It's the Circular Firing Squad of Flying Attack Monkeys!

Once again, that is the *only* way to describe the Bush administration's policy development process.

I read Bush's opening statement at his press conference last night:

Text of Bush's Press Conference-Part I: The money from a voluntary personal retirement account would supplement the check one receives from Social Security.

In a reformed Social System, voluntary personal retirement accounts would offer workers a number of investment options that are simple and easy to understand. I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of treasury bonds, which are backed by the full faith and credit of the United States government.

Options like this will make voluntary personal retirement accounts a safer investment that will allow an American to build a nest egg that he or she can pass on to whomever he or she chooses.

The "build a nest egg" part... The "invest in Treasury bonds" part... Let's mosey on over to the Federal Reserve and look at the safest long-term investment the U.S. Treasury offers: the twenty-year inflation-protected TIP:

FRB: H.15--Selected Interest Rates, Web-Only Daily Update--April 28, 2005: Inflation-indexed: 20-year 1.83 1.86 1.87.

What the Federal Reserve is telling us is that the 20-year TIP is currently providing a real yield of 1.87% per year. What Bush is not telling you is that, under the Bush plan, if you divert $1000 from your Social Security to private accounts, that amount is clawed back--charged to an account associated with your normal Social Security benefit, that amount is then compounded at 3% per year plus the rate of inflation, and then after you retired deducted over time from your normal Social Security benefit.

If you are 45 and if Bush's plan were available today...

Follow George W. Bush's advice, divert $1,000 into your private account, invest it in TIPS, and at the 1.85% per year interest rate you will indeed by able to collect an extra amount worth $10.11 a month in today's dollars when you retire at 65...

But the clawback would reduce your normal Social Security benefit by $14.16 a month. You're $4.05 a month behind.

"Building a nest egg." Feh!

---

Did nobody inside the White House bother to run the numbers? Did nobody care?

And now I am told that the White House is wheeling out, to explain the details of his plan... Cathie Martin, Deputy Assistant to the President for Communications, will answer your questions about Strengthening Social Security and Future Generations. Are all the substance people in the White House fleeing from this? Where are they?

Comments

[Chris Andersen]

You're talking facts and facts don't have any relevence to this discussion. The point is not to protect peoples retirement savings. The point is to bamboozle people into thinking that (1) SS is failing and (2) Bush's plan is the only way to fix it so that (3) they can then screw it up so badly that it WILL become a disaster that people will eventually support eliminating completely.

In the mean time, (4) the Bushies get to use the trust fund dollars to further prop up the economy (and hide their failings) for another couple of years.

It's the ENRON model writ large!

[Zach]

There are substance people in this White House? Huh, who'd've guessed.

[anne]

The Social Security plan beyond the give-away with private accounts is designed to increasingly reduce benefits through changing the indexing method. The plan would turn social insurance to welfare, and discriminate against middle income retirees. So, essentially the plan is designed to end Social Security.

[Auros]

I can't listen to his press conferences anymore. The subtle denigrations and stupidities -- using "Democrat" as an adjective, "Sosul Security", "nucyalar" -- drive me up the wall.

[pebird]

You have to break a few nest eggs to make an omelette for Wall Street.

[Tim H.]

The important thing is that we're going to save the economy by making asbestos legal, or something. We must be starting the asbestos textile export industry.

[anne]

http://www.rwjf.org/research/researchdetail.jsp?id=1882&ia=132

April 2005

Characteristics of the Uninsured: A View from the States
University of Minnesota

This report reviews state-level data about adults who work but do not have health insurance coverage. More than 20 million working adults do not have health care coverage, according to an analysis of 2003 data from the Centers for Disease Control and Prevention. In eight states, at least one in five working adults is uninsured. In 39 other states, at least one working adult in every 10 does not have health care coverage.

Additional findings include:

The problem is pervasive among workers in every state. States with the highest rates of uninsured residents among employed adults include Texas (27 percent), New Mexico, (23 percent), Florida (22 percent), Montana (21 percent), Oklahoma (21 percent), Nevada (20 percent) and Arkansas (20 percent). States with the lowest uninsured rates among employed adults include Minnesota (7 percent), Hawaii (9 percent), Delaware (9 percent) and the District of Columbia (9 percent).

Uninsured adults are unable to see a doctor when needed. Nationally, 41 percent of uninsured adults report being unable to see a doctor when needed in the past 12 months, due to cost, compared to just nine percent of adults who have health care coverage.

Uninsured adults are less likely to have a personal doctor or health care provider. Nationally, 56 percent of adults without health care coverage say they do not have a personal doctor or health care provider, compared with just 16 percent of people with health care coverage.

Adults who are uninsured are much more likely to report being in poor or fair health than are adults who are insured. Nationally, one in five uninsured adults (20 percent) say their health is fair or poor, compared with nearly one in nine adults with health coverage (12 percent).

[Brian]

My favorite part of the debate is that these people insist that the system can be a lot better without any drawbacks whatsoever. I'll admit, I haven't read the Ryan-Sununnu plan, but I've heard Peter Ferarra of the IIP and the Cato Institute say that there will be no benefit cuts, thus preserving the safety net, no tax increases for private accounts, and large returns for enough people, if not everyone, to make it worthwhile. More or less, it sounds like he's describing a free lunch.

[Movie Guy]

"The important thing is that we're going to save the economy by making asbestos legal, or something. We must be starting the asbestos textile export industry." -- Tim H.

Yeah. That was the best part of the whole speech. I'll bet that there wasn't 2% of the listening audience that understood what that was about. ha.

[pgl]

Brad - Don Luskin has run the numbers over at socialsecuritychoice.com. And for some reason, he thinks earning a 2% real return on assets when the real borrowing rate = 3% is still a good deal for workers. I'm not going even try to explain his "logic".

[RonK, Seatle]

And what just woke up the press corps(e)?

CNN tells me that last night the President, FOR THE FIRST TIME, proposed BENEFIT CUTS.

Nooooo, last night the President proposed a modification to mitigate his most brutal proposed BENEFIT CUTS affecting the neediest recipients, as per the SOTU edition of his "reform" package. He switched from pure, unadulterated price indexing to a cheezy blend preserving some low-end wage indexing.

He just REDUCED the BENEFIT CUTS he's been advocating (and advertising) from the beginning.

Excuse the shouting ... just trying to wake the dead.

[Ken Houghton]

Luskin! I knew I forgot some columnist to list for Roger Ailes's poll!

brian - Ryan/Sununu makes up any shortfall by fiating taking the money from the general fund.

nmg - If you take away the clawback, what you have is an extension to an IRA/401(k). But if you set the clawback at CPI+3.00% (which Pozen did), and declare that Treasuries and Corporate Bonds will be at least 40% of the portfolio (and must be at least 80% for the last six years before retirement; ibid., p. 23), then you either need a SPECTACULAR SPECTACULAR return from the equity portion, a lesson in investment strategy, or securities that actually pay at least that much.

A 3.00% clawback makes a dubious proposal untenable. Unless we're suddenly going to pay another 120 bp on Treasuries--which somewhat defeats the ideal of balancing the budget, no?

[bakho]

Maybe if I attend the Hitchhikers Guide to the Galaxy opening this weekend, I can get some clues. After all, Mr Bush is only proposing to demolish Social Security in order to preserve his tax cuts for the wealthy. He could be proposing to destroy the earth in order to clear the way for an intergalactic highway. Since the Bush SS plan and the movie are both fantasies, I can choose the more pleasant fantasy.

[renato]

look I'm not stupid and certainly not scared by numbers (far from it)... but once the math gets this complicated, the possibilities for bamboozlement abound.

Why anyone would go for Bush's piratization plan, I don't know. This is like trying to understand how the credit card company calculates your finance charge, and we all know who comes out on the winning end of that one...

[nick]

"Since the Bush SS plan and the movie are both fantasies, I can choose the more pleasant fantasy."

Actually, Bush is adopting the Magrathea model:

"for all the richest and most successful merchants life inevitably became rather dull and niggly, and they began to imagine that this was therefore the fault of the worlds they'd settled on - none of them was entirely satisfactory: either the climate wasn't quite right in the later part of the afternoon, or the day was half an hour too long, or the sea was exactly the wrong shade of pink.

"And thus were created the conditions for a staggering new form of specialist industry: custom-made luxury planet building. The home of this industry was the planet Magrathea, where hyperspatial engineers sucked matter through white holes in space to form it into dream planets - gold planets, platinum planets, soft rubber planets with lots of earthquakes - all lovingly made to meet the exacting standards that the Galaxy's richest men naturally came to expect.

"But so successful was this venture that Magrathea itself soon became the richest planet of all time and the rest of the Galaxy was reduced to abject poverty. And so the system broke down, the Empire collapsed, and a long sullen silence settled over a billion worlds, disturbed only by the pen scratchings of scholars as they laboured into the night over smug little treaties on the value of a planned political economy."

(c) Douglas Adams, RIP

[John Gillnitz]

Maybe that should be a Circular Firing Squad of Flying Attack Monkeys on Crack.

[Onceler]

"substance people"???

[Agitprop]

Flying attack monkeys throwing feces at the American people--that's the Bush administration.

[tunesmith]

I've never understood comments like the first one in this thread. Of *course* Bush is doing what you say. But Brad's proving it by exposing how Bush's approach doesn't make sense. The snark/cynicism of saying that his entry is irrelevant is kind of stupid.

[Ghost of Joe Liebling's Dog]

"Did nobody inside the White House bother to run the numbers? Did nobody care?"

Why would they bother? And why should they care?

Dan Froomkin is happy that the WH press is boldly asking follow-up questions.

Fine -- Owen Glendower could call spirits from the vasty deep! Hotspur's response ("But will they come when you do call for them?") is the appropriate one. The press, so called, is getting slightly better about calling spirits from the vasty deep and bragging about it is enjoyable for all concerned. But at the end of the day, are there substantive answers?

Ted Koppel asked that, roughly, of Dana Milbank and John Harwood afterwards. They said that you have to know just how to ask the questions -- not too hard (honestly), etc.

Koppel asked for an example of a question put the right way THAT GOT A SUBSTANTIVE ANSWER ...

"Don't mind if we say good night now, do you?" said the Bear-Cat. "They'll be getting anxious about us at home."

The WH doesn't need to run the numbers (or care) as long as the Professional Journalists don't bother if the WH runs the numbers, or cares, or not.

[Frederick]

Hey, I'm turning 45 this year, so your hypothetical applies to me! Sign me up for Social Security piratization!

[Tom Hamill]

The thing that was so curious about that Bush statement of putting it in Treasury bonds to me was that in order to pay for the private accounts, we have to borrow a bunch of money up front, right? That extra deficit will be a cost imposed upon future taxpayers.

So let me get this straight: we're going to issue a whole bunch of extra Treasury bonds to fund the additional deficit caused by the switchover to private accounts. Future SS retirees will invest in those...and explain HOW our fiscal situation will be better? Surely the little bit of added return of some T-bonds will be more than offset by the costs, direct (deficit) and indirect ("crowding out"), of servicing that extra debt.

This is insanity! Quick, check and see if Andrew Fastow is running the numbers for the Bush White House.

[Rebecca]

Problem is that Joe Blow isn't going to listen to all of this math. The message makers (Reid and Co.) should make the analogy that this would be like getting a cash advance on your credit card to invest in a savings account. Why would you pay 18% interest to your credit card to get 2% interest from your savings account? It's the same logic - why would you borrow at 3% + inflation to get a return of 1.87%?

[Vinnie]

Wow, Can you just picture it? In January 2009, Bush reaches under his chin and rips off the rubber mask to reveal............Kenny Boy!!!!!!!!

[Jennifer]

Rebecca, that is nice and simple. We need to explain all of these proposals just as clearly.

[Tony the Pony]

Brad,

"Feh" is the most under-used exclamation ever. More, please.

Oh, and, yeah, the substantive point is appreciated also.

Best,

TtP

[larry birnbaum]

"Are all the substance people in the White House fleeing from this? Where are they?"

Uhm, Brad, where are they? WHO are they?

[tante aime]

("Flying Attack Monkeys" sounds more like a DoD R&D
AF2025 program. Nano-UAV's with prehensile tails.)

Having just read Brad's: "Some Simple Analytics for
a “Hard Landing”" J. Bradford DeLong, University of California at Berkeley and NBER, April 20, 2005;
it then occurred to me, (and I checked this first
with an investment banker friend of mine), that if
the Chinese are forced to float the renminbi (it
rhymes with "Ren and Stimpy"), and as analysts are
predicting that float makes the RMB worth some 37%
more than its current peg to the USD, then not only
would the Fed be insane to insist the Chinese float,
but the Chinese would be insane to continue to hold
their USD-denominated T-bonds, especially as Brad
delineated the hard landing those bonds will have.

Ergo, if the Chinese are forced to float, they will
dump their T-bonds first, (and then perhaps buy them
back later as the Fed thrashes around trying to
control the bow wave that selloff creates in the
derivatives market by manipulating Fed rates),
and take questions later.

The SE Asian banks, which employ an entire office
building of automated trade computers, all sensing
the ebb and flow of USD's and US T-bonds, will then
automatically execute at the first ripple off that
bow wave, rather like the Cold War's MAD, and send
the American economic system down the toilet.

Overnight. The US market will open -400 points, and go
down from there past the trade limit stops, -200 at a
gallop, until the DJIA shoots past a face loss on the
USD of 37%, well into the -40's and -50's. Of course,
it will recorrect, and then stab the dagger catchers,
and then level out at a level far below Brad's guess
for demand cutback, supply cutback and a recession.

The Arab States, also pegged to the USD, and also
sitting on the red button, again, overnight, will
join China and the ASEAN tigers, so that not only
will Wall Street wake up with a custard pie in the
face, but a price for oil heading towards Uranus,
priced in USD's, that is. Bring your wheelbarrow.

Everyone in the EU will dump their USD-denominated
stocks and hedge their currencies massively, so that
when you and I wake up in the morning, and hear the
chatter on the radio driving to work, and sneak a
peak at Bloomberg as our office computer boots up,
our 401(k)'s, that privatization plan extraordinaire,
won't be worth the trade cost to close them.

All of which goes towards this post. Why is everyone
so hung up on who will get off the Titanic first when
it docks in NYC? Social Security is an icy sea away.
The issue isn't 2015, nor a 'crisis' 2025, the alarm is that mammoth iceberg out there just past the rising sun.

[Hedley Lamarr]

What's with the 1.86%?? You can get T-DAB at around
4% now for a shorter term than 20 years. Didn't you
used to work there?

[KCinDC]

How about the point that Bush is suggesting investing in Treasury bonds at the same time he's claiming they're worthless IOUs?

[boilerman10]

Ummm, Brad,

Please consider that Bush's newest "Bamboozle-palooza Tour" is becoming, literally, a comic theatre experiment.

Further, consider that Chimpy McFlightsuit's social security mish-mash is one more nail in the coffin that is becoming Bush's second term. Bush is racing into lame duck status far faster than anyone expected, including the Republicans, and Karl Rove.

[Leslie]

There's something else about Bush's speech that few people are talking about regarding his idea to allow people to invest their private account money in US Treasuries: It was only a few weeks ago when Bush said that there was no social security trust fund, and that the nation might not honor its debt to social security. In other words, US-backed Treasuries invested in the social security trust fund might be worthless. [Joshua Micah Marshall mentioned this in Talking Points Memo.]

[modus potus]

boilerman10,

Next think you know, he'll be paying for it with an NEA grant.

[JustMe]

I was just wondering.....if you are able to "divert" some of your Social Security contribution to a private account, what happens to the amount that your employer would normally be contributing to Social Security on top of the money that is deducted from your paycheck? Are they let off the hook for that money, or do they still have to send it in to Social Security anyway? Or, will they claim that since the money won't be going into the fund, that they don't have to make their normal contribution?

Since I haven't heard "them" mention it, I wonder if this is just another way to funnel even more money back into the pockets of businesses at the expense of the public.

[Oisin]

I'm days away from turning 80, and my wife is closing in on 73. We both watched that charade last night,

My wife asked me, "Do you think this guy really believes what he's saying?"

I don't know the answer. Is he a serious player, shrewdly figuring out how to bamboozle the crowd while wreaking havoc behind the curtain? Or is he more like a marionette with someone quite clever working the strings?

This is an apparently intelligent guy telling us that cutting SS benefits for everyone barely above the poverty level is a better deal than raising the SS w/h rate and increasing the cap on income subject to it.

If he does believe that, he's a greater fool than any of his predecessors.

[cymack]

So many details to muse upon, so little time for the working press to cover them ...

How about the point that Bush is suggesting investing in Treasury bonds at the same time he's claiming they're worthless IOUs?

I was just wondering.....if you are able to "divert" some of your Social Security contribution to a private account, what happens to the amount that your employer would normally be contributing to Social Security on top of the money that is deducted from your paycheck?

Wouldn't you think that with a bit of this kind of question-posing, plus some clear explanations like Brad's of the clawback, and Rebecca's of the plumb dumb savings strategery implied by these "proposals" we could all very soon go back to work on some things that matter?

By the way, that little Glendower-Hotspur (Henry IV,1 Act III-1) dialog's an old favorite. The scene sounds like signifying for our times:

(Owen Glendower starts with an elaborately vainglorious version of "Bring 'em on", then continues ... )

GLENDOWER

I can call spirits from the vasty deep.

HOTSPUR

Why, so can I, or so can any man;
But will they come when you do call for them?

GLENDOWER

Why, I can teach you, cousin, to command
The devil.

HOTSPUR

And I can teach thee, coz, to shame the devil
By telling truth: tell truth and shame the devil.
If thou have power to raise him, bring him hither,
And I'll be sworn I have power to shame him hence.
O, while you live, tell truth and shame the devil!

[hedgehog]

If you want to see wack, check out his comments on energy. Quote and comments at:
http://rhinocrisy.blogspot.com/2005/04/dont-listen-to-filter.html

[Gray]

Okay, I admit some amount of ignorance here, but isn't a significant amount of SS funds currently invested in Treasury bonds?

[Bruce Webb]

Gray, pretty much all of it.
http://www.ssa.gov/OACT/TR/TR05/VI_cyoper_history.html#wp127040

[Eric]

I read the questions and answers for Ms. Martin. It was amazing; who writes this stuff? Does she have "volunteers" posing as Secret Service agents to screen out people with No Blood for Oil on their bumpers too? Was that supposed to be an unfiltered cross section of the American public asking their most pressing questions about Social Security?, Then pigs must be sprouting wings at this very moment. I guess that pretty much the entire White House staff is fleeing from the American public on this, not just the "substance people."