[Part of The Earth-Based Initiative: Social Security Meta-Archive]
Social Security Meta-Archive: 2005
TIME TO PRIVATIZE SOCIAL SECURITY
Economist Dean Baker writing at MaxSpeak:
How would privatizing Social Security help? Well, I don’t mean the personal accounts idiocy, I mean making Social Security a private corporation that does the exact same thing the current program does, except have the organization that administers the program be a private company operating on contract with the government.1/4
Then, when David Walker, Thomas Friedman, Peter Peterson, the Washington Post editorial board etc. make some outlandish claim about Social Security devastating the country, the company could sue them for libel, just as Microsoft would if they made an equally outlandish claim about that company’s impact. One or two lawsuits like this and these people would adhere much more closely to the truth, as would the newspapers and television stations that wholesale this tripe across the country.
Economist's View links to Dean Baker's response to Tom Friedman.
Goldilocks and the Three Social Security Bears
Bruce Webb at MyDD.
Private Pensions and Social Security "Reform"
Brad DeLong keys off of New York Times coverage of the decline of defined benefits packages to discuss the increasing value of social insurance.
Chile Confronts Problems Caused by Social Security Privatization
Economist's View links to New York Times coverage of problems with Chile's system.
Demography Is Not Destiny
Economist's View samples Paul Krugman and LA Times coverage of demography's impact on the budget.
The Rise Of Blogs
The National Journal on blogging's impact on the Social Security debate:
With such active readers, it made sense for bloggers to turn their attention to Washington -- and for more people inside the Beltway to awaken both to the influence of bloggers and the potential of blogging technology. That is exactly what happened after the 2004 election.Issues such as Social Security reform drove the interest in blogging and demonstrated the technology's power. George Washington University's Farrell said that blogs were very effective at "creating outrage and creating a groundswell" against Bush's plans for Social Security. Experts -- such as economics professor Brad DeLong of the University of California (Berkeley) and Max Sawicky, an economist at the Economic Policy Institute -- used their blogs to create a "testing bed for interesting arguments," Farrell said.With Great Power Comes Great Responsibility
"We began to see those arguments being taken up by op-ed people ... and change the conventional wisdom in the media" about the Bush plan, Farrell said. Although the blogosphere alone did not push Social Security off the short-term agenda, it was a factor, he contended.
Andrew Roth, the government-affairs director at the conservative Club for Growth and the group's blogger, agreed -- to an extent. He said that Social Security reform is dead in Bush's second term not because of opposition from liberal bloggers but because Republican leaders lack the will to "force moderates to vote on it." Yet he also said that liberal bloggers "were far better organized and ready to fight than conservatives were."
The Club for Growth launched a group blog called Social Security Choice, and Roth expected more like it. "In fact, I was worried that somebody else was going to beat us to the punch. But that never happened, and the other blogs never materialized. I don't know why it didn't happen, but it was frustrating."
Brad DeLong responds:
Let me be more skeptical. The Bush administration did the heavy lifting, through failing to come up with a Social Security plan that anybody liked. You can get Congressmen to vote for tax cuts for the rich because the rich like tax cuts--and give campaign contributions. But who liked Bush's never-spelled-out Social Security plan? There is something to the idea that weblogs are contributing to the creation of a public sphere of debate and discussion at a more elevated level than the somewhat stylized, hieratic, and chronically-underbriefed-on-matters-of-policy-substance traditional media and opinionate. But there is not very much.In comment, Barkley Rosser responds to DeLong:
think that Max deserves the prime place here. Certainly your blog is more read than his. But you must admit that for all your criticisms of the Bush non-plan, you have continued to argue that "something should be done," and have not ultimately gone back on those folks from the Clinton administration who really got all this nonsense going with their hysterically ridiculous projections as Social Security Trustees back in the late 1980s. What was with all that anyway? Those projections provided the base for the Bush nonsense....with follow-up by Bruce Webb:
The first to point out in print that those projections were ridiculous were the late Robert Eisner and then Dean Baker and his coauthor, Weissbart. Max and those on his blog, including Dean, were probably the first to give those a serious airing in public as Bush began his push. It is good that people like you and Krugman picked up on all that and helped get it out to the broader public.
So, Brad, you deserve some kudos, but please recognize that in fact nothing really needs to be done to social security. Do not provide ammo for a future Dem prez to come back with another round of this stuff.
Josh deserves full credit, and Matt and Kevin were relatively early adopters. But the real credit goes to the numbers. The entire Bush plan required all players to get on board the train before the release of the 2005 Social Security Report. March 23, 2005 was the day the music died for the Cato Institute. None of their plans survive encounter with the economic numbers.2/7
The "No Economist Left Behind" contest settled one end of the logic fork that impaled privatizers. You don't get 6.5% returns across the boards with the productivity numbers of Intermediate Cost. And the business pages settled the other end of the logic fork. The economy will not perform down even to the level of fully funded Low Cost.
President Dole might have had a good shot in 1997, you had to be pretty optimistic about the economy to expect that we would beat a pretty good 1996 productivity number year in and year out. But we did. President Bush might have had a fair shot in 2001, you could squint and still make out "crisis". But at that point the economy had to seriously underperform to sustain "crisis". It didn't. Despite a worrisome disconnect between productivity and real wages by historical standards, the overall economy has continued to grow.
You can argue whether the 2001, 2002, 2003, 2004 Reports were deliberately manipulated. I believe they were, others are free to disagree. But there is no question about the 2005 Report. The 2004 Report predicted 2.7%, the real economy returned 3.3%, then the 2005 Report set 2.1% as the "optimistic" number. You don't even have to know what that number refers to, the Trustees expected us to believe that under the best case scenario it would shrink to 66% of the 2004 number. That's optimism?
In the event the relevant number is productivity as defined by the Trustees (somewhat different from productivity as defined by the BLS and reported in the papers). Nobody could defend the numbers in table V.B1 (Principal Economic Assumptions), no one even tried, not once.
The blogosphere and Congress can dislocate their shoulders patting themselves on the backs for delaying the departure of the Privatization Train until March 23, and good on them and us. But the real juice in the Third Rail of American Politics came in the form of a 216 page government report.
Stitching a New Safety Net
The Wall Street Journal's Econoblog features an exchange between Andrew Samwick and Mark Thoma.
This Week In Entitlement Reform
A quick survey by Dave Altig at macroblog.
Night of the Living Policy Proposal
Matthew Yglesias on the never-ending GOP impetus to pop-up zombie proposals.
Zombie Reforms, Zombie Arguments
Will Wilkinson of CATO says if Republicans won't "reform" Social Security, Democrats eventually will.
Daily Policy Digest
"Policy Notes" from the Pete du Pont-founded National Center for Policy Analysis.
Ramesh Ponnuru Is Off Message!
DeLong chastises NRO apparatchik for spilling the beans.
The Missing Social Security Trustees Report
Michael Hiltzik's Golden State blog.
Is There a Social Security Crisis?
Defining the Social Security Privatization Debate
Mark Thoma links to an Economist's Voice article enumerating the seven attributes of privatization.
REFORMING SOCIAL SECURITY SOONER RATHER THAN LATER:
FACT AND FICTION
Jason Furman of the Center for Budget and Policy Priorities.
Social Security Report Released
Mark Thoma links to Angry Bear, triggering a long discussion of productivity.
The Trust Fund
More from Economist's View on the 2006 report.
DeLong links to an announcement of an Andrew Samwick Social Security reform presentation, Samwick responds to Bruce Webb in comment:
Bruce writes:Barkley Rosser responds to Samwick:
"Will Andrew take table IV.B6 "Unfunded OASDI Obligations for 1935 (Program Inception) Through the Infinite Horizon" (2005 Report p. 59) to front a 3.5% payroll gap like he did on this site in November 2004 (thanks Brad I kept the e-mail) to sell his then solution?"
Answer: Yes. The 3.5% uses the intermediate assumptions to make a projection of the unfunded obligations that does not set an arbitrary stopping point that is 75 years in the future. A 75-year average is an inadequate summary of a series that has a trend.
"... there may be a alternate reality where a professional economist might decide to stop at IV.B6 on page 59 and not examine the numbers of V.A1 (Principal Demographic Assumptions) on pages 75-76 and ignore V.B1. But that would be sloppy at best and thoroughly dishonest at worst."
Answer: Obviously, projections for a less rapidly aging population or higher productivity growth would make Social Security more solvent over the projection period. I have discussed on my blog that I think the demographic assumptions (mortality) are too favorable and the economic assumptions (productivity) too unfavorable for Social Security's projections. See the following posts:
"Professor Samwick is not sloppy. Pretty damn slick in selling privatization, but not sloppy. Which still does not make the graph in Figure II.D7 go away."
Answer: I don't find the assumptions of the "low-cost" scenario reasonable, and so it is of little consequence that the trust fund is not projected to run down to zero in that case.
If I thought of myself as "selling" something, it would be this:
I have not looked at this year's report, but I looked pretty closely at last year's and have been following this ever since the Trustees first began issuing their goofy projections in the late 1990s. My understanding is that the numbers are not all that different from last year.Bruce Webb responds to Samwick:
So, basically ever since these projections first appeared in the late 1990s, the intermediate projections have been for the economy to start growing at about half its historical rate in the near future. However, that near future never seems to arrive, except for the occasional recession year like 2001. I know this year the year of "bankruptcy" moved forward a year, but in most years these "crisis" dates have kept being pushed off.
I do note that you agree that the economic projections are probably too pessimistic. It may be true that the length of life projections are too "optimistic" (in the sense that people are predicted to die sooner than they will). But my memory is that there was also a projection of a drastic slowdown in immigration that was to occur in the near future, which also has not shown up yet. Well, who knows? Maybe this anti-immigration movement will really kick in, walls will get built, and we'll get the expected demographic crisis after all.
I basically have two observations (aside from noticing that medicare is in far worse shape and that is where the focus should be; it is already running a deficit).
1) There are quite a few countries out there that have the demographic ratios we are forecast to have three decades from now. Many of these countries have earlier retirement ages, longer life expectancies, and in some cases, much larger government paid old age pensions (nearly twice as high as ours in Germany, last time I checked). In none of these countries has the system "gone bankrupt" or are old people not getting their pensions.
Now, I am not suggesting that we should have Germany's system or some other country in Europe (most of those countries are trying to reduce the generosity of their systems and having trouble doing so). But it does seem that those selling "crisis" stories are simply way overexaggerating things.
2) Even if the more pessimistic scenarios do eventually come to pass. I do not see why we should be running out to "do something now." We are at least a decade away from the system even beginning to run a deficit (as medicare is doing right now, not to mention pretty much the entire rest of the US government). Why not wait and see if the more pessimistic trends emerge and then do something?
Given what happened over the last decade, it looks to me like the probability is very high (certainly higher than you think) that we will wake up a decade from now and find out that it has resembled this past one. That if we do nothing, we will find a cottage industry of people like you running around like Chicken Little warning about how the system will be going into deficit in 2027 and will be bust in 2050 and how we need to have a conference at this or that think tank to...
Greenspan and his crew fixed it in 1982, and so far it is very far from being broke.
"Answer: I don't find the assumptions of the "low-cost" scenario reasonable, and so it is of little consequence that the trust fund is not projected to run down to zero in that case."Webb continues:
Which ones are unreasonable? And why?
Low Cost has been a much more reliable predictor than Intermediate Cost in the ten years I have been following the numbers. Blithely waving that away by saying you don't find them "reasonable" buys you nothing. Bring numbers, explain which numeric series of Low Cost is too optimistic.
[Changes in trustees' projections over time]
Year in and year out the real economy has been outperforming Intermediate Cost, indeed it has been outperforming Low Cost. Why is the assumption that it will continue to do so, particularly when Low Cost calls for productivity growth no greater than 2.2% in any future, unreasonable?
The 2006 Report presented 2.0% as the productivity number for 2005. The Trustees did not explain why productivity slumped from a reported 3.0% in 2004 or why this mysterious slump occured and yet did not have an effect on any number series that would cause someone to comment on it. They simply present the number.Barkley Rosser follows up:
[ECONOMIC ASSUMPTIONS AND METHODS] And then add this rather peculiar footnote:
"3. Historical data are not available for the full year. Estimated values vary slightly by alternative and are shown for the intermediate alternative."
One is left scratching one's head. Why on earth were "historical data" "not available"? Never seemed to be a problem before. Note that this does not equate to "productivity figures are subject to revision as more data comes in". This has always been true and merits no special recognition now.
What is the real function of footnote '3'? My only explanation is that it is meant to enter some dusty foggo into what should be a rational examination of actual economic numbers.
I fully endorse Bruce's questions and comments to Andrew.5/22
For the rest of you, be careful. Note that Brad put this up without snide or critical commentary. He has been part of this cottage industry for some time.
Dean Baker has pointed out that the Monica Lewinsky affair may have saved us from Clinton actually following through in the late 1990s on what we now know were off the wall pessimistic projections. It was people Clinton appointed to the SSA who started this baloney of overly pessimistic projections. This is a bipartisan hysteria, with Dem presidents the real danger. A Dem, especially Bill's wife, might feel the "need to show responsibility" and appeal to Wall Street money by pushing some garbage on this through.
The real irony of Bush's disastrous tour last spring for two months is that he did increase the number of people who agreed with the phoney baloney claim that "social security is in crisis," even as support for his plan, and for him more generally, went down. Dems will oppose any social security change while he is in office. But, if we have Hillary, or Mark, or Al, or John, or Wesley, or Russ, or another "showing responsibility" and backed by Brad DeLong and heavens knows who else from the Dem part of this ridiculous Cottage Industry, Wachet Auf!
Greg Mankiw Criticizes Lieberman, Bush, and Krugman...
DeLong links to Mankiw and cites Jason Furman in response.
GOING ONCE, TWICE,A PENSION AT A PRICE
Tabloid story of Wall Street lawyer attempting to sell his Social Security benefits decades ahead of time on ebay.
Social Security Reform: A Bipartisan Proposal
AEI Webcast of presentation of Liebman-MacGuineas-Samwick Social Security plan.
Jason Furman x 2
Libertarian Arnold Kling living in The Furman Century.
Social Security Private Accounts: Add-ons and Carveouts
DeLong links to a presentation of Samwick's latest plan.
The Tree of Tax Hikes and Social Security Privatization
DeLong on the benefits of add-on accounts.
CATO GUY FOR HIGHER TAXES
The dilemma of the privatizers is that current law favors the status quo, and eventually the use of income tax revenues, backed by the political clout of retired Baby Boomers, to maintain the program.6/27
They've already lost. The might have lost in 1983, betrayed by one of their own -- Crazy Al and Ronald Reagan. Their reform commission may have been the last plausible chance to radically remake the program.
Now if you want reform, you have to accede to tax increases. Give us some revenue, and maybe we'll give you some itty bitty reform. Roll over and we'll rub your tummy too.
Talking Points Memo
Josh Marshall on Bush's latest phase-out attempt.
Can Social Security Reform Be Saved?
Capital right-wing outlet American Spectator on the Liebman-MacGuineas-Samwick "bipartisan" plan:
Since the LMS plan is a sincere effort at compromise, and since much of the left would still oppose it were Congress to seriously consider it, it would be worthwhile for those of us on the political right to contemplate just how much we would be willing to give up to achieve reform. Of most concern would be the increase in the earnings cap, a tax increase that would fall hard on small businessmen and women, some of conservatives' biggest supporters. Could we, say, accept a plan with only an add-on personal account in exchange for only a minimal rise in the earnings cap and the rest funded via debt? Or should we demand a carve-out in exchange for any increase in taxes?7/2
Social Security Confusion from the American Spectator
An increase in contributions coupled with diverting some of those contributions to private accounts is indeed "a carve-out... [plus] an increase in taxes." But the short way of describing "a carve-out... [plus] an increase in taxes'" is "an add-on." Hogberg's second question is essentially "should we accept an add-on?" The answer is yes.7/19
Conversely, an unfunded add-on--a "personal account... funded via debt" that doesn't raise the resources devoted to funding the Social Security system--the short way to describe that is as a "carve-out." Hogberg's first question is "should we demand a carve-out?" The answer to that is no.
But should I be surprised that writers for the American Spectator are hopelessly confused, and call a carve-out an add-on and an add-on a carve-out? I think not.
Given how confused they are, why don't we good guys reframe the debate. An increase in contributions to the Social Security system is to require that current workers accept some of the responsibility for funding their own Social Security benefits, and not push it off onto future generations. Taking responsibility is supposed to be something that responsibility-loving Republicans favor, isn't it?
Dean Baker on the promise of productivity and demographics.
Pulling on Liberal Heartstrings
Economist's View on Social Security's purported threat to the world's poor.
Does Your Social Security Check Perpetuate Global Poverty?
Angry Bear's PGL tracks the argument.
Talking Points Memo
Josh Marshall on the latest instance of Social Security bamboozlement by GOP candidates remaining at large.
"We're Going to Get Serious"
Economist's View on the latest threats from John Boehner and Hank Paulson among others.
President Remains Eager to Cut Entitlement Spending
Michael Abramowitz's Washington Post coverage.
More "Entitlement" Nonsense at the Post
Dean Baker responds at his American Prospect Beat the Press blog:
Yet again the Post reports on the threat posed by “entitlement” spending, referring to Social Security, Medicare, and Medicaid. To quickly repeat myself, this is dishonest. There are modest and manageable increases in projected Social Security spending due to the aging of the population. There are unmanageable projected increases in Medicare and Medicaid expenditures due to a projected explosion in health care costs. If the projected explosion in health care costs proves accurate, then it will devastate the economy, and cause serious budget problems.11/18
Honest people respond to these projections by examining ways to prevent the explosion in health care costs. Less honest people talk about the need to cut entitlement spending, including Social Security.
Who Needs Social Security?
Mark Thoma links to a Kotlikoff paper on high-earning households' dependency on Social Security.