Saturday, January 08, 2005
An End to Social Security?
Stopping the Bum's Rush
By Paul Krugman
The New York Times
The people who hustled America into a tax cut to eliminate an imaginary budget surplus and a war to eliminate imaginary weapons are now trying another bum's rush. If they succeed, we will do nothing about the real fiscal threat and will instead dismantle Social Security, a program that is in much better financial shape than the rest of the federal government.
In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program. I'll also talk about the much more urgent fiscal problems the administration hopes you won't notice while it scares you about Social Security.
Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis. That claim is simply false. Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning."
Here's the truth: by law, Social Security has a budget independent of the rest of the U.S. government. That budget is currently running a surplus, thanks to an increase in the payroll tax two decades ago. As a result, Social Security has a large and growing trust fund.
When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund. And the trust fund will last for a long time: until 2042, says the Social Security Administration; until 2052, says the Congressional Budget Office; quite possibly forever, say many economists, who point out that these projections assume that the economy will grow much more slowly in the future than it has in the past.
So where's the imminent crisis? Privatizers say the trust fund doesn't count because it's invested in US government bonds, which are "meaningless i.o.u.'s." Readers who want a long-form debunking of this sophistry can read my recent article in the online journal The Economists' Voice (www.bepress.com/ev).
The short version is that the bonds in the Social Security trust fund are obligations of the federal government's general fund, the budget outside Social Security. They have the same status as US bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.
There are only two things that could endanger Social Security's ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the US to default on all its debts. The other would be legislation specifically repudiating the general fund's debts to retirees.
That is, we can't have a Social Security crisis without a general fiscal crisis — unless Congress declares that debts to foreign bondholders must be honored, but that promises to older Americans, who have spent most of their working lives paying extra payroll taxes to build up the trust fund, don't count.
Politically, that seems far-fetched. A general fiscal crisis, on the other hand, is a real possibility — but not because of Social Security. In fact, the Bush administration's scaremongering over Social Security is in large part an effort to distract the public from the real fiscal danger.
There are two serious threats to the federal government's solvency over the next couple of decades. One is the fact that the general fund has already plunged deeply into deficit, largely because of President Bush's unprecedented insistence on cutting taxes in the face of a war. The other is the rising cost of Medicare and Medicaid.
As a budget concern, Social Security isn't remotely in the same league. The long-term cost of the Bush tax cuts is five times the budget office's estimate of Social Security's deficit over the next 75 years. The botched prescription drug bill passed in 2003 does more, all by itself, to increase the long-run budget deficit than the projected rise in Social Security expenses.
That doesn't mean nothing should be done to improve Social Security's finances. But privatization is a fake solution to a fake crisis. In future articles on this subject I'll explain why, and also outline a real plan to strengthen Social Security.
By Paul Krugman
The New York Times
The people who hustled America into a tax cut to eliminate an imaginary budget surplus and a war to eliminate imaginary weapons are now trying another bum's rush. If they succeed, we will do nothing about the real fiscal threat and will instead dismantle Social Security, a program that is in much better financial shape than the rest of the federal government.
In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program. I'll also talk about the much more urgent fiscal problems the administration hopes you won't notice while it scares you about Social Security.
Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis. That claim is simply false. Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning."
Here's the truth: by law, Social Security has a budget independent of the rest of the U.S. government. That budget is currently running a surplus, thanks to an increase in the payroll tax two decades ago. As a result, Social Security has a large and growing trust fund.
When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund. And the trust fund will last for a long time: until 2042, says the Social Security Administration; until 2052, says the Congressional Budget Office; quite possibly forever, say many economists, who point out that these projections assume that the economy will grow much more slowly in the future than it has in the past.
So where's the imminent crisis? Privatizers say the trust fund doesn't count because it's invested in US government bonds, which are "meaningless i.o.u.'s." Readers who want a long-form debunking of this sophistry can read my recent article in the online journal The Economists' Voice (www.bepress.com/ev).
The short version is that the bonds in the Social Security trust fund are obligations of the federal government's general fund, the budget outside Social Security. They have the same status as US bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund.
There are only two things that could endanger Social Security's ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the US to default on all its debts. The other would be legislation specifically repudiating the general fund's debts to retirees.
That is, we can't have a Social Security crisis without a general fiscal crisis — unless Congress declares that debts to foreign bondholders must be honored, but that promises to older Americans, who have spent most of their working lives paying extra payroll taxes to build up the trust fund, don't count.
Politically, that seems far-fetched. A general fiscal crisis, on the other hand, is a real possibility — but not because of Social Security. In fact, the Bush administration's scaremongering over Social Security is in large part an effort to distract the public from the real fiscal danger.
There are two serious threats to the federal government's solvency over the next couple of decades. One is the fact that the general fund has already plunged deeply into deficit, largely because of President Bush's unprecedented insistence on cutting taxes in the face of a war. The other is the rising cost of Medicare and Medicaid.
As a budget concern, Social Security isn't remotely in the same league. The long-term cost of the Bush tax cuts is five times the budget office's estimate of Social Security's deficit over the next 75 years. The botched prescription drug bill passed in 2003 does more, all by itself, to increase the long-run budget deficit than the projected rise in Social Security expenses.
That doesn't mean nothing should be done to improve Social Security's finances. But privatization is a fake solution to a fake crisis. In future articles on this subject I'll explain why, and also outline a real plan to strengthen Social Security.
Friday, January 07, 2005
Capitalizing on the Tsunami
Two reflections on the Australian reponse to the tsunami disaster:
1) However sincerely the Little Rodent [Australian Prime Minister John Howard] might feel compassion for the for the victims of the Boxing Day tsunami, his "Australia-first" jump to offer aid cannot help but win him brownie-points from his neocon mentors in Washington who want to cripple the United Nations;
2) Recently the Australian Shareholders’ Association pontificated that Australian companies should not donate any money to appeals for the victims of the tsunami unless they could guarantee that it would bring a “cost-benefit” to shareholders. How pleasing to see that capitalism is regaining its red-blooded, hairy-chested approach after decades of emasculation at the hands of limp-wristed snivel-libertarians!
Sunday, January 02, 2005
2004 in Review
Oh, What a Year it Was
by Molly Ivins
by Molly Ivins
...
In other highlights:
The Coalition of the Willing was depleted when Hungary, Thailand, Nicaragua, New Zealand, Honduras, Ukraine, Spain, the Philippines, the Netherlands, the Czech Republic and Poland (so movingly cited by President Bush during one of the debates) all proved less than willing. On the other hand, Tonga is still with us.
Texan Jessica Simpson, the one who makes Paris Hilton look like a genius, showed an astonished nation what a Texas intellectual looks like. Upon being introduced to Interior Secretary Gale Norton, she said, "You've done a nice job decorating the White House."
The Ukrainians showed us all what people who really care about democracy do when there's cheating at the polls. Bless them for just not standing for it.
Media Low Point of the Year: Rush Limbaugh on Abu Ghraib: "I'm talking about people having a good time, these people, you ever heard of emotional release? You ever heard of the need to blow some steam off?"
Emblematic Political Moment of the Year: As the full dimensions of the tidal wave in the Indian Ocean became clear, Bush's staff used the occasion to ... take a few cheap shots at Bill Clinton. Explaining why the president had neither returned to Washington nor even bothered to come out and read a statement of sorrow, The Washington Post reported that one official said: "'The president wanted to be fully briefed on our efforts. He doesn't want to make a symbolic statement about 'We feel your pain." Many Bush aides believe Clinton was too quick to head for the cameras and to hold forth on tragedies with his trademark sympathy. 'Actions speak louder than words,' a top Bush aide said." So for action, the Bushies pledged less than the amount that will be spent on parties for the Bush inauguration.
What Were They Thinking? Moment of the Year: Janet Jackson's "wardrobe malfunction" at the Super Bowl. Seriously, who planned that?
Dumbest Reaction to Wardrobe Malfunction: FCC decides its job is to censor bad taste on television (got their life's work cut out for them, haven't they?), instead of preventing the truly obscene and dangerous concentration of ownership in the media.
Another high point: John Ashcroft (the man whose understanding of the right to dissent is so profound he said, "To those who scare peace-loving people with phantoms of lost liberty, my message is this: Your tactics only aid terrorists, for they erode our national unity and diminish our resolve") will be replaced as attorney general by Al (Defining Torture Down) Gonzales. Gonzales put out the legal memo that says "cruel, inhumane or degrading" treatment does not constitute torture as long as it is not "equivalent in intensity to the pain accompanying serious physical injury, such as organ failure, impairment of bodily function or even death."
The Coalition of the Willing was depleted when Hungary, Thailand, Nicaragua, New Zealand, Honduras, Ukraine, Spain, the Philippines, the Netherlands, the Czech Republic and Poland (so movingly cited by President Bush during one of the debates) all proved less than willing. On the other hand, Tonga is still with us.
Texan Jessica Simpson, the one who makes Paris Hilton look like a genius, showed an astonished nation what a Texas intellectual looks like. Upon being introduced to Interior Secretary Gale Norton, she said, "You've done a nice job decorating the White House."
The Ukrainians showed us all what people who really care about democracy do when there's cheating at the polls. Bless them for just not standing for it.
Media Low Point of the Year: Rush Limbaugh on Abu Ghraib: "I'm talking about people having a good time, these people, you ever heard of emotional release? You ever heard of the need to blow some steam off?"
Emblematic Political Moment of the Year: As the full dimensions of the tidal wave in the Indian Ocean became clear, Bush's staff used the occasion to ... take a few cheap shots at Bill Clinton. Explaining why the president had neither returned to Washington nor even bothered to come out and read a statement of sorrow, The Washington Post reported that one official said: "'The president wanted to be fully briefed on our efforts. He doesn't want to make a symbolic statement about 'We feel your pain." Many Bush aides believe Clinton was too quick to head for the cameras and to hold forth on tragedies with his trademark sympathy. 'Actions speak louder than words,' a top Bush aide said." So for action, the Bushies pledged less than the amount that will be spent on parties for the Bush inauguration.
What Were They Thinking? Moment of the Year: Janet Jackson's "wardrobe malfunction" at the Super Bowl. Seriously, who planned that?
Dumbest Reaction to Wardrobe Malfunction: FCC decides its job is to censor bad taste on television (got their life's work cut out for them, haven't they?), instead of preventing the truly obscene and dangerous concentration of ownership in the media.
Another high point: John Ashcroft (the man whose understanding of the right to dissent is so profound he said, "To those who scare peace-loving people with phantoms of lost liberty, my message is this: Your tactics only aid terrorists, for they erode our national unity and diminish our resolve") will be replaced as attorney general by Al (Defining Torture Down) Gonzales. Gonzales put out the legal memo that says "cruel, inhumane or degrading" treatment does not constitute torture as long as it is not "equivalent in intensity to the pain accompanying serious physical injury, such as organ failure, impairment of bodily function or even death."
Bush, Stingy? Nahhhhhh
Stingy? Not with WMD and War
by Heather Wokusch
Published on Friday, December 31, 2004 by CommonDreams.org
by Heather Wokusch
Published on Friday, December 31, 2004 by CommonDreams.org
As the body count from the tsunami rises, America's international reputation plummets to new depths, thanks to the Bush administration's smugly incompetent response.
While other world leaders immediately put forward action plans and solid donations, Bush has spent most of the past critical week on holiday at his Texas "ranch," riding his mountain bike and avoiding the press. Predictably, only allegations of stinginess increased the White House's initial measly offer of $15 million for the relief effort to a grand total of $35 million...
