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Josh Marshall

Josh Marshall is editor and publisher of TalkingPointsMemo.com.

Articles by Josh

I keep hearing from TPM readers who've got their noses bent out of shape because it turns out that while their brokers are helping them invest their private savings on the one hand they're trying to pull the plug on Social Security with the other.

We've also heard from folks within the industry who don't like what they're seeing, especially from the real pied pipers of private accounts like Charles Schwab and Edward Jones. Back a few years ago Bill Shipman at State Street Global Advisors was one of the biggest pied pipers. But he's now moved on to other things. So we're not clear on what the situation is there now.

In any case, we'd really like to know more. And since a lot of you seem to know more already, why not let us in on the story?

Which companies are, shall we say, heavily invested in phasing out Social Security? We also hear tell about various pied pipers getting in touch with HR departments to set up workshops about how Social Security is like Wile E. Coyote already out three feet over the cliff. Seen anything like that? Let us know. We even hear that now President Bush is again putting the touch on folks in the business to ante up more money to help him get phase-out back on track. Know more? Let us know.

A glass of sherry or just a cup a' grog?

Rep. Sherwood Boehlert (R) of New York tells the Poughkeepsie Journal he's skeptical about privatization but thinks "everything should be on table to examine from stem to stern."

So Sherry's still a Caucus man, just not Loud and Proud.

The article also gives a good run-down of Social Security politics in the state's dense archipelago of Republican districts.

Some other highlights.

Rep. Sue Kelly (R) says "I think most people agree that Social Security needs to be looked at. People are hung up on that one piece [personal savings accounts]. But I know of six or seven plans that senators and House members are talking about. It's not just private accounts."

That's great. A real profile in courage.

And then there's Rep. Jim Walsh (R), our New York project for the week. A candidate for the Caucus or still hanging tough for W?

Rep. Charlie Rangel (D) of New York: "There is no Democrat in the House of Representatives, on my committee, that this president has reached out for. I'm telling you now, Social Security reform by the president is dead, and he killed it."

From this morning's Meet The Press.

See the video here.

There's been a lot of question about whether Sen. Gordon Smith (R) of Oregon belongs in the Conscience Caucus.

But in today's paper, Portland Oregonian columnist David Sarasohn, asks the man directly.

And Smith tells Sarasohn he deserves in ...

Is the Conscience Caucus the accurate address for him?

"That's an appropriate conclusion," says Smith. "I have not signed up to anyone's plan.

"I'm open to the debate. I'm keeping my counsel."


Sarasohn also asks Sen. Smith the details about President Bush's efforts to lure him out of the Caucus.

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.

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