will buy stocks, bidding up their price, until they are no longer a bargain. That's Econ 101. It's paradoxical (and ironic) that conservative free-marketeers are the ones who seem to be (or choose to be) oblivious of this basic economic principle, which might be called the principle of "no free lunch".
Indeed, the market may have already adjusted. Historically, stocks were priced at 14 times earnings; today, they're priced at 20 times earnings. The return tends to be inversely proportional to the price-earnings ratio, so at current P/E ratios, future returns will be lower than they've been historically: 5%, rather than the historical 7%.
But that 5% is still better than the inflation-corrected return on bonds (about 2%), isn't it? Yes, but wait. As Krugman points out, private Social Security accounts probably won't be 100% in stocks. Probably more like 60%, with the remainder in bonds. That reduces the overall return to 3.8%. Then there are the commissions and fees. In the UK, they are about 1.1%, lowering the return further to 2.7%, barely better than what Social Security earns right now, but now with lots of added risk.
Privatizers propose to keep fees low by having the investments go into government-managed index funds (funds where individual accounts are pooled to buy a broad basket of stocks selected by fund managers to match the average performance of the stock market as a whole). As Krugman says, this is probably the bait in a bait-and-switch. How are you going to keep individuals from selecting their own investments when you've sold the plan as the "ownership society"? Once people start picking their own stocks, the fees — and the risk — skyrocket. If, on the other hand, privatizers do stick with government-managed index funds, it's just the trust fund all over again, but investing in index funds rather than bonds. As Krugman asks, what would be the point then of calling them private accounts?
Tomorrow, Part 5 — Motives
January 05, 2005
|Social Security, Part 3||Politics Social Security|
[Third in a series on Social Security. Previous.]
The Trust Fund
Conservatives like to attack Social Security by saying the Social Security trust fund is a fiction: IOUs from one part of the government to another. They say it's all just a big shell game, a fraud.
As Paul Krugman points out, there are two problems with this position.
The less significant problem is that if the conservatives are right that the trust fund is a fraud, then it's a Republican fraud, perpetrated when the Reagan administration and the Greenspan Commission got Congress to raise payroll taxes and create the trust fund in 1983. The Republicans invented the trust fund, but now we're supposed to listen to them when they tell us: a) it's a fraud, and b) they've got the solution.
The more significant problem, however, is that there's a fundamental illogic in singling out the government's obligations to Social Security as somehow distinct from its debt obligations generally. The so-called "IOUs" held by the trust fund are US government bonds. The government got money to spend, and in return it issued promises to repay, with interest — i.e., it issued (sold) bonds. The treasury sells bonds to all sorts of buyers, Social Security being only one of them. The proceeds from these sales finance the deficit.
In a world where the government always operated under balanced budgets, so that it had no debt (bonds) to sell, the Social Security trust fund would invest in something else. Conversely, if the trust fund hadn't bought the bonds, the government would have sold them to someone else. The government had debt to finance. It would have done so, whether the Social Security trust fund existed or not.
There may be a fiscal crisis in the offing, but, if so, it is a general problem of large-scale deficits and indebtedness, caused in no small measure by tax cuts for the wealthy. It's not a Social Security problem. Put another way, the problem is that so many bonds are being sold, not that Social Security happens to be buying some of them.
If there is a fraud here, it's the Republican fraud of transferring enormous sums to the wealthy via tax cuts, then trying to blame the resulting indebtedness on Social Security, when Social Security, year after year, operates in the black.
Tomorrow, Part 4 — Returns on Private Accounts
January 04, 2005
|Social Security, Part 2||Politics Social Security|
[Second in a series on Social Security. Previous.]
Is Social Security Going Broke?
Social Security isn’t going broke. Social Security’s own actuaries conservatively estimate that payroll taxes alone will be sufficient to cover benefits until 2018. From 2018 until 2028, the interest earned on trust fund assets will cover the shortfall. After 2028, the trust fund assets themselves will have to start being used. It is only in 2042, at the earliest, that trust fund assets will be exhausted.
This 2042 date itself is very conservative, and it keeps receding (ten years ago, the estimate was 2029). The Congressional Budget Office projects a date of 2052. All of these estimates are based on considerably lower average rates of growth in GDP and productivity than have historically been the case. If the economy and productivity were to continue to grow at historical rates, the dates would be pushed back much further.
In any event, it is essential to understand one key fact: even if the trust fund is completely exhausted, Social Security benefits won’t come to an end. Incoming payroll taxes will still cover most of the benefits. In fact, the Social Security trustees estimate that:
Social Security will still be able to pay 74% of its promised benefits from 2042 to 2078, and those benefits would still be higher in real (inflation-adjusted) terms than retirees are being paid today” [My emphasis]
That’s if absolutely nothing is done in the meantime. Relatively minor tweaks in the system would be enough to push shortfalls back indefinitely.
Tomorrow, Part 3 — The Trust Fund
January 03, 2005
|Social Security, Part 1||Politics Social Security|
How Social Security Works
Current workers (and their employers) pay a payroll tax that goes into the Social Security system, which uses that incoming tax money to pay current benefits. I.e., Social Security is essentially a “pay as you go” system, supported by a tax that’s dedicated to a specific purpose, like highway maintenance taxes.
More money comes in than is paid out, however; the difference is the Social Security “surplus.” This surplus ($153 billion in 2003) is invested in special-issue US government bonds. “Special-issue” in that they cannot be traded; otherwise, these bonds are like other government bonds, representing a loan to the government for which the government pays interest ($75 billion in 2003, for an effective annual rate of 6%) and which the government promises to repay after a specific time period.
Social Security’s bond investments are held in a trust fund that was created in 1983 when the Reagan administration cut taxes for the well-to-do and raised the highly regressive payroll tax. The idea was for the trust fund to be a savings account to help cover benefits when baby boomers retire.
Currently, the trust fund has over $1.5 trillion in assets. Some conservatives argue that the trust fund is a fiction, though, or even a "fraud," a claim that I’ll come back to in Part 3.
Tomorrow, Part 2 — Is Social Security Going Broke?
December 21, 2004
|Social Security: Outright Lies||Politics Social Security|
Both Card and Snow, who appeared on "Fox News Sunday," said Social Security is beyond repair as it now stands. They said details of a plan to overhaul it remain to be worked out. [...]
Asked whether Bush's ideas would remove guarantees of Social Security benefits to younger workers, Card said: "Under no one's plan will younger workers receive benefits they've been promised because the Social Security system doesn't have the financial underpinning, the foundation to support the expectations of social security 75 years from now, 50 years from now." [Emphasis added]
Is there any other issue where the administration shows even the minutest trace of concern for what may happen decades from now? Global warming? Oil depletion? Rain forest destruction? But Social Security — there's a five-alarm fire demanding emergency action RIGHT NOW!
They're just worried sick about our retirement, you see.
December 20, 2004
|Social Security and Medicare||Politics Social Security|
Repeat after me: There is no Social Security crisis. There is no Social Security crisis. There is no Social Security crisis.
Social Security is not in imminent danger. Projections by the GAO say that if nothing is done, the Social Security Trust Fund will run out of money a half century from now. But there are two key things to remember:
- Relatively minor tweaks will be enough to prevent this.
- Even if the trust fund is exhausted, Social Security will not be "bankrupt". Social Security revenues (the money being paid into the system) will still be enough to cover more than 80% of promised benefits. That's if absolutely nothing is done.
Republicans need you to believe there's an imminent crisis, but it's a lie. They want to corporatize Social Security for ideological reasons and so they can divert billions of dollars into the pockets of Wall Street firms.
But corporatization (privatization) doesn't work. We don't have to guess about this. We can learn from the experiences of other nations who have tried it. Those nations found, quoting Paul Krugman:
- Privatization dissipates a large fraction of workers' contributions on fees to investment companies.
- It leaves many retirees in poverty.
If Republicans really cared about protecting entitlement programs, they'd look at Medicare long before they looked at Social Security. The LA Times:
As restructuring Social Security moves to the top of his agenda, President Bush is sidestepping a troublesome problem: Medicare, which provides health insurance for 41 million elderly and disabled people, is fast going broke.
Medicare is projected to exhaust its hospital-care trust fund by 2019, more than 20 years before Social Security is forecast to slide into the red. The day of reckoning could come even sooner, because Medicare's condition has been going from bad to worse.
The government's unfunded promises to future retirees under Medicare amount to a staggering $27.7 trillion over the next 75 years, according to Congress' Government Accountability Office. That dwarfs the $3.7-trillion liability over the same period for Social Security.
"The Medicare problem is about seven times greater than the Social Security problem, and it has gotten much worse," said Comptroller General David M. Walker, head of the GAO. "It is much bigger, it is much more immediate, and it is going to be much more difficult to effectively address." [My emphasis]
But then constructive problem-solving isn't what it's about.
December 10, 2004
|Social Security Corporatization Explained||Humor & Fun Social Security|
The Onion puts Social Security corporatization into perspective.
November 18, 2004
|Tweak Social Security, Don't Corporatize It||Politics Social Security|
The people who are determined to corporatize ("privatize") Social Security want you to believe Social Security's in desperate trouble. Not so.
As Edith Fierst demonstrates in today's WaPo [via Kevin Drum], if we set aside ideology and just look at the numbers, fairly minor (and relatively painless) changes would suffice to wipe out all or nearly all of the Social Security deficit and guarantee solvency for decades to come. There are other possible approaches besides Fierst's, but the key point is that the sky is not falling. When people tell you it is, it's because they want to get their hand in your pocket.
September 03, 2004
|The Ownership Society||Politics Social Security|
Last night, Bush declared the "Ownership Society." Or, as Greg Palast puts it, Bush told the convention "he's ordered the invasion of the Social Security Trust Fund." Excerpts from Palast:
Of all the bone-headed, whacky, breathtakingly threatening schemes George W. Bush is trying to sell us in his acceptance speech tonight is something he and his handlers call, "the Ownership Society." Sounds cool, "ownership." Everyone gets a piece of the action. Everyone's a winner as the economy zooms. All boats rise.
Sure. Behind the hooray-for-free-enterprise crapola is that dog-eared game-plan to siphon off Social Security revenues to pay for making Bush's tax cuts for the rich permanent.
Here's what the President has in mind. Social Security is an insurance plan. You pay in, you get back. But it's hard to get your money back when there's a war where the Clinton surplus used to be. [I love that phrase!] It's not the war on terror, or the war in Iraq, though Lord knows those have cost us a bundle with nothing to show for all the lost loot. I'm talking about the class war that Dubya and his Dick Cheney have waged on the average working person.
We're talking an economic Pearl Harbor here. While firemen and policemen went running into falling buildings, the Bushmen were preparing to relieve some gazillionaires, such as say, the Bush family, of the need to pay the taxes that the rest of us pay. Work as a teacher, you pay Social Security and income taxes on every darn penny. Sit on your yacht and speculate in the stock market casino and you are off the hook on taxes on the "capital gains."
Bill Clinton proposed putting his big surpluses into a Social Security "lock-box" for that predictable rainy day. But tonight, Bush instead proposes to give the stock-options class a boost by lopping off a chunk of Social Security insurance revenue for gambling in the stock market. He had this same idea in 2000. If he'd had his way on his inauguration day, the average "owner" in America, investing in the stock market, would be 7% poorer, many flat busted. Some "security." Happy elderly "owners" would be hunting for lunch in the garbage cans under Madison Square Garden.
Here's the latest report from the front lines of the class war: The World Bank reports the USA has more millionaires than ever — we'll see them at the Garden tonight. Median household income's down — most of us are median — while the bottom has fallen out for those at the bottom. Our poorest 20% have seen incomes drop by a fifth. America's upper one percent now own 53% of all the shares in the market.
And now the uppers want to crack open your retirement piggy bank, cut some of your retirement benefits, then "allow" you to give them the remainder of your money to fund their latest stock float schemes.
If betting trillions on stock market ponies doesn't produce a big win, what does Mr. Bush propose to do with all the hungry old folk? I think I heard George say, "Let them eat Enron certificates."
And the future market fall, Mr. President, is a slam-dunk certainty. Let's do the math. OK, class, we all buy stock this afternoon to fund our retirement. In fifteen years, baby-boomers are ready to kick back, take it easy and retire on the stock they're about to sell. Did I say, "SELL"? And HOW. Around 2020, tens of millions of "owners" will be selling their shares … to whom? CRRRRASH! [My emphasis]
"America's upper one percent now own 53% of all the shares in the market." Do you suppose that could have anything to do with the motives for this plan that will pump trillions of new dollars into the market, thereby raising the value of that 53%? Raising the value, that is, until the Boomers sell, the gazillionaires having long since taken their profits and gotten out. The Ponzi scheme of all time.
August 27, 2004
|Reverse Robin Hood||Politics Social Security|
Atrios on Greenspan on Social Security:
Greenspan advocated raising [regressive] payroll taxes which later allowed him to advocate for using that revenue to pay for tax cuts for the rich and then advocate against using that money for the purpose he said it should be used for.
Decent people should shun this man.
They should indeed. Read the rest here.