Statement on Social Security Reform

J. Bradford DeLong
U.C. Berkeley and NBER

Democratic Policy Committee
192 Dirksen
May 13, 2005, 10 AM

3385 words

Any discussion of Social Security reform needs to begin with one too-rarely-asked question: Why is the American political system focusing its attention on Social Security? Is this really the aspect of American fiscal policy that should be absorbing our attention right now?

The answer is that we shouldn't. We shouldn't be focusing on Social Security right now. America has three problems with the fiscal policy pursued by the Bush administration:

• The current 5% of GDP on-budget deficit, the likelihood of major legislative changes (like extensions of expiring tax cuts) that will blow further holes in the budget, and the risks of economic crisis and recession and slowed long-run growth created by this Bush-league fiscal policy.
• The generational explosion of federal health-care costs we expect to see. From one perspective, this is not so much a problem but an opportunity: we expect our doctors, nurses, and druggists to do even more wonderful things for us in a generation. We would like for all Americans--not just those with thick wallets--to benefit from the advances in health care that we confidently anticipate. But this will be expensive: we need to figure out how much publicly-funded health care for the poor, the disabled, and the old we as a society wish to buy, and what taxes are going to fund these public health-care programs.
• The likelihood--not the certainty--that the Social Security system as currently structured will be in deficit by mid-century.

The first of these--the current Bush deficits--is the most urgent. The second of these--the health care funding "opportunity"--is the largest. The third of these--Social Security--is both the least urgent and the smallest. So why are we spending our time on it? There's no good reason. As Berkshire-Hathaway Chairman Warren Buffett, no bleeding-heart liberal he, said last week:

...a [Social Security] deficit of $100 billion a year, something, 20 years out, seems to terrify the administration. But the $400 plus billion dollars deficit currently does nothing but draw yawns....

The answer, I think, is that the Bush administration doesn't want to deal with our current deficit because it made the mess and hopes that if it pretends it doesn't exist nobody will really notice. It's very much the three-year-old approach to fiscal policy: "What broken jelly jar on the kitchen floor?" The answer, I think, is that the Bush administration doesn't want to deal with health-care financing issues because they have no idea what to do: the only person even close to the inner circle with serious views is Mark McClellan who could get nobody else to pay any attention, so he's parked himself at CMS in the hope that by writing rules he can improve the efficiency of the public health-care systems.

Focusing on Social Security thus performs the important political function for the administration of allowing it to pose as seriously concerned with responsible governance while at the same time ignoring the mess on the kitchen floor. And in this case, it's not a three-year-old who has dropped a jelly jar. It is the moral equivalent of a three-year-old who has climbed up on the counter and thrown everything breakable in the room down onto the floor.

Moreover, how serious is Social Security's long-run financing problem? The 2005 Social Security Trustees' Report reduced its estimate of Social Security's 75-year deficit from 0.7% to 0.6% of GDP. Using the same accounting methods, the 75-year deficit of the U.S. government as a whole under current law plus extension of the Bush tax cuts and an AMT fix is 4.8% of GDP. The Social Security Trustees assume, for their intermediate run, that productivity growth in the economy will average 1.6% per year. They justify this assumption by writing that:

[since] productivity growth can vary substantially within economic cycles.... [We] consider historical average growth rates for complete economic cycles. The annual increase in total productivity averaged 1.6 percent over the last four complete economic cycles (measured from peak to peak), covering the 34-year period from 1966 to 2000. The annual increase in total productivity averaged 2.2, 1.2, 1.3, and 1.6 percent over the business cycles 1966-73, 1973-78, 1978-89, 1989-2000, respectively...

And the average of 2.2, 1.2, 1.3, and 1.6 is 1.6, hence their 1.6% per year assumed growth rate--the same growth rate they assumed in 2004, and 2003, and 2002. In 2003 the Trustees learned that the previous year's rate of productivity growth had been 3.2%, but this good news did not lead them to increase the assumed productivity growth rate. Ditto for 2004, when they learned the previous year's rate had been 3.5%. Ditto for 2005, when they learned the previous year's rate had been 3.3%. Past groups of Social Security Trustees have not been hesitant to lower estimates of productivity growth when bad news comes in; this group of Trustees is extremely eager to throw away all of the good news about the underlying productivity trend of the American economy we have had since 2000. I cannot think of a defensible economic rationale for such a forecast construction procedure. Nobody else I have talked to--not Democrats, not Republicans, not Independents--has been able to think of a defensible rationale either.

Taking account of the three places where I think the Trustees' forecasts are clearly awry--productivity growth, life expectancy, and also immigration--if I were running the Social Security Trustees, I would be forecasting a 75-year deficit of 0.2%-0.3% of GDP. Even if we weren't facing other much more urgent, dire, and serious fiscal problems, that deficit would be too small for me to think that it would be a good idea to focus for a year the limited discussion and decision-making power of the U.S. government on this issue. The limited attention span of the government needs to be focused on dire and urgent problems, not limited and far off ones.

With that note--that it is really a bad idea for us to be here talking about Social Security rather than talking about bringing the on-budget deficit down to zero from its current value of nearly $600 billion a year--let me, finally, begin:

In my view, a Social Security reform plan needs to clear five hurdles before it is worth considering:

1. The private accounts it offers people must be a good deal for beneficiaries.
2. The plan must raise national savings.
3. The plan must preserve the valuable defined-benefit nature of the current program.
4. The plan should restore long-run solvency, and put in place mechanisms for automatic adjustment should the system fall further out of balance.
5. We must have confidence that the plan will be competently implemented.

You have already heard from Robert Shiller on how private accounts as proposed by the Bush administration are not a good deal for beneficiaries. They do promise some higher returns, yes, but those higher returns are not worth the risk they make beneficiaries bear--the extra purchasing power gained in those states of the world when stocks do well does not match the losses beneficiaries see in states of the world when stocks do not do so well, because the lower your income is the more you miss the extra dollars that just aren't there. I don't have more than quibbles with Shiller's analysis, and none of my quibbles have any effect on his conclusions.

It is depressing to have to say this, because I am actually, in at least one of my hearts-of-hearts, the heart-of-hears of an Eisenhower Republican, a believer in private accounts. I agree with Marty Feldstein that the higher value of the equity premium in the United States over the past half-century tells us that the stock market has really not done very well at mobilizing the risk-bearing capacity of the American economy, and that any steps we can take to broaden and deepen stock ownership promise not just boosts the income and wealth of new stock owners but also significant improvements in the ability of America's business to raise capital for large risky and entrepreneurial ventures. I agree with former Bush II Treasury Deputy Assistant Secretary Kent Smetters that it is a scandal and an outrage that the poorest half of Americans have no easy, automatic, straightforward, and low-fee way of investing in stocks.

But the Bush plan's private accounts are not private accounts that anybody should endorse. The 3%-plus-inflation clawback rate is just too high given likely future asset reurns--as Robert Shiller has just demonstrated. When I conduct informal conversations with those who have been called senior administration officials and ask "Why? Why not a clawback rate that is the Treasury's actual borrowing rate, or even subsidize the private accounts a bit?" I tend to get one or more of four answers:

1. We know. We're trying to fix it. Our voice isn't very loud in here...
2. There are powerful people who think that if we set the clawback rate at the Treasury's borrowing rate, it will look like our plan is nothing more than letting people borrow from Social Security to speculate in stocks.
3. We can't find any money for a subsidy to make private accounts a good deal: we don't have the resources to reach actuarial balance as it is.
4. There's a "fuzzy math" problem in here. People think that "ownership" is a good thing by itself, and don't focus on the numbers.

Let me skip over the "increase national savings issue" even though it is very important. Let me just say that boosting national savings in the medium run is a dealbreaking essential for Social Security reform, that the most even those under tight message discipline like Greg Mankiw dare say is that the Bush plan will neither raise nor lower national savings, and that Alan Greenspan, among others, is very worried that Mankiw and company are wrong and fear that it might lower national savings and raise interest rates:

We don't know the extent to which the financial markets... trading in long-term bonds, are discounting the... contingent liability.... If indeed the financial markets do not distinguish... one would say, 'Well, if you wanted to go to a private [accounts] system, you could go... without any response in interest rates because... you're just merely switching assets....' But we don't know that. And if we were to go forward in a large way and we were wrong, it would be creating more difficulties than I could imagine.

The boosting-national-savings concern is the big reason that it is important that properly-designed and properly-implemented private accounts will be an add-on to Social Security as it currently exists, not a carve-out from it.

Now let me turn to the defined-benefit nature of Social Security: that it takes a share of your wages, and returns a certain, inflation-adjusted, stable monthly benefit check that replaces a reasonable (althought sliding-scale) proportion of your pre-retirement income. Such a defined-benefit retirement program is a very valuable thing: people like the idea a lot. Such a defined-benefit program is very hard to get elsewhere than Social Security these days: Businesses today are very hesitant and unwilling to assume the risk and liabilities involved in setting one up. And businesses are not large and stable enough to be able to bear the long-run risk: ask the steelworkers, or the employees of United Airlines, where there defined-benefit corporate pensions are. Or ask the workers of GM.

The government, however, is big enough to bear the risk of a defined-benefit pension program. And I think that where there is something that people regard as extremely valuable that only the government can provide, the government should provide it. In another of my hearts-of-hearts, you see, I am a social democrat. An it is in this context that I find myself very skeptical of progressive price indexing, for over the long-run it eliminates Social Security as a defined-benefit pension program, replacing it with a Social Security system that gives everybody the same value monthly check equal to about 22% of the average wage. It (a) cuts average benefits relative to current law by about 40%, and (b) changes Social Security from a defined-benefit program to which you contribute a share of your income to a simple flat benefit check, along the lines of what George McGovern proposed in the 1972 presidential campaign.

Now this is a progressive change in America's tax and transfer system. But Peter Orszag talks fast enough to be able to list 20 better ways to make America's tax and transfer system more progressive in less than thirty seconds. And this way does come at a major cost: eliminating people's defined-benefit pension component, a component that cannot be easily replaced in the economy we are moving into.

Now there are problems in analyzing what the administration's progressive price indexation proposal is. It came without numbers, which is why we are all using the numbers that Jason Furman has cranked out based on Pozen's original plan and on Jason's Talmudic reading of what actual modifications of Pozen's proposal would be needed if the words from speeches and press conferences were to actually make sense. And we have disturbing claims on Meet the Press that Pozen's plan is "'...really not necessarily the president's plan,' [Andrew] Card noted. 'It's directionally consistent with the president's plan'."

Robert Pozen proposes to fill the post-2050 projected funding gap in Social Security by reducing benefits and raising taxes. He would fill 10 percent of the gap by cutting Social Security disability payments. He would fill 60 percent by shifting to "progressive price indexing." He would fill 30 percent of the hole by tapping into income tax revenue. Is Bush's adoption of Pozen's ideas a backhand way of saying that he too wishes to fill the anticipated funding hole with income taxes? Does anybody know?

It is important to register the magnitude of the benefit cuts relative to current law that Pozen is proposing. For those retiring in 2075, Pozen would keep the replacement rate at 49 percent for the working poor—those making half the average income. But the replacement rate for those making more would be cut: At the average income, the replacement rate would go from 36 percent to 26 percent; at one-and-a-half times average, from 30 percent to 17 percent; at the Social Security maximum, from 24 percent to 12 percent. Medicare premiums are already deducted from your Social Security check. Deduct the claw-back for the private-accounts diversion as well, and by late in this century the odds are that—-at least for the upper middle class—-the standard Social Security check would be zero. Social Security would no longer be a universal program: It would be a program in which the half of America that is richer and more powerful and more likely to vote sees large chunks of its money going in and nothing coming out.

It is possible that this is the point, at least for some factions within the White House: perhaps creating a large and powerful class of Americans who get much, much less out of Social Security than they put in and for whom Social Security as a whole is demonstrably a very bad deal is the objective. It was early Social Security guru Wilbur Cohen who said that "in the United States, a program that deals only with the poor will end up being a poor program. ... " Loading a large chunk of the burden of fixing Social Security onto America's upper middle class may be the first step in the creation of a mid-21st-century political majority for the phasing-out of the program as a whole. But it is also possible that the White House doesn't have such a long-run Machiavellian plan in mind--that it is hoping to attract some more support for its proposals by making them more progressive, and is just trying to trick its right-wing supporters by pretending that this is a deep, long-run, Machiavellian plan to eventually eliminate Social Security entirely. The only thing that is clear is that it is very unlikely that the White House is proposing progressive price indexing because it believes the government needs to put its thumb on the scales to make the U.S. distribution of income and wealth more equal: that's not their game. (It is, however, Robert Pozen's game: that's why he advocates this proposal.)

Let me skip over point four, solvency, by pointing out that the Bush plan--excuse me, there is no Bush plan, there are only "ideas" that are "not necessarily" the Bush plan but are only "directionally consistent" with it--doesn't reach actuarial solvency unless Bush's embrace of Pozen includes his plans to rest part of Social Security on income taxes. If that is in fact what Bush's embrace of Pozen means, that's big news.

And let me end with point five: competence in implementation. A Social Security reform plan could clear hurdles one through four, and still fall flat on its face if incompetently implemented: the devil is in the details. And looking at the farm bill, the steel tariff, the return of deficits bigger than ever, the use of intelligence by the NSC, the absence of a real plan for post-invasion Iraq, the Medicare drug bill that ex-HHS Secretary Thompson now really wishes had been structured differently, et cetera, et cetera, it is hard to believe that any reform to be implemented by this administration will be implemented competently. It has the anti-Midas touch: whatever it grasps turns to mud.

Let me give a small example of this, from George W. Bush's statement on April 28:

In a reformed Social System, voluntary personal retirement accounts would offer workers a number of investment options.... 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... On April 28 the Federal Reserve was reporting that the twenty-year inflation-protected Treasury bond was yielding 1.87% plus inflation per year. The money you divert into your private account under the Bush plan is clawed back--charged against your normal Social Security benefit--at a rate equivalent to 3% per year plus the rate of inflation. Were interest rates to stay where they are now over the next fourty years, if you were 25 now, made an average of $80,000 a year over your career, and diverted all 4% of your wages possible into your private account and invested them in twenty-year inflation-protected Treasury bonds... then your Social Security benefits--normal plus the annuitized check from your private account balance--would be $514 a month less than if you had said "No thanks" to private accounts and kept your money in the standard program.

"Building a nest egg"?! Given current interest rates, following George W. Bush's advice and investing Social Security private-accounts money in inflation-protected Treasury securities is a really bad idea. Yet they let him go out there and say that.

Did nobody inside the White House bother to run the numbers? Did nobody care? This breaks my heart--for in yet another of my hearts-of-hearts, I am a technocrat who believes in administrative competence, and think that the President of the United States should not be sent out to make speeches that only an underbriefed fool would write because of the nonsensical things that they say.

Until the center of policy making and implementation in this administration is moved outside the White House to someplace else where people seriously concerned with the substantive design and implementation of policy, nothing the White House proposes--nothing, no matter how good it sounds at first--can be expected to turn out to be anything other than a large pile of mud.

Thank you.

Comments

[pebird]

Bravo!
Encore!

[rsl]

Great article, Brad. We can only hope the Democrats (and sensible Republicans) listen.

[howard]

i think the coherence and high degree of information this wonderful piece embodies is not only a tribute to the prof's own analytic processes but also an outgrowth of having a forum - this blog - on which to work out the ideas, receive feedback, and constantly improve their presentation.

bravo.

[CalculatedRisk]

Error correction: Dr. DeLong, a portion of the quote you attribute to Buffett is actually from me.

The Buffett quote should read: "Well, it's an interesting idea that a deficit of $100 billion a year, something, 20 years out, seems to terrify the administration. But the $400 plus billion dollars deficit currently does nothing but draw yawns. I mean the idea that this terrible specter looms over us 20 years out which is a small fraction of the deficit we happily run now seems kind of interesting to me."

SOURCE: http://transcripts.cnn.com/TRANSCRIPTS/0505/04/ldt.01.html

The following sentences were my commentary. I am sorry that my blog wasn't clear.

Excellent letter!
Best Regards.

[lfs]

Please forward this to Gail Collins at the NYT & request that she assigns it as mandatory reading to Brooks & Tierney. (And a day later, have Krugman query them on their comprehension). And if they flunk, Gail should fire them.

[pgl]

Thorough and well written with only one problem - three-year-olds can be a pain at times, but it's still not fair to compare them to the White House crowd. After all, these 'adults' should know better.

[bob mcmanus]

Superb

[Jeff L.]

Beautiful. I've always known you were a ruminator, and now you've admitted it with your multiple heart-of-hearts comment. One question: maybe I'm getting things confused, but wasn't there some law change that mandated that the Trustees get their productivity growth number the way they have, thereby not taking into account the recent rise in the rate? I think Yglesias has been on this case.

[hrned]

Fantastic! Thank you. I am tempted to send the link to Debra Saunders, the SF Chronicle opinion columnist who on Sunday asked if GWB was Washington's only adult, if only for the three-year-old comparison.

[till]

Great piece.
I'd just add to your prologue that if the leadership of our country really wanted to confront big long-term problems that risk causing economic and humanitarian havoc, we would be talking about global warming, not social security. The Prez keeps saying his job is to confront problems and educate the country about them. Unlike with Social Security, waiting is certain to magnify the harm of global warming and dramatically inflate the costs of reducing emissions and dealing with climate change. On his own standard of leadership, the Prez is failing dramatically, with dangerous consequences for all.

[Mandos]

Umm, could you put some of this in the extended entry? It'll be making it hard to scroll this blog for a while...

[Doctor Biobrain]

I agree with PGL. My three-year-old will often listen to reason and compromise fairly, and always tells us what mischief she's been up to. I see none of that in the current administration. Then again, she's almost four, so it's not really a fair comparison.

It was a good post, but I don't understand your confusion about them sending Bush out without real numbers. It's not necessarily that they're boobs or incompetents (though they are both); it's that they're afraid the answers will go against them. And they'd much rather have Bush out there talking out his ass as an "underbriefed fool" than to have him know the truth about his bogus claims. Bush just isn't an effective liar, and it's much better to have him underbriefed than knowingly trying to deceive. He'd just rather not know.

If you don't understand that, then you don't know who you're dealing with. These are not empiricists using facts to form policy. These are ideologues using their policy to form facts, and they have no problem with ignoring "bad" facts. That sounds snarky, but it is the truth.

[Michael Cain]

Is there a chance that, deep down, the Trustees realize that the portion of national income that goes to the capped wages and salary base for the SS taxes will be a shrinking one in the future? And that the "productivity" growth that they assume is actually that portion of the overall growth rate that will show up in that tax base? And that they find it politically infeasible to actually make such a statement?

[bakho]

Good post Brad. Follow it up with a blueprint for attacking the deficit and health care, problems #1 and #2.

Doctor Biobrain- What we are dealing with is not empiricism, not ideology, but good old style Boss Tweed corruption. Does cutting SS benefits cut future obligations of employers to pony up for worker pensions? You betcha. Did the UAL decision just open the door for every other airline to jettison their pensions too? You betcha. Will that cause a run on pension funds? If it does, will corporate interests benefit at the expense of workers? You betcha.

Name one fiscal policy of the Bush administration that has not had the effect of transferring wealth from middle income and low wage earners to the wealthy. I expect to be waiting a long time for an answer.

[Maynard Handley]

If the goal is to "mobilize the risk-bearing capacity of the American economy" that surely means increasing the risk-bearing capacity of individual Americans. Yet there is pretty much not a single development of the last ten years that has not DECREASED this risk.

This is larger than social security. Risk in the American economy that "the system" copes with, but that destroys large numbers of individuals is politically unsustainable, and what replaces is will, even in a best-case scenario (something like Peron's Argentina) not be pretty.
The only sustainable way for an economy as a whole to take risks is for individuals to be well insured. You have to make this point more aggressively, Brad, because the idiot opposition is intent on pushing the precise opposite point --- in their bizarre world view, making individuals lives more risky (old age, health insurance, ARMs, at will jobs, new bankruptcy laws etc) will apparently lead to an explosion of additional risk taking by these individuals as they seek to increase their excitement regarding their current and future lives by gambling on starting a new business, moving to new jobs, retiring to train for new careers and so on.

[qwerty]

Why is the American political system focusing its attention on Social Security?

Because it is an obligation our goverment would like to default on. Why not Medicare? See, HMOs, drug companies and medical profession would not want our goverment to default on it. As Guenter Grass says, "Parliament is no longer sovereign in its decisions. It is steered by the banks and multinational corporations...."

[Giles Robertson]

A powerful and cogent expression of what's wrong with the current "proposal". The 5 hurdles make a lot of sense, though if they can possibly be compressed to three articles of faith (or articles of reality, depending on taste), then it'll be easier to sell. When a debate has been conducted at the intellectual-lowest-common-denominator level for some time, the most powerful arguments in raising the standard may not be those at the most desirable level of sophistication.

If you ever want to rephrase this, you might like to try asking two questions:

What do we want from Social Security? (as opposed to your current question, "what do we want from Social Security reform?")

What will our current understanding of the President's plan give us?

Answering those two should make the third:

Should we support our current understanding of the President's plan?

a self-evident no-brainer.

[dougs]

re: statement on ss reform. Shouldn't there be a credit somewhere in here to PK?

[praktike]

perfessor-

That was lucid, eloquent, witty, and absolutely devastating.

Thank you.

[Auros]

Brad has three hearts? Is he secretly an octopus?
http://www.mote.org/~lauren/motenews/winter96/octopus.phtml

[Jonathan Goldberg]

Like others, I think this is a fine piece.

A rhetorical quibble: I think bringing in the three-year-old weakens the arguement. If my reaction is typical, readers will be slightly irritated with you because you've infringed on their conclusion-drawing perogative. YOU present the facts and analysis, YOUR READERS draw the conclusion that Bush is acting... My reference standard for this is computer documentation that starts "This is an easy to use program..." You don't tell me it's easy to use; I tell you.

Sorry to run on so long about a nit. If you make no changes I still rate it a class A effort.

[Thomas T. Schweitzer]

Has the Bush administration given the perpatrators of the Abu Ghraib outrages AND THEIR SUPERIORS 15 years of prison and and a dishonourable discharge? That would have sent everybody the necessary message. If they did not, why not? Where does the buck stop? This way the present hypocritical, and for the USA deeply harmful administration has become an accomplice after the fact.

[MTC]

As a written statement, I have no quibbles. As a performance piece, I have some serious worries. Dr. DeLong has included a large number of quotations, some unattributed, some with serious ellipsis. From the one NPR recording I have heard of Dr. DeLong, his natural voice is high, soft, unmodulated tenor. He has very little natural room to alter his voice so as to indicate that he is quoting someone. Unless he brackets the quotations with folksy "he says" or "they say," he might lose the Senators. I think the section on the four unattributed quotations from "senior administration officials" on the clawback issue to be particularly perilous

[putnam]

I agree wholeheartedly with the thrust of your astute analysis.

In the spirit of your request for comments, I agree with others' suggestions that the analogy to three-year-olds is overdone and perhaps shouldn't be used at all.

I was also jolted suddenly by the descent in diction and tone from discussing policies to discussing insider-personality-stuff with an air-kiss to someone named Mark McClellan and speculation about this person's motivations (not admissible as evidence, and easily denied) in taking a job at some acronym place.

[Lee A. Arnold]

Stratospherically excellent! My only teensy quibble is that the paragraph on the "equity premium" and the "risk-bearing capacity" needs a rewrite for the dense and earthly clods like me. People in the fight for a better future everywhere are going to be reading this piece, and especially aspiring journalists--not just the policy committee. Maybe insert one more sentence that brings it down a notch, onto the voter's kitchen table? Or perhaps you might point your readers toward a tutorial on the subject? I know I have several questions about a fifty-year endemic situation that could suddenly be cured by shifting the loci of a money-go-round.

[rsl]

Brad,

You may be able to strengthen your argument for preserving the defined-benefit nature of Social Security. I'd consider making the following two points more explicitly:

1. Unlike private-account-based plans, defined-benefit plans spread risk among a group of participants, providing insurance-like protection for the participants. One of the problems with private accounts is that all the risks are born by the individual. This includes the risk of not having enough income to sufficiently fund the individual account, the risk of investment failure, and the risk of living longer than average in retirement. With defined-benefit plans, these risks are shared across the whole group of participants, making each individual less vulnerable. Like you, I would like people to save more and think personal accounts could have a role as an add-on to SS. But preserving some sort of plan that spreads risk among a group (rather than concentrating all risk with the individual) is essential to preserving retirement "security."

2. As employers replace traditional defined-benefit pensions with 401(k)s and cash-balance plans (which are considered defined-benefit plans, of course, but which don't provide the same risk-protection as traditional final-average-pay plans), there has been a significant loss of diversity in the retirement programs of most workers. Moving away from a defined-benefit approach in Social Security furthers this loss of diversity, essentially creating a system where all of a worker's retirement plans are based solely on personal savings invested in stocks and bonds. We all know that diversifying one's financial portfolio is a key to managing risk and achieving success. If we eliminate the defined-benefit aspect of SS, we reduce diversity significantly and essentially create the same situation we had prior to the Great Depression: a system in which people's retirement security depended solely on their individual ability to save and the success of their stock and bond portfolios.

[pi]

Quite a good piece of rhetoric. A couple of quibbles:

(1) Not only is the comparison of Bush admininistartion behavior to that of three year olds unfair to three years olds as pgl and others noted, but the description of Bush policies as Machiavellian is unfair to Machievelli, who was quite a deep thinker and, compared to Bush et al, a defender of what is just and good.

(2) Hurdle number 1 needs clarification: An essential element of social insurance (IMO) is redistribution. SS can't be a good deal for everybody ex post and still be redistributionary. It should be a good deal ex ante, not knowing how one's lifetime income will turn out. But, ex post, it needs to redistribute income from those lucky enough to have chosen the right parents, had access to good schools, and worked for the right company to those who weren't so fortunate.

Following from (2), the argument of Wilbur Cohen ("in the United States, a program that deals only with the poor will end up being a poor program.") is rather weak. A program that is a good deal for the rich is not going to do much redistribution. I believe that if the rich are as selfish as Cohen and DeLong propose, they will resist a SS program that is bad for their interests, even if they get a SS check when they retire. We need to appeal to people's sense of justice, not their self interest.

[Bruce Webb]

From Michael Cain
"Is there a chance that, deep down, the Trustees realize that the portion of national income that goes to the capped wages and salary base for the SS taxes will be a shrinking one in the future? And that the "productivity" growth that they assume is actually that portion of the overall growth rate that will show up in that tax base?"

Well sure, but that is not the number they report in "productivity". The effect you mention would show up in other columns like Real Wage Differential. Productivity is the overall pie, the size of the slices depends on other factors. Lowballing the size of the pie because you know the people cutting the slices are rogues is to make a mockery out of the whole model.

We are talking about a spreadsheet. Intermediate Cost and Low Cost are nothing more than an Excel table. You change your initial assumptions and the changes ripple right through to the end. Productivity is just one assumption, though the driver, there are others and anyone if free to challenge them and show how they might offset productivity. But these tables are math and not psychology, they don't measure the evil that is in the hearts of men, they are not a scorecard on the Masters of Capitalism. They simply show that if you input a set of economic and demographic assumptions we can label A you get outcome X. If you input a different set of assumptions we label B you get outcome Y.

What you suggest here is that initial numbers are being distorted in an effort to hide the thuggery needed for Capital to extract all the gains of likely productivity over the next 75 years at the total expense of Workers. (Which was the outcome of the "No Economist Left Behind" challenge. You can save 6.5% stock returns with 1.6% productivity by putting 90% of America into perma-poverty). Well no thanks.

I assume that workers will extract some share (not necessarily a fair share) of the gains in productivity over the next years. Because despite the flaws both exhibit on a daily basis we still have some capital letter players called Democracy and Markets. And you can only game the latter so much before the former bites you in the ass.

Social Security insolvency requires one) that some future US government openly proclaim themselves to be thieves and liars and two) that corporate America will simply feel free to grind down American wages into the dirt. There are plenty of people who believe that, read any comment thread at dKos. But it is an uncomfortable starting position for privatizers. "Sure we will default on the bonds, and no you will never get a raise ever, but trust me with that 4% of your check"

You can only get to Social Security "crisis" by trashtalking the American economy and the whole concept of market wages. Ask the next privatizer you meet why he hates America so much.

[Lee A. Arnold]

Bruce Webb, you are good!

[anne]

http://www.nytimes.com/2005/05/13/opinion/13krugman.html?hp

Always Low Wages. Always.
By PAUL KRUGMAN

Last week Standard and Poor's, a bond rating agency, downgraded both Ford and General Motors bonds to junk status. That is, it sees a significant risk that the companies won't be able to pay their debts.

Don't cry for the bondholders, but do cry for the workers.

Standard and Poor's downgraded GM and Ford sooner rather than later because it believes that the public is losing interest in S.U.V.'s. But the companies were vulnerable because they still pay decent wages and offer good benefits, in an age when taking care of employees has gone out of style. In particular, they are weighed down by health care costs for current and retired workers, which run to about $1,500 per vehicle at G.M.

So the downgrade was a reminder of how far we have come from the days when hard-working Americans could count on a reasonable degree of economic security.

In 1968, when General Motors was a widely emulated icon of American business, many of its workers were lifetime employees. On average, they earned about $29,000 a year in today's dollars, a solidly middle-class income at the time. They also had generous health and retirement benefits.

Since then, America has grown much richer, but American workers have become far less secure.

Today, Wal-Mart is America's largest corporation. Like G.M. in its prime, it has become a widely emulated business icon. But there the resemblance ends.

The average full-time Wal-Mart employee is paid only about $17,000 a year. The company's health care plan covers fewer than half of its workers.

True, not everyone is badly paid. In 1968, the head of General Motors received about $4 million in today's dollars - and that was considered extravagant. But last year Scott Lee Jr., Wal-Mart's chief executive, was paid $17.5 million. That is, every two weeks Mr. Lee was paid about as much as his average employee will earn in a lifetime.

Not that many of them will actually spend a lifetime at Wal-Mart: more than 40 percent of the company's workers leave every year.

I'm not trying either to romanticize the General Motors of yore or to portray Wal-Mart as the root of all evil. GM was , and Wal-Mart is, a product of its time. And there's no easy way to reverse the changes.

What should be clear, however, is that the public safety net F.D.R. and L.B.J. created is more important than ever, now that workers in the world's richest nation can no longer count on the private sector to provide them with economic security.

When they reach 65, most Wal-Mart employees will rely heavily on Social Security - if the privatizers don't kill it. And many Wal-Mart employees already rely on Medicaid to pay for health care, especially for their children....

[anne]

Bruce Webb really is thorough and incisive :)

[matt]

The only thing that will get this administration to stop the rhetoric about Social Security is for the democrrats in congress to take to the floor and just keep repeating "Remove the income cap."

Democrats with name recognition should write op-ed pieces showing how removing the income cap will permanently fix the system and they can contrast that with how the permanent Bush tax cuts will cripple our country.

If these people are shown for what they truly are, a bunch of greedy selfish bastards who won't let go of a penny so that someone else can survive, maybe more people would realize just how one-sided this whole issue is and maybe, just maybe, Bush would stop this ridiculous fixation of his with gutting the New Deal.

It isn't enough that people should see the economic and social programs that FDR instituted as socialist giveaways, now Bush tries to tar FDR with that old bugaboo of giving away Europe to the communists. You don't hear anyone pointing out, however, that Bush's grandad, good old Senator Prescott Bush collaborated with the Nazis and was cited for it under the Trading with the Enemies Act nor is it mentioned that the Bush family has had ties since the 1930s with the fascist Somoza family in Nicaragua, probably one of the biggest reasons we were so involved in the whole Iran-Contra mess.

So it isn't surprising to see Bush saying that siding with the fascists after WWII was the way to go, it's the only ideology and faith his family really knows.

[anne]

http://www.nytimes.com/2005/05/13/opinion/12rubin.html?pagewanted=all

Attention: Deficit Disorder
By ROBERT E. RUBIN

THE United States has tremendous economic strengths but it also faces great challenges: the need to ensure national security; a newly competitive China and India; serious shortcomings in public education, basic research, infrastructure and other requisites for meeting that competition; and much else. An immediate and critical imperative is to redress fiscal imbalances.

Most pressing is the 10-year federal deficit, which most independent analysts project at $4.5 trillion to $5 trillion, assuming that the tax cuts passed in 2001 and 2003 are made permanent and that the alternative minimum tax is adjusted to avoid unintended effects on middle-income taxpayers. And while 10-year numbers can be highly unreliable, deficits are as likely to be higher as to be lower. Over the longer term, Social Security has a 75-year estimated deficit of $4 trillion, while the different components of Medicare, including its new prescription drug benefit, represent a fiscal problem of roughly $20 trillion.

Virtually all mainstream economists agree that, over time, sustained deficits crowd out private investment, increase interest rates, and reduce productivity and economic growth. But, far more dangerously, if markets here and abroad begin to fear long-term fiscal disarray and our related trade imbalances, those markets could then demand sharply higher interest rates for providing long-term debt capital and could put abrupt and sharp downward pressure on the dollar. These market effects, plus the adverse impact of continuing fiscal imbalances on business and consumer confidence, could seriously undermine our economy.

We have managed to avoid these market effects so far because private demand for capital has been relatively limited, and because the central banks of Japan, China and other countries have provided large inflows of foreign capital. A change in either of those circumstances, or simply a change of market psychology for whatever reason, could, however, turn these interest rate and currency risks into a reality....

[kharris]

Michael Caine,

The actuaries have actually said as much, on the record. Given that people earning over the cap are expected to be the most blessed in coming years, it is something of a mystery that we hear dire warnings about the economic consequences of raising the cap. Or hear that it would be unfair to ask those who benefit most from our economic system to give most back.

[anne]

Michael Caine:

'Is there a chance that, deep down, the Trustees realize that the portion of national income that goes to the capped wages and salary base for the SS taxes will be a shrinking one in the future? And that the "productivity" growth that they assume is actually that portion of the overall growth rate that will show up in that tax base?'

Thank you, I did not properly understand the implication. The question then is whether middle and low income work will count for a still smaller portion of national income...?

[tjoad]

Remo:
wrt point 3
I am not sure that the current deficit size (as a fraction of GDP) is necessarily the problem. The problem is that there is nothing on the horizon that indicates that deficits won't balloon out of control -- ie... wait until the current tax cuts don't expire. And this congress seems to have no intention of slowing down its spending binge.

[David]

A good reason to reform SS before Medicare, even though Medicare may be a bigger problem, is that fixing SS is much easier.

[It is? Why? How?]

[anne]

Social Security is completly solvent and has a massive and growing surplus that will enable full benefits to be paid for at least 40 years. There is every likelihood that full benefits can be paid for decades beyond, for that will only take economic growth of 2.2% which is far less than America's average growth over the last 50 years. There is no problem with Social Security, other than for those who wish to end the system.

[anne]

The Administration is not trying to fix Social Security, but to reduce middle class benefits and so end Social Security. Social Security needs no fixing at this time and possibly not in a decade or two or three....

[Lee A. Arnold]

Since some of us don't follow Brad's paper, I have attempted to write A Social Security Primer: ...Social Security is already solvent, and probably always will be. The Social Security actuaries low-balled the PRODUCTIVITY figures in their "official" projections, thereby understating ECONOMIC GROWTH. With regular economic growth you can have three or even two workers per retiree, and the system will be fine forever. In reality, Social Security will probably never do into debt, at all. At its worst, it'll be the least of our problems. At the moment, since PAYROLL TAXES are DEDICATED to it, it is certainly running a SURPLUS. That surplus is used to cover OTHER GOVERNMENT SPENDING and to cover the INCOME TAX CUTS, CAPITAL GAINS and DIVIDENDS TAX CUTS, and ESTATE TAX CUTS for the wealthy, 2/3rds of which total go to the upper 20% of the population! This is a redistribution of money UP to the rich, from the bottom poorer 80% of the population: the ones who pay predominantly payroll tax! The propaganda is that these tax cuts are necessary for economic growth, but that is not supported by all of economic theory, nor history. In fact you can increase taxes a little on the wealthiest people, and still have great economic growth, as happened in the 1990's. ...The SS surplus, when it is spent every year, is replaced by special Treasury BONDS, making it into a paid-forward credit-account, called the "TRUST FUND," to guarantee the future of Social Security, by PRIOR AGREEMENT. A bond, by dictionary definition, is a PROMISE. Now, before we go on, the President wants to BREAK a prior promise because of a phony crisis, so why should we believe what he says next? ...Anyway, his "solution" to his phony crisis has two parts: (1) to create PRIVATE (he wants to call them "PERSONAL") ACCOUNTS using payroll taxes (this is called the CARVE-OUT of payroll taxes,) these accounts under government control until the WALL ST. LOBBY pushes for more profits, in which 1/3 to 3/4 of the retirements will BREAK-EVEN or LOSE MONEY, according to investment experts, and from which the government is still going to CLAW-BACK your principle investment plus interest, so you lose more money. At the same time the government has to BORROW a $4 to $6 trillion TRANSITION COST to cover the current retirees, because not enough payroll tax will be coming in to cover them, and that money will be borrowed from the BOND MARKET as always, where we are supposed to invest these accounts, and the bonds will be repaid with interest, like always, out of future TAXES on us. So the whole private accounts thing is a huge MONEY-GO-ROUND: out of one pocket and back into the other. (2) The other part of the Social Security "solution" is PROGRESSIVE INDEXING of BENEFITS, which divides the people up into a MEANS-TESTED WELFARE system, and CUTS BENEFITS for everybody a second time, except for the bottom 30% poorest. Since Social Security is not really in trouble, this is unnecessary. It is no longer discreet and dignified, and destroys the measured inclusion of everyone. And as a welfare system it will finally be gutted. Fianlly, it actually makes benefits worse than if you left the Social Security system alone under the official estimates! And with losses in the private retirement accounts, we're going to need a bigger welfare system! ...Quite a story! There are many other facts in the debate but I hope I covered the basics. Jump in and correct it wherever you can! ...The real key to Social Security is that all retirees, from the billionaires to the poorest, think it is a GOOD IDEA. Have they learned something about the world that maybe you haven't? The politicians are using fear--of SS bankruptcy, of trust fund default, all nonsense--to help get your support for a "Wall St. Re-Employment Act." Don't fall for it! The solution to Social Security is to wait, and VOTE THESE BUMS OUT. THEN fix what needs fixing.

[jdw]

Mr. DeLOng,

I'm watching your appearance on Cspan this evening. Thank you!

[David]

Lee Arnold - why should we believe you rather than the Social Security actuaries? They're the very best experts on this matter. They've studied actuarial science for years and passed a series of very demanding examinations. They do Social Security calculcations daily for a living.

[tjoad]

David:

There are scenarios under which SS is solvent -- (according the SS actuaries!) Read Bruce Webb's post.

Ask yourself this question -- 30 years ago --what did you think the world was going to be like now? How close was your guess?

That's part of the point -- worry about the 420B deficit we have today, instead of making up some giagantic crisis about something 30 years from now.

[tjoad]

"It seems unfair to blame the President for fixing these programs in the allegedly wrong order. Bush deserves credit for trying to fix either of them, compared to his predecessor, who didn't try to fix either."

Hmm..he jumped in head first to this didn't he? So it was his choice. So should we blame someone else?

I think there are numerous good reasons pointed out above that this was the "least" pressing and some would argue, not a problem at all.

and if one argues solvency is a problem, his solution --private accounts-- did nothing to fix the problem.

So you wonder why we question?

[anne]

The Social Security actuaries simply have developed a model to estimate possible returns to and payments from Social Security over several generations. The possible outcomes range from a surplus that will last 75 years to a deficit that will become a problem in paying benefits in 40 years. There is no problem now, nor any reason to cut benefits and undermine Social Security.

The problem is not Social Security solvency, but those who from the New Deal on have wished to end Social Security for they would have no reliance on a public insurance or security program.

[anne]

With private pension programs continually under pressure and duress, the idea of reducing Social Security benefits when there is a wonderful surplus in Social Security is tragic. Do we care for the well-being of our grandparents and parents? I think we do.

[Jennifer]

Remo Williams

The argument is not over investment returns but whether we wish to continue Social Security. Do we wish to continue our social insurance program or not. I save, I invest, I know how to invest, but I wish a social insurance program in any event even if I may never need it. The program is for all those who have needed it and will need it; for most of us.

Robert Rubin by the way is simply describing what he sees, not timing markets which he has been astonishingly adept at. I assure you I take his concern seriously as I invest.

[Jennifer]

I would certainly not object about having a portion of the Social Security surplus invested by the system in a non-voting share stock index fund. Also, I would not object to private accounts added to Social Security as long as there are no benefit cuts at all. But, I will automatically vote against any political representative who supports benefit cuts.

[Jennifer]

Understood. Then, just post the correct quotation and source. I know I saw the correct quotation from Bloomberg in a comment on this blog just after Warren Buffett and Charles Munger held the shareholders meeting. I am not sure who posted the quotation.

[Jennifer]

Here is the correct quote which Anne posted and then Brad posted:

http://delong.typepad.com/sdj/2005/05/warren_buffett_.html

http://quote.bloomberg.com/apps/news?pid=10000006&sid=aGh_OPpEs3_4&refer=home

Buffett and Munger also told shareholders they oppose U.S. President George W. Bush's plan to allow privatization of Social Security because the government has a duty to take care of the country's elderly.

``The Republicans are out of their cotton-picking minds on this issue,'' said Munger, a self-described right-wing Republican. Social Security is ``one of the most successful things that the government has ever done.'' ...

[Jennifer]

http://delong.typepad.com/sdj/2005/04/somebody_is_wil.html

Here in a comment by Anne is where the correct quote first appeared....

[Lee A. Arnold]

Brad: Somebody used my name too.

David: You shouldn't believe anybody. You should get all the facts, and make up your own mind. The actuaries calculate correctly. But if you start calculating, using the wrong numbers, you get the wrong result. There are a few different projections. The President uses the one where things go bad. Most people who have studied it are more optimistic, and think things will go better. This is weird, because in most other things, the President is an optimist! The Social Security actuaries adopted a "rule of method" a couple of years ago which prevents them from including the newer productivity growth that the economy is having, right now. This will probably be reported in the newpapers, if the reporters wake up!

[David]

I'm an actuary myself, although my field is casualty insurance, not pensions. AFAIK the SS actuaries do the very best they can to estimate future financial condition of SS. Of course the reality will be different from the projection, but that doesn't mean we should ignore the projection.

It would be a terrible thing to reach 2040, say, and find that SS and Medicare couldn't meet their obligations. What would we do? Deprive seniors of their promised benefits? Dramatically raise assessments, which fall on all workers, including the working poor with children? Raise income taxes, possibly making the US less competitive in the world market, thus harming the overall economy and/or causing an immediate recession? Europe had a problem of unaffordable benefits. The result is that their unemployment rate is around 10% while ours is only 5%.

It's up to the SS actuaries to plan properly for the future so that these awful scenarios don't take place. We should all support them in that effort.

[anne]

Then your solution is to cut benefits, but that is surely not my solution. My solution is to wait, and the pattern of American economic growth that develops. There is ample time years from now to adjust moderately if necessary. Cutting Social Security benefits to enhance our competitiveness internationally, surely does not seem called for.

[David]

Anne - the only solutions are to cut benefits or raise taxes. Raising the retirement age could be considered a form of benefit cut.

I favor converting SS into more of a welfare program. As currently constituted, it's not affordable. The burden of SS and Medicare assessments is already over 15% of salary. The assessments will go much higher unless benefits are cut.

Why should the working poor to pay higher and higher assessments so I can get full SS and Medicare benefits that I could afford to do without?

[Lee A. Arnold]

For any question about whether we should change Social Security into a welfare program, we have to understand how the Social Security benefits are currently structured.

The reason Social Security is admired by all retirees is because it works this way: everybody pays in, and the benefits are paid out in mild proportion: if you're rich and paid in more, you get back more. Not a lot more, but a little more. The rest of that money goes toward the bottom, because Social Security is also a mild redistribution: the poorest get more back than their working taxes would strictly allow. This keeps everybody's head above water in their old age. It is discreet, it is dignified, you worked all your life and you can deserve it, it is the simplest imaginable pay-go system, and there is almost no overhead: all good reasons not to touch it, but do something else to solve other problems. If we make Social Security into a welfare program, it will become a bureaucracy of means-testing, the middle 50% of the population (everybody making from about $20,000 to $90,000) will have almost zero benefits after Bush's clawbacks and the Medicare co-pays, there will be corruption, and the system will be gutted with no political support, as happened to AFDC (unbelievably), as is happening to Medicaid now. Since capitalism does not work all the way (if it did, we'd have all been living in Fat City since 200 years ago, and we wouldn't need to be having this discussion now) we will end up with half the retirees below the poverty line (as they would be this minute,) and we will have to re-invent Social Security.

As for the fair solution, we have to understand the different incidences of payroll taxes and income taxes. Broadly speking, the top 20% of the population (everybody making over around $90,000 this year) pays predominantly income taxes, while the bottom 80% pays predominantly payroll taxes.

Social Security is an accounting column in the federal budget that happens to have a dedicated revenue stream: payroll taxes were invented and promised for it. But since the unified federal budget is all one big pot of money anyhow, it could be fixed by any other revenue stream if it came to that, without raising assessments on the poor. That is not a happy solution, but consider what is going on right now: Bush's INCOME-tax cuts are used to bring forward a cash-flow crunch to make a phony political "crisis" for Social Security! And in addition, they're claiming that the paid-forward account by PAYROLL taxes will not be honored! Why are they making a mountain out of a molehill? They knew this would happen; they planned it. Who benefits from the subterfuge? More importantly, what should we do about it? Why shouldn't some of those income-tax cuts be rolled back to a level more in keeping with the last 50 years? It won't hurt economic growth at these rates; it never has. And it would solve even the SS actuaries' projection shortfall problem. Why should we let the Republicans get away with being crooked? The real problem at this minute is the total federal debt: $7 trillion, almost twice the official 75-year shortfall of Social Security, $3.7 trillion. The real problem for the future is the medical system: the 75-year shortfall for Medicare is $27.8 trillion, SEVEN TIMES the size of Social Security's. Bush's own new (2003) Medicare drug giveaway (no cost controls) to the pharmaceutical companies is over twice the projected Social Security shortfall: $8.1 trillion. And these are genuinely "unfunded": whereas the payroll taxes for Social Security were paid in, and are paid in, under a promise. Social Security is the fourth largest problem (at worst), and the only one with promised taxes. Why are they messing with it? And why do people believe that all politicians are dishonest, EXCEPT for the current crew?

[anne]

David

Thank you for being so clear in argument. This helps me clarify and sharpen my own thinking. I will respond at length as we continue the discussion and as I set down notes on the matter. I would rather chose another subject, but there is no choice and the argument will continue and likely soon and increasingly add Medicare to the mix :)

[anne]

Lee A. Arnold

Nicely done :) I am not however glum about Medicare, though there problems are real. Remember that there is a general economic benefit from advances in medical reasearch and treatment and coverage of subject. I see no end to production benefits in health care advance.

[anne]

http://www.nytimes.com/2005/05/14/health/14cancer.html

New Biotech Drugs Are Producing Gains Against Cancer
By ANDREW POLLACK and LAWRENCE K. ALTMAN

ORLANDO, Fla. - New drugs developed using the tools of biotechnology are helping prevent relapses among cancer patients and prolonging some lives, cancer specialists said Friday at the opening of the biggest annual conference devoted to treatment of the disease.

Much of the attention at this year's meeting of the American Society of Clinical Oncology is directed at 'targeted therapies,' which take aim at the underlying molecular mechanisms that prompt tumor growth.

Those drugs have been a focus at previous conferences, but the evidence for their effectiveness is mounting, and experts are predicting that many cancer patients, if not most, will eventually receive at least one such drug....

[tjoad]

For all of you out there arguing that we can't possibly save social security with a tax increase as it will deter economic growth answer the following question:

What would the effect of benefit cuts in SS have on economic growth? Especially the ones outlined in W's plan?

Any economists want to answer?

[anne]

There is every reason to wish to limit needless administrative cost to health insurance, and to temper the inherent monopoly power in drug patents by institutional price bargaining. But, I am not about to admit that gains in cancer treatment are not vastly beneficial to all of us.

[anne]

TJoad

Friend that you are of John Steinbeck, I would happily have you remind us that Social Security benefit cuts may well have as much of an effect on economic growth as any gradual payroll tax increase :)

[anne]

http://www.nytimes.com/2005/05/13/health/13breast.html

Therapies Cut Death Risk, Breast-Cancer Study Finds
By DENISE GRADY

A large new study is providing good news about long-term survival for women with breast cancer.

Standard chemotherapy and hormone treatment work even better than researchers had expected, the study found. For middle-aged women with an early stage of the disease, combining the treatments can halve the risk of death from breast cancer for at least 15 years.

For instance, a woman under 50 with a tumor big enough to feel, but not invading her lymph nodes, would have a 25 percent risk of dying of breast cancer in the next 15 years if she had surgery but no drug therapy. Adding both chemotherapy and hormone treatment would drop her risk to 11.6 percent.

Among the most important findings was that a certain type of chemotherapy, already widely used, was most likely to save lives. It included six months of the drug Adriamycin, also called doxorubicin, or a related drug, epirubicin. Though the drugs cause hair loss and nausea, and in some cases heart problems, in the long run their benefits outweighed the risks, the studies found.

The greatest gains in survival came when the treatment also included five years of tamoxifen, a drug that blocks the effects of the hormone estrogen, which can feed some tumors. But tamoxifen helps only women with estrogen-sensitive tumors, about 60 percent.

"I think women should feel very encouraged by the progress that has been made," said Dr. Sarah Darby of Oxford University, an author of a 30-page report on the work that is being published today in The Lancet, the British medical journal. "Mortality rates are falling in the U.S. and the U.K., and are starting to fall in some other countries."

The study proves that drug therapy deserves credit for the dropping death rates, Dr. Darby said.

The findings come from an analysis of 194 studies involving 145,000 women in two dozen countries - the largest analysis ever of research results in cancer, and also one of the longest, with 15 years of follow-up in many cases.

The analysis was paid for by the British government, not drug companies....

[anne]

Now, remind me again, would you rather be treated for cancer or eat? I forget....

[anne]

http://www.nytimes.com/2005/05/08/politics/08drugs.html?ex=1116734400&en=57aa8a153dd5ed52&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." ...

[anne]

Care to value Medicare against our lives?

http://www.nytimes.com/2005/05/14/health/14cancer.html

New Biotech Drugs Are Producing Gains Against Cancer
By ANDREW POLLACK and LAWRENCE K. ALTMAN

'Targeted therapy is really a clinical reality,' Dr. Roy S. Herbst of the University of Texas M. D. Anderson Cancer Center said at a news conference here. He called the drugs the 'smart bombs' of cancer treatment.

A drug called Avastin, which works by choking off the blood supply to tumors, prolongs the lives of patients with lung cancer and also significantly delays the worsening of breast cancer, according to the results of clinical trials presented here. Another cancer drug, Herceptin, when used after surgery to remove breast tumors, cuts by about half the chance that breast cancer will recur.

Although these results were announced in advance of the meeting, many of the details are being released here for the first time, providing doctors with the crucial clinical details they need to advise patients about the benefits and risks of treatment with the drugs.

Of course, what oncologists at the meeting celebrate as major gains are still far from cures.

Avastin, when added to chemotherapy, extended the median survival of people with advanced lung cancer by about two months. After two years, 22.1 percent of those who took Avastin were still alive, an improvement over the 16.9 percent who received only chemotherapy.

While targeted therapies avoid some of side effects of more traditional chemotherapy, they can have complications of their own, and experts cautioned that doctors would have to be careful in using them....

[anne]

John C. Halasz

Clever and nice comment :)

[john c. halasz]

Why was my post to this thread deleted or was it a technical glitch? After a brief mildy sardonic comment alluding to the previous Grass fiasco, it drew on bits from other commenters recontextualized in an argument questioning why the Social Security issue should be tied to the issue of net national savings, and whether the supply of investment capital could be viewed in a non-dynamic context, more or less in a left-Keynesian/post-Keynesian vein. There was no polemic, no ad hominem, no blood-curdling demands, and no obscenity. It occurred sometime before Anne's 5/14 2:45 PM comment, which now looks rather silly. Even if the opening remark was unappreciated, due to a flayed epidermis, why was the rest unacceptable? Is there some sort of crypto-Leninism going on here, whereby any diasgreement or dissent from the party-line must be censored and deleted from history?

[Jennifer]

Remo Williams

That helps me understand and consider your perspective properly. I do not disagree, but we are now turning from a measure of equality and I worry about losing institutional constraints. Where would we be were there no Medicare, as Anne has argued? I will think about this.

[Jennifer]

John C. Halasz

I would imagine there was an error.

[randy]

The social security reform has nothing to do with rates of return, or even of FUNDING future SS benefits. It has to do with ideological reform, with making people see themselves as individuals and not part of a collective group. SS reform is all about dividing up the population.

And because you completely ignore the ideological aspects of this situation in your so-called analysis of SS reform, I think you are just another rightwing piece of fecal matter.

[SS]

"It has to do with ideological reform, with making people see themselves as individuals and not part of a collective group. "

That's bad?!?!!

[Helping out...]

http://poorandstupid.com/2005_05_15_chronArchive.asp#111633964370592301

Brad misquoted Warren Buffett, corrected the error, and did not acknowledge the little mistake.

C'mon Brad. You can do better. You're making the reasonable left look bad.