Social Security: Threat or Menace?

Charles Krauthammer is on quite a soapbox, these days, arguing that Social Security is bankrupt and hence needs to be restructured, whether by cutting benefits, pushing back the retirement age (a favorite of those who don't intend to retire, and for whom, in any case, Social Security benefit payments would be the equivalent of the change they dump on the dresser every evening), or by some other means to keep it solvent.

Social Security, we are given to understand, is part of the deficit problem because, although actuarially speaking it works (that is, it has collected more money than it needs to pay out, and will remain in the surplus condition so defined for decades to come), it has made bad investments. Leave aside the likely Krauthammer response to a sudden discovery that, in fact, the Social Security Administration had been, these 30 years, stuffing the surplus into, say, Euros or the stock market: the System has taken the excess money it has collected and invested in government bonds, and the government --profligate Uncle that it is-- has simply squandered the money, leaving SSA with a bunch of worthless IOUs.

Krauthammer rightly points out that these bonds are owed by one branch of the US Government to another; and he scorns the notion that, in such a circumstance, the "full faith and credit" of the US means anything. "In judging the creditworthiness of the United States, the world doesn’t care what the left hand owes the right," he says. By this he means that, if the Treasury simply told the Social Security Administration to take a walk, those bonds are not going to be redeemed, the international markets would not care, and our financial position in the eyes of the world would not be changed.

Savor that thought: if the United States simply cancelled the Social Security program, the world would take no notice: financial markets would hum along without a hitch.

It is this kind of conceit that makes one wonder whether some opinion-makers have been too long ensconced in their think-tanks or faculty offices. It's not even necessary to construct the thought experiment in which fifty million senior citizens were told, one morning, that the checks would no longer be coming.

Well, Krauthammer would protest, it wouldn't happen like that. The government would be ... responsible (never mind that he is positing the opposite); it would cut benefits, or raise the retirement age, or, horrors, increase the payroll tax.

Fine. So his argument comes down to this: we must cut benefits now, or raise the retirement age now --he doesn't directly mention taxes; too painful for a rightie-- or else we will have to do so later.

As a call to arms, it falls a bit short of "The British are coming!"


But allow me to pursue the subject. Social Security, long hated by the conservative mainstream, is lumped in with the "entitlement" (a dirty word when it doesn't refer to Congressional perks) problem that is real, Medicare/Medicaid. The argument, of course, is this: Social Security is supposed to be self-funding.

Now hold that thought.

The next assumption is that Social Security, beginning this year or next, will pay out more than it will collect.

The conclusion is that this shortfall, a result of payroll tax collections being less than Social Security benefit payments, adds to the federal deficit and therefore must be corrected, within Social Security itself.

But wait, you will complain, that's okay: there's a huge surplus within the Social Security Trust Fund, from all those years up until today when the System took in more than it had to pay in benefits. Something sounds wrong here: either Social Security is a separate fund, entitled to draw as needed on its surplus, or its not. If it is, there's no imminent problem; if it's not, then it's just like any other government department --why single it out?

Think about this: if Social Security is not a separate fund, why should it be singled out more than, say, the Navy, or subsidies to corporate agriculture or Big Oil, for a haircut? No one ever warns that, next year, the Navy will be in a deficit position and so must be cut.

Here's the answer that dare not speak its name: Krauthammer and his chorus don't like Social Security. They like the Navy. The plan is to expand the military, because it goes where the really big money is, the money that goes into the pockets of those who don't depend on Social Security, will never miss it, and regard the dollars it pays out as a lost opportunity: the opportunity for more and greater tax cuts for themselves.

So Krauthammer wants it both ways, because it supports his agenda to have it so: Social Security is a "trust fund," and it must rely on generating a surplus (or at least on breaking even) to stay in business. But Social Security has no surplus --we spent that on other things-- and is not a trust fund, it's just one of the largest government expenditures, and so should be at the front of the line when those expenditures are cut.

Social Security is broke because it invested its funds in bonds that the government has the legal right to repudiate, without breaking a contract of the sort that is represented by government bonds in the hands of, say China. But because it is supposed to be self-funding (unlike the Navy), we must respect the fact that it is broke --we more or less intended this to happen, because we are inviting the government to act irresponsibly; leave aside the howls we'd be among the first to raise if it actually followed our advice.

And a final point: Krauthammer & Co. talk about the "solvency" of Social Security. They aren't serious, any more than they have ever been serious about the national debt. They don't want to "fix" Social Security so as to restore its solvency. They want any proposed fix to look so draconian that the program will be cut, will be allowed to wither, over decades, until it becomes our century's equivalent of the old WWII ration books: better than a poke in the eye, but it won't buy you much.

This is the political equivalent of killing your parents and asking for leniency because you are an orphan. But the unintentional irony of Krauthammer's position --he's just parroting the Party line-- should not mask its pernicious intent.

Lies, and Big Lies (and Statistics)

From a January 27 editorial in the Wall Street Journal:

“Eighteen months after the recession formally ended, the federal deficit for fiscal 2011 (through September) is expected to increase once again, this time to $1.48 trillion, or 9.8% of GDP. That's a share of GDP topped since World War II only by the 10% reached in Mr. Obama's first year in office, when at least the recession was an excuse. The annual deficit in the 1980s never exceeded 6% of GDP.

As the nearby chart shows, the main culprit is spending. After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP. Overall federal spending will have increased by $1 trillion in a mere four years. Without spending cuts, outlays will remain above 23% for the rest of the decade—starting to rise again once ObamaCare becomes fully phased in. (The outlay average from 1971 to 2010 was 20.8% of GDP.)”

There are so many objectionable comments in this piece that it is hard to know where to start. So I decided to focus on what has become received wisdom on the Right these days, and, because of the feckless acceptance by the Democrats of a Republican narrative, is generally understood to be true.

It is encapsulated in these sentences from the editorial:

"After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP."

and 

"The GOP-Obama tax deal will also keep revenues as a share of GDP below 15% in 2011."

The entire article is built on this comparison, and the accompanying chart. But it's misleading, as a look at the actual numbers would show. Here’s a summary:

GDP in 2011 is expected to be about $15 trillion. Federal Revenues will be about $2.3 trillion, or about 15% of GDP. Federal expenditures are expected to be about $3.6 trillion, or roughly 25% of GDP. So far, so good --precise numbers are surprisingly difficult to come by, at least in a half-hour of basic web-searching--, but this is as the article says, or implies.

By the way, according to the World Almanac for 2001, US federal government expenditures were $1,863,039,000,000 --about half of the projected 2011 level. Doubling in ten years sounds like a lot, but the old "Rule of 72" tells us that this would be an annual growth rate of 7% or so had it been spread evenly across the period. Still, population growth has been roughly 1% per year; so the increase is still substantial.

Federal government spending, as a percentage of GDP, was just under 18% in 2000; it grew slowly (okay, inexorably) for the first several years of the Bush II administration, until it was 19.38% in 2007, In 2009, it was 24.67% of GDP --it grew by more than four percentage points, or nearly 20%, in just one year, from 2008 to 2009 --way more than the ten-year average. 

So what happened to government spending between 2008 and 2009, to account for that enormous growth?

Well, spending grew, all right: from 2.75 trillion in 2008 to 3.2 trillion in 2009. This is nothing to sneeze at; it's an increase of 16%. But GDP fell between those 2 years, by 2.5%. This made the growth more than a full percentage point higher than it otherwise would have been: had GDP merely stayed the same, spending as a percent of GDP would have grown by almost exactly 24% --still high; and if GDP had grown by even 2% (less than its average growth during the Bush II years), spending as a percent of GDP would have grown to 23.2%. Of course, if GDP had not fallen, we wouldn't have had a recession, and substantial amounts of the spending growth would not have occurred.

Revenues, meanwhile, went from 2.5 trillion in 2008 to an estimated 2.1 trillion in 2009. Correct: a drop of 400 billion dollars, over 15%. 

So, when the WSJ article says, "As the nearby chart shows, the main culprit is spending," it is simply wrong. Revenues fell by almost the same amount that spending grew.

The fact is, if we step back, we had, between Bush's final full year (2008) and Obama's first (partial) year (2009), an increase in government expenditures of $450 Billion, and a drop in revenues of $417 Billion. So it's not too hard to see why the deficit "under Obama" has ballooned. And most of us, regardless of our opinion of federal spending, would not expect, or want, to see a drop big enough to make up that difference in a single year*.

     *I would be in the minority, here: I'd be happy to see a one-year cut in defense from $700 billion to $200 billion. But then I'm a Muslim-loving socialist.

I admit that when you lay out the actual numbers it's not nearly as sexy as using the percentages. But it would be well to remember that percentages involve both a numerator and a denominator. It's easy to see what happened here; it's what anyone would expect in a huge, crashing recession. 

And as long as we're looking at that WSJ chart of "The Spending Boom," we might just notice that, according to the chart, average revenues and average expenditures, as a percent of GDP, have been, since 1971, 3 percentage points apart. That's exactly what the chart projects for the future: 

Ought Obama to have avoided spending as much as he did? Maybe you can argue that, although not many serious people do --certainly the Republicans in Congress, along with GWB, were happy to install the TARP back in the weeks before Obama was elected. You cannot seriously argue that Obama has been on some sort of unprecedented, breakneck spending spree.

But you can make it look like that, if your political agenda requires it.

[sources for the figures: http://www.usgovernmentrevenue.com/#usgs302a   and

http://www.measuringworth.com/datasets/usgdp/result.php  ]

Taxes and the Real World

Kevin Baker tells it like it is on the state of US tax policy.

His point is straightforward. And, if I may elaborate a bit ---

The Republican religion (aside from Religion) has become "no tax increases of any kind --only tax cuts!" This makes it impossible to have a serious discussion about what kinds of adjustments ought to be made to a tax system that has become, some would argue, both a drag on our economy and an inadequate tool to support the operation of a modern state.

The system is a drag on the economy because political considerations have produced enormous imbalances, like direct government subsidies to gigantic oil companies that, year in and year out, are the most profitable organizations in the world; subsidies to corporate agribusiness --they were sold as, and maybe even meant for, help to the mythical "family farm--; artificially low tax rates to pharmaceutical behemoths who end up paying 5%.

The irony of this is that the Republican chant is always "small business;" yet small businesses, if they are profitable, and if they are operated as regular, taxable corporations, actually pay the highest rates, much higher than, say Eli Lilly or Pfizer.

In another arena, individual taxes, the imbalances are equally stark: a marginal tax rate of 28% on a doctor or small businessman who earns, say, $200,000, and a tax rate of 35% on an athlete or big-time Wall Streeter with earnings of $10 million. No rational person would say that this makes sense.

The trouble is, because of the no-tax religion, the Republicans are always in the position, even when they agree with the above, of saying that the only solution they will even discuss is to lower all rates.There's never an appropriate tax.

In other areas where sensible tax regimes would strengthen the country from a geopolitical perspective while helping reduce deficits and spurring "innovation" --another Republican totem--, sensible policy runs up against the same "no tax increases" refrain. So we have the lowest gasoline tax in the world, outside Saudi Arabia, and we consequently have huge barriers to change of any kind in the economic system that imports billions of gallons of gasoline, millions of barrels of oil, per day at enormous cost in terms not only of absolute dollars but also in terms of an unfavorable balance of payments, the support we provide to fundamentalist, autocratic regimes around the world who sponsor active hostilities against us, and the stifling of development in promising alternative technologies, which are being developed for sale to the world by China, instead.

Mr. Baker does a service by pointing out, from a relatively conservative vantage point, the destructive influence of the current Republican fixation on the status quo. Unfortunately, he is up against a force that is probably insurmountable: the need to get re-elected, and, in the process, to nurture the illusions of millions of self-styled (but inaccurately labelled) conservative voters, while doing the bidding of Big Oil, Big Pharma, and others who support the Congressional lifestyle.

Socialist Death Panels

From the blog "Texas on the Potomac," reporting on the comments of U.S. Congressmen from that state's delegation concerning the House vote to "Repeal the Job-Killing Health Care Law Act:" 

Rep. Jeb Hensarling, R-Dallas, chairman of the House Republican Conference:

"The American people don't want it. It's personal.

"Here's my story, two days ago, I was in San Antonio, Texas, and my mother had a large tumor removed from her head. They wheeled her away at 7:20 in the morning, and by noon, I was talking to her along with the rest of our family. It proved benign, thanks to a lot of prayers and good doctors at the Methodist hospital in San Antonio. My mother's fine. I'm not sure that would be the outcome in Canada, the U.K., or anywhere in Europe.

"No disrespect to our President, but when it comes to the health of my mother, I don't want this President or any President or his bureaucrat or commissions making decisions for my loved ones. Let's repeal it today, replace it tomorrow."

Now, first of all, this holder of one of the highest offices our nation has to offer believes that the reason his mother's tumor was benign was "thanks to a lot of prayers and good doctors ..." Prayers? Well, okay; if they'd been doing a better job of praying maybe the lady wouldn't have had the tumor in the first place. But good doctors? I know a lot of doctors, but I don't know of any who can make a malignant tumor benign. So we have to question Rep. Hensarling's understanding of how things work. Not in medicine; I mean, in the Universe in general.

But to move on, Hensarling, 53, doesn't want Obamacare. Specifically, he doesn't want the government making decisions about his mother's health care. Presumably, his mother is at least twelve years older than he, and so is most likely a Medicare beneficiary. Medicare, unlike private health insurance would have done, did not require that her surgery be pre-approved in order for the hospital and the surgeon to be paid. It did not, as some private insurers do, place limits on the pain medication or other drugs she could have in connection with the surgery. And unlike most private insurers, Medicare will in all likelihood pay the physician within 30 days.

Hensarling was pretty happy with his mother's government-provided health care. And, of course, as a congressman, he also has government-provided health care, and top-quality care at that, just like Mom. 

He just doesn't want the rest of us to have it. 

Universal Coverage: A Suggestion

As I understand it, the argument in the big lawsuit being brought against the President's health care plan is this: Under the Commerce Clause (in Art. I, Sec 8 of the U.S. Constitution), the federal government has the right to regulate commerce among the states.

This has been interpreted very broadly, to reach almost all economic activity that occurs within the U.S.

The lawsuit, however, argues that this rule provides only the power to regulate commercial activity that is taking place, or might take place; there is no power to compel that any particular activity be undertaken by anyone.

Example: You can be forced, if you, say, sell beef at wholesale, to abide by various federal restrictions on how beef cattle are slaughtered, packaged, graded for quality, and so forth. But if you grow vegetables, or just have some idle acreage, you cannot be compelled to begin raising and selling beef cattle.

To a layman, this argument makes some sense. Of course, the government has the power to tax; but by definition, taxes apply to economic activity, not inactivity. [this may need a separate examination]

It would be unfortunate, from my perspective, if this argument were to prevail. The individual mandate is key to the Affordable Care Act, for well-rehearsed reasons that go like this:

1. The system will depend on the availability of private insurance for everyone not covered by Medicare, Medicaid, or similar government programs; and the lack of a "public option" means that tens of millions will not be so covered, and so will have to seek private insurance.
2. Private insurers are required to offer coverage to all comers, on substantially comparable terms, so that everyone will have access to coverage.
3. To avoid "adverse selection" --a situation in which healthy people stay away because of the cost of insurance-- everyone not only can, but must, buy insurance. Subsidies exist to support those who may not be able to pay for the coverage.

This third point needs elaborating: If the cost of insurance is high, and I am healthy, why not just forego the insurance? After all, because of item #2, I can always buy in if I get sick, or start to age, and so forth. The result, of course, would be that (1) only the sick would sign up, (2) this would drive costs up, and so (3) even more people would begin to drop their insurance.

They key point in all this is that you can sign up whenever you want to. And this is a mistake. First of all, it's not true now even for Medicare participation: if you don't sign up within a specified time after you become eligible, you will be charged more to join; and if you miss the window for signing up, it will remain closed for a time.

This could easily be applied to private insurance under the Affordable Care Act:

• Everyone is allowed, but not required, to sign up for health insurance;
• If you fail to sign up, any insurer with whom you subsequently sign up can charge you a premium based on how long you went without coverage.

But there's more: If you don't sign up, you won't have another opportunity to sign up for five years. And, when you do apply, your application cannot be approved prior to the date that is 12 months after your application is received. So, if you don't sign up when the program is first available, you are guaranteed to be uninsured for a long time.

There are details to be ironed out, including notification, what to do with people who don't sign up but then join a company that provides coverage, and so forth. These are, I think, administrative matters that can be resolved fairly easily.

What's the catch? It's a big one: What do we, as a society, do with the person who fails to sign up, and then has a catastrophic accident, or a stroke, or gets cancer?

I'm sorry; but I suggest that we have to be harsh here: these people are on their own.

No, we won't leave them to die in the alley outside the ER entrance. But they will receive maintenance care ("palliative care") only, unless they pay, in advance, for any extensive treatment, curative or otherwise. And they (or their estates) will be billed for that care.

So, you don't have to have health insurance. But you do have to face the consequences, just as those who now rail against this requirement would presumably prefer.

The Gamble

The Congressional Republicans, clearly, have drunk the venomous Kool-Aid that has poured forth in an ever-increasing torrent from the likes of Limbaugh and Beck. [Q: why are the most listened-to voices on the radio not, somehow, part of the "mainstream media?"] They have accepted anger and denial as their governing philosophy. Having done so, they now must substitute symbol for substance, spectacle for plot (although "character," in the personae of some of the wing-nuttier new members of the House, looks promising as well).


Among the first items in the order of business:

• Read the Constitution on the House floor. The Constitution has become, for the Tea Party, what Mao's little Red Book was to the Cultural Revolution. It is Holy Writ, inerrant, universal, timeless. It's every word is sacrosanct. Well, okay, not every word: they skipped the part about slaves counting for 3/5 of an actual human being in determining population for purposes of Congressional apportionment. [It occurs to me to wonder: if a slave was the bastard child of his owner and an unfortunate slave-girl, would that child be counted as 1/2 x (1 + 3/5)?] Only the parts we like (or must pretend to like, such as the 13th Amendment) are holy.
• Pass "The Repealing the Job-Killing Health Care Law Act." And whatever we do, let's not record any votes on the specific provisions of the Law, which everyone likes.  We'll just repeal the whole thing. And the CBO's analysis that such repeal will add to the deficit? The CBO is wrong, because its conclusion is inconvenient. So we don't have to find the cuts we promised to find to match any and all increases in the deficit.

These are just two of the growing list of things the Republicans in the House will spend their time on. There are others, and they fall into two categories: Symbolic gestures, and reformulating their own campaign promises, including the Pledge to America, so that they can be excised from the public mind like gangrenous tissue.

The symbolic gestures won't hurt anyone. Sure, some of them will make some people look ridiculous; but that's in keeping with what has become the Republican style of late. No, the symbols are fine, and it's hard to avoid the suspicion that they are getting so much play just now, in part, out of a fervent hope that symbols will be enough.

And here is where the gamble comes in. Having cynically used the most extreme of the excesses of an ignorant, jingoistic, hopelessly confused minority as their rallying cry, the Republicans must now hope that they won't actually have to deliver. They'd like to; but they can't. They can't lower taxes and balance the budget. They can't cut  spending, win in Afghanistan, and bring back full employment. They cannot remove the regulations (whatever poor shades those might be) that are "killing jobs" and stifling entrepreneurship while helping the middle class return to prosperity. They can't turn back the clock.

Unfortunately, this is what they have promised to do. The risk is that those who voted them in will expect them actually to deliver. The gamble is that, as voters often do, these voters will forget what they asked for, and accept instead the clever naming of bills that will go nowhere, the subtle but persistent disrespect for, and de-legitimizing of, a president who won 53% of the popular vote, and the fulminating against socialism in the form of government regulation.

The gamble is the Republican hope that Republican voters don't really care about substance.

Equal Protection of the Law

Here’s the deal (as our Vice-President is fond of saying):

Every defendant in any criminal trial in the U.S. may have representation in the courtroom by only one attorney: the legal counsel appointed him, by lot, from the Office of the Public Defender.

Oh, and attorneys in said office must be paid on the same (average) salary scale that pertains to the lawyers in the nearest offices of the two largest private law firms in the country.

Now, go ahead and do your worst, budget-cutters, in stripping the courts of the means of functioning properly. At least we’re all equal in the eyes of the law, now.