Why Oh Why Can't We Have Better Think Tanks? (Yet Another AEI Edition)

And, while they're at it, what has AEI produced in the way of macroeconomic analysis that is worthwhile? Can't the funders find something better to do with their money?

Mark Thoma reads Kevin Hassett so that the rest of us don't have to:

Economist's View: Social Security Reform Stopped by Democrats' Radical Economists: Kevin Hassett of Bloomberg says he is frightened with the thought that Democratic economists might be running the country again some day...:

Until two weeks ago, Social Security reform was sort of dead. But now it seems to be all dead. The breakdown occurred when the administration backed away from a proposal making its way through the House of Representatives that would have introduced personal accounts without specifically restoring solvency to the system. Ben Bernanke, chairman of President... Bush's Council of Economic Advisers, publicly signaled the White House's displeasure with such an approach. Asked if restoring solvency was an inviolable condition, Bernanke said, “Yes, I think the president will insist on maintaining the long-term solvency of the Social Security system.” The word from... up on Capitol Hill, is that this signal from the president sucked the remaining life out of the House measure....

Another thing we learn from the demise of Social Security reform is that when it comes to economics, this is now Howard Dean's Democratic party. This completes, really, the economic radicalization of the Democrats, and it is a frightening picture -- frightening if you consider that they might run the country again some day. The fact is that the Social Security reform proposed by the president is quite moderate.... If private accounts were introduced, then you might buy a U.S. Treasury bond and hold it until retirement.... The labels change but the economic difference is not earth shattering.... Instead, we got only obstruction. Perhaps this is because Democratic leaders don't have any novel policy ideas they would like to see implemented. Perhaps it's because the Democratic leadership is currently to the left of the Mongolians on Social Security...

But why on God's green earth should any Democrat endorse Bush's Social Security proposals? They:

• Offer beneficiaries private accounts that are likely to be a bad deal.
• Include no mechanisms to raise national savings.
• Eliminate or cripple the valuable defined-benefit nature of the current program.
• Fail to restore expected long-run solvency
• Fail to put in place mechanisms for automatic adjustment should the system fall further out of balance.
• Give us no reason to have any confidence that the plans will be competently implemented.

Why on God's green earth should any Republican endorse Bush's Social Security proposals?

It's a mystery.

Comments

[piotr]

Didn't you just least 6 reason why GOP should like these proposals?

The only problem with this snake oil is that it is rather rancid. In that sense the sponsors of AEI have not got value for their money. Otherwise, AEI is a mercenary outfit, and they will give you an opinion thay you paid for. My favorite is AEI theology department.

Does Berkeley have theologians in the school of bussiness? If not, why not?

[Tom Cecere]

The burden of proof is on the side demanding complete overhaul. The reason it is dead is because the president failed the proof test. People had little trouble seeing through the president's proposals when their money (or retirement benefits) was on the line.

The problem with the AEI excerpt is that they assume the correctness of their policies and then go on to "prove" that the people who fought them are fools: "How can we LIVE with these idiots? What if they EVER get back into power?" -- I almost expect to see hair tearing and teeth gnashing icons along with the exceptional prose. Maybe they're hoping for a guest stint on Rush Limbaugh during the third Clinton term?

[mrjauk]

"Why on God's green earth should any Republican endorse Bush's Social Security proposals?"

Because I am the better judge of what to do with my money than any bureaucrat (isn't that a French word) in Washington. Now, if you'll excuse me, I'm off to buy some Google at $300 per share. It's only gone up since it IPO'd and I'm fairly certain that past performance is a good indicator of future performance.

[bellumregio]

For no other reason than that is what they want. Every time I read this sort of thing from the AEI and other propaganda factories I think of the ‘peas have become the prerogative of millionaires’ quote from Orwell’s wartime column ‘As I Please’:

“An extract from the Italian radio, about the middle of 1940, describing life in London:

Five shillings were given for one egg yesterday, and one pound sterling for a kilogram of potatoes. Rice has disappeared, even from the Black Market, and peas have become the prerogative of millionaires. There is no sugar on the market, although small quantities are still to be found at prohibitive prices.

One day there will be a big, careful, scientific enquiry into the extent to which propaganda is believed. For instance, what is the effect of an item like the one above, which is fairly typical of the Fascist radio? Any Italian who took it seriously would have to assume that Britain was due to collapse within a few weeks. When the collapse failed to happen, one would expect him to lose confidence in the authorities who had deceived him. But it is not certain that that is the reaction. For quite long periods, at any rate, people can remain undisturbed by obvious lies, either because they simply forget what is said from day to day or because they are under such a constant propaganda bombardment that they become anaesthetised to the whole business.”

[DonPedro]

"when it comes to economics, this is now Howard Dean's Democratic party."

Right on!

[pebird]

I'm trying to figure out where "to the left of the Mongolians" puts one.

Does that make the Republicans "to the right of the Uzbekistanis"?

[Derelict]

Personally, I like the line about Joe Sixpack buying a Treasury with his private account. Given the pittance Bush wanted to actually divert into the private accounts, Joe would have saved enough money to buy a long-term Treasury about two week before he retired.

Then, too, I thought that we (collectively) were buying Treasuries to build the Trust Fund. But the president says that Treasuries are just "worthless IOUs." So I guess AIE wants Joe to blow his dough on a worthless IOU. Maybe he can burn it for heat and to warm his can of catfood when he retires.

[Stephen Kriz]

The fact that Bush's Social Security privatization scheme does nothing to help the systems long-term solvency offers a window into his Administration's motives. Like almost everything else this president does, this scheme is payback to some of his most important constituencies - in this case, Wall Street and large annuity marketers - and is part of the overall pattern of using his position in government to enrich people who agree with him and NO ONE ELSE (emphasis mine).

Never in American history has a president so shamelessly and nakedly looted the public purse for the benefit of a small few and completely ignored THE COMMON GOOD.

[Bruce Webb]

Stephen, it is not a payback to Wall Street. Any rational analysis of private accounts show that they are losers for the brokers that are called to administer them. Privatization is a payback to Alf Landon, Ayn Rand and Milton Friedman, all of whom hated Social Security from the get go. This is all about hatred of FDR and the New Deal and nothing about retirement security.

Privatizers hate Social Security on principle. Which is why numeric based arguments always fall on deaf ears. These guys just don't care. I am happy to fight this one out on "productivity" and income vs cost based on various economic outcomes. I have a whole website devoted to the numbers. But I put it up in ironic detachment, it was never designed to convince privatizers that they were wrong, they either knew that or were so brainwashed with the rhetoric that they would never know it. This battle will be won or lost with the general public who either will buy into Privatizers' "Something is better than nothing" vs Rock the Vote's "You've been Played". http://www.rockthevote.com/socialsecurity/getitstraight.php.

If sufficiently spread this Flash will do much more than the hundreds of numeric smackdowns I have tried to administer to moronic privatizers. And I could not be happier.

[Tim Silman]

Is this the same Howard Dean who pushed for a balanced budget amendment in Vermont and who was generally quite fiscally conservative during his time as governor of Vermont? I have consistently been disappointed with Republican attempts to portray Dean as a wacko freespending liberal, and by Dean's attempts to live up to this image because it played well with the base.

[Robert Geilfuss]

I'm in complete agreement with Tom Cecere. By Hassett's own admission, private accounts will do little to change the economic calculus for retirees. In his parlance: "The labels change but the economic difference is not earth shattering." So the only real change will be a couple trillion dollars of new debt from transition costs and a tiny bit of increased personal control coupled with increased risk over one's social security.

In the long run, what's important is not the solvency of Social Security, but rather the solvency of the entire government. A couple of trillion dollars of debt does little to improve the latter and private accounts do little to improve the former.

Can you believe that Democrats would oppose something like this? What reflexive hostility! I mean, with private accounts, the "economic difference is not earth shattering." I, too, am terrified of the prospect of a President with the economic credibility in academia that he could actually find three people to serve on his Council of Economic Advisers. Those three and the President will certainly be the four horsemen of the apocalypse.