Sunday, April 30, 2006

Social Security Meta-Archive: April 2005

[Part of the Social Security Meta-Archive: 2005]

Social Security Meta-Archive: March 2005

April 2005
What is Progressive Price Indexing?[PDF]
Alicia Munnell of the Center for Retirement Research at Boston College.
A Proper April Fools Day!
Brad DeLong responds to Donald Luskin.
Stepford Town Meetings
EJ Dionne on Bush's employment of Secret Service as pep rally bouncers.
Asset Returns and Economic Growth
DeLong links to Mankiw's response to his paper with Baker and Krugman.
The Need for Social Insurance
Mark Thoma.
Prefunding and Private Accounts
DeLong quotes Andrew Samwick quoting Alex Tabarrok and responds.
Rove Says Social Security Overhaul Must Have Private Accounts
Bloomberg coverage.
The Commander Is on Deck
DeLong:"Gene Sperling issues marching orders on Social Security reform"
April Fools Day Continues!

Donald Luskin:
NRO Financial April 4, 2005: The actuaries, as noted earlier, assume about 1.9 percent annual real GDP growth over the coming 75 years.... At the same time, the actuaries assume 6.5 percent annual real total returns to stocks.... What’s the complaint, then? Where’s the inconsistency?..
Donald Luskin:
NRO Financial February 2, 2005: Krugman does make one good point... stock returns in the neighborhood of 6.5 percent will not be possible over the coming 75 years if economic growth is as low as the 1.9 percent rate used by the actuaries of the Social Security Administration in their solvency estimates...
There is one thing that puzzles me: Is Luskin genuinely too dumb to remember what he wrote two months ago? Or does he just think that National Review's readers and editors are too dumb to remember what he wrote two months ago?
Mark Thoma in comment:
Your reponse shows an admirable amount of restraint given the baseless hatchet job Luskin tried to do on your paper with Baker and Krugman, and the uncalled for personal attacks. He even pulled out the "Brad DeLong (the former Clinton administration official who is the self-confessed most-Marxist-leaning economist on the U.C. Berkeley economics faculty" which shows you just how scared you guys have him. Too bad he doesn't understand the point about social arrangements and modes of production you are trying to make in the post he links, and that what you write there is critical of, not supportive of, what most people think of as Marxian tenets.

A more honest link would have been to the comments on the transformation problem where Marxists are not happy with you...
George W. Bush's $1.7 Trillion Grand Larceny Spree
DeLong quotes Max Sawicky.
The Bush Administration Clown Show Continues...
DeLong articulates the implications of one of White House spokesman Chuck Blahous's talking points:
If you go to the real Republican economists, you will find the argument going something like this, where I have turned the frankness-and-blunt-speaking-o-meter up from its usual level of 3 to the Spinal Tap level of 11:

  1. Currently, the U.S. government is running a Social Security surplus--taking in more in Social Security taxes than it spends in benefits.

  2. When the baby-boom generation retires, the U.S. government is going to be spending more on Social Security than it will take in in taxes--so the government is going to have to borrow a lot of money in order to cover the deficit.

  3. The government will only be able to borrow if creditors think (i) the debt is not already too high and (ii) the government will have the will to levy taxes to pay us off when our bonds come due.

  4. Thus it's important that now--when Social Security is in surplus--that the government be not running up but running down the debt.

  5. If the government takes the current Social Security surplus and spends it--doesn't run a big current surplus and buy back debt now--then it will be unable to borrow when the baby-boom retirement payments come do because the debt level from which we will then start will be too high.

  6. The U.S. government--especially Frist, Hastert, Delay, and Bush--have a demonstrated incapability to not spend the Social Security surplus: there is no a snowball's chance in hell that a government run by them will buy back debt.

  7. So we are in big trouble.

  8. If only we could keep Frist, Hastert, Delay, and Bush from knowing that they have a Social Security surplus to spend, they would be forced to raise taxes or cut spending, and then the government would be able to borrow in the future to meet its Social Security obligations to the baby boomers.

  9. So let's set up private accounts. That will cut government revenues now--and so eliminate the Social Security surplus. Frist, Hastert, Delay, and Bush will be forced into fiscal sanity, and so we'll have a lower debt when we really do have to borrow in the future. And we won't have to borrow any more in the future as a result of our private accounts plan because we will cut normal benefits by an amount that is in present value equal to the amount that we're diverting to private accounts.
"Battlepanda" in comment:
Alan Greenspan in '83: Let me put this cookie away for you so you can have it for dessert later instead of ruining your dinner.

Al Gore in 2000: I wouldn't keep the cookie jar right out in plain sight if I were you.

George Bush in 2005: Oh uh! Somebody ate your cookies! Or perhaps your cookies never existed in the first place.

American people: Why preznit hand in cookie jar?

GB: To make sure this terrible terrible thing never happens again, next time we're going to keep the cookies in a jar with your name on it!

American people: (...)
The Bush Administration Social Security Clown Show Continues
DeLong links to Judd Legum and resumes bashing Blahous.
Losing the Social Security Battle
Stephen Moore, longtime libertarian think-tank operative, lays longterm plans for the destruction of Social Security in the Weekly Standard:
Finally, to put the Democratic obstructionists in an especially uncomfortable position, it would make sense to start proposing fallback positions that at least get personal accounts started. One idea would be to defuse the fatuous "risky stock market" argument by simply offering a plan where workers can have a private account, but are permitted to purchase only Treasury bills. Take the stock market out of the equation and there is not even the odor of risk with personal accounts.

Max Sawicky responds:
But . . . but . . . I thought Government bonds were "just IOUs"?!?

Steve and his boyz are in it for the long haul. Let's back up and see where we are.

At the least, the privatizers have helped to back the public into the Dems' position: there is a problem but not a crisis. So we are still ripe for misguided efforts to close deficits that are decades in the future.
A Note: Returns, Growth, and Financing Social Insurance
DeLong follows up on his paper on asset returns with Krugman and Baker.
"Asset Returns and Economic Growth": The Econ 1 Version
DeLong continues...
The focus groups speaketh
The Carpetbagger Report on "privatization" morphing into "personal accounts" morphing into "modernization."
Live Blogging from Heritage, III: The Demographics of the International Pension Situation
"This session is led by Richard Jackson, Director, Global Aging Initiative at the Center for Strategic and International Studies (CSIS). He's going to put the SS reform debate here in international perspective..."
Jackie Calmes on Chuck Blahous
DeLong links to Wall Street Journal coverage and comments:
A Social Security reform plan that does not preserve a defined benefit component, does not offer a good deal to the non-rich choosing private accounts, and does not boost national savings is not a Social Security reform plan worth proposing. There are no reasons for anybody to support this thing.
Matt Miller: Why Are Republican Economists Averse to Raising National Savings?
DeLong links to a discussion of the White House refusal to pay for private accounts.
FDR's Card Trick
A conservative attack on Social Security by William Voegeli of the Clairmont Institute writing at
Social Security Reform
Peter Orszag testifies before the Senate Finance Committee.
Personal Accounts Are Not A Certainty
Washington Post coverage.
Press Conference of the President
Remarks on Social Security:

Congress also needs to address the challenges facing Social Security. I've traveled the country to talk with the American people. They understand that Social Security is headed for serious financial trouble, and they expect their leaders in Washington to address the problem.

Social Security worked fine during the last century, but the math has changed. A generation of baby boomers is getting ready to retire. I happen to be one of them. Today there are about 40 million retirees receiving benefits; by the time all the baby boomers have retired, there will be more than 72 million retirees drawing Social Security benefits. Baby boomers will be living longer and collecting benefits over long retirements than previous generations. And Congress has ensured that their benefits will rise faster than the rate of inflation.

In other words, there's a lot of us getting ready to retire who will be living longer and receiving greater benefits than the previous generation. And to compound the problem, there are fewer people paying into the system. In 1950, there were 16 workers for every beneficiary; today there are 3.3 workers for every beneficiary; soon there will be two workers for every beneficiary.

These changes have put Social Security on the path to bankruptcy. When the baby boomers start retiring in three years, Social Security will start heading toward the red. In 2017, the system will start paying out more in benefits than it collects in payroll taxes. Every year after that the shortfall will get worse, and by 2041, Social Security will be bankrupt.

Franklin Roosevelt did a wonderful thing when he created Social Security. The system has meant a lot for a lot of people. Social Security has provided a safety net that has provided dignity and peace of mind for millions of Americans in their retirement. Yet there's a hole in the safety net because Congresses have made promises it cannot keep for a younger generation.

As we fix Social Security, some things won't change: Seniors and people with disabilities will get their checks; all Americans born before 1950 will receive the full benefits.

Our duty to save Social Security begins with making the system permanently solvent, but our duty does not end there. We also have a responsibility to improve Social Security, by directing extra help to those most in need and by making it a better deal for younger workers. Now, as Congress begins work on legislation, we must be guided by three goals. First, millions of Americans depend on Social Security checks as a primary source of retirement income, so we must keep this promise to future retirees, as well. As a matter of fairness, I propose that future generations receive benefits equal to or greater than the benefits today's seniors get.

Secondly, I believe a reform system should protect those who depend on Social Security the most. So I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off. By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty. This reform would solve most of the funding challenges facing Social Security. A variety of options are available to solve the rest of the problem, and I will work with Congress on any good-faith proposal that does not raise the payroll tax rate or harm our economy. I know we can find a solution to the financial problems of Social Security that is sensible, permanent, and fair.

Third, any reform of Social Security must replace the empty promises being made to younger workers with real assets, real money. I believe the best way to achieve this goal is to give younger workers the option, the opportunity if they so choose, of putting a portion of their payroll taxes into a voluntary personal retirement account. Because this money is saved and invested, younger workers would have the opportunity to receive a higher rate of return on their money than the current Social Security system can provide.

The money from a voluntary personal retirement account would supplement the check one receives from Social Security. In a reformed Social Security system, voluntary personal retirement accounts would offer workers a number of investment options that are simple and easy to understand. 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. Americans who would choose not to save in a personal account would still be able to count on a Social Security check equal to or higher than the benefits of today's seniors.

In the coming days and weeks, I will work with both the House and the Senate as they take the next steps in the legislative process. I'm willing to listen to any good idea from either party.

Too often, the temptation in Washington is to look at a major issue only in terms of whether it gives one political party an advantage over the other. Social Security is too important for "politics as usual." We have a shared responsibility to fix Social Security and make the system better; to keep seniors out of poverty and expand ownership for people of every background. And when we do, Republicans and Democrats will be able to stand together and take credit for doing what is right for our children and our grandchildren.
The Bush Social Security Clown Show Continues
DeLong responds.
It's the Circular Firing Squad of Flying Attack Monkeys!
More from DeLong in response to the press conference.

Jason Furman of the Center on Budget and Policy Priorities.
Max Sawicky on the implications of progressive indexing.
Has Bush gone Commie?
The conservative blogger ProfessorBainbridge riffs off of the Voegli attack on Social Security to rub his hands in glee at the thought of subverting the "universalist" principle behind the implementation of Social Security in the US.
Max Sawicky links to a report by EPI's Josh Bivens.

Social Security Meta-Archive: May 2005

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