02 January 2008|
Rebuttal: Paul Krugman
I really would stop talking about Social Security, but what am I going to do when I discover articles like this?
President Bush's effort to hustle the nation into dismantling Social Security as we know it seems to be faltering: the more voters hear about how privatization would work, the less they like it.
It is quite curious that you would cite an evanescence of public support as a probative example. President Clinton's health care proposals in the mid 1990s - a system effectually identical to the one you've promoted in past columns - died because of a similar lack of public support.
There are two relevant lessons:
Lesson One. The American public has no idea what it really wants, and is capable of being primed (prime: v. the process by which the media can activate mental constructs and influence how individuals evaluate concepts and ideas) into a complete reversal of preferences.
Lesson Two. If you truly believe a proposal's public support is the singular determinant of its desirability, you would have stopped clamoring for universal health care in 1996, once its lack of public support made it "falter."
Of course, you don't believe that. You, as your cohorts, simply apply specious reasoning only to confirm certain positions. It's not very admirable.
As a result, some Republicans are reported to be talking about a compromise in which they would agree to some kind of tax increase, probably a rise in the maximum level of earnings subject to the payroll tax.
But it would still be a bad deal. First, think about the fiscal implications. We have a huge budget deficit, largely caused by Mr. Bush's decision to cut taxes while waging war.
Indeed, but that observation fails to make the Social Security budget crisis illusory.
Any realistic plan to bring the budget deficit under control will have to include tax increases, especially if we want to avoid the harsh cuts the administration is trying to impose on Medicaid and other essential programs.
This is not necessarily true. Mr. Bush's non-defense discretionary spending has grown 16% over his first three years. There is much room for spending reform that doesn't include Medicaid, unless you define "other essential programs" as any government programs.
Writer's note: Perhaps Mr. Krugman indeed does consider "essential programs" as all government programs, as one will note through this article, he offers no other rational justification for the preservation of Social Security other than its current existence as a government program...
There may be a place for a rise in the payroll tax maximum in such a plan: AARP, among other groups, has proposed such a rise as one way to improve the Social Security system's long-run finances. Devoting the extra revenue to the trust fund would also reduce the overall budget deficit. But if the revenue from a rise in the payroll tax maximum was used to subsidize private accounts rather than to bolster the trust fund, it wouldn't address any urgent priorities: it wouldn't help the long-run finances of Social Security, it wouldn't reduce the budget deficit, and it wouldn't support crucial programs like Medicaid.
It is interesting that you espouse that viewpoint, observing that the Social Security tax rate has been raised to "bolster the trust fund" forty times in less than seventy years as the maximum contribution rose from $60 to $3,000, and yet bankruptcy is still close enough to certainly affect the retirements of America's young workers.
Secondly, Social Security reform is supposed to neither reduce the budget deficit nor support Medicaid - it's supposed to reform Social Security. In an ideal world, one believes, Medicaid would support Medicaid - rather than relying on support from another program that can't even support itself.
Every time I think I have penetrated the locus of statist reasoning, I get thrown a curveball like this one. Social Security naturally lacks funding as an artifact of its indigenous inefficiencies, so let's fix that with a bureaucratic solution that funds all of our other problems at the same time. Okay, man.
What it would do, instead, would be to get in the way of any return to fiscal sanity.
Would that be the same fiscal sanity that funds Medicaid with Social Security tax contributions?
After all, raising the maximum taxable income would be a fairly stiff tax increase for some taxpayers. For example, someone making $140,000 a year might owe an extra $6,000.
I shall celebrate this sentence as the first time in the recorded history of your opinions that you've expressed concern for the fiscal responsibilities of those making over $100,000 a year.
Furthermore, it's all too likely that any compromise that created private accounts would turn into a Trojan horse that let the enemies of Social Security inside the gates.
These enemies, one presumes, are to be distinguished from the enemies of basic economic law that are running Social Security's finances into the ground?
This might happen almost immediately, as a result of the legislative process. As you may have noticed, moderates don't run Congress. Suppose that a moderate senator thinks he has struck a deal for fully funded private accounts that don't directly undermine traditional Social Security. Almost surely, he would be kidding himself: by the time the conference committees were done with the legislation, the funding would be gone or greatly reduced, the accounts would be bigger, traditional benefits would have been cut, and the whole thing would have turned into a privatization wish list.
OK, I think this hypothetical reality eluded me. I must not be watching C-SPAN enough.
This reality probably manifested itself the forty times the Social Security tax rate was cut, the numerous times Social Security was sliced into private accounts, the subsequent times private accounts grew to relatively gargantuan proportions (right after they were enacted, presumably), and when the greedy arms of the privatization zealots successfully privatized Medicare, Welfare, Social Security, and Medicaid in the process.
Even if that didn't happen, private accounts, once established, would be used as a tool to whittle down traditional guaranteed benefits. For example, conservatives would use the existence of private accounts, together with rosy scenarios about rates of return, to argue that guaranteed benefits could be cut without hurting retirees.
OK, here we go again.
1) Traditional guaranteed benefits are being "whittled down" by the realities of Social Security deficits, not by private account proposals.
2) The private accounts augment benefits as follows: Private accounts are expected to accrue at a rate equal to the accrual rate of the Social Security Trust Fund, which is 3%. Assuming the private account portion exceeds this rate (which it likely will, observing that the average rate of return on stock investments is over 7%), the individual will gain more money.
3) The scenario is "rosy" because every cut in guaranteed benefits is supplemented with a commensurate amount invested in private accounts. What is taken out of the bureaucracy is put into a private account that accrues at a greater rate.
In short, anyone who wants to see the nation return to fiscal responsibility, wants to preserve Social Security as an institution or both should be opposed to any deal creating private accounts.
1) On fiscal responsibility. I would be interested to hear a dilation on the assumption that a system that is facing a deficit in 2018 and a $26 trillion unfunded liability is a shining paradigm of fiscal responsibility to which we should be "returning."
2) On Social Security as an institution. Observing that the private account proposals increase the net gain for retirees and avoid a future financial shortfall affecting either the deficits or the retirements of American workers, one sees little logical purpose of defending Social Security as an institution, any more than defenders of segregation defended it as a historical institution.
And there is also, of course, the political question: Why should any Democrat act as a spoiler when his party is doing well by doing good, gaining political ground by opposing a really bad idea? (Hello, Senator Lieberman.)
It speaks poorly of either the Democratic Party or the American public that the Democrats can gain political ground by duping individuals into believing that bureaucratic solutions to a failing bureaucratic program is independently superior to personal control over one's retirement finances.
The idiocy of the latter might be more enjoyable (for me) to cite, seeing as your column began with justifications based on popularity.
The important thing to remember is why the right wants privatization. The drive to create private accounts isn't about finding a way to strengthen Social Security; it's about finding a way to phase out a system that conservatives have always regarded as illegitimate.
You know, Mr. Krugman, I really would lose sleep at night if you really weren't here for us as America's preeminent extra sensory psychoanalyst.
I mean, I always figured that my support for private accounts was a common sense position based on solipsistic realizations of the importance of my own retirement, the inefficiency of the public safety net, and the allure of private control over my earnings.
I can now change that outlook, now that I've been shown that my real promotional impetus is that:
a) I am a conservative.
b) I want to phase out Social Security for no reason except its own illegitimacy.
c) I don't care about Social Security whatsoever, and by extension, my own retirement.
Thank you. You've changed my life.
And as long as that is what's at stake,
Since you proved that point so effectively...
there is no room for any genuine compromise. When it comes to privatization, just say no.
I should expect your ad hoc exhortations to be about as successful as the "Just Say No" programs that so successfully kept millions of young Americans from taking a joint.
It actually might be a relevant analogy. The lesson: Government programs that limit the free exercise of choice are always bad ideas.
It's funny how you missed it.