Bob Drogin article in Thursday's Los Angeles Times put me in the mind of something I came across a year and a half ago when I was researching my first long article on Iraq -- a murky moment from Ahmed Chalabi's past, which played a key role in making him an object of deep distrust and animosity for many at the CIA.
In case you haven't read the earlier posts, Drogin's article says that US intelligence has concluded that a number of defectors with stories about Saddam's WMD programs were probably either double-agents or dupes who unwittingly passed on disinformation from Saddam. (One might also suppose they simply saw the rewards in store for any Iraqi defector who told the Americans what they wanted to hear ...) The piece went on to say that the Agency was applying renewed scrutiny to many of those defectors and implied that that scrutiny would also be applied to the man who was the conduit and handler of many of those defectors: Ahmed Chalabi.
Here's the incident I'm talking about ...
In the Iraq hawks' version of the events of the last dozen years, a key turning point was the failed CIA-backed coup attempt against Saddam in 1996. The coup was run out of Amman, Jordan; it centered on a group of Iraqi army defectors. And it came apart in a particularly humiliating manner: Saddam's agents used the radios the Agency operatives had given the plotters to radio them back and tell them they'd foiled the coup and that the plotters would be executed.
From any perspective it was a pretty low moment.
But, again, back to the Iraq hawks' version of events.
In early 1996 - a few months before the plot unraveled - Chalabi came to Washington to warn the US that the CIA's coup plot had been compromised and should be called off. Chalabi went to Richard Perle - already the eminence grise behind the INC's shadow war in Washington - who arranged a meeting with then-CIA Director John Deutsch, his then-deputy George Tenet, and the CIA's Director of Operations for the Near East, Steve Richter.
According to the INC, Chalabi warned the three of what he had discovered --- that the plot had been compromised. But his warnings went unheeded. That meant the CIA brass was doubly responsible for the plot's eventual failure: Not only was the operation poorly run, but they refused to call it off even when they'd been warned that the plot had been compromised.
In September, a couple months after the coup attempt went bust, Deutsch was called to testify on Capitol Hill about whether Saddam had bested the United States with the thrust into northern Iraq he had just made. (This move back into northern Iraq came after a series of US setback earlier in the year and came after Saddam was able to sow division between the two main Kurdish factions.) Before Deutsch went to testify, Perle went to him and put that earlier meeting to good use, bullying
Deutsch into, in essence, breaking with the administration on Iraq. "Richard Perle got a hold of him and really busted him up," one source familiar with both meetings told me. With the knowledge of the earlier tip-off meeting, this source told me, "Richard had even more ammunition come September."
When Deutsch appeared before the Senate he broke with the administration's position and agreed that Saddam was, in fact stronger, than he had been before the thrust North.
INC sources tell this story as an example of how they used the CIA's incompetence as a tool to advance their own agenda in Washington.
In any case, that's their version of events.
The CIA had a very different take on what had happened with the 1996 coup debacle. Many at the Agency thought that Chalabi, rather than warning that the plot had been compromised, had in fact been the source of the compromise.
The key thing about the 1996 coup attempt, after all, was that it didn't include Chalabi --- but rather the rival umbrella group, the Iraqi National Accord, an assortment of Sunni military defectors. And Chalabi had a history of scuttling anti-Saddam plans that didn't involve him.
Most believed that Chalabi had intentionally compromised the plan, though some thought he might have unwittingly done so or that his group had been infiltrated by Iraqi agents.
Let's make clear that the CIA also wasn't an unbiased observer to all this. The plot had gone south. It was their operation. And they weren't crazy about Chalabi to begin with. It's not unreasonable to question whether these operatives were just looking for a convenient person to blame the whole mess on.
Without all sorts of security clearances, it's almost impossible to judge the basis of their suspicions, though senior people at the Agency implied that their evidence was more than circumstantial.
However that may be, the fact that many folks at the Agency believed Chalabi had leaked word of their plot and gotten a number of US assets executed helps explain why their distrust and animosity toward him runs so deep.
If the CIA is now taking another look at Chalabi's organization, suspecting it may have been infiltrated by or used by Iraqi double-agents, will this earlier incident come in for more attention?
It certainly should be. And given the hostility between the CIA and Chalabi, you'd expect they would if for no other reason than bureaucratic payback.
But according to one former Agency employee, quite the opposite might happen. The CIA, this source told me recently, is in full circle-the-wagons mode. They've got their hands full a) trying to find some WMD and b) investigating why so many points in their pre-war intelligence analysis seemed to be wrong. Looking back to the mid-1990s might drudge up some facts
that would sully Chalabi's reputation. But it would probably bring up many of the Agency's errors too. At the moment, they're trying to keep the self-examination and investigation limited to only the most recent events.They've already got more problems than they can deal with...
Tuesday, July 31, 2007
Iraq Backstory: Josh Marshall on the CIA vs. Chalabi
Saturday, June 30, 2007
Secular Non-Insularity
Now I've found a response from Conservative historian John Patrick Diggins to a New York Review of Each Other's Books review:
In his review of Garry Wills' Under God [NYR, February 14], C. Vann Woodward missed an opportunity to set the record straight. According to Wills, Henry Steele Commager and Arthur Schlesinger, Jr. are two eminent historians "for whom much of American history simply does not exist" because they allegedly ignore the important role of religion. Curiously, these two historians were among the first secular liberal scholars to recognize that role. Commager's Theodore Parker: A Yankee Crusader (1936) is nothing less than a tribute to a transcendentalist as a Christian hero. Schlesinger's Orestes A. Brownson: A Pilgrim's Progress (1939) offered a brilliant, sympathetic analysis of America's greatest Catholic social philosopher. But these matters of omission are minor compared to the author's conviction that religion and skepticism are incompatible and that in America religion has its most powerful expression in evangelical fundamentalism. Could it be that Wills has written a book prefaced by the assumption that religion is absent in American historiography only because he failed to perceive its true presence?
Wills seems to assume that because a historian sees the American mind as "skeptical,pluralistic, irreverent, and relativist" (Schlesinger), that historian cannot account for America's religious sensibility. Yet anyone who has read Perry Miller or Reinhold Niebuhr will appreciate what Edmund Burke was forced to recognize in the eighteenth century: American Protestants love nothing so much as to "protest" and "suspect," and thereby challenge authority and interrogate philosophy, even in full awareness that reason may be corrupt and the will decayed. The New England Calvinist "Augustinian strain of piety" (Miller) gave America what George Santayana called "an agonised conscience," a religious mentality haunted not only by guilt but by the thought that we may not really know how we know what we think we know. A Calvinist sense of sin enabled humankind to understand its own finitude and the contingency and relativity of all knowledge. "Sin," Niebuhr reminds us, "is the refusal to admit finiteness." Precisely what Wills' righteous fundamentalists refuse to admit...
Wednesday, May 30, 2007
Federal Budget Archive 2000 - 2020
2001
3/1
Thinking About a New Economy
Economist Timothy Taylor subjects “New Economy” hype to some basic knowledge of productivity history.
12/19
Supply-Siders Go to War
Robert McIntire writes in the American Prospect on the Bush Administration’s wartime tax-cutting strategy. A “decelerated appreciation for accelerated depreciation.”
Full Employment at Risk
Jared Bernstein assesses the threats and challenges of maintaining “full employment.”
2009
6/25
The Long-Term Budget Outlook[PDF]
Courtesy of your friendly local CBO.
2013
6/27
Our New Look at the Long-Term Budget Picture
The Center on Budget and Policy Priorities, via its Off the Charts blog, updates its projections in view of Obamacare cost-cutting and beyond..
Monday, April 30, 2007
Federal Budget Archive 1980 - 2000
Online Resources
The Budget
Archive maintained by The Atlantic Online.
Debate Chronology
1991
The Roots of the Public Sector Fiscal Crisis [PDF]
A paper by Max Sawicky of the labor-funded Economic Policy Institute.
1992
11/1
A Program for Economic Policy Watchers
Then-Harvard economist Brad DeLong tells what to watch for in economic policy in Clinton’s first term.
1994
11/3
Where Does the Deficit Come From?
A Lloyd Bentson Wall Street Journal op-ed drafted by Brad DeLong outlines the causes.
1996
2/21
Clinton Policy Accomplishments
An assessment by Brad DeLong.
1997
6/11
The Market, the State and the Dynamics of Public Culture
Kevin Phillips outlines and updates his cyclical economic thesis from his 1990 book Politics of Rich and Poor.
7/15
Reaganomics: What Worked? What Didn’t?
Former Reagan Deputy OMB Director Lawrence Kudlow attributes the 1980s deficits to the reduction of inflation:
Moreover, I believe the single largest cause of the deficit was the sharp reduction of inflation, from a zone of 12-15% in 1980 and 1981, to a zone of 2-3% in 1986. The government had been living on inflated revenues and inflated personal income revenues for over a decade, from LBJ through Nixon and Ford, to Jimmy Carter. The government’s appetite for inflated revenues was virtually insatiable, and it supported, nourished, and ultimately overfed the rise of the entitlement state. Reagan inherited that.1998
Rising inflation was a huge effective tax increase on the economy on top of the already high actual tax rates. So, getting inflation down was a huge tax cut, though it probably resulted in a loss of nominal GDP income of, I would say, by 1986, close to a trillion dollars from what might have been the case if the inflation had continued at a 10-12% annual rate. If the choice is to finance a deficit in order to lower inflation and improve the economy, or to oppose a deficit and maintain the inflation that was destroying our economy, I would take the former any time. I believe Reagan made a brilliant economic and political decision to give Volker the green light to do what he had to do.
1/1
The End of Federal Deficits
Brad DeLong outlines the events leading to the end of deficits.
1999
1/1
Meeting Challenges and Building for the Future
Eugene V. Kroch on business cycles and public finance.
3/4
Economic Growth Through Tax Cuts
William Gale of Brookings surveys challenges in a potential tax-cutting environment.
2000
1/1
Clintonomics: A Report Card [PDF]
Economist Timothy Taylor reviews and critiques the Clinton administration’s economic policy choices.
4/
Formation of Fiscal Policy:The Experience of the Past Twenty-Five Years [PDF]
Economist Alan J. Auerbach writing in the FRBNY Economic Policy Review.
9/15
How Much Credit Does Clinton Deserve for the Economy?
Brad DeLong’s take.
11/14
The Federal Budget and Interest Rates
Analysis by Richard J. Keating of the Small Business Survival Committee.
2002
11/18
Wile E. Coyote Explains Bush Administration Fiscal Policy
Brad DeLong examines whether deficits constrain spending, looking at the 1980-2000 time period.
Friday, March 09, 2007
Those silly Europeans
American policymakers have found it hard to believe, but leading officials and politicians have worried more about how the United States might handle or mishandle the problem of Iraq--by taking unilateral and extralegal military action--than they ever worried about Iraq itself and Saddam Hussein's weapons of mass destruction.Since then, neocon Kagan has hit upon the solution of treating China primarily as a problem, while the rest of us--given the neoconservative stewardship of the size of the Iraq problem--are onto the problem of treating neoconservatism as any kind of a solution.
Tuesday, March 06, 2007
Shifting balances of terror
Reminds me of the classic Harvard (or was it National?)Lampoon parody of Newsweek, unforgettably entitled "Nuclear Arms and Terrific Legs: The Atomic Threat to America's Cover Girls."
Wednesday, February 28, 2007
Social Security, in Ecolanguage
Wednesday, January 31, 2007
Who Was Milton Friedman?
What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.
In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there's a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I'd argue, is a counter-counterreformation.
Tuesday, December 12, 2006
What do Bush and Iraq have in common?
...There's a very bleak irony here that's worth noting. Because of the unipolar world we now live in, when anarchy and genocide break out in the world, only the US is really in a position to halt it. I don't mean alone. But rather with other countries acting in concert and probably with some NATO or UN mandate. That was the lesson of the Balkans in the 1990s. Only the US has the mix of military, diplomatic and financial muscle to make it happen. Or did. I don't pretend it would be easy in the middle of Iraq. It might not even be possible. But we're simply not available because as the authors of the catastrophe we simply have no standing or credibility to bring it to a halt. Or even to lead others in doing so. Add to that the fact that the last four years of twiddling our thumbs has sharply depleted our military capacity, diplomatic influence and financial flexibility. It's worth stepping back for a moment and realizing that if we weren't the ones who had started this a lot of us would be calling for the US to intervene to prevent what looks to be coming down the pike. But, as I said, we're not available...
Sunday, November 05, 2006
pop prescience
Then you have the nerve to tell me you think that as a mother I'm not fit.Harper Valley PTA
Well, this is just a little Peyton Place and you're all Harper Valley hypocrites
[songwriter Tom T. Hall for Jeannie C. Riley, 1968]
You strut around and you flirt with disasterGolden Country
Never really carin' just what comes after
[songwriter Gary Richrath of REO Speedwagon, 1972]
Tuesday, October 31, 2006
Sheri Berman seminar at Crooked Timber
Saturday, September 30, 2006
Alicia Munnell on Social Security research
Not only do studies show conflicting conclusions or different interpretations of existing information, but the sheer weight of the evidence makes it difficult to move. Any dramatic change in a large and important program is fraught with difficulties, and the more research that emerges the more the difficulties become apparent. Research also eliminates some of the simplistic arguments that would make privatization appealing. For example, work by Geanakoplos, Mitchell, and Zeldes (1998) carefully distinguishes between privatization, prefunding, and diversification and debunks the notion that privatization alone can lead to higher returns. My sense is that at least one if not more of the authors of that study may favor individual accounts, but their work demonstrates clearly that this preference has to be based on something other than an improvement in returns.
[Added to the 2000 Social Security Chronicle.]
Thursday, August 31, 2006
Vial Mendacity
ob·fus·cate ( P ) Pronunciation Key (bf-skt, b-fskt)http://dictionary.reference.com/search?q=obfuscation
tr.v. ob·fus·cat·ed, ob·fus·cat·ing, ob·fus·cates
1. To make so confused or opaque as to be difficult to perceive or understand: “A great effort was made... to obscure or obfuscate the truth” (Robert Conquest).2. To render indistinct or dim; darken: The fog obfuscated the shore.
Discussions with Iraqi scientists uncovered agent R&D work that paired overt work with nonpathogenic organisms serving as surrogates for prohibited investigation with pathogenic agents. Examples include: B. Thurengiensis (Bt) with B. anthracis (anthrax), and medicinal plants with ricin. In a similar vein, two key former BW scientists, confirmed that Iraq under the guise of legitimate activity developed refinements of processes and products relevant to BW agents. The scientists discussed the development of improved, simplified fermentation and spray drying capabilities for the simulant Bt that would have been directly applicable to anthrax, and one scientist confirmed that the production line for Bt could be switched to produce anthrax in one week if the seed stock were available.A very large body of information has been developed through debriefings, site visits, and exploitation of captured Iraqi documents that confirms that Iraq concealed equipment and materials from UN inspectors when they returned in 2002.One noteworthy example is a collection of reference strains that ought to have been declared to the UN. Among them was a vial of live C. botulinum Okra B. from which a biological agent can be produced. This discovery - hidden in the home of a BW scientist - illustrates the point I made earlier about the difficulty of locating small stocks of material that can be used to covertly surge production of deadly weapons. The scientist who concealed the vials containing this agent has identified a large cache of agents that he was asked, but refused, to conceal. ISG is actively searching for this second cache.
Matthew Yglesias, 17 October 2003:
EVEN MORE BOTULISM. About a week and a half ago I noted that the botulism discovered by David Kay in an Iraqi scientist's refrigerator -- and since discussed in speeches by the president, Dick Cheney and Colin Powell -- was more hype than threat. Today Bob Drogin of the Los Angeles Times is on the case with a few more key points:
The single vial of botulinum B had been stored in an Iraqi scientist's kitchen refrigerator since 1993. It appears to have been produced by a nonprofit Virginia biological resource center, the American Type Culture Collection, which legally exported botulinum and other biological material to Iraq under a Commerce Department license in the late 1980s.. . .
But Dr. David Franz, a former chief U.N. biological weapons inspector who is considered among America's foremost experts on biowarfare agents, said there was no evidence that Iraq or anyone else has ever succeeded in using botulinum B for biowarfare.
"The Soviets dropped it [as a goal] and so did we, because we couldn't get it working as a weapon," said Franz, who is the former commander of the U.S. Army Medical Research Institute of Infectious Diseases at Ft. Detrick, Md., the Pentagon's lead laboratory for bioweapons defense research.
Long story short: There's no threat here. This raises the question of why, exactly, Kay's team and the gang at the White House are trying to convince people that there is. Politically speaking, obfuscation is an effective strategy on this subject, since it's easy to get confused between the botulinum B bacteria (not dangerous, found in Iraq) and the botulinum A neurotoxin (dangerous, not found in Iraq). I myself made this mistake, but I'm not a biologist and I'm certainly not a biowarfare expert. This tactic -- saying things that are true in such a way as to get people to believe things that are false -- has become a prominent feature of the administration's public relations strategy on a number of fronts and, frankly, it stinks.
--Matthew Yglesias
George W. Bush, 3 October 2003:
The report states that Saddam Hussein's regime had a clandestine network of biological laboratories, a live strain of deadly agent botulinum, sophisticated concealment efforts and advanced design work on prohibited longer-range missiles
Richard Cheney, 3 October 2003:
Next item, reference strains of biological organisms concealed in a scientist's home, one of which can be used to produce biological weapons.
Lo and behold, Kay and his team found strains of organisms concealed in a scientist's home, and they report that one of the strains could be used to produce biological agents
Press Briefing by Scott McClellan, 6 October 2003
Q The administration is now asking for an additional $600 million. What exactly is the $600 million for? And what will you say to the arguing from some that --MR. McCLELLAN: We went through this --
Q -- you're throwing good money after bad?
MR. McCLELLAN: We went through this last week. In the wartime supplement, there is a classified section, just like there is any budget appropriation. And I'm not in a position to confirm or deny what's in there, or to get into a position of discussing what's in that classified section. And I'm sure no one in this room wants me to discuss classified information.
Q What about the argument, though, that it would appear to be throwing good money after bad?
MR. McCLELLAN: Well, let me mention that the Iraq survey group does continue to do its work. Dr. Kay pointed out over the weekend a lot of what they have found was not the focus of the initial coverage, and now I think it's important to look at what they have found, as well. Dr. Kay summarized in his report that was made public that -- and I quote that the report discovered what the report calls: dozens of WMD-related program activities and significant amounts of equipment that Iraq concealed from the United Nations during the inspections that began in late 2002.
He talked about the strain of botulinum toxin that were found. He talked about -- yesterday, about how a scientist was asked to keep a large amount of anthrax and turned that down. So there's a lot of work that continues. And it's important that the Iraq survey group continue to move forward on its work so that we can uncover the full extent of Saddam Hussein's weapons of mass destruction programs.
Brad DeLong, 17 December 2003:
I'll stop calling the Bush administration "Orwellian" when they stop using 1984 as an operations manual.
[Added to the Iraq Chronicle]
Monday, July 31, 2006
Social Security Meta-Archive: 2006
[Part of The Earth-Based Initiative: Social Security Meta-Archive]
Social Security Meta-Archive: 2005
1/3
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.
DeanSpeak
Economist's View links to Dean Baker's response to Tom Friedman.
1/7
Goldilocks and the Three Social Security Bears
Bruce Webb at MyDD.
1/9
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.
1/10
Chile Confronts Problems Caused by Social Security Privatization
Economist's View links to New York Times coverage of problems with Chile's system.
1/16
Demography Is Not Destiny
Economist's View samples Paul Krugman and LA Times coverage of demography's impact on the budget.
1/20
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.
2/8
This Week In Entitlement Reform
A quick survey by Dave Altig at macroblog.
2/9
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.
2/21
Daily Policy Digest
"Policy Notes" from the Pete du Pont-founded National Center for Policy Analysis.
3/31
Ramesh Ponnuru Is Off Message!
DeLong chastises NRO apparatchik for spilling the beans.
4/3
The Missing Social Security Trustees Report
Michael Hiltzik's Golden State blog.
4/17
Is There a Social Security Crisis?
zFacts.com
4/20
Defining the Social Security Privatization Debate
Mark Thoma links to an Economist's Voice article enumerating the seven attributes of privatization.
4/28
REFORMING SOCIAL SECURITY SOONER RATHER THAN LATER:
FACT AND FICTION
Jason Furman of the Center for Budget and Policy Priorities.
5/1
Social Security Report Released
Mark Thoma links to Angry Bear, triggering a long discussion of productivity.
5/2
The Trust Fund
More from Economist's View on the 2006 report.
5/13
Social Security
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.
Bruce writes:
"... 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:
http://voxbaby.blogspot.com/2004/12/more-from-max-on-framing-social.html
http://voxbaby.blogspot.com/2005/01/more-on-life-expectancy-projections.html
http://voxbaby.blogspot.com/2005/01/victor-does-heavy-lifting.html
Bruce writes:
"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:
http://voxbaby.blogspot.com/2004/10/how-to-reform-social-security-part-i.html
and this:
http://voxbaby.blogspot.com/2004/10/how-to-reform-social-security-part-ii.html
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.
SUPER-ANNUATED
MaxSpeak's take.
5/23
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.
6/19
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.
6/26
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
MaxSpeak:
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
Delong responds:
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?
Stagnation Celebration
Dean Baker on the promise of productivity and demographics.
7/26
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.
7/31
"We're Going to Get Serious"
Economist's View on the latest threats from John Boehner and Hank Paulson among others.
8/11
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.
Wednesday, July 26, 2006
Signs of the crimes
So if this bill ends up passing and Bush signs it, what would his signing statement say?
Wednesday, June 28, 2006
Taxes then and now
THEN...
"Well before the [civil] war, the wealthy of America had begun holding a dramatically large portion of the nation's wealth. According to the economic historian Lee Soltow, 37 percent of the nation's wealth was held by 2 percent of the people, and the top 5 percent held 50 to 60 percent of the nation's wealth in the 1850s. This inequality was tolerated, according to Soltow, because the average person was gaining wealth and saw the system as making it possible to get more."
Steven R. Weisman, The Great Tax Wars:Lincoln to Wilson - The Fierce Battles over Money and Power That Transformed the Nation.
NOW...
But when all federal taxes were thrown together, the share of the lowest quintile was 1.6%, while the share of the highest quintile was 60.2%. Karl Marx, call your office.
- The Wall Street Journal Editorial Board, January 20, 2003.
Well, if "all federal taxes thrown together" includes taxation of wealth it may behoove us to note that as of 1998 when all marketable wealth - defined by economist Edward Wolff as "the current value of all marketable or fungible assets less the current value of debts" were "thrown together," the share of the lowest two quintiles (bottom forty percent) was 0.2%, while the share of the highest quintile (top 20%) was 83.4%.
Andrew Mellon, Line One.
Charts based on 1998 figures analyzed by economist Edward Wolff.
"At least the surface evidence suggests that equality and growth are complementary. The high growth rates of the 1950s and 1960s occurred during a period of low inequality. The slowdown in growth that began in the 1970s was accompanied by rising inequality in both income and wealth. High levels of inequality put better training and education out of the reach of more workers and may breed resentment in the workplace. Analyses of historical data on the U.S. as well as comparative international studies confirm a positive association between equality and growth."
Brad DeLong's favorite Paul Krugman Essay:
"A particularly striking statistic in Wolff's book should put an end to the still widespread tendency to discuss the growth of inequality in America by tracking the fortunes of the top 20 percent, or of college-educated workers. Between 1983 and 1989, while the wealth share of the top 20 percent of families rose substantially, the share of percentiles 80 to 99 actually fell. In other words when we say that America's rich have gotten richer, by the " rich " we did not mean the garden variety yuppies-we mean true plutocrats."
"Despite the overall gains in stock ownership, fewer than half of all U.S. households had any stake in the stock market by 1998--and many of those had only a minor stake. In 1998, while 48 percent of households owned some stock, only 36 percent had total stock holdings worth $5,000 or more and only 32 percent owned stock worth $10,000 or more. Moreover, the top 1 percent of households accounted for 42 percent of the value of all stock owned in the United States; the top 5 percent accounted for about two-thirds; the top 10 percent for more than three-quarters; and the top 20 percent for almost 90 percent (see table 2)."
[Added to the Chronicle of the 2003 Tax Cut]
Tuesday, May 30, 2006
2003 Tax Cut Archive
[Part of the Taxation Survey]
Taxes then and now
Chronology
1992
January
Integration of the Individual and Corporate Tax Systems: Taxing Business Income Once
Glenn Hubbard’s 1992 paper on integrating taxes.
2002
10/31
Do Lower Taxes Mean Faster Economic Growth?
Jeff Madrick, writing in The New York Times, surveys the empirical evidence against long-run stimulative effects of tax cuts.
12/4
Hey, lucky duckies!
Paul Krugman responds to The Wall Street Journal.
12/8
If Tax History Is a Guide, the Poor Are in Trouble
Roger Altman surveys the Republican Party’s historical antipathy to tax relief for those with lower incomes, and notes that a Brookings study by Joseph Pechman in the 1980s indicated that the totality of the American tax system does not effectively change the state of income distribution.
12/15
ARE TAXES TOO CONCENTRATED AT THE TOP?
The Center on Budget and Policy Priorities responds to The Wall Street Journal’s infamous editorial, “Lucky Duckies.”
2003
1/7
Talking Points for KQED Forum 1/8/2003 9:00 AM PST
Former Clinton economist J. Bradford DeLong organizes enumeration of the probable effects of the Bush tax cut in preparation for a radio appearance.
It's Time for Glenn Hubbard to Quit as CEA Chair
DeLong calls for Hubbard’s resignation in view of Hubbard’s pejorative use of the phrase “Rubinomics” in direct contradiction to the spirit of his own text.
1/8
After Action Report: KQED Forum 1/8/2003
“Post-game summary.”
1/11
Two Defenses of Glenn Hubbard
Brad DeLong responds to defenses of Glen Hubbard.
1/15
GREENSTEIN ASSESSES BUSH PLAN
A concise press release from the Center on Budget and Policy Priorities on the ramifications of the Bush tax cut.
1/17
Off the Wagon
Paul Krugman on tax cuts and deficits.
1/18
Gale and Orszag Provide an Informed View
Brad DeLong introduces Brookings analysis of the tax cut.
1/19
What Every American Wants
Milton Friedman, writing in The Wall Street Journal, tells us:
Tax cuts may initially raise the deficit above the politically tolerable deficit, but their longer-term effect will be to restrain spending.
1/20
Comments: Tax divide
A discussion from Jane Galt’s Assymetrical Information in response to Friedman’s column.
Glen Hubbard
Brad DeLong reviews the inconsistencies of the Bush administration economist’s statements in office from his prior textbook passages.
Lucky Duckies Again
The Gamma Quadrant holdouts at The Wall Street Journal editorial board throw their hands up in horror at the alleged benefits to the poor of the Bush tax cut.
1/21
A (Very Short) Guide for the Perplexed
Paul Krugman on the motivations behind the tax cut.
A Touch of Class
Paul Krugman on the motivations behind the tax cut.
The Administration's Economic "Stimulus" Proposals
Peter Orszag’s testimony.
1/22
Meme Watch: Follow the Money
Chatterbox’s Timothy Noah on the true beneficiaries of the Welfare State.
1/23
Do Budget Deficits Raise Interest Rates?
Brad DeLong introduces an article in The Economist on fiscal profligacy’s impact on interest rates.
Where's the Bang for the Buck?
Jeff Madrick on the cut’s effect on investment.
1/27
The President's Tax Proposal: Second Thoughts
Gale and Orszag revisit the proposal.
1/30
Testimony of R. Glenn Hubbard Chairman, Council of Economic Advisers [PDF]
The Bush administration’s chief economist on the tax cut.
1/31
Where Is the Beef Supposed to Be?
Brad DeLong examines the fiscal and economic logic of the tax cut vis a vis its probable impact on interest rates.
Doing Corporate Tax Integration the Right Way
Brad DeLong quotes Len Burman on taxing income once with a bit of subsequent debate of the total American tax burden.
2/3
An Interview with R. Glenn Hubbard on the Fundamentals of Tax Reform
From The Library of Economics and Liberty.
2/4
Huh?
Brad DeLong on a Glenn Hubbard assertion on deficits and interest rates.
2/5
Deficits and Interest Rates Once Again
Brad DeLong on Glenn Hubbard, Bill Gale, and interest rates.
3/3
Do We Really Need More Stimulus?
Economics blogger Arnold Kling introduces Eugene Steurle’s essay questioning whether any stimulus is needed at all.
3/11
A Fiscal Train Wreck
Paul Krugman on the potential threat to fiscal solvency created by the accumulated Bush tax cuts.
3/19
THE ADMINISTRATION’S TAX CUTS AND THE LONG-TERM BUDGET OUTLOOK
Peter Orszag, Richard Kogan, and Robert Greenstein, writing for the Center for Budget and Policy Priorities, calculate that the Bush administration’s accumulated tax cut proposals cost more than “three times the Long-term Deficit in Social Security and Larger than the Long-term Deficits in Social Security and Medicare Combined.”
3/21
Who Lost the U.S. Budget?
Paul Krugman on the tax cut’s threat to Social Security and Medicare.
3/26
Dynamic Scoring Is Zero...
CBO says tax cut will not pay for itself.
4/1
Alan Murray Reports on Dynamic Scoring
4/26
It's an Industrial Sealant! No, It's a Dessert Topping!
DeLong introduces Krugman on the many uses of the tax cut.
4/27
Deficits and Interest Rates
Brad DeLong on Glenn Hubbard’s tricking of a newswire reporter.
4/28
Tax Gamble
Jonathan Rauch, writing in the libertarian Reason magazine, on Bush’s tax cut as a pre-emptive fiscal strike.
4/30
Alan Greenspan Undercuts Bush Tax Cut
An AP report on Greenspan’s testimony calling for the tax cut to be paid for.
4/30
Notes: Mankiw: Charlatans and Cranks
DeLong finds an introductory economic text’s treatment of supply-side assertions.
5/4
Notes: Budget Deficits and Economic Growth Once Again
DeLong introduces Gale and Orszag once again on interest rates.
5/12
NEW CBO DATA SHOW DEFICIT WILL BE HIGHER THAN EARLIER FORECAST AS REVENUES
CBPP on the tax cuts effects on revenues.
5/22
The Distribution
The Tax Policy Center’s chart showing who pays under the plan.
5/27
Stating the Obvious
Paul Krugman on snuffing out the Welfare State. Bobby’s synopsis:
“Radical conservatives are intentionally creating huge deficits so that the
government cannot finance its spending and so that there will be a radical downsizing of government programs for the middle class and poor”
5/28
An Email From the United States Treasury
Brad DeLong on the paucity of support for the tax cut from Republican economists.
Fiscal Facts
Paul Krugman on the excellence of CBPP and the Brookings/Urban Tax Policy Center.
The Tax Cut with William Gale
An online chat transcript.
5/30
Eight Million
The Tax Policy Center’s chart showing the eight million income taxpayers whose taxes aren’t cut.
6/2
Taking the Voodoo Out of Tax Cuts
Tax-cuts don’t stimulate demand, says Brian Wesbury. Throw away your reputable economics textbooks!
Wesbury on Tax Cuts
Arnold Kling initiates a discussion on Wesbury’s article.
Why Are We Ruled by These Idiots? CXII
The New Republic points out the Republicans’ child credit shell games.
6/4
Distribution Tables
“The studies included all federal taxes (although its not clear what assumptions they made as to the incidence of the corporate income tax). In short, they both conclude "that a broad swath of lower-middle, middle- and upper-middle-income people, as well as some rich Americans, will carry a greater share of the federal tax burden after the laws passed in the past three years are fully implemented. While taxes are scheduled to decline for all income groups, those earning more than $28,000 but less than $337,000 will end up paying a greater share of the taxes than they did before the changes."
6/25
Bill Gale on JGTRRA
“The Brookings Institution's Bill Gale on the economic effects of the recent Bush tax cut”
6/27
Budget Blues
Tax Policy center on the tax cuts budgetary effects.
Monday, May 01, 2006
Sunday, April 30, 2006
Social Security Meta-Archive: May 2005
[Part of the Social Security Meta-Archive: 2005]
Social Security Meta-Archive: April 2005
FIXING SOCIAL SECURITY [PDF]
Former Social Security Commissioner Robert Ball writing for the Century Foundation.
The Regressive Impact of the Progressive Indexation of Social Security Benefits [PDF]
Dean Baker of the Center for Economic and Policy Research
5/1
Warren Buffett and Charles Munger on Social Security
DeLong links to coverage of Buffett's opposition to privatization.
In Praise of Bush's Honesty (Honest)
Michael Kinsley.
SNATCHING DEFEAT FROM THE JAWS OF VICTORY WATCH
Max Sawicky responds.
5/2
Universalism and Social Security
Mark Schmitt at the Decembrist:
One fascinating aspect of the Bush campaign to privatize Social Security has been the desperate attempt to find some constituency, somewhere, for whom Social Security is a manifestly bad deal. And it's amazing how hard it has been for them to do it:A Gut Punch to the Middle
First there was the claim that it's a bad deal for African-Americans. That was one that you didn't know whether to laugh at or be offended by. (My colleague Marcellus Andrews probably did the best job of combining the two emotions.) Then there was the claim that it's a bad deal for younger workers, but that depends entirely on the premise that the government will chose to default on the Treasury bonds.
Finally, as you could see in Bush's press conference Thursday night they've identified a constituency that supposedly doesn't get a good deal from Social Security: It's a widow or widower whose spouse dies shortly before retirement. The surviving spouse would get either his/her own benefits, or the spouse's, whichever is higher, "but not both," as Bush points out. And that's true. Of course, if the spouse dies and leaves children under 18, survivor benefits under Social Security will be a lifesaver for the family. (As Hans Riemer of Rock the Vote points out, young people are familiar with Social Security and like it, because they think of it as the program that helped Johnny's family when his dad died.) And if the widow didn't put in at least ten years in the workforce herself, or didn't earn as much money, the benefits through her husband's Social Security are much more than she would get on her own. So, to summarize Bush, the person for whom Social Security is a raw deal would be a widow or widower whose spouse dies at, say, 60, after the kids are grown but before retirement, and in a household where both spouses worked for much of their adult lives at relatively comparable incomes. The system is "unfair" to that widow or widower, according to Bush, because she only gets Social Security benefits for one person, not two.
It's a pretty cool social program that's a good deal for everyone except a person in that particular situation. And what's so bad about one person's getting benefits for one person anyway?
(Of course, as was finally pointed out in the Senate Finance Committee hearing last week, the forced annuitization feature of private accounts means that they're not really inheritable either, at least not after the annuitization has occurred.)
Paul Krugman on the effects of Bush's version of progressive indexing.
Krugman Clarifies Liberalism
A response at the blog JustOneMinute, triggering an extended comment thread.
Social Security's Progressive Paradox
Julian Sanchez of the libertarian magazine Reason disputes the insurance aspect of Social Security.
5/3
Talking Points Memo
Matthew Yglesias responds.
My Socks are Cold Feet Insurance!
Will Wilkinson, another libertarian, responds to Yglesias at The Fly Bottle:
Now, yes, it turns out that we don't know exactly how long we're going to live, and so there's some chance we might outlive our savings. Or we might face some kind of financial catastrophe that guts our retirement nest egg. You don't know how long you'll be able to be a productive contributor to the economy, etc. But the point that Matt fails to address is that insofar as Social Security "insures" against these contingencies, so does means-tested welfare, and to a very great extent, so do personal accounts. Means-tested benefits are much MORE like insurance in the sense they kick in only upon the occurrence of some kind of loss or hardship. An annuity from a personal retirement account is exactly like a stream of Social Security checks, except that you actually own something. If Social Security is insurance, then so is a personal account annuity. The reason why Feldstein, in his presidential address to the APA, "Rethinking Social Insurance" discusses the current system, personal accounts, and means-tested benefits as alternative forms of "insurance" is simply that if the current system counts as social insurance, then so do the alternatives.In comment "Gareth" responds:
Regular commercial insurance works by subsidies across the risk pool. (And is by its very nature "social.") Premiums are actuarially determined on the basis of bunch of variables like the probability of the occurrence of loss and the likely cost of reimbursing it. It's a kind of bet. The premiums of people who get lucky, and don't experience the relevant kinds of losses, reimburse people who get unlucky and do experience them.
Social Security isn't like this at all. It "reimburses" everyone who turns 65 (or 62 or 67). Like I said, this event isn't a loss; it is in fact correlated with being rich. A system that pays everyone--Warren Buffet, Tom Cruise, etc.-- is conspicuously un-insurance-like. It's sort of like a system of home-owners insurance where everybody's house burns down ten years after you move in. There's nobody who gets lucky, so no way to transfer risk across the pool. Rather than being structured at all like regular insurance, Social Security is a system of chained intergenerational transfers -- a chain letter, a Ponzi scheme -- which is not what insurance is.
If you insist on calling non-insurance insurance, then Social Security is like insurance in the way that any stream of income is like insurance. It makes it possible to pay for stuff that you wouldn't otherwise be able to pay for. But that's not what insurance is, except in the loosest possible sense. You don't think that you have insurance because you have a salary. You don't think you have disability insurance because you walk around with a helmet on. Most people who receive Social Security are perfectly able to "self-insure." And Social Security improves their ability to self-insure largely because it's replacing income that the government took away in the first place.
The point is: A system that pays everyone benefits upon the occurrence of a near-universal, non-loss event by means of a system of intergenerational wealth transfer just isn't insurance in the paradigmatic sense. If "insurance" just means "making sure that people don't suffer when they don't have enough money," then ANY system that makes sure that people have enough money is insurance. Inter-family transfers, churches, charities, clubs, etc. count as insurance in this sense. And so do means-tested old age benefits and personal retirement accounts.
Libertarian: It's not an insurance system because people want to live to be old. That's not a risk....Expanded upon by R.J. Lehmann:
Socrates: But outliving your savings is a risk. And an actuarially predictible one. So it makes sense to pool that risk. Which is what insurance is.
Libertarian: OK. I can imagine a private company providing that kind of service. But they would have to fund their future liabilities.
Socrates: Dude, Social Security funds its liabilities for years and could do so in perpetuity using slightly more optimistic assumptions. Anyway, if that's your problem, we can tinker a bit and solve it.
Libertarian: But Social Security can't have real assets...
Socrates: US Government Bonds aren't real assets? Would it bother you if the insurance company was 100% invested in US Government Bonds?
Former Libertarina, now anarcho-capitalist crazy: Beer funds! Repudiate the debt and give bondholders a share of Yellowstone!
"Socrates: US Government Bonds aren't real assets? Would it bother you if the insurance company was 100% invested in US Government Bonds?"
In fact, most insurers are invested overwhelmingly in government bonds, and many invested solely in them.
I find the entire line of argument somewhat strange. Like most traditional pension systems, Social Security takes the form of an annuity, which is itself a form of insurance. Risk (in this case, the risk of outliving one's retirement savings) is transferred to a pool, and like most annuities, payouts then proceed from a given starting date until death.
In terms of long-term solvency, Social Security is not a particularly well-structured annuity plan, since the price is not rated according to the size of risk. If it were, then smokers would pay less than non-smokers, men pay less than women, etc. Although arguably, since payout adjustments are progressive with respect to income even without indexing, and the rich tend to live longer than the poor, that's at least one risk factor that is partially accounted for.
But that Social Security is a poorly structured annuity program doesn't mean it is NOT one. Most insurers, including life insurers who offer annuities, hedge against the risk of insolvency by way of reinsurance. The Social Security program's reinsurance is the American taxpayer...
PROGRESSIVE IS
Mad Max contrasts "liberal" and "social democratic" approaches to Social Security.
Pozen Pill
Brad DeLong, in Slate, on Pozen's ideas and what the Bush Administration may do with them.
Screwing the Very People Who Gave Him the "Mandate"
The Decembrist on the combined fiscal impact of Bush's SS and tax cut plans on the middle class.
5/4
Stanford Institute for Economic Policy Research
Audio and video of presentation by Peter Orszag and John Shoven.
Slashing Social Security: Bush Plan Cuts Benefits
Moving Ideas' page on the Bush Plan.
5/5
Let's Not Save Social Security
Mickey Kaus, writing in Slate, says keeping the option to slash Social Security deeper later this century is the top priority.
5/9
The Personal 'Lockbox'
John Fund of The Wall Street Journal proposes Treasury bill accounts.
Bush May Destroy Social Security, Not Fix It: John M. Berry
Bloomburg columnist on the ultimate political ramifications for Social Security implied by the rate of returns of progressive indexing.
The White House Mounts a Feeble Defense of Its Social Security Plans
Brad DeLong.
Give Us the Real Thing on Social Security
Will Wilkinson of the CATO Institute says Social Security is risky to its beneficiaries.
5/10
THE IMPACT OF THE PRESIDENT'S PROPOSAL
ON SOCIAL SECURITY SOLVENCY AND THE BUDGET
Jason Furman of The Center on Budget and Policy Priorities.
Index Fun
Matthew Yglesias in The American Prospect.
Progressive Price Indexing is Not Means-Testing -- It's Arbitrary
Peter Ferrara: Too Busy Being a Hack
The Decembrist.
5/11
Dems’ Plan
Stanley Kurtz of the National Review constructs a critique of Diamond-Orszag and Democratic stewardship thereof singularly lacking in, um, productivity.
5/12
Statement of C. Eugene Steuerle, Senior Fellow, Urban Institute, Codirector, Tax Policy Center, and Columnist, Tax Notes Magazine Testimony Before the House Committee on Ways and Means
Radio host Michael Medved's privatization meltdown
Media Matters coverage.
5/13
Statement on Social Security Reform
Brad DeLong testifies before the Democratic Policy Committee, followed by subsequent comment on the implications of assumptions of the distribution of returns from productivity for privatization in DeLong's blog by Bruce Webb:
From Michael Cain
"Is there a chance that, deep down, the Trustees realize that the portion of national income that goes to the capped wages and salary base for the SS taxes will be a shrinking one in the future? And that the "productivity" growth that they assume is actually that portion of the overall growth rate that will show up in that tax base?"
Well sure, but that is not the number they report in "productivity". The effect you mention would show up in other columns like Real Wage Differential. Productivity is the overall pie, the size of the slices depends on other factors. Lowballing the size of the pie because you know the people cutting the slices are rogues is to make a mockery out of the whole model.
We are talking about a spreadsheet. Intermediate Cost and Low Cost are nothing more than an Excel table. You change your initial assumptions and the changes ripple right through to the end. Productivity is just one assumption, though the driver, there are others and anyone if free to challenge them and show how they might offset productivity. But these tables are math and not psychology, they don't measure the evil that is in the hearts of men, they are not a scorecard on the Masters of Capitalism. They simply show that if you input a set of economic and demographic assumptions we can label A you get outcome X. If you input a different set of assumptions we label B you get outcome Y.
What you suggest here is that initial numbers are being distorted in an effort to hide the thuggery needed for Capital to extract all the gains of likely productivity over the next 75 years at the total expense of Workers. (Which was the outcome of the "No Economist Left Behind" challenge. You can save 6.5% stock returns with 1.6% productivity by putting 90% of America into perma-poverty). Well no thanks.
I assume that workers will extract some share (not necessarily a fair share) of the gains in productivity over the next years. Because despite the flaws both exhibit on a daily basis we still have some capital letter players called Democracy and Markets. And you can only game the latter so much before the former bites you in the ass.
Social Security insolvency requires one) that some future US government openly proclaim themselves to be thieves and liars and two) that corporate America will simply feel free to grind down American wages into the dirt. There are plenty of people who believe that, read any comment thread at dKos. But it is an uncomfortable starting position for privatizers. "Sure we will default on the bonds, and no you will never get a raise ever, but trust me with that 4% of your check"
You can only get to Social Security "crisis" by trashtalking the American economy and the whole concept of market wages. Ask the next privatizer you meet why he hates America so much.
Senate Democratic Policy Committee Hearing:"An Oversight Hearing on President Bush's Social Security Privatization Plan: Will You and Your Family Be Worse Off?"
5/16
"I Want My Safety Net"
"Why so many Americans aren't buying into Bush's Ownership Society" BusinessWeek cover story.
5/17
HEARING BEFORE THE SUBCOMMITTEE ON SOCIAL SECURITY OF THE COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED NINTH CONGRESS FIRST SESSION
5/19
Pozen Blasts Bush Privatization Plans
The Center for American Progress reports on Pozen's opposition to "carved-out" accounts accompanying progressive indexing.
5/20
SOCIAL SECURITY, WHEN “NEVER” IS DEFINED AS "2042"
Team Bush propaganda methods dissected at the blog BE-THINK.
5/22
No Old-Age Security in the Private Sector Either
Joseph Stiglitz on dismantling public pensions and subsidizing private ones.
5/25
What Is the Social Security Trust Fund, Anyway?
Economist Andrew Samwick:
Think of the Trust Fund as a line of credit that the Social Security system extends to the rest of the government. The balance in the Trust Fund is simply the current value--principal plus interest credited at the Treasury bond rate--of all the withdrawals that the rest of the government has made historically on that line of credit to pay for things other than Social Security. Its projected balance at the end of the year is $1.85 trillion. Under current law, that balance is projected to peak at $3.61 trillion in 2022 before declining to zero in 2041. During those 20 years, the Social Security system will be calling in the loans that it has made to the rest of the government.Options for Social Security: Budgetary and Distributional Impacts[PDF]
Keeping track of the total amount outstanding on these loans is the accounting purpose of the Trust Fund balance. It also has a legal purpose. Specifically, as long as the the Trust Fund balance is positive, then the system can pay the benefits implied by current law. It would require the Congress and the President to execute a new law to interrupt this process. When the Trust Fund hits zero, then it would take a new law to get full benefits paid on time--they would be paid only as tax revenues flow into the system.
CBO testimony before the Senate Finance Committee.
Retirement Income: The Crucial Role of Social Security
"An EPI news conference
Wednesday, May 25, 2005, 10 AM (ET)
National Press Club, Washington, D.C.
Co-authors Christian Weller and Edward N. Wolff discuss their new book, Retirement Income: The Crucial Role of Social Security
5/30
MORE MATH PROBLEMS AT THE POST
Dean Baker responds to a Washington Post editorial.
5/31
Privatization's Unintelligent Design
Greg Anrig, Jr. of TPMCafe on the "dynamic scoring" projections of Feldstein and Samwick.
Social Security Meta-Archive: 2005