Social Security Hysteria Rebutted, Yet again
The WaPo editorial board apparently despises old people as much as Alan Simpson, given what they’re willing to put on their op-ed pages. Unfortunately, though, Charles Krauthammer doesn’t disintegrate into quite the degree of gibberish as Simpson, though he’s a liar. He particularly attacks OMB director Jacob Lew, and Lew’s assertion that Social Security is solvent until 2037 and doesn’t add to the deficit. Krauthammer’s argument: the Treasury bonds Social Security funds are invested in are “worthless” and Lew’s arguing otherwise is “a breathtaking fraud” because the “Social Security trust fund is a fiction.”
Dean Baker refutes.
It’s nice that Mr. Krauthammer thinks that government bonds are worthless…. While he is welcome to believe anything he wants, the bonds held by the Social Security trust fund are backed by the full faith and credit of the U.S. government. Krauthammer may want to default on bonds that belong to the nation’s workers, but his desires are not the same as reality.Selling these bonds to fund Social Security no more raises the deficit than the decision of a rich person to sell bonds to finance their consumption raises the deficit. The deficit was incurred when the money was lent to the Social Security trust fund in the first place.
The size of the deficit, including the money borrowed from Social Security — the on-budget deficit — is reported in every budget document put out by the government (e.g. here and here). Krauthammer might try to learn a bit about how the budget works before he goes off ranting about Jack Lew and Social Security….
In reality, the projected shortfall in the program is relatively distant and minor. The country has far more urgent concerns, like putting 25 million unemployed or under-employed people back to work. This should be the focus of our political leaders right now.
And Jacob Lew defends his, and Social Security’s honor:
Krauthammer is correct when he writes that there is no “lockbox” that keeps the money sent in by workers for until they retire. By design, when more taxes are collected than are needed to pay benefits, funds are invested in Treasury bonds and are held in reserve for when revenue collected is not enough to pay the benefits due. Yet these Treasury bonds are backed by the full faith and credit of the U.S. government in the same way that all other U.S. Treasury bonds are, making them anything but ”worthless IOUs” as Krauthammer suggests. The government has just as much obligation to pay back the bonds in the Social Security trust fund as we do to any other bondholders.Responsibly honoring that obligation – one that we planned for and always knew was there –entails undertaking fiscal policies that would make it easier, not harder, to meet these obligations. When I last was OMB Director at the end of the Clinton Administration, the Congressional Budget Office estimated $5.6 trillion in budget surpluses over the next decade because of fiscally responsible measures that Democrats and Republicans, working together, had taken….
This is the most important point: the problem is not with Social Security, but in the near term the mismatch between what we take in and what we spend in the rest of the budget. Working people had payroll taxes taken from their salaries to pay for future benefits, and instead the money was used to pay for tax cuts and other initiatives. It is hardly fair now to say that those working people caused the problem just when they are ready to collect benefits.
Krauthammer’s argument is inside out. We should not blame Social Security for our current fiscal problems when it is the irresponsible fiscal behavior of the past that has presented the country with future challenges to fund our commitments, including Social Security over the next two decades.
That irresponsible fiscal behavior was unfortunately extended by the tax-cut deal and intensifed by the payroll tax holiday, making it even easier for Social Security to be the target of deficit peacocks and the Very Serious People who believe “shared sacrifice” means everybody but the rich and corporations sacrifice. That aside, Lew is absolutely correct. Social Security is not the problem. Massive tax cuts for the rich and two unsustainable wars are the problem.
By: Joan McCarter, Daily Kos, March 12, 2011
Wisconsin Gov. Scott Walker Shows Why Ideologues Can’t Govern
Ideologues make lousy politicians, even worse office holders. The ideological straight jacket does just what you would expect–it constricts movement. Everything is nice and neat and tight but not conducive to serious efforts to move forward. Politicians such as Scott Walker, who put themselves in ideological straight jackets, either live to regret it or are thrown out on their ear, or both.
Intellectuals sometimes make good ideologues, cultural commentators make very thought provoking arguments, philosophers have the luxury of being way out on the edge at times, but those who go into office find that they are rejected very quickly by the public when all they have is their ideology.
Scott Walker is the latest example of an ideologue–combined with a self righteous, bullying approach, not backed up by intellectual rigor.
My guess is that the events of the last month will not only harm him politically in the short run but will result in a serious problem for those who follow in his footsteps.
First and foremost, his approach to governing won’t work. Cutting taxes for ideological reasons, rather than pragmatic ones, prohibiting local governments from paying for education with their own decisions on local taxes, cutting services to the bone, breaking collective bargaining with unions, making them a scapegoat, just won’t wash.
Look at the governors who are putting forth a balanced, reasonable approach to focusing on the dual realities of too much spending and too little revenue. They are not engaging in a hard and fast ideological battle. They are pragmatic. They do not focus only on slash and burn cuts but, rather, are flexible enough to include tax and fee increases.
What was Walker thinking, cutting taxes by $117.2 million as his first act when his state faced a deficit of $137 million? I guess I get the million dollars he included to encourage businesses to move to Wisconsin but I sure as heck don’t understand a $49 million tax cut for health savings accounts. The rich will take advantage of that boondoggle and it won’t create jobs.
That was ideology, not pragmatism.
Look at Gov. Jerry Brown in California, or Mark Dayton in Minnesota, or John Kitzhaber of Oregon, John Lynch of New Hampshire, Pat Quinn in Illinois, or Andrew Cuomo in New York. These are governors, many of whom have a lot tougher problem than Wisconsin, who are struggling and succeeding, not resorting to hard ideology, not refusing to look at the revenue side of the equation.
If members of Congress take lessons from the states, they should learn a whopper from Wisconsin. Don’t follow in Walker’s footsteps, look to the governors listed above.
In fact, they can even look to Ronald Reagan who as governor way back in 1967 raised taxes by $1 billion in California as well as cut the budget. As president, he raised taxes in every year but one, when it was necessary. He learned very quickly about “never saying never.” He didn’t put himself in the ideological straight jacket that many now fantasize about. I am not a Reagan fan, but I do recognize he was pragmatic.
Walker is in way over his head. Sadly, he has been a train wreck for his state. Let’s not let his style and approach be a train wreck for the nation.
By: Peter Fenn, U.S. News and World Report, March 11, 2011
Senate Democrats Weigh Making Big Mistake On Health-Care Reform
I’m getting some worried e-mails from Hill staffers who think Senate Democrats might rubberstamp a policy House Republicans passed to undermine the Affordable Care Act. It’s the sort of policy decision that won’t get much attention but could have some very big, and very bad, effects, so let’s take a moment and go through it.
If you’ve been paying attention to the debate over the Affordable Care Act, you’ve probably heard about the 1099 provision. Essentially, small businesses manage to avoid paying taxes on a lot of small transactions. The 1099 provision would’ve forced them to report those transactions, raising about $20 billion over 10 years. But it would’ve require a lot of paperwork. So much paperwork, in fact, that Democrats agreed to repeal it.
When the Senate repealed the provision, they paid for it by canceling other spending that Congress had authorized, but that hadn’t yet been put to a particular purpose. House Republicans took a different approach. They’re trying to sharply increase the amount of subsidies that families will have to pay back if their income increases during the course of a year. The Center on Budget and Policy Priorities has a longer explanation of how this would work, but here’s the short version:
Under their proposed policy, a family with income at 225 percent of the poverty line who needed subsidies for the first half of the year but canceled them mid-year when the husband got a better job could get a bill for more than $4,500 at the end of the year.
A more worrying example goes the other way: Imagine a family where the breadwinner makes much more than 400 percent of poverty, but loses his job late in the year. He tries to apply for subsidies so the family can keep getting health insurance but is told that he shouldn’t bother — because his total income that year will still be above 400 percent of poverty, he’ll get a bill at the end of the year forcing him to pay back the money.
The Affordable Care Act, unfortunately, already includes a “payback” policy along these lines — the House Republicans are just proposing to make it much, much worse. This will do two things: make people hate the Affordable Care Act for bait-and-switching them, and keep people from entering the exchanges because they’ve heard horror stories of huge bills. It’s clear why the GOP wouldn’t mind that outcome, but there’s no reason for Democrats to accept it. The Senate should stick with the 1099 repeal that the Senate has passed.
By: Ezra Klein, Columnist-The Washington Post, March 8, 2011
Republicans Stampede Toward The Cliff
Interesting findings from the NBC/WSJ poll. Asked about deficit reducing options, the options the public overwhelmingly favors are ones Democrats favor, and the options they overwhelmingly oppose are ones Republicans are promising to propose:
[The survey] listed 26 different ways to reduce the federal budget deficit. The most popular: placing a surtax on federal income taxes for those who make more than $1 million per year (81 percent said that was acceptable), eliminating spending on earmarks (78 percent), eliminating funding for weapons systems the Defense Department says aren’t necessary (76 percent) and eliminating tax credits for the oil and gas industries (74 percent).
The least popular: cutting funding for Medicaid, the federal government health-care program for the poor (32 percent said that was acceptable); cutting funding for Medicare, the federal government health-care program for seniors (23 percent); cutting funding for K-12 education (22 percent); and cutting funding for Social Security (22 percent).
But the public demands deficit reduction, right? Well, actually, they care more about jobs:
In the poll, eight in 10 respondents say they are concerned about the growing federal deficit and the national debt, but more than 60 percent — including key swing-voter groups — are concerned that major cuts from Congress could impact their lives and their families.
What’s more, while Americans find some budget cuts acceptable, they are adamantly opposed to cuts in Medicaid, Medicare, Social Security and K-12 education.
And although a combined 22 percent of poll-takers name the deficit/government spending as the top issue the federal government should address, 37 percent believe job creation/economic growth is the No. 1 issue.
Republican pollster Bill McInturff, who conducted the survey with Democratic pollster Peter D. Hart, says these results are a “cautionary sign” for a Republican Party pursuing deep budget cuts.
He points out that the Americans who are most concerned about spending cuts are core Republicans and Tea Party supporters, not independents and swing voters.
“It may be hard to understand why a person might jump off a cliff, unless you understand they’re being chased by a tiger,” he said. “That tiger is the Tea Party.”
By the standards of these things, those are extremely sharp comments from McInturff. Leaders are usually more worried about internal threats than external threats. Boehner needs to make sure he doesn’t get deposed as speaker before he worries about winning a showdown with Democrats.
The specifics of the fight — Republicans promising to cut overwhelmingly popular programs, being willing to shut down the government, and pushing a plan that private analysts predict will reduce jobs — put them in a very tough position. Republicans are working really hard to buck each other up and ignore data about public opinion. Democrats have the upper hand here. President Obama may decide to cut a deficit deal, but both the politics and the policy say he should hand the Republicans their head first.
By: Jonathan Chait, The New Republic, March 3, 2011
No Glory For Governors Trying To Do The Right Fiscal Thing
If you want to get national attention as a governor these days, don’t try to be innovative about solving the problems you were elected to deal with – in education, transportation and health care. No, if you want ink and television time, just cut and cut and cut some more.
Almost no one in the national media is noticing governors who say the reasonable thing: that state budget deficits, caused largely by drops in revenue in the economic downturn, can’t be solved by cuts or tax increases alone.
There is nothing courageous about an ideological governor hacking away at programs that partisans of his philosophy, including campaign contributors, want eliminated. That’s staying in your comfort zone.
The brave ones are governors such as Jerry Brown in California, Dan Malloy in Connecticut, Pat Quinn in Illinois, Mark Dayton in Minnesota and Neil Abercrombie in Hawaii. They are declaring that you have to cut programs, even when your own side likes them, and raise taxes, which nobody likes much at all. Rhode Island’s Lincoln Chafee has warned of possible tax increases too.
Indeed, to the extent that Quinn received any national press coverage, he got pilloried in conservative outlets in January when he signed tax hikes that included a temporary increase in Illinois’ individual income tax rate from 3 percent to 5 percent.
Despite all the commotion around whether the federal government will shut down, the clamor in the states may be even more important than what’s happening in Washington, which is missing in action on the moment’s most vital fiscal question.
What states are doing to ease their fiscal agonies will only slow down our fragile economic recovery, and may stop it altogether. The last thing we need right now are state and local governments draining jobs and money from the economy, yet that is what they are being forced to do.
As the last three monthly reports from the Bureau of Labor Statistics showed, an economy that created a net 317,000 private-sector jobs lost 70,000 state and local government jobs. Cutbacks are dead weight on the recovery.
In a more rational political climate, President Obama would have resurrected the lovely old Republican idea of federal revenue sharing. Washington should have continued replenishing state budgets for two more years, until we were certain the economic storms had passed. Instead, anything that might be called “stimulus” – “S” is now a scarlet letter in politics – was rejected out of hand.
The federal government could also help the states by picking up more of their Medicaid costs. In the long run, health-care spending should be a responsibility of the national government – as it is in almost every other wealthy democracy. A national commitment would end the specter of states forcing already financially beleaguered citizens off the health insurance rolls.
Such ideas are off the table because the current rage is not for figuring out how to make government work better – a cause that once united governors of both parties – but for cutting back even its most basic and popular functions.
Consider the new budget Gov. Scott Walker announced in Wisconsin on Tuesday. Among other things, he proposed cutting state aid to schools by $834 million over the next two years, a 7.9 percent reduction.
On top of that, Walker would make it harder for localities and school districts to make up for the shortfall by limiting their ability to raise property taxes. This isn’t about education reform. It’s about forcing larger class sizes, layoffs, reductions in extracurricular activities or cuts in teacher pay and benefits. But, hey, if it’s labeled “government,” let’s slash it.
What’s truly amazing, as Stateline.org reported recently, is the number of governors who are cutting taxes at the same time they are eviscerating programs. A particularly dramatic case is Florida’s Republican Gov. Rick Scott. He faces a $3.5 billion budget gap – and is pushing for $2 billion in corporate and property tax cuts.
Historically, times of fiscal stress forced states to make useful economies in programs that didn’t work or were not essential. But what’s happening in so many places now is a reckless rush to gut the parts of government that all but the most extreme libertarians support – and that truly deserve to be seen (one thinks of education and programs for poor children) as investments in the future.
And those governors doing the hard work trying to balance cutbacks and tax increases get ignored, because there’s nothing sexy about being responsible.
By: E. J Dionne, Op-Ed Columnist, The Washington Post, March 3, 2011
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