Grassley Tells Bush to Be Quiet

The Senate Finance Committee starts working. Dana Milbank reports:

Personal Accounts Are Not A Certainty: On the eve of the first congressional hearing on the restructuring of Social Security, Republicans on the Senate Finance Committee signaled that they will not insist that personal accounts be part of the legislation and that they will not seek further details from President Bush about his plans for the government-run retirement program. In a briefing arranged by Republican staff on the committee and given to 60 reporters yesterday, a committee official involved in the Social Security discussions also said the legislation will move through the committee in June or July. The briefing was given on the condition that the official, who is an aide to Finance Committee Chairman Charles E. Grassley (R-Iowa), would not be named and that his remarks would not be directly quoted.

The official's account, given in preparation for today's hearing on various Social Security proposals, appeared to soften many of the statements Grassley had previously made.... In yesterday's briefing, the committee official asserted that the contours of Bush's plan for Social Security are already well known and that the panel did not believe the release of further details of the plan would be helpful.

Comments

[pgl]

Isn't Senator Grassley also very cool towards this privatization idea? Hope so as it is time for the grownups in the GOP to take charge of this issue.

[wkwillis]

Again, you aren't looking at this from the Republican establishment's point of view.
We pay social security to people according to how much they paid in relative to their peer group generation. This means we pay higher social security benefits to Republicans than Democrats.
But if there isn't enough money to go around it isn't practical to cut the checks by an equal amount since that would be too low for poor people (about eighty percent of the recipients) to live on. It will not be politically possible to cut social security checks evenly.
So they will level down social security checks to the minimum amount you can live on without robbing banks or moving in with your voting relatives. That is, the higher earning twenty percent of the population (that will be receiving forty percent of the benefits because they live longer and get higher benefits) will bear all of the social security deficit cuts. The very people who are having their income taxes cut now will have their benefits cut later.
Which is why the personal accounts are so important. They need to shelter some of the higher earning people's social security differential in a place that can't be cut by a bankrupt social security fund.

[Tad Brennan]

Well--

I'd probably title this one "Grassley continues the lie that the President has a plan".

His aim is to give Bush cover so that Bush never has to tip his hand and take the flak for the horrible details (e.g. benefit cuts). The hope is that the Senate will be able to draft a moderate plan, bludgeon the Democrats for intransigence, and then switch all of the details to the horrendous version 30 minutes before the vote is called.

It would be nice to think that any Republican Senator was currently capable of showing independence from the WH. But if they were not doing the WH's bidding, they would not be working to destroy SS to begin with.

[Lee A. Arnold]

On the issue of "enough money to go around," the "low cost" projection (increasingly the most likely projection, due to long-term trends in productivity growth,) shows NO problem in Social Security as a separate item with dedicated taxes and a surplus account already promised. Again, there will be no bankruptcy. On the "middle" projection, there will start to be a deficit in year 2041, and amounting to a $3.7 trillion shortall over 75 years. Under the same conditions, Medicare will have a $27.8 trillion shortfall, of which $8.1 trillion is President Bush's own new largesse to the pharmaceutical companies.

If "there isn't enough money for Social Security" is the Republican establishment's point of view, they have a losing intellectual and moral argument.

Intellectual, because the Bush tax cuts are not sacrosanct. They are not a spur to growth that is otherwise unavailable, and they've ditched the economy in the short-to-medium run.

Moral, because they are breaking a promise: the status of the trust fund. All projections for Social Security include the $2 trillion that should be in there.

To survive as the present party, the Republicans must find a way to appear judicious and sensible about preserving the tax giveaways to the wealthiest while swiping the Social Security "trust fund" account that was paid-into by the poorer:

(1) One way to do this, is for the Republicans to appear to get Bush's "privatizing/personal" accounts OFF the table, at least for a little while: because these have been a tactical disaster, since everybody with a functioning brainstem has been lobbing huge spitbombs at them, until their ratings are so abysmal even the pollsters are taking it down to 24%! You could say they're being hammered to delay! (jeez, I hope that''s original!)

(2) Another way, is for the Republicans to start newer rhetorical lines, even on seemingly disconnected tracks: (a) This immediately confronts our punditocracy with a necessity, because these new words are then needed to keep them current in the databases (to really solve this, they should just print "love--sex--gambling--love--sex--gambling--" across the bottom of all their columns.) (b) The changed Social Security rhetoric quickly floods the controlled newsmedia in the Great Unwashed Interior of the U.S., where almost any change in the sensorium helps the numb to feel they are alive in the heartland, sells newspapers, and avails the Republicans of stimulus-response potential, to be actuated at election-time. Here also, educational spending has been long reduced, while the number of Senators is disproportionate to the amount of people, if not the land mass; and allowing a chorus (at present, a majority chorus) among the Representatives. (c) A typical specimen of this new rhetorical tack is on today's editorial page of The Wall Street Jerk'noff (I am hoping to help them with their sex quotient) whereon "Who Pays What," speaking of taxes, manages no mention of Who Makes What. (To counter that objection, of course, they need this additional meme to be revived: that freeing paper finance capital will increase growth, and growth for everybody. ...That column is coming right up, no doubt!)

To preserve Bush's tax giveaways, of course, the only real answer to the missing trust fund is more taxes on the same ones who already paid the payroll, and/or benefits cuts. Since the Democrats are likely to accept a minor retirement age hike in the end (they're all feeling pretty youthful, these days,) it seems likely that eventually they'll get a good deal, including a hike in income, capital, and estate taxes ("hike the ICE!"). But I think they should refuse a payroll rate or cap hike, at least until after the trust fund is guaranteed in hard cash. They'll end up being in control of both houses of Congress by 2018 anyway.

[Movie Guy]

It appears that some of you are overlooking the way this is playing out.

Take a look at CATO's actions on Tuesday, 26 April 2005.

Today, CATO formally proposed to the Congress that it adopt a Social Security plan which will:

(1) switch to price-indexing from wage-indexing,

(2) require at least $6.5 trillion near-term in transition costs for carve-out private accounts (probably much more once an analysis is provided; the Center on Budget and Policy Priorities analysis will be one to watch for),

(3) allow diversion of 6.2 percent of wages to carve-out private accounts (50% of current contributions),

(4) allow for redemption of individual past earnings recognition bonds, which supposedly represent most of the transition costs CATO identifies. Michael Tanner's testimony: "Much of the short-term cash-flow shortfalls are due to the redemption of recognition bonds, not to the diversion of payroll taxes to the individual accounts." So, what about the existing program costs of diverting 50% of the payroll taxes to carve-out accounts (by those who elect to participate)? What's the new zero surplus date for the existing Social Security program should this bill (HR 350) pass?

Concurrently, CATO admonished its primary audience not to focus any attention on the solvency of the current Social Security program (which it appears to want to eliminate). This point is addressed in the 26 April Daily Debunker:

"The purpose of reforming Social Security isn't and should not be about simply getting a bill passed, no matter how bad the bill is. This is why the Cato Institute has urged advocates of personal accounts to focus not on solvency, but rather opportunity, inheritability and choice, when promoting reform."

"By and large, Those who only three months ago insisted "there is no crisis" are now, after having discovered the American people realize there is a crisis, coming around to the idea of having to do something about it. But their proposals are quick fixes and will cause as much pain -- if not more -- as doing nothing at all."

"Social Security reform is inexorably linked to personal retirement accounts. Without them, reform is merely slang for a massive tax increases or severe benefit cuts, which really isn't reform at all."

Previously, Michael Tanner challenged Democrat presidential contenders on proposing benefit cuts in a September 29, 2003 piece, Ask Dems about Social Security. Tanner stated, "Cutting benefits would be a severe burden to millions of low- and middle-income elderly." (Remember that he said this...)

More recently, Jagadeesh Gokhale of CATO challenged assertions of a $2 trillion transition cost. He stated:

"National newspapers have reported that President Bush's Social Security plan would involve a "huge cost" of "up to $2 trillion." Those claims need careful scrutiny."

"In the first place, President Bush has not offered a detailed plan but has only outlined the principles he would follow in designing one. How can anyone cost out a plan whose details aren't even specified?"

"Note that it is very difficult to interpret the meaning of a $2 trillion "transition cost" for an individual accounts system. Media references to such costs are rarely properly sourced or explained. Neither the most recent Economic Report of the President nor the President's Social Security Commission's report confirm a $2 trillion "transition cost."

Perhaps Gokhale needs to update his December 12, 2004 article to Philadelphia Inquirer. Explain the $6.5 trillion costs that CATO is supporting. Explain the other lost income to the existing Social Security program. Explain the advanced loss of Social Security surpluses.

So, the message from CATO is simple. Cutting benefits to the existing program recipients is ok as long as a carve-out account proposal is approved.

That's the hypocrisy of CATO's position.

Movie Guy

-----

Sources:

CATO Daily Debunker
April 26, 2005

http://www.socialsecurity.org/pubs/articles/debunker-050426.html

TESTIMONY OF Michael Tanner
Director, Cato Institute Project on Social Security Choice
before the Senate Committee on Finance
April 26, 2005

http://www.cato.org/testimony/ct-mt042605.html

CATO's briefing paper No. 92, A Better Deal at Half the Cost, SSA Scoring of the CATO Social Security Reform Plan, by Michael Tanner, dated 26 April 2005 (also submitted to the Senate Committee on Finance)

http://www.cato.org/pubs/briefs/bp92.pdf

CATO's Michael Tanner, September 29, 2003, Ask Dems about Social Security

http://www.socialsecurity.org/pubs/articles/mt-09-29-03.html

CATO's Jagadeesh Gokhale, December 12, 2004, Privatize - it will be good for us all

http://www.socialsecurity.org/pubs/articles/gokhale-041212.html

CATO is taking a lead position. I expect Grassley to embrace CATO's 6.2 proposal or HR 350 if he can round up the votes.

This is probably why he is telling Bush to be quiet. It's time to make the move...

[JackNYC]

Heard an interview of Robert Pozen on Bloomberg today. (Pozen was on the 'Commission to Strengthen Social Security', former Vice Chairman of Fidelity, and now chairman of MFS Investment Management). Obviously not a disinterested party on the private accounts issue, yet while praising Bush for having the "courage" to bring up the issue of the Social Security "crisis" stated that it was a mistake to bring up the private accounts before addressing the "solvency issue" first.
Also interesting was his take on removing the 90K cap. He thought it would be fairer to have a smaller "Medicare like 2 or 3 percent" on everything over 90K rather than bumping the cap to 150K and staying with a uniform 12%.
A Bush is suppose to like this guys take on things.
Looks like there’s a lotta’ backpedaling going on here to me.

[Ralph]

Sen Kent Conrad had the best ideas at today's (4/26), Senate Finance Cmte hearings. He believes there is no SS crisis but there is a budget deficit crisis that would only be deepened by introducing private accounts which would require transition borrowing costs of several trillions to fund. The most important point that Conrad made was that the SS trustees had to make estimates of economic growth rates of 1.9% which are historically too low in order to come up with their projections of the SS shortfall after 2041. If they had used the historically more accurate growth estimates of 3.4% the shortfall would be reduced to only 10% instead of 30%. A 10% shortfall can be easily handled by making minor corrections in benefits and/or taxes.

[kharris]

Lee A,

Did you have a bad day in Chicago once upon a time? "Great Unwashed Interior of the U.S.....helps the numb to feel they are alive in the heartland..." Last I checked, bathtubs and showers, soap and shampoo, laundry detergent all sell well west of the AT. So do books. For all that you may have a bone to pick with the White House, let's not forget that Ohio, Wisconsin, Michigan and the like were all closely contested in the presidential race. Indiana had a Democrat governor for quite some time, till the White House managed to spare one of its great minds to the Hoosier state this January (he now thinks what the state needs most is a tax hike and a new professional sports venue).

The Heartland is a fine place. The Heartland just happens, in some cases, to have voted contrary to the interest of the nation as a whole.

[Retief]

And Bush tells Grassley to go fcuk himself. I've got yer details right here, and I'm gonna pre-empt prime time to share 'em.

[Lee A. Arnold]

kharris--funny-I never think of chicago as the heartland--more like along the hip top edge--I will rearrange my imaginings--I had been struck by several reports of people driving straight across country that, through most of the interior, the radio lost all signals from objective news sources