Ramesh Ponnuru Is Off Message!

Ramesh Ponnuru is off message:

The Corner on National Review Online: SOCIAL SECURITY: Matthew Yglesias accuses me of offering "bad math" in a post the other day. The accusation is a little mystifying. My post criticized Jacob Weisberg for claiming that President Bush had been unwilling to cut Social Security benefits and had instead balanced the books on his reform plan by invoking high stock-market returns. That wasn't true. Bush proposed cuts in future benefits.

Foolish Ramesh! George W. Bush assured us that he never proposed to cut Social Security benefits! He only proposed to slow the rate of growth of benefits!

And Bush never "balanced the books" on his Social Security reform plan. Never. Jason Furman--apparently the only person to go public with any estimates of the budget impact of the Bush plan, such as it was (certainly no Bush appointees ever had any numbers to talk about), says that:

The Impact of The President's Proposal On Social Security Solvency And The Budget, 7/22/05: the President's plan as a whole is found to close only 24 percent of the 75-year [estimated Social Security funding] gap. More than three-quarters of the gap would remain. Additional benefit reductions, new revenues, or large transfers from the rest of the budget would be necessary to fill the substantial remaining gap.

Comments

[dale]

The SS books don't need balancing for the next 40-50 years- they are balanced. Maybe not even for the 75 years. But let's worry about the war, the budget deficit and how we can work through that without exacerbating the already egregious economic inequality in our nation. Then in 50 years we can worry about SS0 if it needs our worry.

[anne]

Oh dear :) Neither cutting Social Security benefits nor slowing the growth of benefits, which I take as a cut, is in the least necessary since Social Security has a large and growing surplus and will by able to pay full benefits till at least 2050, by which year we just might be done with this terrible war. Social Security is fine for other than those conservatives who are determined to do away with every vestige of middle class security.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=6279&exhibition=7&u=99|1|...

Eastern Screech-owl
New York City--Central Park, North Woods.

Ah, Dale :)

[monkyboy]

Can we all just admit that Bush's SS "reform" plan was just an attempt to create 150 million retirement accounts that Wall Street firms could milk for fees?

[Bruce Webb]

Oddly I took the three next work days of this week off. I have six days uninterrupted to confront Social Security and the Annual Report of the Trustees of Social Security is only due within the next ten days and last year was delivered on the 23rd. It will be interesting.

[ken melvin]

For questions about delivery vs capacity call Condi Rice:
http://www.mahablog.com/2006/03/20/free-fraud-zone/

[Neil']

I think the biggest worry is that Bush-allied sophists will continue to pretend that the Social Security trust fund - moneys collected since 1983 IIRC over and above the direct PAYGO rate to provide a cushion for the boomers, per Greenspan's assurances - does not really have to be paid back. They talk of special bonds that aren't real but are only "accounting devices." In honest accounting, anything that serves as a book entry in some sense is owed to whomever it was earmarked to by agreement. Saying as Bush did that "The money is all gone" is like borrowing money, spending down to nothing, and then thinking that voids your agreement. But that is what hacks propose to do (to avoid paying the taxes that would be required to honor the commitments.) Ironically, most of them are conservatives. They are untroubled by the contradiction of complaining about taking people's hard-earned money at all, but OK with taking it under false pretenses and then refusing to pay back what is promised.

[christofay]

Neil:

Thanks for the concise explanation.

I'll save it to send out to my self-labeled conservative pals.

[Robert Waldmann]

How dare you accuse Our President of presenting a social security reform plan !
He never ever did any such thing. He was seeking input and guidance from ordinary* Americans via his town hall meetings.

The claim made by DeLong, Weisberg, and Ponnuru that there was a plan with balanced or unbalanced books is utterly false and slanderous (or libelous I can't keep them straight even if dead trees are involved).

to be serious for a sentence, as you note, Bush never did present a plan whose 70 year shortfall could have been estimated to be zero or any other number, since he never presented a precise plan.

* I admit that the patriotic geniuses who participated in the town hall meetings are** somewhat better than ordinary Americans, as, to gain admisssion to such a meeting, one had to demonstrate an ability to accurately evaluate the severity of the social medicare and security crisis, the genius of Bush, and the fact that US future productivity growth is a holy duality with two aspects -- the father who determines payroll growth and the Son who determines equity returns (heeeey maybe the Holy Spirit could have balanced the books of the transendent and not indwelling reform to be).

** those who have since passed away to the fully funded entitlement in the sky were better than ordinary Americans.

[Lee A. Arnold]

I used lots of Jason Furman's findings for the little "Social Security" flowchart movie at http://ecolanguage.net. (I think the thing that angered me most is the attempted swindle that Neil, above, describes.) But I put the movie out in the middle of last June, and didn't get to practice my intellectual thievery upon this paper! Mr. Furman is smart and kind and I owe him and Brad and all the rest of you a great deal of thanks.

Now, if you click back to his first posting, Mr. Ponnuru writes, "Bush did indeed propose to cut future benefits--or, if you would prefer, to slow the growth of benefits--by trillions of dollars. That's what 'progressive indexing' was about."

But then he writes, "The notion that the president's plan depended for its financing on a 'bogus projection' about stock-market returns is inaccurate." --Is this sentence correct? Or is he just playing with the definition of "financing," or splitting hairs by not including "bonds?" (Or does Mr. Ponnuru secretly suppose the President has no idea on earth how to finance the thing?) I do not understand. Because at every "town hall meeting" Mr. Bush banged the drum loudly for private investments and "a little thing I like to call the 'compounding rate of interest.'"

[Bom]

good! They are untroubled by the contradiction of complaining about taking people's hard-earned money at all, but OK with taking it under false pretenses and then refusing to pay back what is promised.

[lessthanamused]

When the people at CATO were marketing this idea a few years back they came up with an estimate that 27 minutes out of every trading day on the floor of the NYSE would be devoted to funneling this money into equities etc. The Soc Sec Administration went to chief financial analysts from Goldman Sachs, Invesco, Morgan Stanley and J.P. Morgan inquiring about their long term predictions and the consensus was apparently that equities would outperform bonds by 1-1.5%, the latter returning 3.5%. A far cry from the #s Bush was promoting albeit historically.

[Bruce Webb]

There is an unbearable tension between tax cutters and privatizers which is going to snap at some point.

Tax cutters insist that Bush tax cuts are going to result in a gusher of economic growth, privatizers are falling back on an economic model that assumes flat growth forever. These folks have been working from two sets of economic books for a decade or more.

The really ironic thing is that everything is on the table. Private accounts, diversification of the assets in the Trust Fund, real supporters of Social Security are willing to discuss any and all of this. Once opponents admit once and for all that it is fully funded going forward. Just admit that FDR is a hero and Reagan is a zero and we can enter into all kinds of discussions about the American economy post-Solvency.

Social Security is not broke and as such all kinds of assumptions about the long bond, the affordability of tax cuts, foreign account deficits will need to be reexamined. I fully believe that a good part of the "dark matter" that is drawing foreign banks to continue to invest in Treasuries is due to them making a more intelligent bet about supply 10 years down the road. Will the Social Security Trust Fund be a net buyer or a net seller of bonds come 2017? We are not talking tiny dollars here, we are talking about billions of dollars each way. And yet otherwise intelligent people are making bets based on Intermediate Cost projections which called for 2.0% productivity growth last year.

Hello!? It didn't happen. Try 2.7%. In a model that is very sensitive to changes in the first year. Which calls for 2.0% again for 2006.

We are engaged in an elaborate Kabuki dance around an economic projection that has proved itself worthless. And as such has distorted economic and political discourse for more than a decade. The "No Economist Left Behind" challenge was a valuable exercise. It demonstrated that you could not get 6.5% returns on equity given Intermediate Cost economic assumptions about growth. Great, three economists showed that given Intermediate Cost private accounts wouldn't help. But the Strange Attractor in the room is Low Cost. We hit Low Cost numbers and Social Security is fully funded forever. We exceed Low Cost and Social Security is currently overfunded going forward.

Well guess what? We beat Low Cost in 2005, exactly nobody is predicting we won't beat it in 2006, nobody expects the economy to perform down to fully funded Low Cost.

To return to my opening point. Tax cutting Supply Siders are dying to insert better growth numbers into their models. The fanatics that are insistant on killing Social Security have resorted to an economic projection that defies belief, they are clinging to numbers that insist that the US economy is going into the crapper forever. Otherwise they have to concede Solvency. You know that the Cheneyites are saying "Screw Ayn Rand, let's stick 3.0% growth in the model and get our tax cuts".

[ilsm]

Go to: http://www.whitehouse.gov/omb/budgetcharts/2007_budget/index_charts.html

Here are budget charts. One shows the deficit is being halved. But the scam is it is being halved as a percent of GDP.

Still owe more each years!!! But as the GDP grows it looks okay!!

The new tack is 'we should show phony progress' as reducing the percent of GDP that is new debt and lie that the deficit is halved.

This appears to be an official white house site.

They get the trend assuming greater than 3% annual GDP growth.

And go to table 22-1, pg 341: http://www.whitehouse.gov/omb/budget/fy2007/pdf/spec.pdf

They add back the accumulated surplus money in the trust funds and so reduce the perceived deficit each year.

Accounting magic but to Bush who slept through any accounting he may have passed in HBS it follows that the trust fund debt disappears and he never has to worry about the good citizens' patriotic payments to utterly regressiver tax that poses as Social Security going to reducing the cash borrowed each year.

Since no cash was borrowed it does not exist as debt. So let's cut SS benefits or the growth to save the taxpayer from having to cover the deficits in new debt.

Is it not comforting that the US will be borrowing less money?

Huh?

[bakho]

What SS plan? When did Bush ever submit a SS plan with real numbers attached? How do we know that Jason looked at a real plan?

I thought all the Bush hot air was a gambit to try to trick Democrats into proposing their own SS cuts.

[Ralph]

Visit the Social Security Network website, www.socsec.org, for short authoritative papers on the current social security reform proposals. Since the collapse of the Bush administrations legislative initiatives in 2005, the site has added a half dozen additional articles. There is a discussion on the additional (small) changes to SS reform in the president's 2007 budget proposals. There are two articles on the crisis in the former model privatized public pension systems in Britain and Chile. There is an article on the impending collapse of the private (corporate) pension systems in the US and what this portends for future retirees whose dependence on SS will become even more critical as a result. And watch for articles on the upcoming annual SS trustees report which is expected in the next two weeks as Bruce Webb notes earlier in this thread.