Tuesday, February 08, 2005

Take An Interesting Idea...


Take an interesting (albeit dubious) idea, hamstring it, tie it to a counter-productive proposal, and you have a David "Babbling" Brooks editorial.

The notion of having the government set up funds for babies upon birth is interesting, although the only specific proposal Brooks mentions is odd:
Under one version of KidSave, the government would open tax-deferred savings accounts for each American child, making a $1,000 deposit at birth, and $500 deposits in each of the next five years. That money could be invested in a limited number of mutual funds, but it couldn't be withdrawn until retirement.
Why the deposits over five years, instead of a single deposit at birth? Who makes the decision over investment in the "limited number of mutual funds" - and can the child revisit that decision (without penalty) when he or she reaches adulthood? And, if the money cannot be withdrawn until retirement, how is this fundamentally different from Social Security? That is to say, Social Security roughly translates into "money you get when you retire", as does this. Watching a pool of "my money" grow is not much of an object lesson if I didn't earn it, can't invest it in the manner of my choosing, and can't actually spend it... (Or is it that we expect these people to come to some sudden realization about the importance of saving and investment when they retire?) And, if in keeping with Republican "it's your money / ownership society" policies, beyond the restrictions on how the money is invested, retirees are forced to purchase annuities with the funds when they retire, doesn't it become just another form of Social Security or just another iteration of GW's proposed "private accounts" Brooks believes to be a dead letter? These are what Brooks deems to be "the psychological benefits of ownership"? As evidenced by what? The direction in which Brooks' knee jerks? The fact that rich kids never squander their trust funds?

But for Brooks, hamstringing an interesting idea isn't enough. He also proposes,
We could start by indexing Social Security benefits to prices, not wages, so the system wouldn't go broke. Then we could give everybody under a certain age KidSave accounts. This money could either supplement the reduced Social Security benefits, or individuals could divert some of their payroll taxes into their KidSave accounts, trading guaranteed benefits for more ownership.
So we are going to "start" by phasing out Social Security by tying it to price inflation instead of wage inflation? (I don't think anybody with a whit of knowledge about that particular proposal denies that the change Brooks mentions in passing would, over time, be tantamount to elimination of Social Security benefits. Had it been implemented in the 40's, the present maximum Social Security benefit would be what? Something like $5,000 or $6,000?)

How about this? Let me decide how I invest my own money, and stop lying to me about your intention to functionally eliminate Social Security.

And does Brooks really mean this:
And let me commit an act of heresy: it would be smart for Republicans to forgo making the Bush tax cuts permanent in exchange for these kinds of accounts. The Bush cuts are going to be repealed by the next Democratic president anyway, but these accounts, once created, would be forever.
I mean, he believes that the President can implement and eliminate tax cuts, without even bothering to consult the Republican House and Senate? (Or does he anticipate that the blowback from Bush's present policies will be so severe that the Republicans will soon lose their House and Senate majorities along with the White House?)

Rhetorical questions, obviously. He anticipates that the Republicans will do away with their own tax cuts, and blame it on the poor Democrat who is elected to clean up yet another fiscal nightmare created under a fiscally irresponsible Republican president.

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