Paul Krugman Does Some Math on Right-Wing Class Warfare

He writes:

The Final Insult - New York Times: Hell hath no fury like a scammer foiled. The card shark caught marking the deck, the auto dealer caught resetting a used car's odometer, is rarely contrite. On the contrary, they're usually angry, and they lash out at their intended marks, crying hypocrisy. And so it is with those who would privatize Social Security. They didn't get away with scare tactics, or claims to offer something for nothing. Now they're accusing their opponents of coddling the rich and not caring about the poor. Well, why not? It's no more outrageous than other arguments they've tried. Remember the claim that Social Security is bad for black people?...

In last fall's debates, Mr. Bush asserted that 'most of the tax cuts went to low- and middle-income Americans.' Since most of the cuts went to the top 10 percent of the population and more than a third went to people making more than $200,000 a year, Mr. Bush's definition of middle income apparently reaches pretty high. But defenders of Mr. Bush's Social Security plan now portray benefit cuts for anyone making more than $20,000 a year, cuts that will have their biggest percentage impact on the retirement income of people making about $60,000 a year, as cuts for the wealthy.... Let's consider the Bush tax cuts and the Bush benefit cuts as a package. Who gains? Who loses?

Suppose you're a full-time Wal-Mart employee, earning $17,000 a year. You probably didn't get any tax cut. But Mr. Bush says, generously, that he won't cut your Social Security benefits. Suppose you're earning $60,000 a year. On average, Mr. Bush cut taxes for workers like you by about $1,000 per year. But by 2045 the Bush Social Security plan would cut benefits for workers like you by about $6,500 per year. Not a very good deal. Suppose, finally, that you're making $1 million a year. You received a tax cut worth about $50,000 per year. By 2045 the Bush plan would reduce benefits for people like you by about $9,400 per year. We have a winner!

Mr. Bush likes to play dress-up, but his Robin Hood costume just doesn't fit.

Comments

[Randy]

This President annoys me to no end, but 1/2 of America annoys me even more because they re-elected him! So, we deserve what we get, right?

[Scott]

I liked this part:

"The point is that the privatizers consider four years of policies that relentlessly favored the wealthy a fait accompli, not subject to reconsideration. Now that tax cuts have busted the budget, they want us to accept large cuts in Social Security benefits as inevitable. But they demand that we praise Mr. Bush's sense of social justice, because he proposes bigger benefit cuts for the middle class than for the poor."

[pgl]

Another good oped from Dr. Krugman. But his excellent discussion of the Pozen plan opened the door for the hacks at the Wash. Post and socialsecuritychoice.com to say Krugman lied. Never mind the fact that their ignorance of the issue was on display - the rightwing bloggers are having a factfree field day - again.

[Scott]

I agree, Randy. It just irks me every time I see a W campaign sticker on a car (or more likely, a gargantuan SUV).

[Julian Elson]

At the risk of starting a tangent, do you really think that the proportion of SUVs with Bush stickers is higher than the proportion of vehicles in general with Bush stickers?

[Doug]

I don't know about Julian's point, but whenever I get cut off in traffic by some clueless moron (defined as someone who cuts me off without so much as a turn signal) said mouthbreather invariably is a) talking on a cell phone, b) driving a Ford Excrement (or some GM or Chrysler clone therof) and c) sporting a "W" Sticker ("The Road To Hell Is Paved With Liberals" bumper sticker optional).

[Grumpy]

I know this much: you see a higher proportion of Subarus with rainbow stickers on them. Not that there's anything wrong with that.

[almostinfamous]

julian, this is just an observation, but when my friends and i went on a road trip around lake michigan and into the U.P in august '04, most of the new SUVs(and sports cars) and a good number of old rusted ford/chevys carried bush/cheney bumper stickers. almost everything else was a kerry sticker... not that this proves anything, but just saying anyway

[D-Rock]

In the South, where I live, I would predict, based on informal sampling, that the percentage of SUVs with a Bush sticker heavily outweighs the percentage of other vehicles with Bush stickers (with the exception of pick-up trucks). I personally would be really interested to know more about this if anyone has any reliable information.

[spencer]

I just made a trip from Boston to South Florida and the one thing that really surprised me was how few support our troops ribbons I saw on cars.

Anyone have an explanation besides the one that all the cars I saw from West Palm south were rentals.

[Dubblblind]

They say the road to hell is paved with good intentions. Of course every adage has its exception and the Bush administration/Republican controlled congress is it. I can't think of a single good intention coming from them (can you?) yet they have us moving with alacrity down that road. In addition to class warfare there is environmental warfare, health warfare, science warfare, religious warfare, foreign policy warfare, civil liberties warfare, electoral warfare, energy warfare, judicial warfare... A destructive force that will take generations of concerted effort to undo, if we're lucky.

[brodix]

How did we get to bumperstickers? (My own thought on the subject is that those THINK stickers should be brought back to counter all the BELIEVE stickers that originated as a response to the original THINK stickers.)

To get to my point; Another reason Social Security works so well is that money is a dynamic form of economic energy, much like electricity and to store it, you need a productive investment. As it is becoming increasingly clear that there is more money then useful investments, it is becoming increasingly difficult to store money. Just as it would be prohibitively expensive to build the batteries that could store the amount of electricity that is consumed, Social Security transfers wealth from producers directly to consumers, using the far more efficient method of government guarantees, rather then trying to expand the investment community as a form of storage battery for private accounts. If you think there really is more room for money in the markets, then why are interest rates not much higher?

[Dubblblind]

In keeping with the direction of this thread I suppose I should have started out my previous comment with "The road to hell is filled with SUV's with Bush stickers."

[anne]

http://www.nytimes.com/2005/05/09/opinion/09mon1.html

Nature at Bay

The Bush administration's efforts to capitalize on the recent discovery of the ivory-billed woodpecker were bizarre. Gale Norton, the interior secretary, announced a $10 million program to enlarge the bird's habitat, proclaiming that "second chances to save wildlife once thought to be extinct are rare."

But what about first chances? The woodpecker, if it indeed has returned, is as much warning as gift. President Bush's policies suggest that he not only has failed to learn from past mistakes, but is determined to repeat them on a more destructive scale.

The obvious example is his fixation on opening the Arctic National Wildlife Refuge to oil drilling. This bespeaks an intellectually bankrupt energy policy and would certainly cause trouble for wildlife. Yet the Arctic is hardly the only illustration of the administration's insensitivity to wilderness values....

Shortchanging Nature Mr. Bush's environmental agenda in the 2000 campaign consisted of three promises, none realized. One was to regulate global warming emissions. Another was to eliminate the maintenance backlog in the national parks. And the third was to fully fund the Land and Water Conservation Fund, the government's main program for creating and preserving parks and wildlife refuges. The program's authorized level is $900 million, half for federal open space purchases, half for state acquisitions.

Mr. Bush hasn't come close. This year he asked for $130 million for federal purchases, nothing for the states. Last week a House subcommittee axed the federal funds altogether. The irony that Mr. Bush may be presiding over the death of precisely the kind of program that the ivory-billed woodpeckers of this world depend on seemed lost on Mr. Bush's senior officials, who uttered nary a peep of protest.

[Scott]

I have no scientific information on the proportion of pro-Bush stickers on SUVS to those on Non-SUVs. I'm sure it's just that I notice the W ones more. When I see a Kerry sticker, I think, there goes another sorry bastard like me (although I don't have a Kerry sticker -- I'm just a sorry bastard). As to the troop support ribbons, we're lousy with them here in Minneapolis. I haven't seen, but I liked hearing about one that says, "Support our makers of cheap bumper magnets." I think our actual collective way of supporting the troops is pretty crappy: Cut taxes and don't give them what they need. And overextend their stay. But it feels better to sport a ribbon magnet, I guess.

[liberal]

Scott wrote, " I haven't seen, but I liked hearing about one that says, "Support our makers of cheap bumper magnets.' "

That's like an article in the Onion book _Our Dumb Century_ about the bumpersticker industry applauding _Roe v. Wade_.

[Something Polish]

But Mr. Bush isn't calling for small sacrifices now. Instead, he's calling for zero sacrifice now, but big benefit cuts decades from now - which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits.

Yes indeedy. A pet peeve of mine. But Krugs doesn't bother to add that Bush's plan will cost at least a coupla billion from the General Fund. Also, a dirty little secret of SS is how cheap it is to run. Per person, wicked-cheap. Managing private accounts will coast a bunch (someone on Atrios touches on this today), and that's before the Wall Street goons game the system. You don't hear much about these points because the "plan" fails so miserably on it's larger non-merits. But there you go.

[howard]

i know bumper stickers are OT, but d-rock, i can speak to your comment: my favorite numbers from the 2004 election were these:

Bush margin over Kerry in the 13 states of the confederacy: 5.5M votes

Kerry margin over Bush in the remaining 37 states: 2.5M votes.

So it should be no surprise that you see many more bush-cheney stickers in the south; on a percentage basis, the south is hugely favorable territory for them.

[Peter]

You know, Brad, I listened to you last week on "On Point", the NPR show out of Boston regarding Social Security Reform, and I couldn't believe how ineffectual you were. You hemmed and hawed and never got to the few simple -- and devastating -- points Krugman made in his column today. I know you know them. I enjoy reading your blog. But I was extremely disappointed. Dont' be reasonable. Attack the premises, don't given an inch. They won't.

[anne]

http://www.nytimes.com/2005/05/09/national/09medicaid.html?pagewanted=all

States Propose Sweeping Changes to Trim Medicaid by Billions
By ROBERT PEAR

WASHINGTON - Governors and state legislators have devised proposals for sweeping changes in Medicaid to curb its rapid growth and save billions of dollars.

Under the proposals, some beneficiaries would have to pay more for care, and states would have more latitude to limit the scope of services.

The proposals, drafted by separate working groups of governors and state legislators, provide guidance to Congress, which 10 days ago endorsed a budget blueprint that would cut projected Medicaid spending by $10 billion over the next five years....

State officials say their goal is not just to save money, but also to avoid wholesale cuts in coverage like those in Tennessee, which is dropping more than 300,000 people from its Medicaid rolls, and in Missouri, which is dropping 90,000.

Medicaid, the nation's largest health insurance program, covers more than 50 million low-income people. Though originally intended for the poor, it now covers people with incomes well above the poverty level in some states....

[anne]

http://www.nytimes.com/2005/05/09/opinion/09mon1.html

Nature at Bay

Roadless Rollback On Thursday, the administration repealed one of President Bill Clinton's proudest and most popular environmental initiatives, a rule that placed nearly 60 million acres, or roughly one-third, of the national forests off limits to new road building and development. The Clinton rule gave protection to some of the last truly wild places in America and the fish and wildlife that live there.

By the Forest Service's own estimates, these roadless areas shelter at least 200 rare species, which under the administration's less protective regime will now be more vulnerable to commercial development. The rollback also completes the administration's demolition job on the web of forest protections it inherited from Mr. Clinton....

[anne]

http://www.nytimes.com/2005/05/08/politics/08drugs.html?ex=1115697600&en=b62262be31f6be71&ei=5070

Under New Medicare Prescription Drug Plan, Food Stamps May Be Reduced
By ROBERT PEAR

WASHINGTON - Elderly people with low incomes may lose some of their food stamps if they sign up for the new Medicare prescription drug benefit, the Bush administration said Saturday.

When Medicare begins covering drugs in January, older Americans will spend less of their own money on drugs and will therefore have more to spend on food, reducing their need for food stamps, officials said.

The new reading of the Medicare law, set forth in a document sent to Congressional offices this week, comes just as federal officials begin a nationwide campaign to persuade low-income people to apply for the drug benefit.

The document, addressed to elderly and disabled people who receive food stamps, says, 'You may qualify for extra help paying for your Medicare prescription drug costs.' But it adds, 'If you qualify for extra help, your food stamp benefits may decline.' ...

[Unstable Isotope]

Krugman's column is brilliant. I hope Democrats will be using it for talking points.

Bush's plan: benefit cuts to avoid benefit cuts! Talk about boiling the issue down to one sentence.

[philip]

Krugman's column is a direct rebuke of everthing that Brooks wrote on Sunday, and I thank Krugman from saving me the time of having to write it in a email to Brooks (Krugman ripping his sorry argument in an oped piece also carries a little more weight than me getting yet another auto-respose from Brooks after destroying yet another of his pathetic arguments). When I read is Sunday column I thought it was the most disingenuous drivel I've ever read (Becasue I know the loony Coulter/Hannity/Rush wing actually believe what they say) I have a hard time beliveing that Brooks actually believes that shrubs social security plan is good for the poor and the middle class, he is just playing the good soldier political hack - taking shots at liberals and trying to "frame" the debate as liberals as obstructionist, 'first they deny Bush's SS plan after he gives them what they want (progrssive indexing), now their denying the judges and shutting down the senate' Brooks SS column was just a precurser to the filibuster fight - an attempt to get the D'd on the record as obstuctionist.

I'm glad Krugman came out today and called the republicans rhetoric what it is - an insult. The idea that massive tax cuts for the wealthy; that harm the middle and poor class, deprive the troops of life saving materials, provide little to no economic stimulus, pass the cost of an unneccessary war onto the next generation, and resulted in the looting of the social security trust fund are sacrosanct, and can only be remidied by more debt and benefit cuts on the middle/working class in this country is more than insulting, it's revolting.

[dennisS]

P. Sullivan,

Have you guaranteed yourself a positive return on your life insurance premiums too? Health insurance? Car insurance? Home insurance? What's your address? I think I know some actuaries that would like that information.

At least my social insurance return would be better under the current arrangement than any Bush has proposed.

[Jennifer]

There is never a reason to be rude and insulting.

[Jennifer]

The comment on rudeness was directed to Henry.

[Dubblblind]

"Bush's plan: benefit cuts to avoid benefit cuts! Talk about boiling the issue down to one sentence."

Alas, if only that were true. Try this:

Bush's plan: destroy benefits to avoid benefit cuts.

[Nick]

Rude? Henry wasn't rude. Maybe a bit right of center, but certainly not rude.

Anyway, what's wrong with righting social security by limiting payouts for those that don't really need it? I thought we were all for helping those that need it and taking from those that can afford it? Am I in the wrong party or something? This is the self-sacrifice this country needs. My advice: tighten the belt because there's a lot more of this coming as the population ages. Those of us that are LUCKY enough to be healthy and employable should be thankful that we can work for the greater good. Being on the left isn't about getting something for nothing (a la a pie in the sky social security system). It's about social justice. You should be happy that you have the ability to support those that can't support themselves. The real problem are the reactionaries that want to strip all the social programs that progressives have established to protect the poor. We need to ensure that they pay their fair share.

[lise]

Low income families must choose between food stamps and drug benefits, or fare with reductions of Medicaid benefits, but they get to keep Social Security benefits while middle income families lose benefits, and that is called "progressive."

[bakho]

Patrick Sullivan is posting Fuzzy Math againg. First of all, one year olds generally don't have jobs, let alone jobs that pay $90,000 per year. Higher wage earners tend to be college grad that start work at about age 22 and work for 45 years, not 67 years. 18 year olds may work for 49 years, but generally start with much lower salaries. Few college grads will make $90000 right off the bat. The median HOUSEHOLD income is under $45,000 so we are looking at a very small percentage of workers with salaries of $90,000. Higher paid workers often get stock options or other perks that are not subject to SS taxes.

SS benefits are indexed to inflation and Patrick is not bothering to account for the inflation that makes early contributions less than later contributions. In short, Patrick has posted numbers. Patrick would prefer that his mother-in-law have no retirement at all and move in with him when she retires.

[Jennifer]

The writer was sneeringly rude to Brad DeLong, and there is no place for that.

[cl]

Nick:

what wrong with it is that:
1. It is questionable under low cost as to whether it even needs to be "fixed"

2. Simple allowing the tax cuts to sunset will more than amply provide what is needed to shore up ss under the medium cost. (ie... chance for Bush to be truely progressive!)

3. Why would we trust the crew who gave us WMD with even touching SS?

[S0C7]

Back to the bumpersticker subject (because it's fun);
http://travel2.nytimes.com/mem/travel/article-page.html?res=9C05E1DE103FF932A35757C0A9639C8B63
Ol' Mickey Kaus even chimes in with Subaru is the new Volvo.

As for SS, This is not a problem that needs to be dealt with now. China has 6 million kids in science fairs, we have 60,000. THAT is a problem to deal with now.
Many Repubs simply want to end SS on philosophical grounds and are doing what they can to accomplish that. Hacks in the admin are implementing the starve-the-beast routine. Cut taxes, spend, spend, spend, blow up the deficit, and then cry poor. It's amusing to watch the shifting rational. Too bad they have such an effective echo chamber with Fox news et al. Like a fighter, they are jabbing, looking for an opening. They occasionaly find that opening and land a knockout, like the Swiftees hammering Kerry. However, I don't see this working for SS. First off, what congressman is going to run on cutting benefits and win. Who in congress is going to fall on their sword for some ideological tripe...very few, most just want re-elected. Starve the beast only carries if people feel they are cutting the benfits for those "lazy bums" below them. Then they realize they are now the bottom (and not lazy bums). At that point, the pendulum swings. Krugman nails them very well. But does the average Wal-Mart worker read Krugman? No. Does the average Wal-Mart worker know the meaning of fait accompli? No. So people, your homework to find these lost souls and educate them.

[Lawrence]

Did Patrick Sullivan do his sums right? (ignoring the typo 2072)
x*90,000*35=$400,000
therefore x=12.7% (approximately)
Now employers and employees split about 13% on FICA with employees contributing apout 6.5%. So Patrick has conveniently doubled the employee contribution. Or assumed it away (they're all self employed?). Funny thing too on the annual amounts paid out by SS, you get different numbers. Of course this all hides an important point-lower income social security beneficiaries today get a lot more out of SS, than they put in, as they would in the future, with no change. Indeed it is only by adding SS beneficiaries as a whole that we have a progressive tax system.

[John Emerson]

The sneeringly rude moron also had nothing to say. Possible comment spam, I suppose.

[John Emerson]

The sneeringly rude moron also had nothing to say. Possible comment spam, I suppose.

[Karlsfini]

Randy, the truth is, two-thirds of Americans elected Bush:

Roughly one third voted for him and another third didn't bother to vote, which means we are seeing a statistical miracle previously supposed to be impossible: two-thirds of Americans are below average in intelligence.

All my life I thought only one-half were. (On the bright side, one third still voted for Kerry even though in hind-sight it looks like the Kerry campaign was intended to assure Bush got elected.)

I don't know how all this can be, but then I thought the ivorybill was extinct. Shows the longer we live the less we know

[Karlsfini]

Randy, the truth is, two-thirds of Americans elected Bush:

Roughly one third voted for him and another third didn't bother to vote, which means we are seeing a statistical miracle previously supposed to be impossible: two-thirds of Americans are below average in intelligence.

All my life I thought only one-half were. (On the bright side, one third still voted for Kerry even though in hind-sight it looks like the Kerry campaign was intended to assure Bush got elected.)

I don't know how all this can be, but then I thought the ivorybill was extinct. Shows the longer we live the less we know

[jm]

Lawrence: The full 12.4% of FICA is paid by the employee. That half is paid by the employer is just a convenient fiction. When you're running a business, and deciding whether to hire another employee, your concern is how much revenue that person is going to bring in relative to how much you are going to have to pay out to employ them. Competition with other potential employers of that person, who are making the same kind of decision, determines how much you are going to have to pay out in wages and benefits to get them to take your job offer. If the law were changed tomorrow to eliminate the fiction, such that the full 12.4% came obviously from the employee's paycheck, most employers would have to raise their employees' pay 6.2%. Only those in extremely uncompetitive job markets would dare not to do so.

The real problem with the calculation is that since 1999 about 25% of FICA contributions have been going not to pay SS benefits, but to fund the general account deficit, enabling other federal taxes to be lower. So the real contributions of wage-earners to SS has been not 12.4%, but more like 9.2%, the 3.2% difference being in fact a hidden income tax. (For the period since the "Greenspan reforms" of 1983, this hidden income tax has averaged about 2.1%, and the average "real" FICA contribution rate has averaged about 9.8% vs. a nomnial 11.8%.) It was utterly implicit in the buildup of the Trust Fund that the excess paid in by the baby boomers to prefund their retirement SS would eventually need to be matched by higher general fund taxes. Alas, the tax cut that was enabled by the hidden income tax on the boomers probably went not to the younger people who will be paying those higher taxes when the boomers retire, but to wealthy people even older than the boomers.

[ES]

I'm getting to the point where I realize that #3 mentioned above by cl is the only real reason I'm against any changes right now.

If Kerry were in the White House and came forward with the Pozen plan to fix the SS system I'd most likely support it (as would 95% of those of us who are left of center).

On the other end you'd probably have 95% of Republicans pointing out its flaws instead of it's benefits.

Such is politics.

[Karlsfini]

Randy, in truth two-thirds of the eligible voters elected Bush: roughtly one-third voted for him and one-third didn't bother to vote.

What we are seeing here is a heretofore supposed statistical impossiblity: two-thirds of American voters are below average in intelligence. I don't know how this can be explained according to current statistical theory, especially since "average" intelligence is pretty low.

On the bright side, one-third didn't vote for Bush even though in hind-sight it appears that Kerry's campaign (or rather lack of) was meant to assure Bush a Stalinist 100% of the vote.

Think about it -- this is as incredible in it's own way as finding an ivorybill -- not one-half, but two-thirds of a population is below average in intelligence.

Now is the time for your tears.

[jm]

Nominal FICA contribution rates vs. rate corresponding to fraction actually funding SS benefits, 1984-2004.

1984 10.8% 10.3%
1985 11.4% 10.9%
1986 11.4% 11.2%
1987 11.4% 10.2%
1988 11.4% 9.5%
1989 11.4% 9.2%
1990 11.4% 9.0%
1991 11.4% 9.4%
1992 11.4% 9.5%
1993 12.4% 10.5%
1994 12.4% 10.7%
1995 12.4% 10.8%
1996 12.4% 10.5%
1997 12.4% 10.1%
1998 12.4% 9.7%
1999 12.4% 9.2%
2000 12.4% 9.1%
2001 12.4% 9.0%
2002 12.4% 9.0%
2003 12.4% 9.3%
2004 12.4% 9.2%

[Karlsfini]

Brad, when I tried to send my first post above my browser crashed (Safari.) Then I got a "Forbidden 403..ERROR." So I booted my Windows machine and it also got the 403 error. Eventually I got to your site again using the Mac laptop, but there was no sign of my post, so I composed it again, as best I could from memory.

Sorry everyone for the double post.

[ChasHeath]

A small unturned stone.

For whatever degree the Pozen plan has smaller cuts for the middle class than "doing nothing" at any given snapshot, I suspect most of the difference is that Pozen cuts benefits earlier, meaning that the trust fund assets last a bit longer, since less benefits are paid from 2015 through 2045.

That's for plain vanilla Pozen. When privatization is added on top, you're talking about "general fund transfers", big time.

Speaking of fudged data, how the heck is it that the Social Security acturaries can score any plan that includes "general fund transfers" as leading to solvency?

[ChasHeath]

A small unturned stone.

For whatever degree the Pozen plan has smaller cuts for the middle class than "doing nothing" at any given snapshot, I suspect most of the difference is that Pozen cuts benefits earlier, meaning that the trust fund assets last a bit longer, since less benefits are paid from 2015 through 2045.

That's for plain vanilla Pozen. When privatization is added on top, you're talking about "general fund transfers", big time.

Speaking of fudged data, how the heck is it that the Social Security acturaries can score any plan that includes "general fund transfers" as leading to solvency?

[Movie Guy]

jm -- "So the real contributions of wage-earners to SS has been not 12.4%, but more like 9.2%, the 3.2% difference being in fact a hidden income tax. (For the period since the "Greenspan reforms" of 1983, this hidden income tax has averaged about 2.1%, and the average "real" FICA contribution rate has averaged about 9.8% vs. a nomnial 11.8%.)"

Good point. Particularly so, considering that every attempt under the sun will be taken to avoid fulfilling SSA trust fund IOU obligations. Price-indexing is only the beginning.

Baed on your presentation, someone should recalculate returns on net contributions. Might be a more realistic figure.

Moreover, the rate of "investment" return should be further revised to allow for the deletion of disability insurance coverage.

COPA (carve out private account) proposals might have a hard time matching existing net Social Security program returns based on the above.

[jr]

I'm sick of the privatizers

[Ari]

What is wrong is a mean spirited comment when Brad DeLong does so much for all of us. Learn what politeness is. Learn to appreciate Brad DeLong for the wonderful treasure he is and extends to us. Learn to be polite as others are.

[Ari]

Learn to appreciate this superb site that is extended to us. The rest of us know what appreciation is. Learn.

[MTC]

Dr. DeLong is worthy of our respect.

[anne]

http://www.nytimes.com/2005/05/10/opinion/l10social.html

More Bad Faith on Social Security

To the Editor:

Re "Calling Democrats' Bluff" (column, May 8):

David Brooks tries to spin President Bush's attempt to means-test Social Security as a progressive move. If the president wants to talk about sacrifice, he might try asking those making more than $90,000 to forgo their exemption and continue contributing to the system.

There's a reason large numbers of Americans distrust President Bush to reform Social Security. It's because, understanding that he wants to dismantle the system, we can recognize a bad-faith argument when we see one.

Steve Schindler
New York, May 8, 2005

•

To the Editor:

Does David Brooks really think that President Bush and his advisers have made a U-turn and become progressives? One might think so from reading his May 8 column, in which he takes the Democrats to task for not jumping on the bandwagon to support Mr. Bush's latest twist in the Social Security battle, to means-test benefits.

The situation is rather simple. The Democrats know that the leopard hasn't changed his stripes, and they smell a rat.

Charles R. Cowley
Ann Arbor, Mich., May 8, 2005

•

To the Editor:

David Brooks writes that President Bush has called the Democrats' bluff by "embracing the progressive indexing of Social Security benefits."

In 1935, when Social Security was created, President Franklin D. Roosevelt very consciously and deliberately decided that Social Security would not be a poor person's program. The thinking was that programs for poor people are always inferior to universal programs, which are meant to help all income levels.

Veterans' programs, for instance, are based entirely on one's service to our country, not upon one's income.

By threatening to index Social Security, President Bush threatens the very existence of Social Security by seeking to turn it into a poor person's program, another "separate but equal"-type program.

This is not "calling a bluff."

Rich Gardner
Horsham, Pa., May 8, 2005

•

To the Editor:

I am a senior citizen who recently left Manhattan to live in the Bronx because housing costs in Manhattan have gone through the roof.

Social Security accounts for 40 percent of my income. Without it, I would be poor, but I'm not poor - yet.

Social Security is not welfare. We paid into it so that when we were old, we could remain in the middle class.

There should be no "means test" for Social Security.

Paula Kopelman
Bronx, May 8, 2005

•

To the Editor:

It doesn't matter whether, as John Tierney claims, his Social Security contribution would have tripled in value if he had invested it in a Chilean-style account ("Place Your Bets," column, May 7). That's because Social Security is not a retirement plan. It is insurance.

Rachel Dresbeck
Portland, Ore., May 7, 2005

•

To the Editor:

As set up and later modified, the Social Security System had been working quite well. There was even some savings for a rainy day. Then, as John Tierney says, Congress spent the reserve in our trust fund, thus leading to the financial woes that the program now faces.

Mr. Tierney repeats the Republican charge that the Democrats have not offered a solution. I seem to remember otherwise.

In the campaign John Kerry said that if we rolled back those generous tax cuts that President Bush gave to corporations and the upper-income folks, we would have sufficient funds to put Social Security back on track.

For the record, this Democrat is making a proposal: Roll back those tax cuts and do not institute others until we have our Social Security program back on track. And set up Al Gore's "lockbox" to keep sticky fingers out of my retirement funds.

Peggy Backman
New York, May 7, 2005

[MTC]

Dr. DeLong takes time away from his work and his family to educate us, challenge us and make us laugh.

[MTC]

Mr. Deutsch -

Please add my name to your list of those guilty of "multiple consecutive comments on many threads with the same comically slimy grovelling devoid of any substantive content are not a sign of appreciation" alongside Ari and Jennifer.

[anne]

http://www.nytimes.com/2005/05/08/opinion/08brooks.html

Calling Democrats' Bluff
By DAVID BROOKS

Don't take people at their word. Don't listen to them when they tell you how to be virtuous.

They're faking it. They don't care about virtue, or you or the common good. They're just taking opportunistic potshots under the guise of sermonizing. They're just a bunch of hypocrites.

This little bit of moral philosophy is drawn from the political events of the past few years....

http://www.nytimes.com/2005/05/07/opinion/07tierney.html

Place Your Bets
By JOHN TIERNEY

After a recent column comparing Social Security with the Chilean system of private accounts, I was deluged with letters from readers eager to explain why I am a superficial nitwit. In this case, they're at least half right.

The column was superficial because I simply looked at how much more money I'd have if I had invested my Social Security contributions in the private account of a Chilean friend and economist, Pablo Serra....

[anne]

MTC

"Dr. DeLong takes time away from his work and his family to educate us, challenge us and make us laugh."

May it always be so. Lovely for us :)

[Bruce Webb]

JM. Nice chart but what you are showing is the plan. A plan put forth by among others Ronald Reagan. It is not a hidden income tax, it is invested in Interest Earning Bonds which will be redeemed in full unless some future US government shows itself to be a bunch of liars and thieves who would not hesitate to piss on Reagan's grave.

Not actually a bad description of the current proposed Permanent Majority Party. Rove Three Part Plan. One Plan to be in power forever. Two promise that you will have no choice but to repudiate the Trust Fund. Three, use Two to cement One. Not working well.

And Chas Heath what to say about this:
For whatever degree the Pozen plan has smaller cuts for the middle class than "doing nothing" at any given snapshot, I suspect most of the difference is that Pozen cuts benefits earlier, meaning that the trust fund assets last a bit longer, since less benefits are paid from 2015 through 2045."

Charles "doing nothing" does exactly the opposite of what you suggest: it pays out full benefits until 2041, which is to say an excellent deal for everyone born before 1950, which is why Bush exempted over 55's to begin with. "Less benefits are paid from 2015 through 2045". Well duh, over most of that period full benefits are currently scheduled. In 2041 I will be 84 and nearing the end of my drawdown on Social Security, the youngest Boomers will be 75, well into their draw. After bearing the brunt of the 1983 tax cut to start with Pozen wants to screw me out of most of my benefits as well. In exchange for the opportunity to invest in the market (one fully available to me today) I get my check cut anyway.

Hey it is not all about me, but some of it is. I paid in that extra 3% since 1983 and I want full credit for my money. I am not alone Boomers are the biggest demographic cohort out there, we are entering our prime voter participation years. And the 2006 midterms are out there.

(big chunk deleted)
All out warfare broke out on March 23, just most people didn't recognize that. The economic case for insolvency collapsed with the release of Table V.B1 in the 2005 Report. Not a single person has risen to defend 2.0% Productivity for 2005. Not a single person has challenged the math that takes 2.1% for 2005, 2.2% for 2008-2008 and 1.9% for the out-years and gives us $68 trillion Trust Fund in 2080.

That is all it takes to grow out of this. Call it the 2.2% solution. Or we could call it the 1.92% solution, because that is the current payroll gap. And any amount of growth over 2.2% carves away at that 1.92%. Read the papers, no one is using numbers for 2005 and 2006 that even resemble 2.2%.

I want my projected check paid in full until 2041, and I fully expect the economy to return numbers that will allow full payment until I die. And Boomers will politically punish anyone who tries to justify phony crisisis with phony numbers. Kids worried about intergenerational income transfers can get a job and grow the economy past the pathetic numbers needed here. Boomers have been doing our part all along and we are not the problem.

[jm]

Movie Guy: Your 09:49 comment suggests _exactly_ the right next steps in the analysis.

[anne]

http://www.nytimes.com/2005/05/10/opinion/l10brooks.html

At a point after Lincoln had embraced revolutionary ends for the war effort, he was moved to remind his fellow Americans that theirs was a time that demanded deep humility in matters of faith and politics. After all, he noted of the warring parties in the conflict, "Both read the same Bible and pray to the same God, and each invokes His aid against the other."

This was a president who for the good of the country sought to detach theological certainty from even the most moral of political issues.

One wonders whether the Lincoln Memorial would still bear these words if it were being constructed today.

Russell L. Riley
Charlottesville, Va., May 5, 2005

The writer is a research fellow in the Presidential Oral History Program, Miller Center of Public Affairs, University of Virginia.

[anne]

Respect for Brad and this site are as important as Jennifer and Ari and MTC and so many others would have it be :) Me too.

[liberal]

Lawrence wrote, "Did Patrick Sullivan do his sums right? (ignoring the typo 2072)
x*90,000*35=$400,000
therefore x=12.7% (approximately)
Now employers and employees split about 13% on FICA with employees contributing apout 6.5%. So Patrick has conveniently doubled the employee contribution."

Not that I'm any kind of defender of Patrick Sullivan---on the contrary, as he will atest---but you should really think of the employer contribution as being borne by the employee. Why? Because most of the incidence of a payroll tax falls on the employee, regardless of who actually remits the tax.

[Lawrence]

Pareick Sullivan, whomever,
"it doesn't matter where the payroll nominally goes (employee and various govt agencies) it only matters what the total is. Virtually every economist recognizes this."
Actually it does matter.So name the economists. What every economist actually recognizes is that the tax burden can be shifted depending on the relative slopes of the demand curve and supply curve for labor. Basically employees get somewhat lower wages which is the way they "pay" for it. A large amount of empirical evidence indicates that at the very least the amount isn't fully back shofted to employees. Of course there was the other side of the equation, currently SS isn't means tested, everyone gets basically $800 or $1600 depending on whther they are married. Working through the math PS actually has higher income workers getting more than lower income workers. Like $12k for the $400k, and $9k for others. SS has been funnding general fund expenditures based on Treasury Bond exchanges. What all this tells us is how PS and other weave these convenient little meaningless fictions in order to justify a world view fundamentally at odds with reality. As for example, the trust fund is a myth because it has "IOU's," or I can use whatever number I please, so long as I can justify it, however implausibly.

[bakho]

Patrick Sullivan calculations are still fuzzy math. If everyone got fewer SS benefits that the SS taxes they paid, there would be no funding shortfall at all. The idea behind SS is to spread the risk so that those that do live longer are not destitute and are partly supported by excess taxes of those that die early. There are also "survivors" benefits, and those must also be put into the equation. Certainly in any social insurance system there will be winners and losers. The idea is to accept small losses so as to prevent large losses. People understand that logic. It is not a good argument for ending Social Security. If you die early, you won't care. You will be dead. If you live longer than average, you will avoid destitution. You will be very thankful.

Of course, SS does not fit well with the idea that "He who dies with the most toys wins."

[pepe le pu]

"Roughly one third voted for him and another third didn't bother to vote, which means we are seeing a statistical miracle previously supposed to be impossible: two-thirds of Americans are below average in intelligence."

uh ... or, 2/3 of americans are stupid, thus the typical (median) american is stupid. but then, we knew that already, didn't we?

[Lawrence]

Bahko is right. Although "fuzzy" math is not the same as innacurate math. PS sets up his little piece of nonsense in such a way that SS appears to be a simple retirement plan rather than socia; insurance. Then he spins his little fable by assuming away all the little thorny problems with his approach. It like the right wing lunatic fairy tale machine..."Once upon a time..."

[liberal]

Lawrence wrote, "A large amount of empirical evidence indicates that at the very least the amount isn't fully back shofted to employees."

My understanding is that most of the tax---including the employer contribution---falls on the employee, because of the incidences involved.

This is most definitely the consensus among economists. That doesn't mean it's true, but it's more agreed upon than e.g. the incidence of the corporate income tax.

[matt]

There are just aas many toyotas as Hummers with those annoying magnets, but the Hummer owner got a huge tax write-off when he bought his car.

DeLay said recently that this budget was the one that people knew they were going to get when this a--hole was reelected. Whether or not the election was valid, I know a lot of people who are looking at their stock portfolios thinking they made the right choice; me, I'm considering dual citizenship in Ireland so my little kids don't become subject to the inevitable draft.

We have to realize that for a generation there has been nothing but vitriol poured out on any programs that benefited the poor. Or towards unions or any other group that sought to better the lives of its members at the expense of a portion of corporate profits.

The people who cheeered when PATCO was destroyed are the same ones who are driving around with W'04 stickers while the rest of us haved the Wtf04 stickers. Sometimes I feel like that--what the fuck hit us to cause such mass amnesia towards people like the vrew running us into the ground.

I firmly believe Bush and Co. are determined to make this country into a third world country with poor people sleeping in shanties and the rich driving around with bodyguards to protect them from the plebes. The sorry part of it is that none of the people driving blithely around with those annoying magnets realizes what Bush has in store for them; it's just a matter of time.

Let's sit back and enjoy the wholesale whining when it starts.

[matt]

Why aren't the democrats standing up on the floor of congress and repeating over and over ad nauseam "Remove the income cap, remove the income cap."

Once people see that the republicans would rather die than fix social security forever, maybe they'll get the hint, even the brain dead ones with those annoying magnets.

And the proportion of cars with those annoying things is about equal for Toyotas, Mazdas, and Hummers, the only difference being that the guy driving the Hummer got a huge tax writeoff so he can afford more of those magnets to support the troops who are keeping the oil safe for that big old guzzler.

[Movie Guy]

jm -- "So the real contributions of wage-earners to SS has been not 12.4%, but more like 9.2%, the 3.2% difference being in fact a hidden income tax. (For the period since the "Greenspan reforms" of 1983, this hidden income tax has averaged about 2.1%, and the average "real" FICA contribution rate has averaged about 9.8% vs. a nomnial 11.8%.)"

Good point. Particularly so, considering that every attempt under the sun will be taken to avoid fulfilling SSA trust fund IOU obligations. Price-indexing is only the beginning.

Baed [Based] on your presentation, someone should recalculate returns on net contributions. Might be a more realistic figure.

Moreover, the rate of "investment" return should be further revised to allow for the deletion of disability insurance coverage.

COPA (carve out private account) proposals might have a hard time matching existing net Social Security program returns based on the above.

Posted by: Movie Guy | May 9, 2005 09:49 PM

--------

Movie Guy: Your 09:49 comment suggests _exactly_ the right next steps in the analysis.

Posted by: jm | May 10, 2005 07:53 AM

========

Brad DeLong, Jason Furman (CBPP), Robert Greenstein (CPBB), Dean Baker, Paul Krugman, and others:

This type of analysis would serve a worthy purpose.

If nothing more, it could be used to end the crying game over the SSA nonmarketable securities (IOUs) once and for all.

In my judgment, it's a more realistic value assessment.

There is no question that price-indexing and other benefit deferral measures will be undertaken by the current majority in Congress. So, beat them to the punch.

jm has hit on a good discussion point.

[bakho]

A problem with PS Fuzzy math is that SS future benefits are only projections, not set in stone. They depend on wage inflation. Another problem is that wages go up over time. People don't just get paid $53,000 every year. SS future benefits can be projected but cannot be calculated.

The real winners in future SS benefit cuts would be employers that could pocket the money currently going to pay employee SS. The talk about employer SS factored in to employee pay is just BS. Everyone is competing with the lowest common denomenator, WalMart. If WalMart were not required to pay half the SS, employees would still get minimum wage. Don't think they would raise wages.

[chris]

I agree. I appreciate the work that Prof. Delong is presenting here. I understand that life is full of things to do, spending time with the family being a major one. But I think the honorifics are a bit much.

I did miss the insulting comment by Henry. Was it removed? If so, good, I guess I didn't miss anything.

On the other hand the comments on this post are up to 70 +. I've been noticing the life of some of these posts. Wow, big one.

I got back from China last night. The one legged and the no legged pulling themselves begging along the ground are tough to see. I saw a guy dirty carrying about a six year old boy. Maybe migrant labor trying to hold on. We supposed to go part way down that route?

Try listening to the Asian Dub Foundation's Facts & Fiction for keeping up the spirit.

Much appreciate what everyone is trying to do here. This is the real town meeting. Hope I don't come across as a quirpy gadfly.

[Scott McArthur]

Posted by: Tim Worstall | May 11, 2005 07:00 AM

What you say is all true.
Thank goodness then that with continuing population growth and immigration the ratio of US Work Force to US
retierees will not deteriotate much further.

Also thank goodness for worker productivity. Because it rises every year we are able to fund more retirees with fewer man hours worked.

This is why the "drop dead date" for SS collapse always gets revised outwards another 10 years or so every so often. Now its 2041, five years from now it could well be 2068.

Marginal, rather than radical, adjustments to the benefits paid or retierment age can take care of any remaining imbalances.

The voices pushing the "doomsday" scenario are trying to bamboozle Americans out of their government run retierment insurance program, for reasons that have more to do with ideology and crass political power than logic, reason or common sense.

Thank goodness the American people see through the bamboozlers.