“Where Government Excels”: Recognizing The Reality That There Are Some Things The Government Does Better Than The Private Sector
As Republican presidential hopefuls trot out their policy agendas — which always involve cutting taxes on the rich while slashing benefits for the poor and middle class — some real new thinking is happening on the other side of the aisle. Suddenly, it seems, many Democrats have decided to break with Beltway orthodoxy, which always calls for cuts in “entitlements.” Instead, they’re proposing that Social Security benefits actually be expanded.
This is a welcome development in two ways. First, the specific case for expanding Social Security is quite good. Second, and more fundamentally, Democrats finally seem to be standing up to antigovernment propaganda and recognizing the reality that there are some things the government does better than the private sector.
Like all advanced nations, America mainly relies on private markets and private initiatives to provide its citizens with the things they want and need, and hardly anyone in our political discourse would propose changing that. The days when it sounded like a good idea to have the government directly run large parts of the economy are long past.
Yet we also know that some things more or less must be done by government. Every economics textbooks talks about “public goods” like national defense and air traffic control that can’t be made available to anyone without being made available to everyone, and which profit-seeking firms, therefore, have no incentive to provide. But are public goods the only area where the government outperforms the private sector? By no means.
One classic example of government doing it better is health insurance. Yes, conservatives constantly agitate for more privatization — in particular, they want to convert Medicare into nothing more than vouchers for the purchase of private insurance — but all the evidence says this would move us in precisely the wrong direction. Medicare and Medicaid are substantially cheaper and more efficient than private insurance; they even involve less bureaucracy. Internationally, the American health system is unique in the extent to which it relies on the private sector, and it’s also unique in its incredible inefficiency and high costs.
And there’s another major example of government superiority: providing retirement security.
Maybe we wouldn’t need Social Security if ordinary people really were the perfectly rational, farsighted agents economists like to assume in their models (and right-wingers like to assume in their propaganda). In an idealized world, 25-year-old workers would base their decisions about how much to save on a realistic assessment of what they will need to live comfortably when they’re in their 70s. They’d also be smart and sophisticated in how they invested those savings, carefully seeking the best trade-offs between risk and return.
In the real world, however, many and arguably most working Americans are saving much too little for their retirement. They’re also investing these savings badly. For example, a recent White House report found that Americans are losing billions each year thanks to investment advisers trying to maximize their own fees rather than their clients’ welfare.
You might be tempted to say that if workers save too little and invest badly, it’s their own fault. But people have jobs and children, and they must cope with all the crises of life. It’s unfair to expect them to be expert investors, too. In any case, the economy is supposed to work for real people leading real lives; it shouldn’t be an obstacle course only a few can navigate.
And in the real world of retirement, Social Security is a shining example of a system that works. It’s simple and clean, with low operating costs and minimal bureaucracy. It provides older Americans who worked hard all their lives with a chance of living decently in retirement, without requiring that they show an inhuman ability to think decades ahead and be investment whizzes as well. The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?
Needless to say, suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists. As I wrote some years ago, calling for cuts to Social Security has long been seen inside the Beltway as a “badge of seriousness, a way of showing how statesmanlike and tough-minded you are.” And it’s only a decade since former President George W. Bush tried to privatize the program, with a lot of centrist support.
But true seriousness means looking at what works and what doesn’t. Privatized retirement schemes work very badly; Social Security works very well. And we should build on that success.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 10, 2015
“Social Security Faces Threat From ‘Ideological War'”: Republicans Manufacturing A Crisis’ To Hide Their Real Intent
Sen. Elizabeth Warren (D-Mass.) sent a message to supporters yesterday, warning of a real threat to Social Security. By any fair measure, she’s right.
“We’ve known for years that Social Security Disability Insurance is set to run low in 2016, and most people assumed that another bipartisan reallocation was coming,” the senator wrote. “But now, thanks to the Republican ideological war on our most important national safety net, disabled Americans could suddenly face a 20% cut in their Social Security checks next year.”
Let’s recap for those just joining us. The Social Security system provides disability payments to Americans who want to work but can’t for health reasons. For generations, when the disability-insurance program runs short on funds, Congress transfers money from elsewhere in the Social Security system to prevent benefit cuts. The solution, sometimes called “reallocation,” has never been especially controversial – in fact, it’s been done 11 times over the last seven decades.
But last month, congressional Republicans adopted a rule change that makes it almost impossible to approve the usual, straightforward fix. GOP lawmakers seem to want to create the conditions for a crisis.
All of which led to an important Senate hearing yesterday.
Carolyn Colvin, acting commissioner for the Social Security Administration, urged senators to act first to avert the crisis at hand and then begin serious negotiations on finding a longer-term solution. She said the threatened cut in disability payments – about 19 percent – would be a “death sentence” for many of the poorest recipients, but time and again, she refused to opine on more concrete options going forward.
When Colvin read aloud the president’s six principles for future reforms, Sen. Lindsey Graham (R-S.C.) was scornful. “That’s a set of principles that makes sure we do absolutely nothing meaningful,” Graham said. “If that’s the president’s plan, we’ll never get there.”
And by “meaningful,” it appears Graham and other Senate Republicans are waiting for the White House to propose cuts to Social Security. (Ironically, President Obama was open to modest Social Security cuts as part of a grand bargain with GOP lawmakers, but Republicans have refused to consider any possible concessions and effectively ruled out the possibility of a compromise.)
The Politico report added that Sen. Bernie Sanders (I-Vt.), the Senate Budget Committee’s ranking member, “angrily accused the GOP of ‘manufacturing a crisis’ to hide its intent to resurrect past proposals to cut Social Security benefits and privatize the system.”
This has the benefit of being true. Addressing the upcoming shortfall in the disability-insurance program should be easy. Republicans are ensuring that it’s not, hoping to exploit a manufactured crisis to force Social Security cuts they wouldn’t otherwise be able to get.
Indeed, the literal name for yesterday’s hearing for the GOP-led committee was, “The coming crisis: Social Security Disability Trust Fund Insolvency.” There would be no crisis, and no threat of insolvency, if Republicans hadn’t already ruled out the straightforward solution lawmakers have relied on for decades.
Budget Committee Chairman Mike Enzi (R-Wyo.) said yesterday, “I’m hoping the president will take an active role in this.” Expect more of this kind of rhetoric: Republicans will feign outrage over Obama refusing to offer far-right solutions the GOP-led Congress considers acceptable.
By: Steve Benen, The Madow Blog, February 12, 2015
“A Manufactured Crises”: Republicans Want You To Think Social Security Has A Funding Problem. Don’t Believe Them
The ongoing Republican plot to cut Social Security is shaping up to be a major story. As Dylan Scott has documented at Talking Points Memo, through a totally unnecessary change in accounting rules, Republicans are trying to ensure Social Security Disability Insurance (SSDI) runs short of money in less than two years, which would require a one-fifth cut in benefits.
Most recently, there are hints that Republicans may top up the SSDI fund by merely a little bit, similar to what they have done with the debt ceiling. The point is to create a series of manufactured crises, and each time the SSDI program runs short of money, they can use their leverage to ratchet down Social Security as a whole.
The way Republicans spin all this will be critical. Social Security is very popular, so conservatives will have to avoid the perception that they want to cut it, even though they clearly do. Dispelling their squid-ink nonsense will be crucial in protecting the program.
At National Review, Veronique de Rugy gives us a taste of how conservatives will frame their argument for cuts. “We’re broke,” says the headline. The SSDI fund “will be empty in a year” (no mention why), and “we can’t ignore the issue for much longer.” Regular Social Security “is also on an unsustainable path.”
She links to a report by Chuck Blahous, an argument against patching up the SSDI fund with money from general Social Security funds. Regular Social Security “now faces a bigger shortfall in both absolute and relative terms than [SSDI]” over the next 75 years, he says, concluding it would be irresponsible to transfer money to the less-solvent program.
What he doesn’t mention is that the regular Social Security fund won’t come up short until 2034. Plugging the holes in SSDI would advance that date by only about one year, since SSDI is only a small fraction of the overall program. In this country, having some 18 years of breathing space for a government program counts as nearly miraculous.
This complicated talk of actuarial shortfalls and inescapable accounting burdens is meant to obscure the fact that this is a question of ideology, nothing more. Social Security, in contrast to the dread Big Government bureaucracies, is a very simple program that takes in money and kicks it back out again. If the revenue source is insufficient, we could find money someplace else.
The actual worry here, just like any spending program, is whether the cost of the program is getting out of line with the productive capacity of the rest of the economy. All retirement programs take from the currently working and give to the non-working, so we might worry that the elderly and disabled are getting more claims on stuff than the economy can churn out.
Fortunately, as Dean Baker always points out, continuing economic growth keeps expanding our capacity to provide benefits. We can easily “afford” to maintain or expand Social Security, if we want to.
It would be easy to find such money. Indeed, we don’t even have to leave the world of retirement policy! We could simply scrap the 401(k) tax credit, which does not work as advertised to increase savings and sends the vast majority of its benefits to the rich. We could then plow the savings into Social Security. The 401(k) credit and similar programs cost something like $100 billion yearly, as compared to the total cost of Social Security of about $820 billion. Hey presto, we’re done.
The underlying reality is that opinions on any spending program inescapably rest on a judgment about whether that spending is worthwhile. I believe Social Security is excellent policy and its benefits should be increased. Conservatives like de Rugy and Blahous believe benefits are too high and should be reduced. It’s as simple as that.
By: Ryan Cooper, The Week, January 26, 2015
“Everybody Over 40 Has A Little Back Pain”: Watch Out, Grandpa! Republicans Are Coming For Your Social Security
Hey, Rand Paul, why don’t you tell us how you really feel?
Last week, the junior senator from Kentucky mocked people on Social Security Disability Insurance (SSD), suggesting their ailments are not worthy:
What I tell people is, if you look like me and you hop out of your truck, you shouldn’t be getting your disability check. Over half of the people on disability are either anxious or their back hurts. Join the club… Who doesn’t get up a little anxious for work every day and their back hurts. Everybody over 40 has a little back pain. [Huffington Post]
This is just the prelude to the GOP’s plan to roll back the whole of Social Security. Paul’s remarks are part of a PR campaign to portray the program as riddled with lazy deadbeats and cheats.
Don’t believe me? Earlier this month, the Republican Congress adopted a rule change regarding the disability portion of Social Security. It has occasionally run short of money, which last happened in 1994 and will happen again in late 2016. Typically, the disability side is topped up with money from the (much larger) general Social Security funds. But Republicans have changed the rules to prevent this, which means disability payments will be cut by a fifth when the money runs out.
Now, they’re beginning to argue this is a great time to “reform” the system as a whole:
One of the co-sponsors of the rule change, Rep. Tom Reed (R-NY), said that his intention was to “force us to look for a long-term solution” to the disability program. But the rule itself says it will allow a revenue transfer if the “overall health” of Social Security, encompassing both the retirement and disability programs, is improved. That’s what Democrats are warning about, but some conservative analysts who have consulted with House staffers are also hoping that the GOP uses the threat of benefits cuts to go big. [Talking Points Memo]
If you examine the history of conservative animosity towards Social Security, as Dylan Scott does in a great piece, the long game here is obvious. Conservatives hated the program when it started, tried to abolish it for a generation, rolled it back slightly when it became firmly politically entrenched, and tried to privatize it in the Bush years. Conservative activists have been plotting this move for years.
The political entrenchment of Social Security explains the slyness of their tactics today. Social Security is one of the most popular programs in the country, and attempting to privatize it was a political disaster for Bush. Thus, passing bill after bill scrapping the program altogether a la ObamaCare would be committing political suicide. Much better to use a manufactured funding crisis to force a complicated political bargain that most people don’t understand. Better still to maneuver Democrats into accepting cuts, and then blame them for it and run against them on the issue.
Let’s look at the policy. Are conservatives right about SSDI being riddled with fraud, as an episode of This American Life squirmily argued two years ago? They are not. As a Center for Budget and Policy Priorities analysis shows, the increase in disability payments is mainly due to demographic factors. There is little fraud in the program (in reality, a large majority of applicants are rejected). The program doesn’t pay out much per beneficiary. And the general Social Security fund can top up the disability fund with only a tiny overall effect.
How about Social Security in general? Contrary to Republican anti-tax zealotry, the problem with Social Security is that it is not nearly generous enough. American retirement security used to rest on pensions, the 401(k) system, and Social Security. The first of those is almost dead, the second has been an utter failure, and the third is simply not big enough to provide a genuine retirement for most people. Boosting the program substantially would be simple and good policy.
Many years ago, it was widely accepted that as our country got richer, we could afford to work less as a whole. Disabled people could be kept out of poverty, and old people could retire. But conservatives are increasingly abandoning this idea. There is no reason Paul’s logic about the disabled couldn’t be applied to retirees, too. Can your grandma stack shelves at Walmart? Maybe she should, the lazy parasite.
In reality, we can easily afford to boost Social Security. Indeed, we can easily afford to eliminate poverty altogether. That we don’t is a political choice, nothing more.
By: Ryan Cooper, The Week, January 20, 2015
“The Latest Hostage”: Fact-Checking Republicans On Social Security Disability
We’re going to be hearing a lot about the Social Security Disability program over the next few months. That’s because it is the latest “hostage” the Republicans have decided to use as leverage to get President Obama and Democrats to give them what they want. You can read more about all that here, but it comes down to this:
The largely overlooked change puts a new restriction on the routine transfer of tax revenues between the traditional Social Security retirement trust fund and the Social Security disability program. The transfers, known as reallocation, had historically been routine…
The House GOP’s rule change would still allow for a reallocation from the retirement fund to shore up the disability fund — but only if an accompanying proposal “improves the overall financial health of the combined Social Security Trust Funds,” per the rule…While that language is vague, experts say it would likely mean any reallocation would have to be balanced by new revenues or benefit cuts.
As you can see, its simply the GOP’s latest version of, “give us what we want, or else…”
In order to prime the pump, Republicans are already attempting to take on the “slackers” who rely on the disability program. Exhibit A: Sen. Rand Paul.
The first thing I’d like to point out is that – from these remarks – it appears as though Sen. Paul assumes that only those disabilities that are visible physically are real disabilities. We all know that is not true.
But PolitiFact did a thorough job of fact-checking Sen. Paul’s statements. And in so doing, provided us with a lot of information that is going to come in very handy as this whole hostage situation unfolds. On the overall accusations of wide-spread fraud, waste and abuse, here are the facts:
After an audit of disability insurance in 2013, the Government Accountability Office estimated that in fiscal year 2011, the Social Security Administration made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals who were working and making more than $1,100 a month (the limit to receive disability benefits).
The 36,000 people receiving improper payments, while a lot on paper, represent about 0.4 percent of all beneficiaries, the report said.
There are other ways Social Security gives out benefits to those not deserving, but paying people already working is about 72 percent of the problem, according to the Social Security Administration. Factoring that in, the GAO estimates overpayments equaled $1.62 billion, or 1.27 percent of all disability benefits, in 2011. It’s a lot of money, but the disability program is a $128 billion program.
Got that? The level of fraud we’re talking about is 1.27% of benefits paid. As a friend of mine would say, “Now run and tell that!”
By: Nancy LeTourneau, Political Animal Blog, The Washington Monthly, January 17, 2015
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