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Josh Marshall

Josh Marshall is editor and publisher of TalkingPointsMemo.com.

Articles by Josh

I'm actually a little surprised Vice President Cheney said this. But if he wants to be upfront about the folly of his administration's proposal, who am I to complain?

This from Fox ...

"We're going to borrow $758 [b]illion over the next 10 years to set up the personal retirement accounts. We think that's a manageable amount ... Trillions more after that," Cheney said, acknowledging that the personal accounts will help younger workers but will not solve all the problems of solvency.


As the Fox interviewer, Chris Wallace, made clear in the interview, the $758 billion number is itself the product of a little numerical flimflam. As Wallace says at one point in the conversation, "Isn't that misleading? Because under <$Ad$> your plan, the accounts, the program wouldn't actually start til 2009. So, if you take the first full 10 years, when people can actually invest in the program, the cost is over $1 trillion, and for the following 10 years, it's $3.5 trillion. Isn't it a lot more expensive?"

In fact, I think it's considerably worse than Wallace says. But let's leave that aside and assume it was only what Cheney says.

As we've noted repeatedly here, the biggest threat to Social Security is our accumulated national debt -- actually, even more our accumulating national debt. If we only had the debt load we have now and weren't adding hundreds of billions of dollars every year because of the president's policies, we could probably grow our way out of it.

In any case, indebtedness is our problem. And Cheney's solution is to borrow many trillions more dollars over the next two or three decades, in addition to our existing structural budget deficits which are likely themselves unsustainable. And he and the White House now admit this will do nothing to improve the financial condition of Social Security.

Following any reasonable calculation the entire debate should end right there -- though I concede that rational calculation ain't what it used to be.

Look what we hear from the administration's own collective mouth. Their solution to the problem does nothing to solve the problem -- not me saying it, them saying it. However, it does cost trillions of dollars. In fact, it will cost -- by their own estimation -- much more over the next 20 years than it would to keep Social Security going strong for the next 75 years.

At what point does this proposed policy collapse under the weight of its own ridiculousness?

Bloomberg: "McCain, who said he supports the idea 'in principle,' said, 'there's a number of members of the Senate and House who are not happy about President Bush coming to a neighborhood near them.'"

Is Rep. Heather Wilson (R) of New Mexico on the level?

Wilson represents New Mexico's 1st congressional district, which is centered on Albuquerque. She won with 54% of the vote in 2004 and 55% in 2002.

We've been watching the constituent mail Wilson's been sending out on Social Security and it reads right from the Speech Code playbook, sounding like she opposes phase-out but not really saying that at all.

So for instance she says she opposes 'privatization'. But of course under the speech code rules, private accounts aren't 'privatization'. She also says "government should not invest Social Security funds in the stock market." That certainly sounds like it means she's against phasing out Social Security. But the key word here is "government". Under private accounts individuals would be investing their money.

I know it may seem like I'm reading this constituent mail a tad too closely at this point. But, as you can imagine, I've read a lot of this constituent mail at this point. And representative who want to carve private accounts out of Social Security routinely use this "I won't let the government invest" language.

All of this makes her no different from a slew of other members of Congress around the country who are trying to bamboozle their constituents on Social Security. The reason I note her, though, is that the AP is running a story today putting Wilson down as opposing the president's plan.

Rep. Heather Wilson, R-N.M., echoed Democrats' opposition to Bush's plan, saying she opposes efforts to invest even a portion of Social Security revenues in private accounts.

"I don't believe the government should invest Social Security taxes in the stock market," said Wilson, who represents New Mexico's Albuquerque-based 1st Congressional District.


So my question is this: Did the AP just get bamboozled by Wilson's word choice flimflam? Or is she just one of the only Republicans using the English language with its plain meaning when it comes to Social Security?

Better to reign in the Club for Growth than serve in Congress?

We spoke on Friday about how Pat Toomey, cast out of Congress and down into the Club for Growth, had, with his associates and copartners, set about making war on his former Republican colleagues in Congress over Social Security phase-out.

The Syracuse Post-Standard picks up the story on one Toomey target: restored Conscience Caucus member Rep. Sherry Boehlert (R) of New York.

Birmingham, Alabama Dems adopt an anti-Social Security phase-out resolution.

In fact, Alabama turns out to be something of a hotbed of opposition to phase-out, among both Democrats and Republicans. Of which we'll say more later.

Rep. Harold Ford of Tennessee, former Dean of the Fainthearted Faction, calls Bush phase-out plan "absurd" and "just wrong."

Conscience Caucus induction grab bag ...

Rep. Mike Rogers (R) of Alabama. From the Montgomery Advertiser: "'I'm going to be a pretty hard sell,' said Rep. Mike Rogers, R-Anniston, of Bush's proposal to overhaul Social Security ... Rogers said the president's plan was 'too risky' for his constituents."I represent a poor district," he said, nonetheless praising Bush for attempting to strengthen Social Security. 'I applaud him for getting this up on the table,' Rogers said."

Rep. Joe Schwarz (R) of Michigan. From Gannet: "Another Republican, Rep. Joe Schwarz of Michigan, said Social Security 'has worked well for so long, I don't think it needs any wholesale change.'"

Rep. Tom Petri (R) of Wisconsin. From the Green Bay Press-Gazette: "Petri, meanwhile, has his own proposal that would limit personal accounts to newborns. Their parents would receive $1,000 from the government for investment in the Federal Thrift Savings Plan used by federal employees and the money could not be withdrawn until the infants reach retirement age. The Fond du Lac Republican doesn’t want to meddle with the benefits of current workers or retirees. 'I would like to hear him say that Social Security is a contract between the generations in the United States and that we will maintain and improve that contract, not undermine it,' Petri said."

Rep. Jo Ann Emerson (R) of Missouri, early member of the Conscience Caucus, now upgraded to Loud and Proud status. More on this breaking development coming next week.

Nick Kristof has a column today in the Times in which he argues that Democrats are wrong to flatly oppose President Bush on Social Security privatization, both substantively and perhaps also politically.

Democrats themselves, he argues, were serious in pressing the issue of reform in the 1990s. And they were right then and wrong now because even if the president has exaggerated the problems facing Social Security, it does face very real problems. Democrats may object that "Mr. Bush will use his reform as another occasion to soak the poor," as he puts it. But if that is the case, then that is only another reason for them to constructively engage the president rather than flatly oppose him. The heart of the column is contained in the passage in which he says that there is but "one powerful objection to private Social Security accounts." And that is that under present fiscal circumstances we cannot or may not be able to afford them.

Reading Kristof's column I can't come to any other conclusion but that Kristof doesn't grasp either the policy proposals up for discussion or the social purposes for which Social Security exists and that for him both are clouded by rhetoric meant to obscure the issues at stake.

Kristof's column, actually, provides an opportunity to review and expand upon the essentials of this debate. So let's have at it.

President Clinton tried to devote the final two years of his presidency to "saving" Social Security from the threat of future insolvency -- a threat which appeared substantially closer then than it does today, less than a decade later. His plan was to shore up the nation's fiscal standing so that it would be better able to cope with the pressures created on Social Security by the baby-boom generation in the early and middle decades of this present century. (For more on this point, see this earlier post on Social Security and the question of aggregate national indebtedness.)

Let's stop and understand what that means. He wanted to take steps now so that Social Security could continue to exist for future generations as a defined benefit social insurance and old age pension system. President Bush, on the other hand, is trying to phase that system out and replace it with a defined contribution system of 401k-style private accounts.

These are not two spins upon or flavors of putting Social Security on a solid footing. The difference is a category difference, as clear as it ever is between preserving something and trying to bring it to an end. The difference is fundamental. And anybody who does not understand this either doesn't grasp the policies involved, has been fooled, or is at work trying to fool someone else.

Let's grab this by the root.

Is it fair to say that President Bush is trying to "phase out" Social Security? Well, what is Social Security? For seventy years it has existed as a defined benefit social insurance program. What does that mean? It is a social program in which everyone who works during their lifetime gets a guaranteed benefit in retirement. It's not meant to be a sole means of support. Those who pay in more get more back; and those who pay in less a bit less. But everyone who works is guaranteed a benefit which provides at least a modicum of comfort and dignity in old age. Have the benefit structures changed over time? Yes. But they change for everyone together, not by the vagaries of chance or individual fortune.

Social Security envisions a retirement in which recipients, hopefully, have three sources of income: Social Security, some employer-based pension and personal savings. The latter two, in varying degrees depend on how hard you work, how much you make, how wisely you invest and the vagaries of chance. Social Security, as a defined benefit program, is meant to be the one leg of the stool which is a flat guarantee. At root, with all the statistics and flimflam over words, President Bush wants to change that. He wants to phase out Social Security in favor of private investment accounts. In the latter case, there is no guarantee at all, just as there is no guarantee in private nesting, which of course is just as is should be. He wants to get rid of the defined benefit program and change it to a defined contribution program -- not partially, but totally. Indeed, he said this in his recent press conference quite clearly. But few of the reporters present latched on to the statement or its significance. Social Security, he said, is "now in a precarious position. And the question is whether or not our society has got the will necessary to adjust from a defined benefit plan to a defined contribution plan. And I believe the will will be there. (emphasis added)."

There's no 'partial' here. He's talking about phasing out one and replacing it with the other. Reporters and commentators don't seem to get that this is a category difference, though this is something that is widely understood in the pension policy community.

Let's look at the words they use.

Take this article from the trade publication Business Insurance from August 30th of last year. The headline reads: "More employers freezing, phasing out DB [i.e., defined benefit] pensions; Companies closing defined benefit plans may experience unwanted side effects." And the lede reads: "Faced with increasing pension funding liabilities and an unfriendly regulatory environment, more employers are phasing out their traditional defined benefit plans and opting to beef up their defined contribution offerings." Or take an example from the mass circulation dailies in which the same issue is discussed. This from the Miami Herald back on January 22nd, 1995: "If you work for a big corporation, you may still qualify for a defined benefit plan. But don't count on it. Many employers that offer both defined benefit plans and 401(k)s are phasing out their pension plans and beefing up their 401(k)s."

As those who follow these matters well know, going from a defined benefit plan to a defined contribution plan is seldom a good thing for recipients. Under the president's plan benefits would be far lower and they would not be guaranteed in any way. Whether you think this is a good thing or not, the change is a fundamental one.

A number of wavering Republicans are now saying that they will only sign on to the president's plan if it still maintains the guaranteed benefit. But that's silly. Not only is it obvious that his plan doesn't do that; as we've noted above, he's already said himself that it doesn't do that.

It's easy to get lost in verbiage about defined this and defined that and mazes of actuarial figures. The key, though, is the difference between an unsecured system and a secured one. That's why it's called Social Security and why phase-out is really the only candid way to describe what the president wants.

Privatizers have tried to confuse this issue in a number of ways -- most recently by referencing President Clinton's willingness to consider investing a portion of the Social Security Trust Fund in private securities rather than in Treasury bonds. In his 1999 State of the Union address Clinton said "I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years."

Whether investing a part of the Trust Fund in private securities is a good idea or not is a complicated question. In retrospect, at least in the short run, doing so in 1999 would have been a very bad idea since, as we now know, the stock market was at the height of an historic bubble. Tricksters like Brit Hume on Fox and various easily-bamboozled hosts on CNN are now saying that what Clinton was proposing is what Bush is proposing today. But anyone who says this is either being dishonest or is simply ignorant.

What Clinton was proposing was simply a different way for the Trust Fund to invest its money -- perhaps a good one or a bad one. But it would still be a defined benefit program. The risk of investing would be borne by the government, not the individual. Making a higher rate of return would make it easier for the Social Security program to pay guaranteed benefits down the road. But for the individual the benefits would remain the same regardless. As Clinton noted, many state defined benefit plans invest their money in this way. Under the Bush plan, it's different. Individuals invest their own small sums in the market and they're on their own. No guarantee.

So, to sum up this lengthy discussion. Our current retirement system envisions people going into retirement with three sources of income: the guaranteed benefit from Social Security, private savings and hopefully, though less and less frequently, an employer-based pension. Democrats have no beef with private investing, though privatizes try to imply otherwise. They want families to save more for retirement than they are today. The issue is no more complicated than a simple one of diversification -- the need for Social Security and private savings, both of which complement each other. (Later we'll discuss why the decline of employer-based pensions is an argument for the add-on accounts favored by Democrats.)

Anyone who looks honestly at the numbers realizes that under private accounts the average beneficiary would almost certainly get less money in retirement than they will now under the current Social Security system. But the key is that the president wants to phase out the defined benefit Social Security system and replace it with 401ks, the defined-contribution approach. Or, in other words, to get rid of Social Security and have people make up the shortfall with private savings.

Kristof says that the only "powerful objection" to phase-out is that at the moment we can't easily handle the transition costs. So it would seem that the entire issue of defined benefit versus defined contribution plans, Social Security versus 401ks, is lost on him.

Another problem is Kristoff's claim that there are a "variety of ways to organize retirement accounts so the poor are better off."

Social Security is not welfare. The issue is not principally one of "the poor." For coming up on a century, Social Security has been the sheet-anchor of the American middle class. It is about preventing people who have been middle class during their working lives from becoming poor when they retire. (In a later post we'll discuss how Social Security honors the value of work.) In so doing the guaranteed benefit of Social Security ramifies through the economy and through the generations in ways that the current debate has scarcely begun to explore.

For instance, Social Security has been instrumental in preventing parents from the necessity of deciding whether to support aging parents or spend on education for their children -- a devil's choice which was always a key route by which families were yanked out of the middle class, since investment in education has long been key to preserving middle class status.

In any case, we can go into more detail on all these points. And I haven't even touched on the survivors' and disability insurance portions of Social Security, which the 401k model wholly ignores. But let me return to my central point.

Getting rid of Social Security and preserving it are not two versions of the same endeavor, even if the distinction is intentionally obscured by the rhetoric of 'reform.' They are opposite objectives. Since President Bush is now trying to do the former nothing is more obvious or logical than that the Democrats are opposing him root and branch since they want to do the latter.

This is all another way of saying that the Democrats do have an alternative on the table: preserving Social Security rather than phasing it out. (Once again, let me say that in a later post I'll discuss why our values are only honored by a system like Social Security.) Democrats already have and will continue to propose adjustments to the system to handle potential shortfalls which are decades in the future. But this debate -- for anyone who understands it, indeed even the White House now concedes the point -- is not about solvency. And the fact that Kristoff does not grasp that point is not their problem, though his confusing the two issues certainly complicates preserving the program.

Uh-oh ... According to the Fargo Forum, claims that the Fargo Social Security event blacklist was the work of an over-zealous local volunteer may not hold up.

"[C]lues uncovered Friday, says the Forum, "indicate a worker with the White House advance team may have been the culprit.

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