Brad DeLong's Semi-Daily Journal: A Weblog

Here is what Jerry Mazza, author of "Social Insecurity" (OnlineJournal.com) told me:

The problem is as you know that
Bush refuses to raise taxes to finance Social Security, some more
grandstanding for the rich. A friend estimates that additional SS tax could
be as low as $15 a week, not a bad compromise at all to preserve a system of
such great value. Rather, Bush wants to borrow billions, even trillions to
establish private stock market accounts. Which would be another $60 to $90
billion dollar a year giveaway to the Wall Street sharks. And one which
could literally break the economy. But what do they care, they're rich
already. It certainly would destroy the benefit system as we know it for
seniors, leaving them without the SS income stream in their twilight years.
This is a potentially "catastrophic" plan, which will make the Medicare
boondoogle look like a tea party. And this is also part of the systematic
pillaging of the American government's assets and redistribution of them to
the rich and Republican allies of Bush.

Check www.politicalthought.net for more information and for an interview date with Jerry.

This is what annoys me about conservatives. They always win at framing the debates, even though they do it in the most unfair and/or ridiculous ways.

Over at Idiot Boy Don Luskin's site, he links to a piece from The Wall Street Journal editorial page adapted from an entry in the recent Hoover Digest. It's by Milton Friedman. I didn't read the entire thing yet, but one line that I read in the piece from The Journal was that socialism used to be about controls and things like that to command the economy a certain way. Now, Friedman argues, those most likely to be socialists are supporters of the welfare state.

Milton Friedman is clearly an economic genius and a towering figure in the field, but like Yglesias, I have to call bullshit. Friedman seems to be moving the goalposts and/or building a strawman. Paul Krugman and Robert Rubin, two name two people, who are essentially moderate liberals who have a strong free-market streak. They seem to be firmly against privatizing any form of the current Social Security system, yet would anyone besides the most extreme right-wingers accuse them of being socialists?

Matt is correct. We are having a debate on policy and we do not know the details. The plan is to get everyone to choose sides and get on board. Then the details will be slipped into the final bill in the middle of the night and Congress will end up voting for or against a bill most members will not have had time to read. We know nothing about how the plan would be structured, how much extra it would cost to manage the accounts, etc.

What Brooks really means is the debate is between those who HAVE FAITH that the markets will deliver and HAVE FAITH in Bush policies and those that DEMAND to see the DETAILS first. There are actually 2 debates that are simulataneous and conflated. One debate is whether SS is in trouble and if so what would be the best way to fix it. The Bush administration has been entirely dismissive of this debate and acts as if the outcome has been decided in favor of privatization. This is the debate that those opposed to privatization must bring to the forefront. The other debate is whether or not privatization is a good idea. This is the debate the Bush administration wants to have. If the the options for fixing SS are never discussed, Mr Bush will have won that debate without ever debating.

Mr Bush was an oil man who engaged in numerous risky ventures all of which lost money for investors and had to be bailed out by passing the losses onto others. The kinds of risky ventures that are familiar to Mr Bush or totally inappropriate for investments that may be the sole source of retirement income. Mr Bush, an elitist, is out of touch with ordinary Americans on SS and what it means

I can understand that people who don't need their SS would like to invest it in more risky ventures. However, that does not make it a good idea.

I ask again, shouldn't Friedman be arguing for an auction of the right to manage the private accounts since that right will represent an annual income stream to Wall Street? Couldn't funds from the auction be used to offset transaction costs.

Even if for reasons the econogurus understand (but as to which I have not one clue), couldn't people talk about it this way on Sunday morning talk shows?

No one's addressing the elephant in the room. What happens in 5-8 years when Medicare craps out and the government has already added $100 billion a year to privatize Social Security. So not only does this plan have the great effect of destroying Social Security, but it also could put the final nail in Medicare as currently seen. Grover Norquist must be giddy.

You do have to admit it's political genius for Bush to push this through while the Democrats are demoralized and disorganized.

Brooks lines up the markets with Bush and his supporters and suggests that by not supporting the President, the Democrats are against the market. Ironically, history shows that both real economic growth and the stock market do better when there is a Democrat in the White House – must be their market-friendly policies.

I actually think the Democrats should reframe the debate by coming up with their own plan to raise enough revenue to make Social Security fully funded (or maybe just "partially funded," if you will). No, it's not going to be put into law in the current political environment. And it will not come at too much political cost if the Democrats can make the plan super-progressive and sell it as such. They must sell it as a PRECONDITION for any "reform" that Bush or anyone else may want to do. This must be done in order to reframe the debate.

The core of the policy debate here is that Social Security is *pay-as-you-go*. Today's payroll taxes are mostly used to pay the benefits of today's retirees, and the rest of it -- that is, the present excess of payroll taxes over benefits -- is the so-called Social Security Surplus. In a few years, current benefit payouts will begin to exceed current payroll tax revenues. Today's Social Security surpluses (and additional revenues from elsewhere) are needed to cover that coming shortfall. By diverting today's payroll taxes into private accounts for the future retirements *of current payroll tax payers* and away from benefits *for current retirees*, the Republicans exacerbate this coming shortfall. That is, they are making this excess of benefit payouts to current retirees over current payroll taxes even worse, by reducing the amount of payroll taxes available for those payouts.

The Republicans want people to believe erroneously that Social Security is already fully funded. They were even able to fool David Brooks, who I thought was better informed. By fooling people into believing this fallacy, they trick them into thinking falsely that it's a debate of "markets vs. government."

The Democrats must create a plan to "FULLY FUND" Social Security and call it that, selling it as the necessary precondition for so-called reforms. This refocuses attention away from the fake stock market debate and towards the hard budget math that must be considered.

The real elephant in the room is one's economic model. Any privatization plan that relies on stocks to supply historic levels of returns implicitly assumes a certain level of future economic growth. And it is the duty of any honest proponent of private accounts to present his or her built in prediction of that growth so that we can compare it with the Low Cost or Intermediate Cost alternatives presented in the Annual Reports of the Trustees of the Social Security Trust Fund. They simply refuse to do so. It is intellectually dishonest to present a crisis based on one set of numbers and propose a solution based on another, much more positive set. And yet that is exactly what we face here.

Until privatizers bring numbers I will continue to cry "bullshit". (Apparently adding my voice to Matt Y's)

David Brooks's entire life purpose seems to be to reinforce oversimplifications. He's the ultimate legitimizer of "Babbitt America" - an intellectual for anti-intellectuals. An infuriating clown who is a bugle-boy for idiots.

The Times should shitcan his sorry ass yesterday.

Bruce Webb,

Two _New York Times_ articles this morning make the "historic equity returns will continue" fallacy.

"It sounds like a no-lose proposition. According to the Social Security Administration, Treasury bonds can be expected to yield a real annual rate of return of about 3 percent. Equities, by contrast, can be expected to earn 6.5 percent." (Edmund Andrews, "Social Security Reform, With One Big Catch," _NYT_, 2004-12-12, URL http://nytimes.com/2004/12/12/business/yourmoney/12view.html)

"Assume that this person started working at 21 and saw his pay rise so that he was always a medium earner. Figure that half the money is invested in stocks (with an average annual yield of 6.5 percent), 30 percent in corporate bonds (a 3.5 percent yield) and 20 percent in Treasury bonds (3 percent), and then deduct 0.3 percent a year for administrative fees." (David E. Rosenbaum, "Do-It-Yourself Social Security: Many Blanks Left to Fill In," _NYT_, 2004-12-12, URL http://nytimes.com/2004/12/12/weekinreview/12rose.html)

One non-economist who's really been good on the media's lack of digging on this issue has been Bob Somerby at the Daily Howler (http://www.dailyhowler.com). He attacked Brooks' argument in
http://www.dailyhowler.com/dh121104.shtml
and has many recent posts on the subject.

This is the kind of discussion that would delight George Lakoff. He would say "Be watchful, David Brooks isn't spitting bullshit: he's framing the issue as "Market vs State". If you try to debunk his non existent argument you are falling in the trap. Instead you should come up with an opposite and convincing frame, like "Risky Social Security vs Safe Social Security" or any better idea you can think of. Then you will be allowed to get into the details". And I think he would be right.

Bobby and Nicola

Surely we must frame the debate in terms that are as evokative as the "market or state" frame. Nicely argued.