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Josh Marshall

Josh Marshall is editor and publisher of TalkingPointsMemo.com.

Articles by Josh

Another very interesting nugget from Tom Edsall's piece in the Post on why some non-financial services companies are so keen to start phasing out Social Security ...

Some business groups have calculated that if the Bush Social Security plan fails, pressure will grow to raise payroll taxes to pay future costs of the program. Every percentage point increase would cost corporate employers about $50 billion annually.


Now, the odds <$Ad$> of there being much more than a very slight hike in payroll tax rates (and then possibly only on the employer side) seems pretty long to me. However, what's getting a lot of attention is removing or substantially raising the cap on payroll taxes for upper-income earners. That is the current rule which dictates that you don't have to pay payroll tax on any dollar you make over $90,000. That means that for every dollar you make over $90,000 per year your effective rate of payroll taxation goes down.

If that changes, half of that change will be on the employer side. So maybe this is angle: these companies want to phase out Social Security so there's no chance they'll have to pay payroll tax on a larger percentage of the salaries of their upper-income employees.

Of course, the more forward-thinking pro-phase-out companies can probably see that down the road privatization will likely get them out of a lot of existing payroll taxes too.

A very interesting article by Tom Edsall in the Post today about the $200 million waiting to be spent by "a large network of influential conservative groups ... to help the White House win passage of legislation to partially privatize Social Security and limit class-action lawsuits."

As Edsall notes ...

The emergence of the center-right phalanx backing the Social Security proposal is a major victory for the Cato Institute, a prominent libertarian group. In the late 1970s and early 1980s, Cato was almost alone in its willingness to challenge the legitimacy of the existing Social Security system, a politically sacrosanct retirement program.

Recognizing the wariness of other conservatives to tackle Social Security, Cato in 1983 published an article calling for privatization of the system.

The article argued that companies that stand to profit from privatization -- "the banks, insurance companies and other institutions that will gain" -- had to be brought into alliance. Second, the article called for initiation of "guerrilla warfare against both the current Social Security system and the coalition that supports it."

Just 22 years later, the business alliance is fully on board in the drive to create partially private Social Security accounts.


Also of interest to me is this <$Ad$> passage: "For corporations wary of publicity over their involvement in this and other controversial issues, the U.S. Chamber of Commerce's Institute for Legal Reform, the Club for Growth and Progress for America pointedly offer donors the promise of anonymity."

In other words, a lot of the Club's funders appear to be pretty fainthearted themselves and far, far from Loud and Proud.

Perhaps we should be calling it the Laundromat for Growth.

That brings us back to the news yesterday that Edward Jones (of which more dastardly financial shenanigans are discussed here) abruptly pulled out of Derrick Max's Alliance for Worker Retirement Security a couple days ago after a few picketers showed up at their offices.

Now it seems that pretty much all the organization's financial benefactors are fainthearted because when you go to the membership list on the site it brings up a freshly scrubbed page with no names listed at all. Luckily, TPM Reader LY managed to find this archived version of the membership list from the Internet Archive Wayback Machine.

This morning on ABC, Stephanopoulos again put the private accounts question to Sen. Kent "The Kernel" Conrad (D) of North Dakota, who responded thus: "I think there is a kernel of a good idea with individual accounts, because we do need to find a way to get a higher rate of return on funds invested in Social Security. But I cannot support a plan that is financed by massive new debt. You know, the president's plan would require the borrowing of something like $4.5 trillion over the next 20 years. This is on top of already record budget deficits…"

As our new nickname suggests, I think this must be the dozenth time Conrad has used this 'kernel' line about private accounts. Presumably he has chosen this word to show he's still a homey to all his state's grain growers. But who knows?

So by all means, let's crack open the kernel already!

Conrad says there's a kernel of good idea in private accounts because we need to find a way to get a better rate of return on funds invested in the Trust Fund. But there's no logical connection between the two.

Whatever better rate of return can be had from investing Social Security funds in private securities can be had by investing them in the aggregate rather than in millions of private accounts. And the former method -- if you believe in the existing program -- should be far preferable since that spreads out the risk associated with such investments and allows Social Security to continue as a defined benefit program as it is right now. The other alternative is to replace it with a system of unsecured 401k-style private accounts.

So when will Conrad crack open the kernel and just get to the bottom of this? At it is now, it's awfully difficult to keep Conrad out of the Faction when he's saying pretty much the same thing as (former Senate Faction Dean) Sen. Carper (D) of Delaware.

It's amazing how many times the president can lose the Social Security phase-out debate without some of Washington's worthies even noticing.

Today on the Stephanopoulos show, George asked Sen. Judd Gregg (R) of New Hampshire about whether there should be any changes to the new Medicare prescription drug law.

Gregg noted that "over its lifetime, 75 years ... it's going to cost us $8.6 trillion, which we don't have." So that's an $8.6 trillion shortfall, albeit spread out over the lengthy period of three-quarters of a century. The president has said that he'll veto any effort to trim those costs. So that amount of money is manageable.

And yet Social Security -- the program that President Bush thinks is swooning and flailing like some B-Movie damsel in distress -- faces a shortfall of only $3.7 trillion over the same period of time.

The price of keeping Social Security kicking for another 75 years is less than half of that it will take just for the bill President Bush pushed through last year. And because of that Social Security has to go and the drug bill is inviolate.

Why, oh why, must we have this debate on training wheels?

We're hearing again the clarion call of those who say the Democrats can't disagree with the president's 'plan' without bringing forward one of their own. Nevermind the fact that the president hasn't put forward a 'plan' and according to White House and Republican strategiest probably never will.

Let's set all that aside and stipulate to the fact that, all Washington Kabuki aside, the president does have a plan on the table, though one that he reserves the right to change on a day by day basis, and ask whether it makes sense for the Democrats to put one forward too.

There seems little doubt that it doesn't pass the political test. As long as the president is floundering in a debate that is almost entirely confined to his own party, what sense is there for Democrats to throw him a lifeline, especially when the president has all the force of the executive and the legislative arrayed on his side?

Far more important than politics, though, it doesn't pass the test of simple logic.

As we noted earlier this evening, in his radio talk today, Sen. Charles Schumer asked: "Does Social Security need fine-tuning, as most Democrats believe? Or does it need to be replaced with something completely different, as the president wants to do?"

He might have sharpened those words a bit more; but embedded in them is the crux of the matter. We're not having a debate about saving or shoring up Social Security. Chatterers notwithstanding, Democrats have a range of quite well-thought-out proposals for doing that, ranging from changes in fiscal policy, to adjustments in the program itself, to supplements to it.

But, again, to ask this question is to assume that what we're having right now is a debate about shoring up Social Security. And we're not.

The debate we're having right now is whether to keep Social Security or replace it with something else. To press that debate with proposals about how to assure the system's solvency from the middle through the end of the present century is ridiculous. One might as well enter into an argument about whether or not to tear down the house with proposals for reshingling the roof and refitting the windows. The disconnect is too great for there to be any sense in it.

As much as the president wants to scramble it up and mystify the Crowleys, Blitzers and sundry Russerts of the world, we're having an important national debate about whether to keep Social Security or phase it out and replace it with something different -- most likely a system of unsecured private investment accounts similar to 401ks. Once that debate is over, and if it's decided in favor of keeping the Social Security system, then the country can debate how to best preserve it. But before that, there's just no sense in it.

Talk about Fainthearted!

Edward Jones has long been one of the investment house pied pipers of private accounts. Not only were they an original member of the pro-phase-out trade group Alliance for Worker Retirement Security. But in the Wall Street Journal just yesterday, the group's Executive Director, phase-out guru Derrick Max said they were "one of the few firms that has shown some passion for the issue independently of me."

Coming from Max, you've got to expect that was quite a compliment.

It seemed to me that Edward Jones was an odd poster boy for privatization since just last month they were compelled as part of regulatory settlement to disclose that the firm had accepted "$82.4 million in secret payments from seven mutual-fund firms in the first 11 months of 2004 ... that in some cases gave the brokerage firm more compensation for selling poorly performing funds than for selling stellar performers(emphasis added)."

Those words are from an article that appeared in the Wall Street Journal back on January 14th.

However that may be, this week they started pumping a thirty minute pro-Social Security phase-out informercial into their local offices around the country in what the Journal called "rare move by a brokerage house to address the politically charged debate over changes in Social Security with clients as part of a marketing effort."

But then, right as Edward Jones was making its mark among the great pied pipers of private accounts, the AFL-CIO staged a few protests at two of their offices and out of the blue Edward Jones canceled its membership in Max's Alliance for Worker Retirement Security.

Like I said, talk about fainthearted! Maybe we can get these guys together with our man Rep. Allen Boyd and they can compare notes about being wiggly squigglies and folding at the first signs of a fight.

Edward Jones spokesperson Regina DeLuca-Imral claimed, rather limply, that the company had withdrawn from the Alliance "because of the confusion some have expressed about Edward Jones's position on Social Security reform."

These pro-privatization industry groups and astroturf outfits seem to emerge out of the water every year or so and then, as often as not, they die off like salmon after charging home to mate.

Back in 2001, for instance, I wrote an article about an organization called Coalition for American Financial Security, which seemed to spring from the loins of the Frank Russell Company, another one of the industry's pied pipers of private accounts. Their high water mark came in the summer of 2001 when then-Treasury Secretary Paul O'Neill spoke before them thrilling many pro-phase out hearts in the process.

Of course, of all the pied pipers none pipes louder than Charles Schwab.

Schwab himself or some company executive can often be found at the president's economic summits or pro-phase out forums. And as nearly as I can tell they're almost always one of the bigger jobbers in these pro-phase out confabs and clubs. Schwab's chief financial strategist, Liz Ann Sonders, talked up private accounts at the president's summit back in December. (More recently Bush tapped Sonders to be on his new tax reform panel.)

Somehow I doubt Schwab's heart will be as faint as the aforementioned Jones. But I guess only time will tell.

Are Democrats coming down <$NoAd$> with a running bout of rhetorical clarity? I think it may be so.

Sen. Schumer (D) of New York gave the Democrats' radio response today on Social Security. And it's a really good start.

Just one portion ...

Our goal as Democrats is to keep Social Security the way it is, with as few changes as possible, while still making sure it is there for future generations.

For this to happen, some changes will need to be made. The question is, what sort of changes?

Does Social Security need fine-tuning, as most Democrats believe? Or does it need to be replaced with something completely different, as the president wants to do?


Just so: "something completely different".

He might almost have said 'phased out and replaced with something ..." But, hey, you can't have everything.

I'm not quite sure I buy into all this calling this, that and the other 'taxes', like the 'birth tax', which he explains. But, hey, let a hundred flowers bloom.

Give it a look. It's a very good start.

I'm not sure Washington's seen someone take on and then take off a new appointment quite so quicky since Bobby Ray Inman.

Just yesterday, as we then informed you, Sen. Tom Carper (D) of Delaware had taken over as the new Dean of the Senate's Fainthearted Faction. His appointment came right after the AP ran an interview with the senator in which he rather conspicuously opened the door to carved-out private accounts a la the Bush plan.

"2nd Senate Democrat warm to private accounts," ran a typical, and to TPM disagreeable, headline for the story.

But it seems that the emphasis of the piece wasn't quite what Carper had intended and that his heart may, at least, not be quite so faint as the AP article suggested.

This afternoon we received the following statement from the senator ...

I've consistently said I would be open to the idea of establishing personal retirement accounts, but not if they result in an increase in our nation's debt nor a reduction in benefits for seniors. From what I understand thus far from the president, his proposal does not meet that crucial test. I believe that our government functions best when both Republicans and Democrats work together to find solutions to common problems, and that's why I believe it would be prudent for Congress and the president to create a truly bipartisan commission, like the one established in 1983, to find a way to strengthen and preserve our Social Security system and increase savings for young and old workers alike.


The AP had quoted Carper saying <$Ad$> that if we opt for private accounts we "should do so in a way that does not significantly increase our federal budget deficit and does not significantly cut benefits for our parents or, frankly, for our kids."

But now he's setting the standard much more sharply: no more debt, no benefit cuts.

Clearly, the senator still wants to remain in the Faction, since he makes clear he's open to a private account carve-out, at least in theory. But his "crucial test", as he now explains it, is one that, in the nature of things, simply can't be met, or would be so improbable as to amount to an impossibility.

I, for instance, am open to buying myself a new Jaguar. As long as someone is willing to sell me one for no more than nine dollars and just as long as Mayor Bloomberg arranges for a private garage at which I can park it.

One might fairly say that my openness to this purchase is a meaningless one, given the qualifications I've imposed. And Carper's "crucial test", while admittedly not quite so improbable as mine, amounts to pretty much the same thing.

In our view, he remains fainthearted for a simple reason: why, but for some ingrained faintheartedness, not simply say he opposes carved-out private accounts when the logic of his stated position points so clearly in that direction?

But with this new information, he seems no more fainthearted than the other two remaining members of the Senate Faction -- Sens. Landrieu and Nelson of Nebraska. So he's not qualified to serve as Dean.

With the office vacant, the Senate Deanship now reverts to that marble monument in the pantheon of Faintheartedness, Rep. Allen Boyd (D) of Florida.

Sen. Carper of Delaware declines the Deanship? More shortly...

From Sen. Boxer's (D) speech <$NoAd$> yesterday on Social Security ...

So clearly, Social Security is not in crisis, is not bankrupt, and is not collapsing.

Yes, there is a challenge we should address.

Have we ever faced a similar Social Security challenge before? Yes. During the Reagan presidency in 1983. Working together, Democrats and Republicans, we resolved the challenge then just as we can do now. So why would an otherwise optimistic George Bush turn into a prophet of pessimism on Social Security?

Because, his initiative is not about meeting the challenges of Social Security to keep it sound; it is not about bringing together Democrats and Republicans as Ronald Reagan did to ensure that full benefits will be there for all Americans. It is about one thing and one thing only: destroying Social Security.

How do I know that? Am I being partisan? Am I being unfair by stating in a very clear way that I believe the true goal here is to destroy Social Security? Not at all. I am simply telling the truth as told by this very White House.

On January 6, 2005, the White House wrote a Social Security memo. Although marked “not for attribution,” fortunately, we have it.

The most telling sentence in the entire memo is this: “For the first time in six decades the Social Security battle is one we can win – and in doing so, we can help transform the political and philosophical landscape of the country.”


Here's the rest. It was delivered at the San Francisco Senior Center.

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