Monday, February 28, 2005

Beware the compromise.

Some Republicans are trying to negotiate a compromise deal that would include private accounts and allow George Bush to claim partial victory.
As described in interviews, most of these compromises would involve Bush significantly scaling back his proposals for restructuring the popular benefits program. In exchange, he could still claim an incremental victory on what he has described as his core principles: enhancing the long-term solvency of Social Security and giving younger Americans options to invest more of their retirement money.

In one example, Rep. E. Clay Shaw Jr. (R-Fla.) said, a compromise might involve merging Bush's proposal with plans -- some backed by Democrats -- that create government-subsidized savings plans outside Social Security. Under this scenario, Bush's proposal to divert 4 percent of an individual's Social Security payroll tax would become 2 percent or less.

"The president could claim a real victory just by getting personal accounts," said Shaw, who has shared his ideas with Vice President Cheney and White House senior adviser Karl Rove. "It may be that a hybrid" is the key to compromise.

Meanwhile, Sen. Lindsey O. Graham (R-S.C.) said that he is discussing with Democratic colleagues a compromise plan that would guarantee low-income beneficiaries will do better under a new program than the existing system, even if this increases the program's cost.

Saturday, February 26, 2005

It's really about politics.

I keep hammering away at that idea, and I keep finding more evidence that it's true. Here's an example from an AP story yesterday:
"This is the big enchilada of politics. The stakes could not be higher -- whoever wins this fight could dominate politics for perhaps a generation," said Stephen Moore, president of the Free Enterprise Fund and an avid supporter of Bush's push to let workers invest some payroll taxes in private retirement accounts.

This is the same Stephen Moore of the Club for Growth who describes Bush's plans as a "conservative New Deal."

Friday, February 25, 2005

Boycott HP.

Too bad about HP, what used to be known as Hewlett-Packard. They make great printers. (The merits of their computers are debatable.) But they're one of the biggest companies pushing for Social Security privatization, as seen on this February 11 membership list of The Alliance for Worker Retirement Security.

You have to look at that old version because the current one has been purged of names. This was done after investment house Edward Jones backed out after being pressured by the AFL-CIO.

So I won't be purchasing any products or services from HP, or anyone else on the list, because I refuse to support a company pushing a political agenda that's wrong for me and everyone I know. (via Talking Points Memo)

Fox guarding the henhouse?

Does it sound odd that one of the two appointed Social Security trustees -- who joined in 2001, and was appointed when Bush was president -- has signed on as an advisor and spokeman for a pro-privatization group?
A Texas A&M University economics professor has joined the multimillion-dollar political advocacy debate on Social Security privatization as an expert for the pro-reform group, Progress for America.

Thomas Saving, who is also a trustee for the Social Security Administration, will serve as an adviser and spokesman for the group. Former U.S. Treasurer Rosario Marin also joined the organization as an adviser.

And the other appointed trustee is appearing at town halls held by GOP members to push privatization -- but he says he's only providing information:
Mr. Lockhart's travels come at a time when the administration's efforts to advance its policies are under scrutiny. A few weeks ago, employees at Social Security objected to a publicity drive that they said had twisted facts about the solvency of the system to create an appetite for personal accounts.

On Wednesday, a watchdog agency in Washington filed a lawsuit against the Social Security Administration for failing to respond to a request under the Freedom of Information Act about any contracts it has with public relations firms.

This from the agency whose Commmisioner declared in January:
“I have never, nor will I ever, ask or direct Social Security employees to promote or advance any specific proposal for Social Security reform. Our job at Social Security is to provide services and benefits and to educate the American public about the programs and finances of Social Security.

“The role the Social Security Administration plays in educating the public, as well as the messages we are using, have not changed in the past decade.”

I guess the point is, they don't have to ask -- the appointees know implicitly the wisdom of volunteering to spin the administration's plan. (via Talking Points memo)

Wednesday, February 23, 2005

Do you still doubt what this fight is truly about?

Then go here and watch the clip of Young Republicans greeting Pennsylvania Sen. Rick Santorum at one of his town hall forums to promote privatization. They're chanting "Hey hey, ho ho, Social Security's got to go!"

But the GOP wants to save Social Security. Honest. (via Talking Points Memo)

Tuesday, February 22, 2005

The origins of private accounts.

Monday's Washington Post explains how the privatization concept first started. The guy who first had the idea for private accounts 25 years ago sincerely wanted to help, but his plans have been seized upon by groups such as the Cato Institute who want to kill Social Security, and he doesn't like it.

I keep trying to stress that Bush's efforts are not truly to "save" Social Security, but are a trojan horse meant to kill it. Here's yet another quote that proves this is a battle about politics, not how to help preserve the most effective social program of the 20th century:
"'Social Security,' said David Boaz, Cato's executive vice president, 'is the linchpin of the welfare state.'"

Monday, February 21, 2005

Who ya gonna call?

So you need to discredit the most powerful lobbying organization opposing your Social Security plans. Who do you call? Why of course, the same one that slimed your last opponent with lies about his military service:
Taking its cues from the success of last year's Swift boat veterans' campaign in the presidential race, a conservative lobbying organization has hired some of the same consultants to orchestrate attacks on one of President Bush's toughest opponents in the battle to overhaul Social Security.

The lobbying group, USA Next, which has poured millions of dollars into Republican policy battles, now says it plans to spend as much as $10 million on commercials and other tactics assailing AARP, the powerhouse lobby opposing the private investment accounts at the center of Mr. Bush's plan.

"They are the boulder in the middle of the highway to personal savings accounts," said Charlie Jarvis, president of USA Next and former deputy under secretary of the interior in the Reagan and first Bush administrations. "We will be the dynamite that removes them."

A number of people are quoted to the effect that that this is going to be vicious -- as if you'd expect anything different.

And Art Linkletter is their national chairman? Do senior citizens know that Mr. House Party is selling out their grandchildren's future? (via Talking Points Memo)

Saturday, February 12, 2005

The Amazing Disappearing Trust Fund.

The administration is trying the "there is no trust fund" argument. So that $1.76 trillion worth of Treasury bonds that Social Security holds is worthless, and someone better alert the other investors to this fact.

Of course there's a trust fund. It's just that Bush has been looting it to pay for ill-advised tax cuts, a poorly-designed Medicare drug benefit and a war based on false premises and optimistic expectations. Plus the GOP Congress' pork-barrel spending. So Bush wants to weasel out of paying back the money he's used. Don't let him do it.

Friday, February 11, 2005

Sen. Feinstein: My vow not to throw Social Security overboard.

California Senator Dianne Feinstein writes about her (sensible) position:

Over the long run, changes are needed in Social Security, but we need to do it right. Unfortunately, the president's plan would cut Social Security's funding, weaken the program and make its financial problems worse...

But by making some balanced long-term changes, we can ensure solvency much further into the future...

These proposals, and others, deserve careful study so that we fully understand the costs and benefits of each. I deeply believe that our nation should take the time to do this analysis, instead of rushing headlong into one plan or another.

(via Talking Points Memo)

Thursday, February 10, 2005

How to Talk to a Conservative About Social Security (If You Must).

Here's another handy-dandy guide to the Bush Administration's claims and the real facts, with links to the sources. Sample:
CLAIM: “By the year 2042, the entire system would be exhausted and bankrupt.” [President Bush, 2/2/05]

FACT: In 2042, enough new money will be coming in to pay between 73-80 percent of promised benefits. Even with this reduction, new retirees will still receive more money, in inflation-adjusted dollars, than today’s beneficiaries. [WP, 2/5/05]

There's even a PDF version to print and share with your offline acquaintances.

Social Security Problems Not a Crisis, Most Say.

Well, the Bushies have a lot of selling to do:
Most Americans are certain Social Security will go bankrupt but are not ready to embrace changes that would shore up the system's finances, according to two surveys by The Washington Post, the Henry J. Kaiser Family Foundation and Harvard University.

The survey also found a weak majority in favor of investing contributions into stocks or bonds, and what sways them most:
But like nearly half of those surveyed, Traylor wrongly believed that the costs of creating personal accounts would be negligible. Told that the Bush administration estimates the government initially would have to borrow more than $700 billion to set up such a system, he was incredulous. "That seems very excessive," Traylor said. "I would be less inclined to favor it if it costs that much. That much money could serve a lot of good purposes."

That cost estimate proved to be the most effective of four arguments against Bush's proposal tested in the polls. While 56 percent said they support a plan for individual investment accounts, more than half of those said they would be less likely to do so after hearing the estimate. More than four in 10 supporters wavered when they heard that personal accounts would not, by themselves, reduce the financial problems facing Social Security.

And while language makes a difference, but it's not "private accounts" or "personal accounts" that sways people -- it's something else:
Far more sensitive was the characterization of the way a restructuring would include a provision to recalculate initial benefits for retirees. Opposition rose from 68 percent when this change was characterized as "reducing the rate of growth in benefits" to 86 percent when described as "cutting guaranteed benefits." Both phrases accurately describe what would happen.

More Bush lies.

From President Participates in Class-Action Lawsuit Reform Conversation:
Some in our country think that Social Security is a trust fund -- in other words, there's a pile of money being accumulated. That's just simply not true. The money -- payroll taxes going into the Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust.

It was spent on ill-advised tax cuts and wars, too. But that's not my main point. Social Security has been investing its surplus in U.S. Trasury bonds, so if what Bush says is true, those bonds are worthless. Someone might want to tell the overseas investors about this. (via Metafilter)

Wednesday, February 09, 2005

Bush's Social Security plan assumes much from stocks.

Here's a straight news article from the Washington Post that makes the same point as Paul Krugman's NYT column I noted earlier:
To conclude that Social Security is careening toward a crisis in 2042, President Bush is relying on projections that an aging society will drag down economic growth. Yet his proposal to establish personal accounts is counting on strong investment gains in financial markets that would be coping with the same demographic head wind.

That seeming contradiction has become fodder for a heated debate among economists, who divide sharply between those who believe the stock market cannot meet the president's expectations and those who say investor demand from a faster-growing developing world will keep stock prices rising.

"If economic growth is slow enough that we've got a problem with Social Security, then we are also going to have problems with the stock market. It's as simple as that," said Douglas Fore, director of investment analytics for TIAA-CREF Investment Management Group. A spokeswoman said the company has not taken a position on the Social Security debate.

Saturday, February 05, 2005

Non-partisan criticizes Bush's State of the Union arguments.

Annenberg Political Fact Check ( analyzed Bush's State of the Union speech and came up with a lengthy critique. Here's the summary:
In his State of the Union Address, President Bush said again that the Social Security system is headed for "bankruptcy," a term that could give the wrong idea. Actually, even if it goes "bankrupt" a few decades from now, the system would still be able to pay about three-quarters of the benefits now promised.

Bush also made his proposed private Social Security accounts sound like a sure thing, which they are not. He said they "will" grow fast enough to provide a better return than the present system. History suggests that will be so, but nobody can predict what stock and bond markets will do in the future.

Bush left out any mention of what workers would have to give up to get those private acounts -- a proportional reduction or offset in guaranteed Social Security retirement benefits. He also glossed over the fact that money in private accounts would be "owned" by workers only in a very limited sense -- under strict conditions which the President referred to as "guidelines." Many retirees, and possibly the vast majority, wouldn't be able to touch their Social Security nest egg directly, even after retirement, because the government would take some or all of it back and convert it to a stream of payments guaranteed for life.

Bill Gross criticizes Bush's plans.

Who is Bill Gross and why would you care what he thinks? Gross is the very successful manager of the world's largest bond mutual fund. In other words, he understands economics a lot better than most people. In his latest monthly column, he acknowledges the long-term challenges while criticizing Bush's proposed solution:
this argument about insolvency and how much money is or will be in the Social Security Trust fund is really all so silly. It is an argument to promote an agenda that has little to do with seniors and more to do with Bush, his ownership society, and ultimately his domestic legacy alongside the likes of Ronald Reagan and FDR. Without a blockbuster of a program in his second term it is unlikely that Bush can go very far in the history books on the back of a paltry 3 or 4 percentage point tax cut for the rich. Presto! We now have partial privatization of Social Security heading the agenda upon which the President intends to spend his well-advertised political capital. Privatization, however, is advanced as a simple way to salvage a sinking system when in fact the problem has more to do with demographics than the lack of ownership.

Gross goes on to argue that you can't address the demographic issues facing Social Security by simply prefunding it; the only way to do it is by growing economic production (emphasis is in the original):
I mentioned that future IOUs would be of little help in providing senior boomer goods and services but there’s little doubt that the minimizing of those IOUs will make the job a lot easier. By reducing budget deficits now, and especially that portion of the deficit owed to foreign governments, we would be able to keep more of our domestic production within our borders and therefore available to senior citizens, a thought that presumably Pete Peterson of the Blackstone Group and a serious thinker on Social Security would agree with. Similarly, lower deficits ultimately should result in lower future inflation, reducing the burden on seniors with fixed incomes and making it possible to channel more real goods and services in their direction. President Bush’s theoretical prioritization of fiscal conservatism is therefore a promising ray of hope in this Social Security razzle-dazzle, but I remain to be convinced of his sincerity and/or discipline on this particular issue.

It seems to me that the existing set of politicians, both Republican and Democrat, are either shortsighted or legally blind. Common sense would inform even the most inexperienced Washington bureaucrat that Social Security (and Medicare) imbalances are curses of demographics and not financial funding. Keeping the "size" of our future IOUs low and out of foreign hands would minimize inflationary pressures and the transfer of goods and services overseas in future decades. It would also make it possible in future decades to borrow more overseas production than we could have with an excessive debt load.

Friday, February 04, 2005

Private accounts: The 'spicy sauce' to sell deep benefit cuts

From the Economic Policy Institute in December:
Like a cafeteria selling a cheap cut of meat by serving it in spicy sauce, proponents of deep cuts in Social Security benefits are masking their sour taste with the artificial sweetener of private accounts. The possible long-term shortfall in the Social Security system as it currently stands would require modest increases in revenue or cuts in benefits. However, the President has stated he will not increase revenues, leaving only benefit cuts to balance the system.

Indeed, in its primary plan, President Bush's commission on Social Security proposed to slash the guaranteed portion of Social Security by 16% for people who retire in 2022 and who had previously opted for private accounts; the cuts would increase to 40% for those who retired in 2042 and by 62% for those in 2075. To sell those deep cuts, the commission touted the benefits of private accounts, which would require the federal government to borrow several trillion dollars over the next three or four decades. (The additional borrowing would stop once benefit reductions exceeded the new funds going into private accounts.)

My Senators are on the correct side. (How about yours?)

Michigan's Sen. Debbie Stabenow has a special website section devoted to Social Security, complete with an online petition to sign.

Sen. Carl Levin is also on the record against privatization.

The "Screw Your Grandchildren Act."

Slate's Chris Suellentrop explains Bush's plan quite succinctly:
Think of the children, Bush said, "on issue after issue," but especially with regard to Social Security. The president painted his plan to alter the Social Security system as a grand bargain in which the current generation of older Americans, like parents saving for their children's college tuition, would forgo some small benefit so that the next generation could reap huge rewards.

Sounds terrific. Except what Bush proposed is actually the exact opposite: His plan would allow the current generation of retirees and near-retirees to keep the current system, the one where they receive far more money than they put in during their lifetimes, while requiring the next generation to subsist on their own earnings for retirement. This isn't the equivalent of parents saving for Johnny's 529 plan. This is Mom and Dad asking Johnny to invest part of his allowance so that they won't have to bother with paying for college. You could call Bush's idea the Screw Your Grandchildren Act...

For the first time, Bush and his administration have conceded that personal accounts have nothing to do with fixing the solvency of Social Security. (At a Wednesday background briefing for reporters, an anonymous senior administration official called it a "fair inference" when a reporter asked if "it would be fair to describe this as having—the personal accounts by themselves as having no effect whatsoever on the solvency issue?") Instead, personal accounts are just a clever way to reduce the Social Security system's progressivity. Higher-income people will get to keep a greater chunk of their own money than they do now. Lower-income people will have to get by with less.

But that scenario won't play out until the people who vote, the boomers and the retirees, are long gone.

Tuesday, February 01, 2005

The GOP privatization playbook.

Courtesy of Josh Marshall, here's the playbook describing how the GOP will try to sell the American public on privatizing Social Security.

Many unhappy returns.

Economist and writer Paul Krugman explains how preposterously optimistic assumptions made about the stock market by privatization supporters:
Schemes for Social Security privatization, like the one described in the 2004 Economic Report of the President, invariably assume that investing in stocks will yield a high annual rate of return, 6.5 or 7 percent after inflation, for at least the next 75 years. Without that assumption, these schemes can't deliver on their promises. Yet a rate of return that high is mathematically impossible unless the economy grows much faster than anyone is now expecting.

He then points out the Catch-22 that privatization advocates are in:
They can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.

Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.