Opinions, Context & Ideas from the TPM Editors TPM Editor's Blog

How progressive is progressive

How progressive is progressive indexing? Not very, according to a new paper (PDF) from the Center for Economic Policy Research's Dean Baker. Pundits would do well to familiarize themselves with these numbers before proclaiming Bush the second coming of Robin Hood.

Richard Cohen works up

Richard Cohen works up some excellent righteous indignation over the Republican Party's irrational aversion to taxes, but he seems to have a bad case of Washington Post editorial page disease. "George Bush is doing something interesting with Social Security," he writes, "I kind of like the idea of personal investment accounts if funding them does not weaken the overall program or add to the nation's incredible debt."

That's a bit like saying I like the idea of invading Iraq and toppling Saddam Hussein if nobody gets killed and it doesn't cost any money. How, exactly, is diverting one third of Social Security's revenues into another program supposed to be done without weakening the program? Well, obviously, it can't. The idea that "a deal can be made on Social Security" where Bush agrees to raise the FICA cap and Democrats "permit some sort of move toward private accounts" is pure fantasy. The issue on the table here is whether or not we should start phasing Social Security out and replacing it with a 401 (k)-type system. The precise details of the payroll tax aren't relevant. There are lots of ways to broaden asset ownership without undermining Social Security. All you need to do is make sure that the money involved comes from somewhere -- anywhere -- other than Social Security's revenue stream. If this were really the issue, a deal would have been made yesterday. But you can't split the difference between phasing Social Security out and not phasing it out.

A universal social insurance program divided against itself cannot stand. E.J. Dionne gets it.

You may recall that

You may recall that some time ago television networks were refusing to air some advertisements for a gay-friendly church on what looked to many of us like pretty spurious grounds. Turns out whatever policy banned the United Church of Christ from advertising doesn't apply to Focus on the Family, an outfit you may recall as the main organizers of "Justice Sunday," among other things.

Both Ed Kilgore and

Both Ed Kilgore and my American Prospect colleague Sam Rosenfeld wonder if Social Security phase-out isn't going to somehow warp into a proposal for the conservative version of "tax reform" (for how this differs from actual tax reform, see Jon Chait's excellent article on the subject from some time ago), i.e. exempting all income derived from wealth and investments from taxation.

To be frank, I have a hard time seeing how the logistics of that would work, both thanks to the details of the budget process and because the President has appointed a stacked commission to offer tax reform proposals and presumably won't move on the issue until John Breaux's done selling the Democratic Party down the river.

Nevertheless, this is something to keep your eye on. One way or another, this issue's going to hit us before Bush is out of office and Democrats need to be prepared. Unlike on Social Security, where the status quo is basically fine, it won't be viable for Democrats to oppose even a terrible tax reform proposal if that opposition becomes a defense of the actually existing tax code which isn't fine at all. Policywise, an unsatisfactory status quo is obviously better than a change for the worse, but politically I don't think it will be viable. The smart thing to do would be for Democrats to take advantage of their out-of-power status to get ahead of the curve by offering-up some pie-in-the-sky tax reform ideas that comport with progressive principles.

John Podesta and his team at the Center for American Progress offered some smart ideas on this front back in March and liberals everywhere would do well to listen. You can read the short version here or get the details here.

Paul Krugman says a

Paul Krugman says "a program is defined as welfare, it becomes a target for budget cuts." In other words, redefining Social Security as a welfare program for very poor old people rather than universal social insurance will lead to its demise. His example of choice is the same as mine: "Last week Congress agreed on a budget that cuts funds for Medicaid (and food stamps), even while extending tax cuts on dividends and capital gains."

Andrew Sullivan says that "The patent weakness of Paul Krugman's spluttering opposition today is evidence enough of the merit of the president's plan."

And when congress voted to cut Medicaid and food stamps Andrew said . . . well . . . well he didn't say anything about it, did he? And that's the point. I don't know if he thinks cutting Medicaid and food stamps while piling on tax cuts for the rich is a good idea or not. More likely, he's just a bit indifferent to it. Which is just the way these things go. Once a program becomes the narrow concern of a minority of the population -- and not just any minority, but a minority that can't afford lobbysists, doesn't enjoy access to the media, is socially isolated from the American elite, etc. -- it gets squeezed out in favor of programs whose constituents do enjoy those things. There's no flailing here.

As weve been noting

As we've been noting, if productivity rises faster than anticipated, that will make Social Security's deficit smaller than anticipated. And there's very good reason to think that productivity will rise faster than the Social Security administration is predicting. It's very unlikely that productivity will rise fast enough to make the whole problem go away, but it probably will be smaller.

Now insofar as one is inclined to contemplate benefit cuts as a method of closing the whole, it stands to reason that if the problem turns out to be smaller, the cuts will also be smaller. Makes sense, right? The less you need to cut, the less you cut.

But since the president's plan cuts benefits by the difference between wage growth and price growth, and that difference gets bigger the faster productivity grows, it would accomplish the reverse. The less we need to cut, the more he cuts! If I had a seat in the White House press room, I would ask someone about that.

As I said before

As I said before, I was moving furniture yesterday morning when the Sunday chat shows were on, but a couple of emailers have described to me a chart that went up on This Week which George Stephanopoulos used to challenge Nancy Pelosi. Assuming my correspondents are describing the chart accurately, it was what I would describe in terms that aren't appropriate for a family blog. To make a long story short, it compared benefits under the Pozen plan to the benefits people will get if we do nothing to change Social Security and concluded that almost everybody will get more money under Pozen/Bush.

Now since the Pozen plan cuts benefits for most people and leaves benefits unchanged for others, you may be wondering how that could be possible. Well, it's possible because for the "do nothing" scenario they were using benefits payable rather than scheduled benefits. In other words, it's how much you can get if we assume that the Trust Fund runs out of oney in 2041 and benefits thereafter need to be cut down to what can be paid for out of current tax revenues. As you might be able to guess, the cuts are not small. But since the Pozen plan achieves solvency without any changes to the retirement age or any tax increases, how could it possibly cut benefits by less than just doing nothing and then cutting benefits when the Trust Fund runs out of cash?

Good question. The answer is that Pozen's cuts are smaller because the Pozen plan doesn't achieve solvency. It only gets you 70 percent there. With the modifications Bush is propsing, it gets you about 50 percent of the way there.

So what the chart proves is that a plan that only gets you halfway to solvency can be more generous than a plan that gets you all the way there. Which is obvious. And a rather stupid thing to be pointing out. But it only looks stupid if you bother to inform your readers that you're making a pointless apples and oranges comparison. Which, it seems, ABC didn't.

I used to get mad at the administration for trying to manipulate people all the time. I don't anymore. You can hardly blame them. Everyone would act this way if the media were so casual about letting them get away with it. But now we're well beyond letting them get away and deep into aiding-and-abetting territoriy.

Theres more to life

There's more to life -- and to politics -- than Social Security. Perhaps most crucially, as this bloody week in Iraq reminds us, there's national security, the issue that metaphorically killed the Democrats in 2004 and that literally kills people each and every day. As the author of an article criticizing the Democratic Party's tendency to try and avoid these issues and head for the high ground of domestic economic policy, I must admit to some fears that the party -- and liberalism more broadly -- may be falling into just that trap at the moment. Social Security is an important issue, this fight is an important fight, and we need to try our best to win it.

But at the same time, it's a comfortable fight for liberals. We've won a lot of elections on Social Security over the years. And when that strategy hasn't worked, it's never been because the other side won the debate about retirement. Instead, it's been because the public just didn't think Social Security was the most important issue. Right now, Bush has made it the most important issue, and he's paying a price for it. But unless you assume that the Republican Party's campaign operatives are all going to be replaced by idiots, you can get that national security will be back with a vengeance in the election cycles to come. And rightly so since there's no government responsibility more fundamental than national defense. To succeed -- and, frankly, to be worthy of success -- Democrats need to get better at tackling this stuff.

Yesterday on the excellent, new-ish Democracy Arsenal blog, Suzanne Nossel cited "The Energy of the Progressive Foreign Policy Opposition" as one of the top ten things at stake in the John Bolton nomination. "Let’s face it," she wrote, "Bolton’s helping us get our groove back." I certainly hope that proves correct. But so far, the debate over his nomination has centered heavily on questions about Bolton's personal behavior. Not personal in an illegitimate sense -- the material's all been relevant to his conduct in office -- but personal in the sense of being idiosyncratic to Bolton. That's a good way to beat a nominee, but it doesn't do much work in terms of discrediting the broad approach of the Republican Party toward these issues or bolstering the public's sense that Democrats have a good handling on them. Perhaps this isn't the time or place for doing that, but we're going to have to find some time and some place to really lay out a compelling liberal internationalist vision for the 21st century.

As several readers have

As several readers have written in to point out to me, Senator George Allen (R-VA) made some odd comments on Meet The Press yesterday while I was busy trying (successfully!) to stuff a Klippan couch into a Honda Element. Allen says that "in the event that a personal savings account approach is taken" with Social Security, we ought to allow people "to invest in a home in addition to . . . stocks, bonds and other financial instruments." After that he suggested that old people should finance their retirements by selling their homes because "they don't want to be cutting grass and trimming hedges, and that is good for the economy as well."

This suggests some intriguing new spin possibilities. Why do Republicans want to cut Medicare and food stamps? To save poor people from the trouble of going to the grocery store and taking kids to the doctor!

Snark aside, there's a serious point to be made here. When selling phase-out to policy mandarins, journalists, etc. the administration is always quick to point out that there will be severe restrictions on where people can put their money. Just four or five balanced investment funds, all relatively safe. That's important, because if people are given free reign to do whatever they want with their nest egg, some people will invest it very poorly or very unluckily. Even if most people do fine, this is a problem, because if any non-trivial number of people see their account tank, there's going to be irresistable political pressure to bail them out. But once you start bailing a few people out you create a moral hazard and we'll wind up in a downward spiral of bad investments.

But when selling the plan to the public, the White House is all about choice. Your private accounts will be yours and yours alone! The government has no right to tell you what to do! There are going to be a lot of business lobbies out there working right away to loosen the restrictions on what people can invest in. Real estate interests will push for the Allen plan. Financial services companies will want to let people pick and choose individual stocks -- or at least invest in heavily-managed mutual funds that generate more fees. And just as with 401 (k) plans, the coalition of lobbyists and libertarians will succeed. Some folks will think that's great. I disagree (see moral hazard below). But agree or disagree, everyone should understand that the administration's promises on this score are not credible. But then again, when are they?

An excellent Jonathan Kaplan

An excellent Jonathan Kaplan article in The Hill notes that when privatization maestro Edward Prescott tried to sell the Treasury Department's professional economists on phase-out "as part of the department’s effort to build support for its plan in academia and on Capitol Hill," the economists told Prescott that lots of the things the administration's been saying about Social Security are, to put it bluntly, untrue. Kaplan also makes the point that this is part of a larger pattern, just one more step in the development of the postmodern presidency as someone once put it.

LiveWire