May 15, 2005
Why Oh Why Are We Ruled by These Idiots? (Yet Another Social Security Edition)
Edmund Andrews tries to keep score:
Beware the Easy Fix for Social Security - New York Times: The problem is that Mr. Bush's [Social Security] plan would not keep Social Security from running out of money. An apples-to-apples comparison would have to take into account that the government would eventually need to cut benefits or raise taxes even if the government did adopt progressive price indexing.
White House officials contend that the changes Mr. Bush has outlined would close about 70 percent of the long-term deficit, but... the changes would eliminate less than 60 percent... of the shortfall expected over the next 75 years. The projected insolvency would be delayed by only six years, to 2047. At that point... the government would have to reduce benefits by an additional 15 percent. Kent Smetters, a former Treasury official under President Bush and now an associate professor at the Wharton School of Business, came up with similar estimates about the impact of progressive price indexing.
Mr. Smetters noted that Mr. Pozen's original plan would have gradually trimmed disability benefits and would have closed about 70 percent of the shortfall. But Mr. Bush has vowed to preserve disability benefits at current levels, and to ensure that even low-income retirees are kept above the poverty line. 'I would say it solves about 60 percent, or a little less' of the projected deficit, Mr. Smetters said in an interview.
White House officials do not dispute those estimates, but they have redefined the problem. Instead of saying they would solve 70 percent of the 75-year deficit, the measure most analysts use, administration officials say the plan would reduce about 70 percent of the deficit in the 75th year of their plan. The difference is worth about $500 billion over 75 years. 'The real question is how close you are to getting the system back to positive cash flow by the final year,' said Andrew G. Biggs, deputy director of Mr. Bush's National Economic Council. 'How much of the final-year deficit does it eliminate? By that measure the plan closes about 70 percent of the deficit.'
Now let's be clear about what's going on here:
- The White House rolled out its declaration of "directional consistency" with Robert Pozen's progressive price indexing plan on April 28.
- The White House picked up from Pozen the claim that the plan would close 70% of the projected 75-year Social Security deficit.
- Someone in the White House then decided that Pozen's proposed cuts to disability benefits were unacceptable.
- Nobody went back and said: "Wait a minute. We're changing the plan. What does this mean for the 70% number we are claiming?"
- Andrew Biggs in the White House now has the thankless task of coming up with a number--not a number that anybody has ever used before, not a number than anybody particularly cares about, and not a number that anyone but an idiot would take as a summary statistic--that the Bush plan closes 70% of.
It would be much better for Mr. Biggs to admit that he is badly overworked and outnumbered by substance-free spinmasters, and as a result things get sloppy.
Posted by DeLong at May 15, 2005 07:02 PM