Warren Buffett and Charles Munger on Social Security

More opponents of Bush's Social Security "plans":

Bloomberg.com: Top Worldwide: Social Security: [Warren] Buffett and [Charles] Munger also told shareholders of [Berkshire-Hathaway that] 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."

Comments

[Brian]

It'd be interesting to see what Munger's other feelings on things like the Bush administration's trade policies, deficits, and tax cuts are. My guess is, he might agree with the dividend tax cuts in some ways, but he'd hate them because they contributed too much to the deficit, becuase they are creating more inequality, and because they didn't provide enough stimulus. He'd be more or less like Warren Buffet.

Judging from this quote, "'I don't think you can make it so unfair that a man living entirely on dividends will pay zero tax while a cab driver has to work 16 hours a day to barely feed a family,' Munger said. 'I just don't think it works in a democracy,'" I think I am right.

http://www.rochester-citynews.com/gbase/Gyrosite/Content?oid=oid%3A1908

[anne]

http://www.washingtonpost.com/ wp...5043000734.html

Notice this passage from a Washington Post editorial this day: "For the past three months Democrats have declined to engage in a debate over Social Security."

[Brian]

anne,

Without even reading the piece from The Post, I can without a doubt say that that's a ridiculous claim. It's not that we are uninterested in having a debate. I think everyone on the left has a strong desire to reform the program to make it stronger and better for everyone. It's just that we've been burned several times in the past and have no desire to get burned again on one of the greatest achievements of the past century.

[Carol]

http://www.talkingpointsmemo.com/archives/week_2005_05_01.php#005592

Yglesias at his best.

[sm]

OT - see the Guardian on the secret meeting between Taft, Gonzales, Ashcroft and the British AG.

[camille roy]

Okay, let's see: job security is on the decline, job hopping and extended intervals of unemployment is the new norm. Worker financed 're-training' is now required. The cost of housing and education goes up. Ditto for health insurance, although you are quite likely not to have it at all.

In this environment, the ReTHUGlicans are proposing to cut social security for anyone making more that 20 thousand a year? What nutjobs!Munger is right - they're out of their cotton pickin' minds. Wow. They are so detached from the lives of the citizens I'm stunned! I didn't support them before but now I DESPISE them because they are proposing to drive a stake through whatever pathetic security I possess.

I'm furious.

And how self-serving! They have defined middle-class DOWN to anyone making over 20 thousand a year. Here in the bay area that is a poverty wage.

[anne]

http://www.nytimes.com/2005/05/01/politics/01social.html?pagewanted=all&position=

Social Security: Help for the Poor or Help for All?
By EDMUND L. ANDREWS
and EDUARDO PORTER

WASHINGTON - In attempting to fix Social Security's long-term problems without raising taxes, President Bush has chosen to recast the 70-year-old retirement program as one that would keep the lowest-income workers out of poverty but become increasingly irrelevant to the middle class and the affluent.

Under Mr. Bush's approach of "progressive indexation," a typical low-income worker who earns about $16,000 a year today would be entitled to retirement benefits equal to about 49 percent of his or her wages, the same amount that is promised today.

But those earning an average income, about $36,500 in today's dollars, would see big changes. Instead of replacing 36 percent of that person's working pay, as promised under today's system, benefits would cover only 26 percent of pay by 2075. And people who earn $90,000 a year in today's dollars would continue to pay as much as ever in taxes but would receive benefits equal to only 12 percent of their pay....

[ken melvin]

The speech has the architect's fingerprints all over it. Rove uses the negative to win. Always. Under this scheme, the middle class will turn against a program that offers them so little, less support for social security, end of social security,... Rove wins. This wasn't about positives. This was about negatives.

[anne]

What the President has proposed is a plan that will effectively end Social Security. A program that has been a glorious obligation to our grandparents and parents, and a glorious success in supporting and freeing retirees and relieving families, a program with a massive and growing surplus, this program is to be ended. Though I thought for months the point of Social Security change was ending the program, I am still surprised.

[Hedley Lamarr]

Pozen was on the News Hour the other night, claiming that 401k plans, not available at the beginning of SS, will take up the slack for lowered SS benefits in the future.

He neglects to mention that younger earners these days are saving nothing; nada, and will continue to loot or ignore other optional avenues for saving.

[anne]

http://www.pbs.org/newshour/bb/social_security/jan-june05/ss_4-29.html

ROBERT POZEN: The Social Security system now has a huge deficit, so we have to figure out how to constrain benefit growth and do some other things. This is a fair and reasonable way to do it because we're protecting the benefits of low-waged workers who are almost entirely dependent on Social Security for their retirement income and we slow the growth of benefits of higher-wage and middle-wage workers who have IRAs and 401(k)s that are tax subsidized and they help them supplement Social Security in terms of retirement income.

[anne]

Awful, awful, awful. The Social Security program has a huge surplus, a huge and growing surplus, a huge and growing surplus that will continue to grow at least another 15 years and last for at least at least at least another 40 years. There need be no cuts in benefits. We might even think of raising benefits, if productivity and economic growth continue at historical levels. There is no problem with Social Security, other than those who disdain Franklin Roosevelt and all the New Deal stood for.

[anne]

When Robert Pozen can appear on PBS News and set the terms of a discussion by claiming that Social Security has a huge deficit, and there is no instant challenge to this statement, what is PBS News worth? Media coverage of the Social Security issue can be disgraceful and damaging.

[howard]

Anne, you beat me to the punch with your 5:14 comment. I was on vacation at my in-laws, and they like to watch mcneill-lehrer, and pozen came on and made the claim you quote (he also said something about how it was terrible that we get these little letters from the social security administration telling us what our future benefits will be because we can't afford to pay them). I started screaming liar at the screen (i can't help myself; it's sort of a tourette's syndrome when bush apologists - even moderately honest ones like pozen - start spewing falsehoods), which didn't do much for my relations with the in-laws (they oppose the social security swindle, too, but they are a little more genteel about it), but c'est la vie!

anyhow, it's not just PBS; it's astonishing that with all the information available (it shouldn't take more than 2 hours of searching and reading for any journalist to become fully conversant with all the basic issues of social security), most journalists act like they don't (well, perhaps, actually don't) know anything about the facts, only what bush says....

[Lewis Carroll]

What the hell would the world's most successful capitalist know anyhow?

[Ralph]

I read that article from the Sunday Times by reporters Ed Andrews and Ed Porter. The key line occurs at the end of the second paragraph. "Under Mr Bush's approach of 'progressive indexation' a typical low-income worker .... would be entitled to retirement benefits equal to ... the same amount promised today." This is so delicious because of the Bush supporters bragging about how this makes Bush more supportive of the poor workers than the Democrats. An example is John Tierney's column on Saturday, April 30 in the Times. "By proposing to shore up the system while protecting low-income workers, Mr Bush raised a supremely awkward question for Democrats: which party really cares about the poor?" Tierney forgets conveniently the big medicaid cuts in the recent budget put out by the Bush OMB. Even the Republican's in Congress were appalled by the magnitude of the cuts and under pressure from their Governors restored some of the cuts. Of course, medicaid serves mostly the poor who have no insurance or other means for medical care.

[SteveBreeze]

The mileage Bush seems to be getting from most of the corporate press on his "progessivity" is surprisingly similar in away to his statement during his primary campaign "I will not balance the budget on the backs of the poor". Of course logically he was correct in two ways; he hasn't come close to balancing the budget, what cuts have been made are at the expense of the poor and the middle class. Clearly the amounts the poor get don’t' come close to the size of cuts needed to have any effect.

[William Jensen]

I can't understand why more businessmen haven't said that Bush's privatization plan is bad. It's bad for business in the long run to have an ever growing sector of our society - the aged - wihtout any money to spend while further concentrating wealth. This is an income shifting plan that takes money earmarked for the middle class when they become aged at the expense of reduced taxes for the wealthiest. It's just supply side economics in a different suit.

[Cranky Observer]

> t's bad for business in the long run to have an ever
> growing sector of our society - the aged - wihtout any
> money to spend while further concentrating wealth.

Ah, but it is quite good not to have to pay FICA matching for the next 10-15 years. Owners and managers can capture all that surplus. It is also quite good for Wall St to suck up the fees on the private investment accounts. Asking them to think 15 years into the future is a bit futile - sort of like asking W to consider the consequences of his actions.

BTW, Buffet is a successful insurance arbitrager who indulges his hobby for buying undervalued companies. I haven't seen much evidence that he is actually a businessman.

Cranky

[Jennifer]

Robert Pozen, by the way, is Chair of a broker driven expensive sales charge and cost investment company.

[anne]

The Social Security debate is increasingly saddening for it is so difficult to get press coverage with clarity and depth in questioning. Sustaining Social Security will be critical in sustaining Medicare. Medicaid is already being increasingly limited.

[anne]

http://www.nytimes.com/2005/05/02/arts/television/02public.html?ei=5094&en=1085de148e09623c&hp=&ex=1115092800&partner=homepage&pagewanted=all&position=

Republican Chairman Exerts Pressure on PBS, Alleging Biases
By STEPHEN LABATON, LORNE MANLY
and ELIZABETH JENSEN

WASHINGTON - The Republican chairman of the Corporation for Public Broadcasting is aggressively pressing public television to correct what he and other conservatives consider liberal bias, prompting some public broadcasting leaders - including the chief executive of PBS - to object that his actions pose a threat to editorial independence.

Without the knowledge of his board, the chairman, Kenneth Y. Tomlinson, contracted last year with an outside consultant to keep track of the guests' political leanings on one program, "Now With Bill Moyers."

In late March, on the recommendation of administration officials, Mr. Tomlinson hired the director of the White House Office of Global Communications as a senior staff member, corporation officials said. While she was still on the White House staff, she helped draft guidelines governing the work of two ombudsmen whom the corporation recently appointed to review the content of public radio and television broadcasts.

Mr. Tomlinson also encouraged corporation and public broadcasting officials to broadcast "The Journal Editorial Report," whose host, Paul Gigot, is editor of the conservative editorial page of The Wall Street Journal. And while a search firm has been retained to find a successor for Kathleen A. Cox, the corporation's president and chief executive, whose contract was not renewed last month, Mr. Tomlinson has made clear to the board that his choice is Patricia Harrison, a former co-chairwoman of the Republican National Committee who is now an assistant secretary of state.

Mr. Tomlinson said that he was striving for balance and had no desire to impose a political point of view on programming, explaining that his efforts are intended to help public broadcasting distinguish itself in a 500-channel universe and gain financial and political support.

"My goal here is to see programming that satisfies a broad constituency," he said, adding, "I'm not after removing shows or tampering internally with shows."

But he has repeatedly criticized public television programs as too liberal overall, and said in the interview, "I frankly feel at PBS headquarters there is a tone deafness to issues of tone and balance."

Pat Mitchell, president and chief executive of PBS, who has sparred with Mr. Tomlinson privately but till now has not challenged him publicly, disputed the accusation of bias and was critical of some of his actions.

"I believe there has been no chilling effect, but I do think there have been instances of attempts to influence content from a political perspective that I do not consider appropriate," Ms. Mitchell, who plans to step down when her contract expires next year, said Friday.

Robert Coonrod, who stepped down as corporation president in July 2004, has known Mr. Tomlinson about 20 years and considers him a good friend. "I believe that his motives are exactly what he says they are," he said. Mr. Tomlinson is "trying to help the people in public broadcasting understand why some people in the conservative movement think PBS is hostile to them and, two, imbue public broadcasting with the notion of balance because he thinks that long term it's a winner in getting Congressional support."

"Whether people like the way he goes about it or not is a different issue," Mr. Coonrod added.

Though PBS's ratings have stabilized lately after several years of decline, the network has faced criticism that much of its programming - shows like "Antiques Roadshow" and "Masterpiece Theater" - is little different from what can be found on cable television. Though a huge bequest to National Public Radio from the estate of Joan Kroc, widow of the founder of McDonald's, has furthered the independence of public radio, corporate support and state financing for public television have slipped in recent years, making the nearly $400 million in federal money annually funneled through the corporation increasingly important.

Nor have administration officials and lawmakers been shy about challenging certain programming. Education Secretary Margaret Spellings, for example, earlier this year publicly denounced a program featuring a cartoon rabbit named Buster who visited a pair of lesbian parents....

[chris]

I saw the NYTimes article too but was too depressed to read it after the feeling here seems to be not questioning Pozen was a derelicton of PBS journalism. I guess we'll only be able to export journalists to China, Cuba, the former East Germany, wherever the dear leaders screen and script the questions and answers.

[dave munger]

The only thing I can say is, boy, I wish I was related to Charles Munger.

[anne]

The attempt by conservatives to slant and stifle Public Broadcasting is a tragedy. Though I have long noticed the attacks on PBS, I am continually surprised at the attacks and saddened at the obvious success.

[anne]

http://www.nytimes.com/2005/05/02/opinion/02krugman.html

A Gut Punch to the Middle
By PAUL KRUGMAN

By now, every journalist should know that you have to carefully check out any scheme coming from the White House. You can't just accept the administration's version of what it's doing. Remember, these are the people who named a big giveaway to logging interests "Healthy Forests."

Sure enough, a close look at President Bush's proposal for "progressive price indexing" of Social Security puts the lie to claims that it's a plan to increase benefits for the poor and cut them for the wealthy. In fact, it's a plan to slash middle-class benefits; the wealthy would barely feel a thing.

Under current law, low-wage workers receive Social Security benefits equal to 49 percent of their wages before retirement. Under the Bush scheme, that wouldn't change. So benefits for the poor would be maintained, not increased.

The administration and its apologists emphasize the fact that under the Bush plan, workers earning higher wages would face cuts, and they talk as if that makes it a plan that takes from the rich and gives to the poor. But the rich wouldn't feel any pain, because people with high incomes don't depend on Social Security benefits.

Cut an average worker's benefits, and you're imposing real hardship. Cut or even eliminate Dick Cheney's benefits, and only his accountants will notice.

I asked Jason Furman of the Center on Budget and Policy Priorities to calculate the benefit cuts under the Bush scheme as a percentage of pre-retirement income. That's a way to see who would really bear the burden of the proposed cuts. It turns out that the middle class would face severe cuts, but the wealthy would not.

The average worker - average pay now is $37,000 - retiring in 2075 would face a cut equal to 10 percent of pre-retirement income. Workers earning 60 percent more than average, the equivalent of $58,000 today, would see benefit cuts equal to almost 13 percent of their income before retirement.

But above that level, the cuts would become less and less significant. Workers earning three times the average wage would face cuts equal to only 9 percent of their income before retirement. Someone earning the equivalent of $1 million today would see benefit cuts equal to only 1 percent of pre-retirement income.

In short, this would be a gut punch to the middle class, but a fleabite for the truly wealthy.

Beyond that, it's a good bet that benefits for the poor would eventually be cut, too.

It's an adage that programs for the poor always turn into poor programs. That is, once a program is defined as welfare, it becomes a target for budget cuts.

You can see this happening right now to Medicaid, the nation's most important means-tested program. Last week Congress agreed on a budget that cuts funds for Medicaid (and food stamps), even while extending tax cuts on dividends and capital gains. States are cutting back, denying health insurance to hundreds of thousands of people with low incomes. Missouri is poised to eliminate Medicaid completely by 2008....

[anne]

http://www.nytimes.com/2005/04/24/magazine/24QUESTIONS.html?ex=1115179200&en=bcdd7803b7c8fba7&ei=5070&adxnnl=1&adxnnlx=1114362188-eB4JgBBmMLUVbcNp9RPjiw

Recasting PBS?
QUESTIONS FOR KEN FERREE
Interview by DEBORAH SOLOMON

As the chief executive of the Corporation for Public Broadcasting, you've been said to represent the growing influence of conservative politics in public TV and radio.

Believe it or not, we don't discuss politics here. We're just trying to get money into the public broadcasting system in the most efficient and intelligent way we can.

But who can deny that politics has crept into the process? Your predecessor, Kathleen Cox, was axed just two weeks ago, supposedly because she had incurred the wrath of conservative groups. Recently, they were outraged by an episode of ''Postcards From Buster,'' which was never shown, in which the animated bunny visits a friend who lives with a lesbian couple.

All I know is that on Friday afternoon the board chairman came in and asked if I would serve as interim president. I had no idea until the 11th hour that this was happening. I don't know what led to what.

Do you worry that these sorts of incidents will alienate the old left-leaning PBS loyalists?

Well, maybe we can attract some new viewers.

You mean viewers who are more conservative?

Yeah! I would hope that in the long run we can attract new viewers, and we shouldn't limit ourselves to a particular demographic. Does public television belong to the Democrats? ...

[j.Asherman]

Obviously they want to kill SS.
Why ?
I don't know.
Ideologically, how does this serve them?
They have the young workers convinv=ced by simply lying about how it works and making all these predictions about how there won't be enoughh workers in the future.
How does that work? If no one works, what do they think will be going on ?
What is their plan for the future besides finacial hardship for the elderly and poor-ass jobs for the young? I don't see it. No tech innovation, no biotech, no energy,
and all our money going to nice places like Iraq.
And theyy havve the young really convinced too. by lying about how it works and playing on the GREED of the young workers who aparently have NO feelings of responsibility.
THEN... I see some schmuck on one of the shoutinng shows telling me that
we should love the illegal aliens because THEY will save SS.
How freakin' absurd can they get?
Don't you have to have a SS number to pay in?
Don't you need to be legal to gett that?
Are tthey for rel? Are we going to be saved by people with STOLEN SS numbers who pay in and then just dissapear?
How silly can they be?

[anne]

When the subject of PBS News came up, the chief executive of Public Broadcasting noted that he seldom watched since the News was slow, like Shakespeare, and he rather preferred People Magazine.

[j.Asherman]

As Buddy Ebson used to say: "Pitiful".

[Scott McArthur]

My favorite Munger quote comes from the internet bubble days when a question from the floor asked why Bershire hadn't invested in more dot com's. Munger's reply was:

"In my experience when you mix rasins with Rabbit turds you end up with a bag of Rabbit shit.

[phaedrus]

A question: If under the President's new plan, a worker earning $37,000 per year before retirement would see a benefit cut of 28 percent, and someone earning $58,000 would suffer a 42 percent cut ...

What would the rate of return on the person's private account need to be to obtain a total benefit that offsets the cuts?

[Cranky Observer]

> What is their plan for the future besides finacial
> hardship for the elderly and poor-ass jobs for the
> young? I don't see it. No tech innovation, no biotech,
> no energy, and all our money going to nice places like
> Iraq.

The period 1880-1920 was a very innovative and productive time for the US economy, as well as being unbelievably lucrative for those in the top 0.25%. Lots of unpleasant suffering and death in the lower 33%, but hey, omlettes, eggs - you know.

Yes, I am well aware that the circumstances of the 1880s no longer pertain to the United States. I am not sure if the tops jackals of the Radical Right don't know this, or if they do know this and don't care because (1) they will be rich anyway (2) suffering is good for the poor on principle.

Cranky

[ken melvin]

Social Security is all a part of this Stone Soup called capitalism. Where is it writ that its support should come from wages/salaries? Seems to me that those who benefit most from this propping up, i.e., those whose income comes from investment, should contribute the more rather none at all.

[Laurel Kenner]

Comments: This is a textbook example of what was known in Brooklyn street games as "your own man."
http://www.dailyspeculations.com/vic/sage_dollar.html
Does anybody really believe that a 1% a year return is a successful program? I guess Charlie and Warren are rich enough and hypocritical enough not to care. For those who are interested in how their money is being invested for themselves and their aged parents, here is an analysis of Social Security by someone who is receiving payments himself after a career as a very senior aerospace systems analyst -- a rocket scientist.
http://dailyspeculations.com/haynes/ssi.html

[howard]

Laurel, why is it so hard to understand: social security is not an investment program. It is an annuity program. Failure to grasp this fundamental point rules you out of the discussion.

Anne, for what it's worth, i think the thing to do with respect to PBS at this point is to let it go. I don't see much value add in PBS anymore, and at this point, i think it would be worth playing against type and saying if the nitwit who runs it who prefers People magazine wants to play political games, we should just abandon the concept. There's not much that PBS does any more that you can't find elsewhere on your cable box....

[anne]

Howard

Well, there is British comedy and drama and the science shows. "Arthur..." "Sagwa..." :)

[Fraydog]

Howard:

Why would an annuity program be better than an investment program in regards to Social Security? I'm afraid I'm not going to live to see my SS collection, on my dad's side of the family, the death ages for the three brothers and sisters were 61, 58, and 52 for my father. I could do better off taking the 12 % , investing in T-bills, getting a 3.5 % return as a "security blanket, than if I got sick, I could use the money to pay the medical bills and pass whatever is left over to heirs.

My point is this: if we need a welfare program, than let's have a welfare program. If someone is old and doesn't have the werewithal to live comfortably, then let's just develop a welfare program for those people. Those who can live comfortably, pay in for others. The more you have, the more you pay in to help others.

Mind you, I'm not a supporter of what the President is doing. I think he's just delaying (or maybe even accelerating!) the inevitable blow up here.

[Carol]

Here's a better idea than welfare: give everyone a base income regardless of age, and then tax progressively what they make on top of that, and tax every single cotton-picking form of income. SO that the rich are guaranteed a base income as are the poor. That is fair, and how European countries handle the "motherhood" benefit. Stop this maddening, time wasting, idiotic means testing. Just use a good progressive form of taxation, and probably a good policy form of sales taxes (IE increase the sales tax rate on Hummers as a luxury tax, decrease it on low end cars).

This might do away with the welfare department as some sort of dole agency, and allow it to do something like take care of the welfare of children.

Also, scrap that dang corporate income tax, make corporations distribute all income that is not need for reinvestement in assets and contingencies.

No more corporations as individuals.

[j.Asherman]

I do not think that SS is an investment or an annuity.
It is a Social Contract, in which we accept responsibility for those who have made
things work with little reward.
It is a "safety net" so that oldsters who have labored a lifetime at menial jobs can have just a little dignity.
The rupubs are really playing to the ignorance of the young and the not so young.

As to doing away with Corporate taxes.
You can't do that. Assetes and contigincies would pile up faster than you can say "fastow".

[j.Asherman]

And please folks....
Just beacuse the guy from PBS is a schmuck doesn't mean they all are.
It is too easy to fall into the trap.
Once they have discredited the Newspapers, Judges, Courts, the other party,
Science, Network news, etc. who is going to be there.? ( to call Bullshit bullshit)
Must we through out Sesame street Nova and Frontline, with the bathwater?

[Neil S]

The following are notes from a lecture by a brilliant economist...

"Long and Very Long Run Deficit Projections

In 1995, federal spending on Medicare plus Medicaid amounted to 3.8 percent of GDP.

In 2005, we project that federal spending on Medicaid and Medicare will rise to 6.0 percent of GDP.
And by 2015 the projection is that--under current laws and procedures--Medicare and Medicaid spending will be up to 7.5 percent of GDP.
In 1995, federal spending on Social Security amounted to 4.7 percent of GDP.

By 2005 it will be little greater: 4.8 percent of GDP
But by 2015 it will be 6.2 percent of GDP, and rising as a share of GDP thereafter as the baby-boom generation retires.
Thus today the big entitlement programs consume some 8.5 percent of GDP; by 2015--when you are in your peak earning years--these programs would, if current laws remain unchanged, amount to 13.7 percent of GDP.

Suppose we wiped out all non-military discretionary programs: that would save only some 3.0 percent of GDP's worth of federal spending in 2015.

Suppose we wiped out all other entitlement programs: that would only save some 3.1 percent of GDP's worth of federal spending in 2015.

Unless we grow faster (in population or in productivity), we have a big problem.

Current federal spending (excluding offsetting receipts): 22.9 percent of GDP"

We have a big problem. In just 10 years, entitlement programs are expected to consume an additional 5.2% of GDP, and it only gets worse (much worse) farther out.

I agree that Social Scurity is a small part of the problem, but I get the impression that most of the commenters here are prepared to reject any changes to expenditures on SS, Medicare, and Medicaid. At some point though we have to question how much wealth our society can afford to transfer from the working class to the non-working class. Not just whether it's fair, but what we can afford. Talk of the deal that was made (binding children who were not yet even born) is irrelevant. The problem does not go away no matter where we place the blame.

Regards,
Neil S.

The brilliant economist above, of course, is our gracious host...

[howard]

Neil, actually you misread (or don't know much about) most posters here. our actual position is that there is no point in even attempting to deal with the bush administration about anything important, because they are dishonest and inept, much too dangerous a combination to entrust.

Nor does it make sense to lump together the problems of social security, which are potentially real, with the problems of medicare, which are absolutely real. Although the wonderful anne disagrees with me, i'm fully prepared (i indeed urged kerry to propose) that we rescind the bush prescription drugs bill on the grounds that it is unaffordable, poorly designed, and disliked by its target audience.

Fraydog, first let's take care of one minor point: you wouldn't get the employer's match to put into your personal account. If you think that employer's are voluntarily going to raise your salary by the match if social security turns into welfare, you've never been an employer.

That said, maybe you would do better - and maybe you wouldn't. There is no accounting for individual variation.

But there is accounting for aggregate conditions, and in the aggregate, knowing that there is an annuity that is inflation-indexed is a very nice baseline for the rest of my retirement planning (and i speak as someone who is in the upper 5% of household income and upper 6-7% of household wealth). An annuity is, in this sense, better than investments because i can't outlive the annuity, whereas it is quite possible to outlive my investments.

Now, of course, the annuity isn't the whole of your needs for retirment, even if you are a low-income person and the modest progressivity of the system helps you more than it helps me, but it's a very important aspect of how you will survive in retirement.

PS. to both of you, the primary problem is to restore fiscal sanity to washington. The current budget resolution, which cuts spending minutely and cuts taxes even further, is an example of the insanity that must stop. The second problem is addressing medicare and the vast wastefulness of the american medical system. After we've dealt with those two problems, we can see how the 75-year projections are doing, and assuming we have a restoration of honest governance in washington some day, we can deal with social security through a combination (if necessary, and it may not be) of modest adjustments in benefits and/or an increase to the level of income to which the social security tax is applied.

[idook]

Neil S, the sane answer is of course cutting military spending.

[Neil S.]

Howard,
Thank you for your thoughtful response. I do understand the feelings of most of the posters here, I just think that venting those feelings on every post is pointless. One can repeat theat GWB is stupid, incompetent, venal... endlessly, but it's boring.

I'm hoping for someone to make some concrete suggestions. I disagree with your position regarding the need to separate SS from Medicare and Medicaid. I believe that the issue is broader than that, and has to do with what sort of society we want to have. How much money can we expect our children to pay to support us when we retire? What will scoiety look like as the ratio of productive / non-productive citizens changes dramatically - and how long do we expect the productive citizens to gladly pay ever-increasing shares of their income to support an affluent retirement for you, me, and Prof. DeLong?

Absolutely our budget is broken. To pretend that it's the fault of the Republicans and nothing can be done about does not move us forward. Corporate subsidied existed long before the Republicans gained control of Congress. Military spending has decreased from historic peacetime levels of around 5% of GDP to 3.8% of GDP for 2005. Tax revenues went up from 95 to 2000, but the stock market bubble may have had a little to do with that. Spending levels (~20.3% of GDP) are not overly high by historic standards, though gov't receipts are somewhat low.

Where do we go from here? Increasing taxes, without restructuring our tax system could tip us into recession. Cutting spending in a meaningful fashion will be very difficult, and no one seems to have a proposal. We're staring at a problem in the very near future and no one wants seems to propose anything other than tinkering around the edges. Maybe we will see amazing economic growth into the future, but aging societies around the world seem to stagnate, rather than grow dynamically...

Regards,
Neil

[Ralph]

Fraydog says "if you need a welfare program lets have a welfare program." Fraydog, the problem is that welfare programs do not fare well in Congress! A recent example is the large cuts in Medicaid, the nation's most important means-tested program, which the large population of uninsured rely on for medical care. Why do you think SS has lasted for 70 years? One reason is because it is not a means-tested welfare program.

[anne]

Social Security has a massive and growing surplus. The surplus will grow for another 15 years at least, and the surplus will last for another 40 years at least. There is absolutely no reason to cut Social Security benefits or to raise payroll taxes because of self-serving dire predictions of growth over the coming 40 years. We can visit the issue again in 10 years. Growth of 2.2% which should easily be obtainable will assure no Social Security problem for far longer than 40 years. Since growth has historically been far higher than 2.2%, there is simply no reason to fret about Social Security unless you wish to end America's monument to social policy. I however wish to continue Social Security precisely as is. Happily I will care for my parents.

[Jennifer]

Neil S.

"I'm hoping for someone to make some concrete suggestions."

Done. Leave Social Security alone, and go on to other issues. Funny thing about affording Medicaid. The new tax cuts in the budget just passed are many times as large as the Medicaid cuts. Medicare? Suppose we begin by changing the law just passed to allow Medicare to negotiate drug prices, or allow states to negotiate drug coverage insurance plans for retirees, or...?

[Neil S]

an additional 5.2% of GDP...with net interest payments as a % of GDP likely to increase over the next ten years as well. Leaving SS alone and fiddling with drug prices seems unlikely to to hit 1% of GDP, but maybe I'm just naive.

Anne - It's not our parents' generation I'm worried about, it's the generations that follow us. We are on the verge of a demographic shift that we have not begun to prepare for. I can still remember the books and magazine articles predicting the triumph of Japan, until an aging population brought their growth to a halt. I believe that we need to start preparing people to work longer. Retirement at 55 or 62 may be a luxury we won't be able to afford in the not too distant future.

Regards,
Neil

[anne]

Neil S.

Please date your notes for us. I am thinking again about the demographic issue you argue. Even though I think demographics was not significant for Japan, let me consider again. Edward Hugh would argue demographics as well in past times. I am thinking.

[Neil S]

anne,

On closer examination, it looks like one he's planning to give. I just happened across it...

http://econ161.berkeley.edu/Teaching_Folder/Econ_100b_S96/Lectures/lecturethirtythree.html

I'd also like to add that I deeply appreciate your willingness to listen, engage in dialog, and post thoughtful replies.

I'm not certain what the impact of an aging population will be, but I do believe we should be having the dialogue now.

Regards,
Neil

[anne]

Neil S.

What do I really understand about Japan? I look to Paul Krugman's analysis, but several sociologist friends lean to demographic change as the problem. Japanese friends point to a still evolving participatory democracy. Again, remember that Japan has been able to protect middle class families through the deflation. So, you have set me back to thinking about the Japanese growth puzzle...

http://web.mit.edu/krugman/www/jpage.html

[Laurel Kenner]

Howard, I don't care what you call it -- bad investment, bad annuity, whatever. Any program that can only offer 1% annual return before inflation is just...bad.

[Ari]

Howard,

The website and example cited are of course bizarre, and the comment aimed at intimidating Brad DeLong. Pay no mind.

[Ari]

Howard: This is just a professional intimidator at work.

[Knut Wicksell]

Down thread a bit. I gave up on PBS and am no longer contributing. I wonder if it wouldn't be possible for some of the stronger stations -- Boston, New York, Philadelphia, LA, San Francisco, and Chicago (and Seattle if they weren't so deep in debt) to form a consortium, dump the Corporation for Public Broadcasting and all it now stands for by way of censorship, and finance their own news shows, which they can sell to smaller public broadcasters. I'm sure there is a good reason why this isn't possible, but I'd like to know it. Public Broadcasting is going the way of the old Soviet Press; one line and one line only permissible. It's tragic, but I am not going to pay good money for stuff I can't stand. There was life before Public Broadcasting.

[Knut Wicksell]

One one percent return. It's guaranteed, which is more than you can say for stock market speculations. If you bought in 1930 and held to 1950 your rate of return would have been exactly zero. So much for the long run. If I had taken BuffetT's advice in the fall of 2000, which I read and accepted, I would have got a 6 percent positive return on my then large portfolio, rather than a negative 8 percent (after the recent recover). The reason it's not worse is that about 40 percent of my portfolio is Buffett's company. So much for a pitiful 1 percent return. There are no absolutes in this game, only relatives.

[anne]

Knut Wicksell

Interesting :)

[Ralph]

Neil S asks "where do we go from hers?" Since Bush's news conference on Thurs and judging from the small set of reactions I have seen -- Joe Scarborough said means-testing won't fly in Congress, Fox News permanent journalist panel was pessimistic, etc, I would say it is DOA on Capitol Hill. Private accounts are off the table for the Dems so no compromises there. All that is left seems to me is raising the $90k cap on taxable income. The President gave some indication he might compromise on this though the Republican Congress is probably against it. But this would restore some progressivity in a real sense to the SS revenue stream and I hope the Dems will continue to pursue this path. Raising the cap will reduce the projected shortfall over the next 75 years by half. Benefit cuts of a modest size would then not be politically damaging for the continuation of the system unlike the cuts that the President proposed on Thursday.

[chris]

"Again, remember that Japan has been able to protect middle class families through the deflation," from Anne's post above. What do you mean by "Japan"? do you mean the government set in place some programs that helped ease that long recession? I remember reading the government building bridges to everywhere, was that it?

The Japanese protected themselves by saving still a high proportion of their wages/earnings/salaries. They had money in their pocket to tide theirselves over. We don't have those savings. We have 20% of the economy (finance, weighted on the capital markets, I'm guessing here) making 40% of the corporate profits off of people borrowing money for trinkets and speculative condos in Las Vegas if not just blowing it at Vegas poker.

Another repeated line that I don't understand is wishing Greenspan stop raising interest rates. Only once here have I seen a comment that Greenspam's ultra-low interest rates have hurt savers. People who lived their lives conservatively saving for a rainy day or retirement have been badly hurt with the ultra-low rates. The ultra-low rates have also fostered the U.S. turning into an asset based economy where we need the continuous bubbles. People who don't play the bubbles get hurt along with the bubble players. Someday, perhaps soon, some of the bubble blowers will really blow, everyone will pick up the tab.

It's too soon to claim Greenspan had a good response to his mistake of not treating the internet changes everything bubble. He gave a speech that's the equivalent of W's Mission Accomplished banner. What I'm afraid of his treatment of the burst bubble might have made the situation worse.

New Zealand or Argentina, either of those two places might be the future for us. New Zealand has a lower standard of living than we do. That is lots of stuff (junk) that Americans' consider affordable that looks too dear for a typical Kiwi. Maybe our standard of living will fall or move to something equivalent to New Zealand or slightly higher Australia, Canada. The scary alternative is the U.S. enters a series of recessions/depressions/debt repudiations till sometime in 2010 to 2020 or later we have a massive collapse like Argentina. We can have some socialism/crony capitalism with Nazi characteristics. Jew/liberal baiting, runs on banks, posses protecting supermarkets, people keeping their real ethnic background secret while holding Christian bonfires. You know, the type of script Tante Aime writes. Why doesn't Tante Aime write Philip K. Dick-style film scripts rather than sit in a cubicle? Maybe that will help shake us up.

[Jennifer]

"Howard, I don't care what you call it..." This comment was from a troll who attacks Brad DeLong for publicity.

[anne]

There is every reason to believe Federal Reserve policy has been very well handled since January 2001 when the cycle of short term interest rate decreases began. A short and shallow recession followed, along with sustained growth from then till now. Nor do I argue that the Fed should have been more restrictive in policy from 1995. There was minimal inflation and wonderful employment and wage gains from 1995 to 2000. Inflation is low still, and long term interest rates tell us the expectation is inflation will stay low. Brad DeLong has found scant reason to criticize Fed policy from 1995, nor have I found reason to be critical though we might both wish a little slower tightening cycle now.

[anne]

As long term interest rates remain low through the Federal Reserve tightening sequence we can in creasingly consider this Fed cycle another success. Long term rates and job creation seem our most important indicators of near term economic health at present. Job creation is sadly weak however.

[Weco]

Re: PBS

Things like this makes me cherish Dear Auntie and smug Paxo even more. Despite coming in from much more political pressure than PBS (or may be because of it), BBC's election coverage has been pretty good. The interviewee would never be allowed to get away with this on the BBC because they employ actual journalists as presenters and interviwers.
(For those unfamiliar with BritSpeak, BBC is referred to as Aunties.)

[chris]

"When anyone begged from them, (the mongols) replied, 'Go, with God's curse, for if he loved you as he loves me, he would have provided for you.'"

Ian Frazier, Annals of History, Invaders: Destroying Baghdad, The New Yorker, 4/25/2005

[anne]

What is happening at PBS is a tragedy.

[chris]

From the calamities, the start of the bear market, the inauguration, the terrorist attacks, and the brief recession, in the period 2000 to 2005, how good was the growth in this later period? For most workers there have been stagnant wages, we know. The reported growth is also due to what Buffett said, "Give me a trillion dollars and I'll show you a good time, too," or words to that effect.

From Anne's post above, "long term interest rates tell us the expectation is inflation will stay low." Are long term rates being supported by foreign central bank buying? If that's the case, is the rate to be trusted as it is not set by the market? Buffett seems to be investing some large portion of his portofolio away from treasuries by buying foreign currencies. If the local rate was good, I guess Buffett would keep it next to the Dairy Queen close to Home.

1995 to 1999, how good was that growth?

[j.Asherman]

95-99 kicked ass.
As a worker at the low end of the spectrum, I
can attest to this. In fact I did better from 95-00
than any other time I can remember.
This is absolute and beyond issue.
My business is such that I can tell the state of
the stock market and corporate America by how many times the phone rings.
Since March 2000, the entire tone of things has gone to hell,
and even the crappy lowend work I do is no longer in anyone's discretionary budget.

[anne]

Fiscal and monetary policy were excellent during the years of Clinton and Rubin, producing terrific economic growth and job creation, fine wage and benefit increases, with ever lower inflation and ever less of a government deficit, indeed there came to be a surplus. Productivity growth accelerated and workers benefited from the growth.

Monetary policy continues to be excellent, but fiscal policy has led to a structural deficit that will continue to worsen with little job creation impact, and workers wages and benefits are growing more slowly than productivity or inflation. Growth produced by monetary policy has been fine, but more, much more, could have been done with fiscal policy.

Federal Reserve policy has been fine these last 25 years. Fiscal policy has at times been another matter.

[anne]

Thank you, J Asherman.

There has indeed been a marked worsening of returns to labor, though growth has been reasonable to fine. There is the worry.

[anne]

J. Asherman's comment captures perfectly the problem we have slighted with fiscal and even regulatory policy.

[j.Asherman]

Thank you Anne.
I think I meant March 2001 but it was already slowing. And your comment is right on.
In plain English, I can borrow all the money I want.
But I can't find enough decent work to pay it off.

[chris]

I can't make this argument on the quality of growth by myself. I'm just quoting some writing that I have read elsewhere that to me seems to make sense of what happened the last decade.

I could only quote from Dr. Kurt Richebächer, The Great Wealth Deception, April 27, 2005, but wouldn't know what not to quote. So here's the conclusion:

"In other words, there is tremendous inflationary pressure at work, but it has impacted the economy and the price system very unevenly. The credit deluge has three obvious main outlets: imports, housing and the carry trade in bonds. On the other hand, the absence of strong consumer price inflation is taken as evidence that inflationary pressures are generally absent. Everybody feels comfortable with this (mis)judgment."

And ask anyone interest to browse on over to the http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=42561, guest commentary section for access to the richebacher piece.

From Bill Fleckenstein I learned that bubbles growing can be good for lots of people, but when they pop they hurt everybody and that's why they should be avoided. I am glad that J. Asherman made some money in the last decade. Mark Cuban made enough to buy a basketball team. But when the bubble bursts, everyone's going to get hurt. Ultra low rates that hurt savers is an example. It would have been better to have a stabler base for the growth in the late nineties. Since the W inauguration, have the Feds and Greenspan done anything more than make the numbers look purty?

[j.Asherman]

I just want to point out that the money I made in the 90's was real and from work.
I conspicuously avoided using credit because I was accumulating it to move my family to bettr neighborhood, which was acomplished in 99.
Later we bought two used cars for cash money.
The cars have taken a beating but the house has grown in value by 100%.
I am very glad not to live next to a combinatin Crack/Whore house anymore
and have my kid in one of thhe best school systems in the state.
I have virtually 0 investments.
My sole contribution and reward from the bubble was the fees i got for making promo videos for corporations that had more money than they knew what to do with.
So don't blame me for instability.
I told you I am a low end guy.

[chris]

J Asherman, I'm just trying to say there was a bubble. Business improved for everybody, but when the bubble bursts we all get caught in the pull back. In retrospect if the late nineties growth wasn't as heavily dependent on the bubble, that would have been more stable for us. Growth on a lower path but as due to more stable foundations would have continued longer.

If that was possible.

Over here I have a Yank friend who is in advertising. He was crowing loudly during the nineties. then along with the turn of the millenium, his wife divorced him, he lost his job, wife moved far away. He had a devil of a time finiding new work. Now he's pretty much self-employed working with others in Hong Kong, not doing anywhere near as well as he did last decade. That's the type of life story that really hurts. Multiple it by how many people.

[Ashish Hanwadikar]

The reason Charlie Munger likes Social Security so much is because he doesn't have to social security taxes on most of his income.

[anne]

J Asherman and Chris

The 1990s became an increasingly vibrant economic period in America, a period in which a bubble developed in technology and telecommunication stocks. Since technology and telecom stocks make up a sizeable portion of the S&P Index, there was obviously over-valuation of the index. Nonetheless, the economy was vibrant and fiscal and monetary policies were sound. I would argue a sound fiscal and regulatory policy carried on from 2001, would have left us growing more rapidly with little price pressure no matter the bubble. The problem and strength of monetary policy is that while it directly effects short term interest rates it does not directly interfere in price settlement in other markets. There will then be periods and sectors of poor pricing, but proper general policy should allow for rapid recovery from resulting poor asset allocation.

[j.Asherman]

So... had sane planners been in charge, the bubble could have contracted more slowly with less pain in the job market, more thought to future industries and
a fluctuating but less volatile stck market ?

[j.Asherman]

Over here I have a Yank friend who is in advertising

I had a friend in advertizing too.
What a jerk!
Guy spent money like water and couldn't get a mortgage on his mother's house.
But he was happy to tell you all about how he kissed the behinds of clients and treated vendors (like me) like used tissues.
This jerk bought into being a republican bigtime.
Seriously described how he neglected to point out a mitake in artwork so he could refuse to pay the artist then would wait for publication to see if the client noticed.
If the client missed it he would keep the artist's fee.
He did this to me several times.
I could no longer stand to be his friend.

[j.Asherman]

sorry for the OT