Social Secuirty and Medicare -- The Sky is Still Falling

Frank Bruni has penned an entirely banal editorial, echoing those of years and decades past, about how unfair it is that Americans are "saddling" the next generation with the cost of Social Security and Medicare. Bruni pitches people over the age of forty against the "Millennials", but it seems like only yesterday that poor Gen. X was going to be forced to support the Baby Boomers.

For Bruni, Bob Kerrey proves to be a veritable fount of platitudes,

This subject haunts him more and more. “If we’re trying to figure out how to advance the next generation’s future, we need to be spending more on the next generation, and we’re spending it on yesterday’s generation,” said Kerrey, 70. “I am not the future. My 12-year-old son is. But if you look at the spending, you’d think I’m the future.”

So the argument is that we need to spend more supporting children? No, of course not.

Kerrey is referring mostly to Social Security and Medicare, which, along with Medicaid, are the so-called entitlements that claim a larger and larger share of the federal budget.

He’s fixated on those sorts of numbers: According to the Congressional Budget Office, Social Security, Medicare and Medicaid totaled 6.7 percent of the country’s gross domestic product in 1990. By 2010, they were 10 percent. And by 2038, such spending may represent 14.3 percent. It’s hard to see how that leaves much money for discretionary spending on infrastructure, on education, on research, on a range of investments that safeguard or improve the America that today’s young people will inherit.

Of course, by 2020 such spending may not represent 14.3 percent, but that's always beside the point in this type of editorial

If the problem is that we need to shift those numbers, let's consider what has happened when the President has proposed Reagan-style adjustments to FICA taxes and benefits. The Republicans have obstructed those efforts, and have even demagogued against the President as trying to cut Medicare benefits for seniors. The politics seem to be irrelevant for Bruni, but it's reasonable to infer both that one of the two political parties has no interest in reforms that will help to preserve Social Security and Medicare over the long-term, and that very same party is too craven to be honest with its supporters about its goals. And that's why haven't we moved forward on the obvious solution, which Obama has at times attempted to pursue despite strong opposition to benefits reductions from within his party. How does Bruni see it?

That unwillingness [to look at budgetary math] includes the predictable pushback from many members of Congress, from voters and from various advocacy groups when proposals are made to limit the growth of Social Security by, say, fiddling with cost-of-living adjustments.

Well, yeah, but it does bear mentioning that when one party was ready to forge ahead with reforms, the other party refused to cooperate.

Bruni continues with a complaint that we're already making cuts,

Talk to physicians and other scientists who have long depended on research grants from the National Institutes of Health to keep the United States at the forefront of invention and innovation and they’ll tell you how thoroughly that spigot has closed over the last 10 years. They’re defeated, despondent.

Would Bruni have us believe that those doctors were focusing their full effort on childhood illnesses? Of course not. But if not, how does he reconcile his complaints about spending cuts with his complaint that we're spending too much money on the medical needs of older Americans?

Bruni offers another tired complaint,

The Urban Institute released a report in 2012 that looked at figures from 2008 for the combined local, state and federal spending that directly benefited Americans 65 and older versus spending that went to Americans under 19; the per capita discrepancy was $26,355 versus $11,822. Julia Isaacs, a senior fellow at the institute, told me that while data for subsequent years hadn’t been analyzed yet, it wouldn’t show a significant change in that gap.

Sure, if you include Social Security and Medicare, we spend a lot more money on older Americans than we do on kids. But Social Security is a program that you pay for over your working years, and for the average participant the return on the investment is not particularly impressive. Similarly, Medicare is supported by people over their working lives and it's reasonable for people who have spent their lifetimes paying into the system to receive its benefits when they retire.

Would Bruni complain that the money in his 401K plan is not clawed back for the benefit of younger workers? That the long-term care insurance he paid for ends up paying for his long-term care? One would expect not. While an argument can be made about whether workers should pay more or whether the payout is too high (or too low), there's no equivalence between Medicare and Social Security payments, which workers have paid for, and government funding for kids.

As for Bruni's general complaints about how his peers talk about millennials,

Sure, some people make a habit of complaining about "kids these days", but such has it always been. Bye Bye Birdie came to stage in 1960. here's a memory from 1967:

What's the Alternative to Chained CPI

Matthew Yglesias is upset that the President has raised the possibility of using chained CPI for cost of living adjustments for Social Security:

The risk here now is twofold. Inside the Beltway, Republicans can say "well, look, we disagree about taxes but why don't we just do these entitlement reforms that even the president thinks we should do." Meanwhile, outside the Beltway Republican candidates can run ads castigating Democrats for bankrupting the country so badly that they want to add Social Security cuts to the dastardly Medicare cuts they already implemented. Part of the point of the Senate Democrats' budget was to stake out a position of easily defensible high ground. This seems like the White House wading into a much more exposed piece of territory.

If the leading concern is that the Republicans will take one of President Obama's proposals and run misleading or false attack ads, the President may as well close up shop and go home. That's inevitable.

If the leading concern is that the Republicans will propose a Social Security "fix" that renders the program solvent for the indefinite future, it's been pretty clear that the Democrats and President Obama would cooperate. That's been true for more than four years. Obama's "grand bargain" proposal from a couple of years ago included a Social Security "fix".

The Republicans won't propose to isolate Social Security, patch the program and end their demagoguery about its pending insolvency because they don't want to fix the program and leave it, essentially, as-is. Were they to actually propose such a Reagan-style fix, it would not be the Democrats whose agenda would suffer were it to become law.

I think Yglesias also misapprehends public sentiments about Social Security. That is, while there's not broad excitement or enthusiasm for benefits cuts, the net impact of decades of rhetoric about the program being on the verge of bankruptcy has created a context in which the public (including many Social Security recipients) is willing to accept cuts in order to preserve the program. There is no broad, public confusion about which party wants to preserve Social Security and which would prefer to privatize or end the program and, while the Republicans might create scare ads to try to gin up their base, I don't think many outside of the Republican base would be receptive to the notion that it is the Republicans who want to prevent cuts and save Social Security.

Social Security is supposed to be self-funding. If you want to preserve it as a self-funded program over the long-term, you need to look at its income and expenditures. If you want to complain that the President is looking at the wrong number, please tell us: what number would you prefer that he look at? Sure, you can argue that the President should be asking for a FICA tax increase to cover the projected growth in Social Security expenditures, instead of suggesting a cost of living adjustment that will lower payments over the long-term, but it's pretty obvious why the President isn't offering the Republicans a tax increase in exchange for their agreement with his tax increase for the general fund.

It would be reasonable to argue that there are presently two aspects of Social Security that are putting the most stress on the system, SSD benefits for disabled workers and the effective subsidy given to families where one spouse does not work outside the home or earns significantly less than a higher-earning spouse. If you believe the definitions are too lax, it would be reasonable to argue that Congress should revisit its definitions of what constitutes a disability for the purposes of qualifying for SSD. If you do not, it would be reasonable to argue that a spike in SSD applications and qualifications due to a significant downturn in the economy justifies a subsidy from the general fund, just as SSI payments for disabled persons who don't have enough work credits to qualify for SSD are paid from the general fund.

It would similarly be reasonable to argue that the benefits given to a stay-at-home or lower-wage spouse offer value to society, but would more reasonably be paid for out of the general fund as opposed to from wage-based contributions. Keep the program true to form, as a compulsory savings program, and to the extent that Congress believes it beneficial to society to provide a larger-than-otherwise-available retirement benefit to the lower-earning or non-earning spouse, pass that cost onto society as a whole instead of asking workers who will not receive that subsidy to take a benefits cut in order to subsidize other families. But... I don't hear anybody making that type of argument.

The proposal I hear most often is to remove the cap from FICA taxes, such that the wealthiest in effect experience a pretty massive tax increase. The argument is that if you look at the numbers, that move renders Social Security solvent for the indefinite future. The first problem is that it's a non-starter: nobody who is in a position to effect Social Security reform is backing it. It's not going to happen. The second problem is that you will shift some wealthy and powerful defenders of Social Security from the pro- column, based upon the largely equitable system for collecting and distributing benefits, into the anti- column, based upon your transforming a savings program into what will come to be perceived as a welfare program. You'll mobilize every anti-tax group that is presently agitating over significantly smaller numbers to target Social Security. So if that's your idea of "serious", you're agitating for a proposal that is completely unrealistic and, over the longer run, is apt to bring the roof down on our heads.

Let's recall also that one big factor here is that senior citizens vote. Yglesias is concerned about Republican ads that "Obama cut your Medicare and wants to cut your Social Security" because... senior citizens vote. So why am I to believe that if senior citizens realize that chained CPI is reducing their benefits to an unacceptable level, no politician will notice, and no senior will say, "Hey - let's vote for the politician who's going to fix this boondoggle and implement a more reasonable COLA"? We are presently talking about ten year budget plans but that means we're talking... five Congresses, two, maybe three Presidents... none of which can bind its successor. For a point of comparison, under the present formula if the cost of living adjustment would reduce benefits due to deflation, the COLA applied is zero percent - by design, not by accident. Seniors will notice what is happening.

Seriously, it's easy to say, "The President shouldn't have made that specific proposal, even though it fixes Social Security's books", but what's the alternative? And why should we view as "serious" a President who simply shrugs off the issue because a tough choice is involved or, shocking as it is, because politics are involved?

Ruth Marcus, Susceptible to Self-Satire

Ruth Marcus appears amused that some of her peers can't recognize obvious satire,

The item was too delicious to resist: New York Times columnist Paul Krugman, he of the don’t-worry, be-happy approach to the federal deficit, had been forced to declare personal bankruptcy.

Except it wasn’t true. The tidbit was satire, from a Web site called the Daily Currant. The Currant’s “tell” was obvious to anyone who took introductory economics: Krugman, it said, had attempted, like a good Keynesian, to “spend his way out of debt,” after “racking up $84,000 in a single month . . . in pursuit of rare Portuguese wines and 19th-century English cloth” — a wink-wink reference to the classic examples of comparative advantage in international trade.

The piece would be stronger, of course, if it didn't open with Marcus caricaturing Krugman's views, or even if it were clear that Marcus knew what she was doing. It would have taken even the more credulous of her peers mere seconds, minutes at most, to determine the source of the Krugman satire, or that Krugman had not declared bankruptcy. So what's Marcus's excuse for not knowing the views of an economist who has been anything but a wallflower on these issues?

Here's Krugman on debt:

Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest....

So yes, debt matters. But right now, other things matter more. We need more, not less, government spending to get us out of our unemployment trap. And the wrongheaded, ill-informed obsession with debt is standing in the way.

And more recently:

Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period....

So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now. And as I said, given the needs of the economy, the deficit is currently too small.

In simple terms, Krugman is explaining that deficits matter, but that if they're at a sustainable level they're not a threat to the economy, and that the time to worry about balancing the budget is when the economy is booming in part so that you can avoid self-destructive austerity measures and afford sufficient stimulus spending when the economy is faltering. It doesn't seem that hard to understand... unless, as it seems, you're a Beltway pundit or a Republican partisan.

Do you remember who actually took the position that "deficits don't matter"? A guy whose administration used the Clinton surplus as an excuse to slash taxes for the rich, ran up huge deficits during a period of economic recovery, and crashed the economy on its way out of town. Did Marcus ever so much as whisper a word of criticism? If so, I missed it.

But, oh, something seems familiar about Marcus's quip. "Don't-worry, be-happy." Oh, right, the time Marcus humiliated herself by trying to take on Krugman in public. (Do I give her and her peers too much credit by assuming she's been introduced to at least one take-down of that piece? Mark Thoma: "Ruth Marcus Tries to Show Her Beltway Badge of Seriousness"; Brad Delong piles on. Krugman commented primarily to point out that Marcus didn't understand the statement that she had used as the centerpiece of her attack.)

I really think it's time for Marcus to do the tiny bit of work that she recognizes would have saved her colleagues from embarrassment, and take the few seconds to read what Paul Krugman is actually saying about the economy and deficits, even if it's more fun to believe the satire.

Collective Action - Aspiration vs. Reality

Charles Lane wrote a column recently in which he complained that "collective action" is overrated:

[T]he gist [of Mancur Olson's argument] is that large numbers of people do not naturally band together to secure common interests. In fact, the larger the group, the less likely it is to act in a truly collective manner.

As Olson explained, the interests that unite large groups are necessarily of the lowest-common-denominator variety. Therefore the concrete benefits of collective action to any individual are usually small compared with the costs — in time, effort and money — of participation. “Free-riding” is a constant threat — as the difficulties of collecting union dues illustrates.

By contrast, small groups are good at collective action. It costs less to organize a few people around a narrow, but intensely felt, shared concern.

Lane suggests that Olson's thesis is supported by the existence of lobbyists and "special-interest groups that swarm Congress", seeking favorable legislation. He also speaks as if this is a new thing, or that the recognition of diverse interests and competing factions didn't arise until Olson published his 1965 book.

I agree with the general thesis that, the larger the group, the more difficult it is to achieve consensus, and that the difficulty compounds as you try to achieve consensus on a greater number of issues or across a broad range of subjects. Lane is also correct that factions tend to look out for their own self-interest, "whether or not success comes at the larger society’s expense". Lane is correct that groups that self-select for a specific purpose (e.g., to lobby Congress for a favorable tax law, or a protectionist regulation that protects them from competition) can be effective at advancing their agenda. They tend to be even more successful when they are well-funded.

However, he runs into trouble when he attempts to turn his critique of collective action into a critique of stable democracies and, more specifically, the Obama Administration. Turning to a later book by Olson, Lane argues,

His paradoxical, and deeply depressing, conclusion: Political stability is a curse of sorts, because, over time, stable societies accumulate interest groups, with all the distortion and complexity that breeds. “On balance,” he wrote, “special-interest organizations and collusions reduce efficiency and aggregate income . . . and make political life more divisive.”

Lane diagnoses the United States with that "British disease", with too many factions looking out for their own self-interest, with the result that the bargaining table is "too crowded to agree on the problem, much less a solution."

But if we step back for a moment, the foundation of the Lane/Olson "British disease" thesis is weak. First, Britain's fall from its status as a dominant world power followed the collapse of colonialism and its involvement in two world wars. Over that same period the U.K. underwent a massive social transformation. Its likely that the social transformation did lead to a greater number of voices vying for the attention of Parliament, but Britain's decline began long before, under a class-based power structure that was far less responsive to many of those voices, so it's difficult to even find a meaningful correlation, let alone causation. To focus on an increased number of "special interests" while ignoring the economic drivers of Britain's shrinking influence is to miss the forest for the trees.

Further, if it is in fact true that older democracies become ineffecient due to their being overwhelmed by a proliferation of special interests, where can we find the modern, nimble democracies not yet weighted down by faction? France's Fifth Republic? Greece passed its most recent Constitution in 1975 - what should we make of that? Which of the democracies borne of the fall of the Iron Curtain are exemplars of the efficiency and lack of faction that Lane attributes to long-term stability?

In criticizing the President, Lane also misses the entire point of appeals to unity and collective action. It's not that the President is lacks "realism". It's that he, like every President who came before him, recognizes that you don't unify the people or inspire the type of solutions Lane claims he favors by telling the people, "We're hopelessly divided by faction, we have no chance of solving tough issues, so 'every man for himself,' 'good luck and thanks for all the fish.'" The notion of the people as a collective, pulling together, is part of the preamble to the Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence,[note 1] promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Divisions among the citizenry, and the need to nonetheless pull together, have been part of presidential rhetoric from the time of George Washington:

Citizens, by birth or choice, of a common country, that country has a right to concentrate your affections. The name of American, which belongs to you in your national capacity, must always exalt the just pride of patriotism more than any appellation derived from local discriminations. With slight shades of difference, you have the same religion, manners, habits, and political principles. You have in a common cause fought and triumphed together; the independence and liberty you possess are the work of joint counsels, and joint efforts of common dangers, sufferings, and successes.

But these considerations, however powerfully they address themselves to your sensibility, are greatly outweighed by those which apply more immediately to your interest. Here every portion of our country finds the most commanding motives for carefully guarding and preserving the union of the whole.

Lyndon Johnson:

This is one nation. What happens in Selma and Cincinnati is a matter of legitimate concern to every American. But let each of us look within our own hearts and our own communities and let each of us put our shoulder to the wheel to root out injustice wherever it exists. As we meet here in this peaceful historic chamber tonight, men from the South, some of whom were at Iwo Jima, men from the North who have carried Old Glory to the far corners of the world and who brought it back without a stain on it, men from the east and from the west are all fighting together without regard to religion or color or region in Vietnam.

Jimmy Carter:

With God’s help and for the sake of our nation, it is time for us to join hands in America. Let us commit ourselves together to a rebirth of the American spirit. Working together with our common faith we cannot fail.

I suspect that Lane has been thinking about the issue of faction and how it impedes government action, and has a better column hidden somewhere inside his head, but made the poor choice of trying to build his case based upon a flawed thesis about the "British disease", presidential rhetoric that is consistent with that of every other president, and the conceit that the concept of faction and competing interests is relatively new to politics. Lane also overlooks the dark side of faction, with its "us versus them" thinking, and although he acknowledges "", he elides from his column any mention of wedge issues and the manner in which political factions and parties attempt to create and exaggerate differences between groups in order to prevent political change or progress. Sometimes it's the rhetoric Lane criticizes, that of unity and common interest, that allows for the type of change he claims to endorse.

Lane betrays his actual complaint when he engages in the language of his own faction, that of the Very Serious Person:

But the president’s paean to collective action lacked Olson’s realism. The question is not just how much more government we need or want, if any. It’s also how much more government we can afford, in light of its purposes and given the risks Olson identified — which have already materialized in the form of unsustainable but politically untouchable entitlement programs.

The question for Lane, though, is not how much government we can afford, because his faction is unconcerned with how government could provide the same level of service at a substantially lower cost. Were Lane to break out of the groupthink of his faction he would acknowledge (as has his paper) that the only government "entitlement" that is projected to be unsustainable is Medicare, while Social Security can be made sustainable for the indefinite future with relatively modest changes. Fixing Medicare? Lane's own newspaper doesn't think the problems are all that difficult to fix, but it's also telling that Lane isn't advocating the immediate, significant cost savings that could come from emulating the better national health insurance plans of other western democracies.

At the end of it all, Lane does a pretty good job of evidencing his larger point, that it's difficult to find solutions when people won't look past their self-interest. He grouses that the President isn't sufficiently serious about entitlement reform while failing to admit that President Obama keeps offering Reagan-style Social Security reforms that will keep its books in balance, despite the howls of factions on the left. He similarly ignores the fact that the Patient Protection and Affordable Care Act (Obamacare) attempts to improve the quality of Medicare while reducing costs, and that its cost-saving measures would be stronger but for the obstructionism and demagoguery of the Republican Party. And of course, he fails to note that Obama was ready to enter into a "grand bargain" with the Republicans on taxes, spending and entitlements but... the Republicans walked away from negotiations.

I can't argue with Lane's feelings - we would all feel better if the government stopped listening to anybody else, and honed in on what we, individually, believed to be in the best interest of the nation. I guess it needs to be said: that's not realistic.

Jennifer Rubin's 'Best' Isn't Good Enough

In what some might see as an attempt to defy a popular definition of insanity, I saw a link to Jennifer Rubin's comment, "How to Win the Debt Ceiling Fight" and decided to see if she actually had something useful to say.

Republicans are struggling to devise a formula that simultaneously holds the president’s feet to the fire and yet escapes the charge that the GOP is playing Russian roulette with the country’s credit rating. As a practical matter I simply don’t think Republicans have the fortitude to hit the debt ceiling. To avoid the inevitable march-up-the-hill-down-the-hill routine there are two strategies (probably more) readily available.

That is to say, without actually explaining what a victory would look like, Rubin perceives two potential "winning strategies" for the Republicans. The first?

First, following the lead of Sen. Pat Toomey (R-Pa.) in 2011, Republicans could pass legislation explicitly prohibiting default on our obligations and spelling out a sequence for paying our bills so that we don’t default on bond holders, stop Social Security checks or stiff the troops. However, this still might require shutting down other parts of the government, which the GOP has shown no stomach to do.

Should somebody point out to Ms. Rubin that if she admits, at the outset, that the Republicans have "no stomach" to implement her first idea, there's no point in pretending it's serious? Note, Rubin's objection is that the Republicans have no follow-through. She ignores the logistical issues: if she knows of a way the House of Representatives can "pass legislation" that becomes law despite being rejected by the Senate and President, I would love to hear about it....

At the heart of Leahy's proposal is, I suspect, a recognition of how much power Congress delegates to the President when it forces a government shut-down. The idea would presumably be to structure the shut-down to damage Democratic interests while protecting Republican interests over a period of months while the government is unable to pay its bills. The problem thus goes well beyond "stomach", and into the territory of naked partisanship. The Republican Party would have to show its hand - to let the public know exactly what the price would be for its brinksmanship, and how much worse things would get over the ensuing weeks and months until default became inevitable. And... then what?

When the blackmail is explicit, the President will be able to point directly at the blackmail - "They say that if I don't agree to budget cuts that they won't identify, they're going to keep me from paying your Social Security retirement benefits>". What would be the Republican response to that? Would they develop the "stomach" to identify the cuts that they want? Rubin doesn't think so. So the President's response can be, "You control the purse strings - pass a bill enumerating the cuts you want in order to get us out of this catastrophe you've created," and the Republicans have to choose between looking like (malicious) fools, identifying the cuts, or folding. Even Rubin can see the folly of that approach.

What's Rubin's other idea?

The other approach, the smartest I have seen so far, comes from Keith Hennessey, who explains that Republican leaders begin by “assuring [the president] that we will not allow the government to default on its obligations. The debt limit will be increased. The questions we must resolve are first, whether we will simultaneously cut government spending and second, who will cast the votes for the debt increase.” The Democrats then have a choice: either agree to significant entitlement reform in conjunction with a debt increase to get Obama through at least 2014 or the House Republicans will ”deliver 50 Republican votes for a three-month clean extension.

Basically, the Republicans will say, "We're up against the debt ceiling and we want you to make cuts." The President will reply, "What cuts would you like to make?" The Republicans will once again come up with nothing (as Rubin says, "no stomach"). The President will reply, "If you don't want to cut the budget, then you are going to need to approve the spending you've already authorized." The Republicans will then pass a debt ceiling increase approving that spending.

That is the smartest Republican strategy Rubin has seen? She provide's Hennessey's rationale,

[T]his strategy would tell the President, “Hey, if you want your terrible policy, you’re going to have to deliver House Democratic votes for it. Good luck with that.” Either the President accepts and Republicans pound on the “Democratic debt limit increase” message every three months, or he agrees to cut spending. Either way, default risk is eliminated. Republicans will look responsible because they will be acting responsibly, and the markets couldn’t care less about which Members take political heat for casting these unpopular votes.

So every three months the Republicans will say, "Cut spending or we'll raise the debt ceiling," the President will reply, "If you're going to raise the debt ceiling anyway... but, okay, I'll humor you, what cuts do you want me to consider?" The Republicans will reply, as usual, with "We got nothing." Then the public will get mad at the Democrats because the debt ceiling goes up? And it's "lather, rinse, repeat every three months for the next four years"?

Wow.

Not content to simply look foolish, Rubin has to embellish Hennessey's proposal with some terrible advice for her party:

I would add that under no circumstances should the negotiations (if the president chooses to entertain real entitlement reform) be in secret and/or between Republican leaders and the president. It’s time for regular business, with all lawmakers forced to cast votes. Shifting the focus away from the White House is hugely important in avoiding a (losing ) PR battle with the president and might actually deliver results.

Except this Republican grandstanding only works when they pretend it's the Republican Congress against an all-powerful President. If you reduce the role of the President, you make it obvious that Congress controls the proverbial purse strings - that the debt ceiling sideshow is irrelevant, and that the fundamental problem is that the Republicans in Congress keep authorizing the spending that necessitates government debt. You allow the President to point to the public, bipartisan negotiations and say, "When they come up with solutions, I'll be happy to review their budget reform bill, but for now they are running up the bills and it's my job to pay them." And then, per Rubin's proposal, the Republicans will raise the debt ceiling without condition. It's as if she wants her party to appear toothless.

A final word of advice: The Republicans should turn the president’s favorite class warfare game against him. He is the one defending Warren Buffett’s right to receive Social Security and free ride on Medicare; Republicans want to force rich people to pay more and get less so middle- and lower-income people have their benefits. Republicans may shy away from such arguments but unless the GOP captures the “fairness” argument and becomes the champion of the little guy, it will keep losing support and forever be outfoxed by the White House.

I am not sure that Rubin is going to convince more than a tiny handful of dimwitted people that somebody who pays FICA at the maximum rate for most of his career, and continues to do so well past retirement age, is getting a "free ride". If it needs to be explained, if you pay for insurance you are entitled to receive the coverage that you have paid for, even if you're rich - and Buffett, at age 82, is still paying into the system. Further, despite Rubin's eagerness to engage in what her party decries as "class warfare", even if you disqualify the top 1% from eligibility for Social Security and Medicare you will not materially affect the balance sheet.

Rubin apparently hopes that this form of Republican class warfare will confuse people. "We could cut Medicare spending by 1% if the richest 1% of the population were declared ineligible for Medicare. We, the Republican Party, don't think that's fair and to show that we stand for 'the little guy' we propose cutting everybody's Social Security and Medicare benefits."

Rubin's good at pouring out the snake oil, but if she wants people to actually buy it the trick is to confuse people into thinking they're getting something other than snake oil.

Should Social Security Retirement Be Subsidized?

One of the central features of Social Security, and one that has helped insulate it from decades of effort to scale it back, is that it is designed to be self-funding, and to pay out an amount that is roughly consistent with what a retired worker paid into the program. The history of Social Security stands as a strong argument against turning it into a means-tested program, requiring higher-earning workers to contribute an even greater share of the cost of the program, or making benefits more contingent upon a retiree's assets and other sources of income than on his past contributions.

A few days ago, David Brooks argued that Medicare is too good of a deal for retirees - that, according to the Urban Institute, a couple of average income receive far more in Medicare benefits than they paid for over the course of their careers. Brooks did not offer a link to the Urban Institute's data and, in this era, the absence of a link makes me suspicious... so I searched until I found the source. Sure enough, the authors found that for a married couple earning an average wage and retiring in 2011 at age 65, under the author's formula the cost of Medicare to the couple was $119,000 and the benefit was $357,000.

Why wouldn't Brooks have linked to that? Because the figure for Social Security was contributions of $598,000, benefits of only $556,000. That is, if Brooks wants to argue that the couple is getting a great deal on Medicare, he has to admit that under the exact same analysis they're getting a raw deal on Social Security, and he apparently decided that rather than trying to reconcile his argument with the facts it would be better to play "hide the ball" with the numbers.

As it turns out, Social Security isn't a good deal for a single person earning an average wage - $299,000 in, and $290,000 out for a female recipient vs. $266,000 for a male. At average wage (or higher) the couple that sees a tremendous return on their investment is the one-earner couple, paying in the same $299,000 but receiving $448,000 in benefits. Looking at other data from the same authors, the subsidy to a couple with one low-earning partner and one partner with average earnings is modest, and everybody else earning an average or higher wage is providing a modest subsidy to other recipients.

There are plenty of reasons why we, as a society, would want to ensure that stay-at-home spouses will not be impoverished in their retirement in the event of divorce or the death of the spouse who was employed outside of the home.¹ The very fact that the phrase, "worked outside of the home" is preferred by many over "had a job" reflects a cultural value. If in fact we, as a society, choose to value and privilege the role of homemaker, that's fine - but taking that position raises the reasonable argument that it should be society, not other working adults, who subsidize that cultural value. We fund SSI benefits out of the general fund due to the disconnect between those benefits and an employment history; why not do the same for retirement benefits extended to people who lack a sufficient work history of their own to otherwise qualify?

To look at it another way, if a Member of Congress were to propose eliminating or substantially reducing the subsidy to retirees in households in which only one spouse worked outside the home, what sort of firestorm would be unleashed? If our societal feelings are so strong that we can't even discuss the economic side of the picture, then we should be willing to address the cultural issue and the benefit we receive as a society by providing a very large subsidy to those households in retirement.

If the program is largely in balance other than for our determination as a society that stay-at-home partners of wage earners should receive most of the benefits that they would obtain had they also been employed outside of the home, it's reasonable to argue that the subsidy should come from the general fund and not by increasing the Social Security taxes upon or decreasing the retirement benefits that would otherwise flow to other retirees.

The Sky Will Always be Falling

Back when I was a kid, a constant refrain was that Social Security was going to go bankrupt and that it would not be around when I eventually retired. "You'll pay into it your whole life, but you won't get any benefit." Then Ronald Reagan signed the Social Security fix, and the narrative changed dramatically. No, wait, it didn't change at all.

So when I hear Kevin Drum argue,

I am, of course, one of those liberals who's in favor of a [Social Security] deal [even though liberals could just wait it out and not give up anything]. Why? Because I think it's worthwhile for young people to have faith that Social Security will be there for them when they retire.

it appears he needs to be reminded: The sky is always falling, we have always been at war with Eastasia, and (even if the actuaries project that it's fiscally sound into the next millennium) young people are going to be told by the powerful voices that hope to undermine the program that Social Security is not going to be around when they retire.

As Usual, Michael Gerson Overplays His Hand

It's not that he gets off to a good start - he's eager to jump sharks from the word "go" - but how can the man look himself in the mirror after serving up a whopper like this one:

There is a political problem at the heart of the budget debate. If Democrats get what they want — tax-rate increases on the wealthy — they can crow about it in public. If Republicans get what they want — structural reductions in entitlement spending — they are unable to crow. Their motivation is fiscal and ideological, not political.

Gerson's memory is perhaps too short to recall, but when his former boss, George W. Bush, was elected to office our nation had a budget surplus. A few years later we has massive tax cuts, two unfunded wars, the unfunded Medicare Part D benefit, and a massive budget deficit. And then, for Act 2, we got the collapse of the economy. Their motivation is fiscal? If you believe that the Republican Party cares about balancing the budget, you're a fool.

Remind me again, where was Michael Gerson when the Bush Administration was taking the explicit, public position that deficits don't matter? Oh yeah... he was writing Bush's speeches.

Is Republican opposition to Social Security and Medicare ideological, at least within the party itself? Certainly, but not an ideology born in a vacuum. The ideology that drives the Republican Party to attempt to undermine Social Security and Medicare is very much about politics - it's about pleasing powerful and monied interests that bankroll the party, and is about gaining and holding power over the long term.

If Gerson means to suggest that it's a double-edged sword - that the Republicans accept a certain amount of political risk when they make massive cuts to Medicare and Social Security a central part of their party's ideology, and that they thus misrepresent their motivations and goals so as not to alienate the beneficiaries of those programs - he has a point. But to make that point he has to actually admit that the leaders of his party cannot be trusted to tell the truth. That is to say, opposition may be driven by ideology at the top, but the rank and file Republican voters like Social Security and Medicare. They don't share the ideology of the party's elite, and the Republicans therefore obfuscate lest they find themselves unable to win an election.

The heart of the present conflict is that the Republicans have been lying to the public for years, a lie exemplified by the Romney/Ryan budget proposal. Romney promised that he was going to cut taxes, significantly increase military spending and, although he proposed an idea to transform Medicare into a voucher program starting a decade in the future, that he would maintain Medicare benefits for those 55 and older and would not cut Medicare spending. When he was asked for specifics we got "I'll fire Big Bird".

The truth is, if you want to balance the budget it's going to be painful. If you want to balance the budget without increasing tax revenue, it's going to be extremely painful to the middle class. Gerson had no problem with the Bush-era lie that "deficits don't matter", and he has no problem with the present Republican lie that the budget can be balanced - with trillions freed up for tax cuts and increased military spending - by closing loopholes in a revenue-neutral fashion and eliminating waste. His problem is that the Democrats refuse to take ownership of the Medicare and Social Security cuts his party desires.

In focusing on the specifics of Gerson's mendacity, let's not lose track of the big picture. This Congress cannot bind future sessions of Congress to its spending plan. What Gerson and the Republicans want is not an actual, workable plan to balance the budget over a period of years. They want the President to agree to structural changes to Social Security and Medicare that would be difficult for future sessions of Congress to undo, while offering no assurance that they won't be every bit as profligate and irresponsible as Bush with the "savings" that result.

The President is resisting that "deal", and Gerson's unwilling to articulate the stakes in an honest manner, so instead we get this noisome whinging about how the President is a meany-pants who isn't offering enough concessions to the poor, downtrodden Republicans.

Politics, Policy and the Fiscal Cliff

Robert Kuttner analyzes the President's proposals on taxes and the budget as we approach the so-called fiscal cliff:

However, despite the president’s elegant move on tax policy, there are two other aspects to deficit and budget politics where his posture is not quite so firm.

One is whether to include Social Security and Medicare reform (by which the right means cuts) in a Grand Bargain.

This was always a dubious idea, and part of the right’s hidden agenda to mix up current budget politics with long-term issues about social insurance. Yesterday, Obama came closer than ever before to saying that he would not sacrifice Social Security.

First, the President expressed during the first debate that Social Security reform was on the table:

You know, I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Speaker -- Democratic Speaker Tip O'Neill. But it is -- the basic structure is sound.

If the Republicans can put politics aside, they can get a Social Security deal inside of a few hours of negotiation - minor adjustments that improve the program's fifty year projection and make the accountants happy. The President appears to be telegraphing that no further deal will be made.

Second, the Republicans made clear first with their demagoguery about "death panels" and Obama's Medicare spending cuts, and second with their retreat from their own voucher proposals for anybody under fifty-five, that they have no stomach for actually reforming Medicare. They want to do it, but they lack the courage and fortitude.

The President can play the same game that Romney and Ryan attempted during the election - "We'll preserve Medicare for now, but we'll cut spending in the future, when the economy is stable and we've had time to study the issue and identify savings." Frankly, if the goal is to avoid the "fiscal cliff", that's all you can do in the short term. Whatever is agreed it's reasonable to anticipate that three, five years down the line when the cuts are supposed to be put into effect, Congress will blink. Just as they do every single year with the "doc-fix".

Kuttner argues,

Obama has let it be known that he wants the deficit reduction to be “back-loaded”—little if any in the first year or two, and then a gradual phase-in. That’s better than the reverse. But in the end game, the most important thing for Democrats is not to be locked into any multi-year mandatory cuts.

Barring some kind of multi-year super-deal—that Obama should avoid—the rules of Congress prohibit one Congress from binding another.

Right now, arbitrary, mandatory cuts are working pretty well for the President. If a new fiscal cliff is created to compel another round of negotiations a year from now, it's likely to be Congress that is running scared.

Realistically speaking, any deal would be in two parts - tax and spending changes that will be put into effect this year and an agreed framework for future years. I'll grant, if you push cuts too far into the future you are likely to see that although some reform measures are put into immediate effect, key future measures not. Neither side wants to fumble that ball - they both have wish lists they want put into immediate effect, and likely both hope to trade them for promises of what they "will" do in the future.

Highly Informed, Highly Engaged Voters Won't Be Fooled by Douthat

It's reasonable to infer that when a partisan Republican columnist laments that he has "sympathy for the undecided", his column is going to attempt to explain why undecided voters should break in favor of his candidate of choice. Alas, Ross Douthat has not polished his skill at making this form of argument to the extent of his colleague, David Brooks, but he gives it his best shot.

Douthat's first tactic, flatter his audience. People make fun of undecided voters, Douthat laments, but you, his undecided reader are part of a "rarer species" than the undecideds who are subject to ridicule - you are "the highly informed, highly engaged, yet still conflicted voter."

Whatever partisans on both sides may insist, there are good reasons that a high-information voter with views somewhere near the American median might still regard this November’s decision as a harder-than-average call.

Rarer than rarer than rare, you're not only a highly informed undecided voter, you're one whose views coincide with the latest opinion polls. I guess Douthat credits you with enough intelligence to recognize that Romney's latest positions are poll-driven, and that you cannot trust that he has departed from the similarly poll-driven positions he took in his past campaigns because the only thing you can trust about the man's political positions is that he'll say what he thinks it takes to get himself elected. No, who am I kidding, Douthat's not crediting you with that much intelligence - if he were, he would write a different column.

So what, to Douthat, is "one of the biggest issues the campaigns are arguing about", the only one he writes about so presumably the one he believes will most influence the vanishingly small group of highly informed independent voters whose views align with the latest opinion polls? The standard Beltway obsession, "the question of how to bring our spending in line with our revenues". Douthat presents a statement he knows to be false, but who cares about facts when you can fall back on platitudes?

Conservatives think we tax too much and liberals think we spend too little, but the present combination of relatively low middle-class taxes and relatively generous entitlement spending is one that most Americans would happily maintain in perpetuity.

Let's see... on the one hand, we have a party that is promising a small tax increase on the wealthiest Americans, and the hope that through economic growth and spending cuts we can sustain the present system. On the other hand we have a party that is promising a $4-$5 trillion tax cut to be paid for by spending cuts and the closing of tax loopholes, but refuses to get more specific about how that will be achieved than "We'll defund PBS", and is simultaneously proposing a $2 trillion increase in the military budget. As for spending less? The only specifics, turning Medicare into a voucher program, are pushed off a decade into the future - everything stays the same for now.

It is perhaps not an unfair simplification of those different visions of our future budget as "Conservatives think we tax too much and liberals think we should balance the budget before we talk about tax cuts," but it is absurd to pretend that Romney's budget-busting military spending and refusal to commit to even a single meaningful spending cut constitutes anything but thinking we spend too little. And if you look at the history of Douthat's party, going back to Reagan, the whine going into the election has been "liberals tax and spend too much" and the policy coming after the election has been to go on budget-exploding spending sprees - the problem is with taxation that brings the budget closer to balance, not with the spending.

You can argue that trying to cover government spending through tax revenues is a horrible thing, and certain Republicans love to defy math, logic and history by purporting that tax cuts can be presumed to "pay for themselves" by producing economic growth... never mind how G.W.'s tax cuts were followed by sluggish growth - much less impressive than growth under Clinton - propelled in significant part by a housing bubble, and culminating in economic catastrophe. (Yes, Clinton's economic boom was driven in part by a different bubble, the Internet bubble, but at least he didn't squander the tax revenues.) A highly informed undecided might say, "I'm undecided because I want to vote for a guy who prioritizes long-term fiscal responsibility, someone whose budget priorities are first to balance the budget and only then to discuss what we might do with an assumed future surplus," but they're not going to fall for Douthat's oversimplification.

If we are to actually assume that Douthat's undecided voter is in fact highly informed, that voter knows this: Democrats are more likely to balance the budget when economic times are good, but are less likely to call for cuts in social spending when the economy is faltering or in recession. Republicans are going to call for tax cuts, inuring principally to the benefit of the wealthy, no matter what the economic conditions are, when in power are likely to adopt the Dick Cheney philosophy of "deficits don't matter", would prefer to cut and privatize Social Security and Medicare, but have balked at serious reform because they don't want to alienate the important voting bloc of seniors who receive, or are about to start receiving, those benefits.

The highly informed undecided voter is aware that Romeny is trying to "split the baby" by promising that nothing will change for anybody over 55, but that the promise likely translates into "nothing getting done" because ten years from now somebody else will be in the White House, that President will be as terrified as Romney at standing up to seniors, and that any budget proposal that doesn't go into effect for a decade whil have no impact on the budget, debt or deficit during the next eight to ten years.

At this point, Douthat's highly informed, undecided voter is no doubt wondering, "Why do I bother reading this guy's columns," as they understand that on the issue Douthat deems of highest importance, Romney offers nothing but snake oil and Douthat's nonetheless attempting to argue that it could in fact be a cure-all.

Back to "Beltway wisdom":

Unfortunately, the status quo can’t actually continue: the combination of the baby boomers’ retirement and rising health care costs means something has to give.

Social Security is a big expenditure, certainly, but as Douthat knows, it is not in imminent fiscal peril and can be rendered solvent for many decades to come through some relatively minor adjustments. Granted, the wealthy balk at increasing the FICA cap, and both older Americans and the political left oppose raising the retirement age or cutting benefits, but it has been done before and can be done again. Douthat knows that the only President to present a serious proposal on this issue, to make the same type of adjustments that were put into effect under Ronald Reagan is President Obama. And, one must assume, so does his highly informed yet undecided voter.

Medicare is a more pressing issue, not so much because of its present size but because of its projected growth.

The White House is arguing that we can limit health care spending largely by bureaucratic fiat, by empowering experts to change the way doctors and hospitals spend and treat and charge. But we’ve tried variations on centralized cost control for years — “Medicare Whac-A-Mole,” Reason magazine’s Peter Suderman has called it — without reaping anything like the promised benefits.

Douthat's highly informed voter can see through Douthat's charade. This voter knows that there is nothing unique in the government's effort to try to steer patients toward the most cost-effective care and to reduce waste - that private insurers do that as well, sometimes with a very heavy hand.

The highly informed voter is probably also thinking, "The best Douthat can come up with to back up his rhetoric is a columnist for Reason magazine? Isn't that a bit like inbreeding - one columnist who knows little to nothing about the subject matter attempting to support his political case by referring to another guy who who knows little to nothing about the subject matter but has a similar political philosophy?" They might click through to the article and see that it opens,

House Republicans, you may have heard, are trying to “end Medicare as we know it.” And well they should—Medicare as we know it is the nation’s biggest fiscal disaster.

And recognize that it's not going to attempt balance. They might wonder, "Does Douthat think that marrying Megan McCardle gave Sunderman a bachelor's degree level understanding of economics by proxy?" Or, "Why is Douthat citing as an expert a guy who is part of a political debate about Medicare, but is not part of the actual discussion amongst experts on Medicare reform - the year-old column of a non-expert is the best Douthat can come up with?" They might pause for a moment and wonder, "Has Douthat ever challenged Romney's pretense that a couple of off-the-cuff blog posts constitute 'studies' that prove his mystery budget can work?" and again wonder, "Why am I still reading this guy?"

Seriously, resorting to Sunderman is fine if you oppose Medicare, don't believe that the nation should provide comprehensive health insurance to the elderly as a matter of policy, and don't mind a somewhat inconsistent narrative explaining how the program is an affront to libertarianism. But if you're the highly informed centrist that Douthat proposes, one who wants to continue Medicare as a meaningful program, you're apt to find Sunderman's article to be long but ultimately unconvincing. You already know cost control is difficult and that past efforts have resulted in uneven benefits, and Douthat presupposes that you nonetheless want to keep trying to find solutions that will allow Medicare to continue more or less in its present, highly popular form.

Douthat, as usual, goes from there to worse:

The Republicans are arguing for a more competition-driven approach, which would allow private insurers to compete for Medicare dollars, and hopefully bid down the cost of coverage. There are studies and pilot programs that suggest this kind of structural change might lower costs.

The highly informed voter sees right through Douthat's word salad: "The Republicans want to turn Medicare into a voucher program, have the benefit shrink in value over time relative to medical inflation, and put much more responsibility for health care costs onto seniors while simultaneously providing a massive transfer of wealth to participating private insurance companies." They also can see for themselves that Douthat's pretense that "studies and pilot programs" support the viability of vouchers is false - they know that Medicare came into existence because private insurers did not want to insure the elderly at an affordable price, and know that Medicare Advantage participants needed a subsidy in order to compete with Medicare - and are probably thinking, "Douthat at least linked to a libertarian screed to support his last argument - why no link for these purported 'studies and pilot programs'?"

Douthat continues,

But there isn’t a large-scale example that conservatives can point to as the template for the United States to follow.

At least, nothing that has worked. If you look for "large-scale examples" of approaches to health insurance that reduce cost and control inflation while preserving choice of doctor, quality of care and quality of outcome, you can look around the world and find many - all of which would be decried by the Republican Party and people like Sunderman as "socialized medicine". You will find that those programs were implemented largely as a response to the faltering or failure of market-based alternatives. You will find that "single payer" is not prerequisite to success, and that it is possible to rely upon private insurance companies to provide coverage under a national health insurance program.

What you will find when you look for "a large-scale [or small-scale] example" is that the most market-based country in the world, the United States, has not only repeatedly failed to demonstrate the superiority of "a more competition-driven approach", its approach has made health care exceptionally costly without an associated improvement in outcomes. If you want to take it on faith that one more experiment will disprove decades of failure, there's nothing wrong with adhering to your philosophical principles, but if you are a highly informed voter attempting to perpetuate Medicare while realizing significant cost savings you know up front that voucher proposals are just another round of snake oil.

On to the hollow man:

That same skeptic’s eye would also tell our hypothetical undecided that neither side is being entirely honest about the costs of its approach. The Democrats are pretending that taxing the rich can pay for almost everything. The Republicans are pretending that neither today’s taxpayers nor today’s seniors need bear any of the burden. The high-information swing voters are basically left to decide which dishonesty is worse, and which unacknowledged cuts or tax hikes they’d rather risk having to bear.

The fact is, "The Democrats" are not claiming that a modest tax increase on the rich will balance the budget, certainly not that it will "pay for almost everything". Douthat probably knows that his claim is untrue - after all, he can read - and no doubt any highly informed voter who has not yet given up on his column knows the claim to be untrue.

But what of the criticism of the Republican Party? It's a point that even Douthat found it hard to gloss over, the aforementioned fact that the Romney/Ryan Republican approach is, "We'll kick the can down the road a decade, at which time Medicare will be a voucher program." Douthat apparently would like to see Medicare immediately tranformed into a voucher program - his criticism is not of its substance but of its timing. I'll give him the benefit of the doubt, that his mention of the fact that the Republicans have promised to spare "today's seniors" of any pain is an actual criticism, not a reminder to seniors who might be reading his column that they don't have to worry about voting for Romney.

But Douthat's highly informed voter, seeing the hollow man on one side of the scale - a position no Democrat has actually taken - weighed against the postponement of any action on the other side of the scale, might be wondering, "Why did Douthat present that hollow man argument in the first place, rather than presenting a simple, honest criticism of his own party. He knows I'm an informed and intelligent person - does he seriously think I'm going to fall for that?" I jest - I expect that by now the "high-information swing voters" to whom Douthat is supposedly speaking have long given up on the column.

Douthat next picks up his fiddle and starts singing about Rome:

If you want to think well of swing voters, and imagine them as wise Athenians rather than a Colosseum-going mob, you could see the improving odds for what once seemed like an unlikely 2012 outcome — a Romney victory in which Democrats hold the Senate — as a nod to the necessity for bipartisanship, and an attempt to make a significant change in Washington while also forcing both parties back to the negotiating table.

The highly informed swing voter, though, knows that the Republican problems with their Senate races emerge in no small part from the radicalism of some of their Senate candidates, and how their dream boys (like Scott Brown) haven't held up as well as they anticipated when running against competent, well-funded opponents. They know it has nothing to do with a fantasy that "bipartisanship" will magically start working just because one party controls the White House and the other controls the Senate.

Douthat's back to his historic practice, pretending to be a wise man, perched upon a fence, but unwilling to come down clearly on one side or the other. His highly informed voter long ago figured out the side upon which Douthat falls - why is he afraid of admitting it?

How the Media Plays Out its Role in Our Risible Economic Debate

After a couple of opening paragraphs of pure snark, the Washington Post's editorial board criticizes the President for failing to clearly articulate why he is running for a second term. I've previously called for the President to do exactly that, but unlike the Post's editorial board I'm not going feign outrage if the President sets different priorities than I would prefer.

After attempting to trivialize the President's stated second term agenda by pointing to his plan to help states hire more math and science teachers, and his proposal to end certain tax subsidies for the energy industry,

He wants to take away $4 billion in tax breaks from oil companies. (The deficit in the fiscal year that just ended was $1.1 trillion.)

Why am I reminded of Robert Samuelson's notion of what constitutes "pocket change". Have we truly entered an era in which $4 billion in waste is not worthy of consideration, and in which a proposal for its elimination is mocked? If your concern truly is to balance the budget, why not respond, "One $4 billion item of waste down, 224 to go"? If you read the Post you know the answer - that's not the type of government expenditure that concerns its editorial board.

From there the Post gets to the meat of the President's tax proposal,

And he wants to increase tax rates for the wealthy. That would put a serious dent in the deficit, but it wouldn’t solve the fiscal problem, which unaddressed will “lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective,” the Congressional Budget Office recently said.

First the problem is the deficit, and cutting waste isn't enough. Next it's, "The President has a clearly stated proposal that will cut the deficit" but, after a bit of sleight of hand, the deficit is no longer the issue.

So now that we're no longer talking about deficits, but are talking about the "level of federal debt", what does the Post have to say?

A solution can come only from restraining spending, especially growth in Medicare and Medicaid, and raising revenue, and not just from the rich.

Let's back up for a moment. The leading reasons we have a significant deficit at the moment are the Bush tax cuts, the Bush Administration's unfunded wars, and the economic downturn. As I recall, the Post supported all of the above. Yes, we would have a substantial deficit right now even without those factors, but principally attributable to revenue reduction from a profound recession and spending measures meant to help us pull out of the recession and to soften its blow on families. The point being, as we pull out of the recession and return to more normal levels of employment, more people will have income and tax revenues will rise.

And yet, when it comes to figuring out how to raise more revenue, creating more jobs, reducing unemployment, reinvigorating a middle class and improving its wages, none of that occurs to the Post's editorial board. It's "Why aren't you cutting entitlements." It's not that they're unaware that growing the economy will raise tax money - it's that they aren't being candid about their own agenda. If the Post's editorial board has a proposal by which tax revenues can be raised without impairing the economy, above and beyond as a result of growth or the proposed modest rollback of the Bush tax cuts, it's high time they shared it. After all, they found the time to chide Mitt Romney for not sharing the details of his secret plan to make revenue neutral his proposed massive tax cuts, so why keep their own secret plan so close to the vest?

You have to love this part. Remember how "A solution can come only from restraining spending... and raising revenue, and not just from the rich"? Seriously, this is the next sentence of the editorial:

Yet Mr. Obama has put forward no plan to curtail entitlement costs, while Mr. Romney at least is willing to say that benefits for wealthy Medicare recipients will have to be cut back.

That is, immediately after acknowledging that the President proposed a tax increase that will significantly reduce the deficit, and poo-pooing that it's not enough because it isn't sufficiently broad-based, they're praising Romney for making an economically meaningless pledge about trimming Medicare benefits for the wealthy. Even if he keeps that promise, the revenue savings will be trivial. So why is it bad for the President to take a serious, effective measure to close the deficit, but laudatory for Romney to make a cynical, hollow gesture? The most obvious inference is that the Post's concern is not with deficits but is instead with entitlements.

The editorial board next returns to its prior snarkiness,

Why the reticence? Maybe, after promising so explicitly four years ago that he would make hard choices and refrain from kicking the can down the road, he’s reluctant to make the same promises again. Maybe the usual Democratic “Mediscare” campaign is so useful he does not want to muddy the waters — or, more accurately, un-muddy them — with budgetary honesty.

You would think that at least one member of the editorial board would remember the Affordable Care Act, including its serious effort to find cost savings in Medicare. You would think that they would remember that the Republicans immediatedly engaged in demagoguery about the ACA, screaming at the top of their lungs about "death panels" and "cuts to the Medicare benefits you paid for." They claim to have watched the debates, so it's difficult to believe that they could have missed the demagoguery from Romney and Ryan about "cuts" to Medicare. Which side is engaged in budgetary dishonesty and is resorting in "Medicare" tactics, again?

Funny, also, how the Post is suddenly unconcerned about Social Security. Which candidate explicitly addressed Social Security and what it would take to make it fiscally sound over the long term? If you need the reminder, it was President Obama. Does the editorial board have the grace our courtesy to say, "At least he has promises to fix this other thing we've been harping about?" Nope. As with discussion of the ACA, any such honesty would undermine the two points they are trying to make, that the President has made no proposals to prevent entitlement costs from spiraling out of control, and that the only possible solution is massive cuts in those programs.

It seems fair at this juncture to ask, how does the editorial board believe that the federal government can cut Medicaid spending? We're not talking in that context about a population with a lot of resources to spare. To the contrary, if you have significant resources you don't qualify for Medicaid. If you cut Medicaid you cut the provision of medical care to that population.

You can, of course, use ACA-type measures to try to identify waste, to evaluate which treatments are the most cost-effective. But in case they missed it, the Supreme Court recently ruled that Medicaid is such a large program, contributing so much money to state coffers, that states must be given the right to opt out of any significantly revised program and be allowed to continue with the status quo. Seriously, does the Post have even one idea it can share? Romney at least came up with PBS and Sesame Street - and the repeal of the cost-saving measures for Medicare that the board wants to pretend Obama didn't sign into law.

As for Medicare, even if they assume Romney is sincere, they know that savings from his proposal to trim benefits for the wealthy would be trivial. They know that his pledge to repeal Obamacare will increase the cost of the program. They know that a promise to do something a decade from now, even if it's something they would applaud (i.e., turning Medicare into a voucher program) is nothing more that irresponsible buck-passing. Within that context, they want the President to promise additional cuts to Medicare - above and beyond the cuts that Romney and Ryan are suggesting will devastate seniors' ability to obtain care?

The Post is right about this: It would be nice if we could have an adult discussion about these issues and how we might mitigate, if not solve them. If the editorial board spent any appreciable amount of time reflecting on the subject, though, they would realize that unless they break with their longstanding tradition they aren't part of that solution. They're not even making an effort.

David Brooks, True to Form

I had a discussion with somebody about David Brooks this morning. He was asking me what I thought of various newspaper columnists, and couldn't quite remember the name, but "David" was enough. He mentioned that he thought Brooks was a pretty clever guy who put his own spin on things. I agreed. I asserted that whatever the spin was, Brooks should be recognized as the partisan he is - reiterating a point that I've made here that when he gives advice to Democrats on what they need to do to win elections it's consistently bad (for Democrats) - whether he's advising Democrats or Republicans on strategy they should adopt, he's in fact giving advice that he believes will help the Republicans win the next election. My friend agreed, but expressed in essence that Brooks is a breath of fresh air as compared to other partisan columnists (his example was Peggy Noonan).¹

When I followed a link to his latest piece, I thought for a moment, "Perhaps David Brooks is going to prove me wrong." He starts out with a valid point: It's time for President Obama to tell us what he plans to do in his second term, and why he deserves a second term. Sure, he puts a light Republican spin on Obama's history, and gives undeserved praise to Paul Ryan², but underneath that, in relation to the President, how can you argue with this:

It’s not clear what he is passionate to do if he is elected for another four years.

But from there, pure reversion to form.

First, global warming. President Obama has occasionally said he’d like to do something about climate change if he gets a second term. Given the country’s immediate economic and fiscal problems, this seems obtuse to me. But if this is really where Obama’s passion lies, he should go for it.

In other words, even Brooks can't hold a straight face when telling Obama to focus his second term agenda on global warming - yet it's his number one suggestion. When you read Brooks' specific proposals, you can't help but wonder if he's already viewed the attack ads the Republicans hope to be able to run on the issue.³

Brooks' next idea is that the President should attack capitalism. Seriously - Brooks is claiming that a President whom the Republicans have bashed based upon zero evidence of not understanding capitalism, of hating capitalism, of being a socialist (if not a communist), of hating rich people... all that nonsense... should make an attack on capitalism the centerpiece of his reelection campaign. The attack ads would write themselves.⁴ Again, Brooks can't help but smirk,

This agenda wouldn’t appeal to moderates, or people like me, but it’s huge, it’s serious and it would highlight a real problem.

It's a serious problem that David Brooks can describe but... doesn't care about? Brooks is mostly correct that his ideas "wouldn’t appeal to moderates, or [Republicans]", which translates into an admission that Brooks expects that such an approach would cost the President votes.

Brooks then suggests that the President should embrace wholeheartedly the report of the chairs of the failed Bowles-Simpson Commission, and finally bring to this country the sort of bad policy and austerity measures that have caused Great Britain to have a double-dip recession. After admitting that even the Republicans at most pay "lip service" to Bowles-Simpson - having apparently forgotten that Paul Ryan served on the commission and voted against the final report - he proposes that Obama could endorse a witches brew of ideas from Simpson-Bowles that even the Republicans view as toxic.

At first blush you might respond, "Well, at least the Republicans wouldn't be able to run attack ads against a plan that's to the right of Paul Ryan's deficit-increasing proposals," but nope. The ads will be running the next day, "See? We told you that Obama was taking away your Medicare and now he's also going to slash your Social Security benefit!" It's also amazingly transparent, "You really want to win this election? Well, first thing you gotta do is give the Republicans everything they want, and don't ask for anything in return." I realize that's not far from how beltway pundits define "bipartisanship" on Social Security and Medicare, but by this point does anybody still believe Brooks is sincere?⁵

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1. This is more than damning Brooks with faint praise. As tiresome as his faux-centrism can be, unlike with many of his peers you often have to read more than the headline in order to know what Brooks is arguing and the conclusion he's going to reach.

2. Brooks wrote,

During this time, you knew what Barack Obama was about, where his priorities lay. But, since 2010, that has not been the case. Since then, Representative Paul Ryan has been driving the Washington policy debate with his plan to cut spending and restructure entitlements.

If we define "Washington policy debate" as "the issues over which beltway pundits" obsess, perhaps that's fair. But (a) Ryan's budget is junk - cowardly junk - and the debate has been anything but policy-oriented. Ryan's budget is a political statement, not a policy statement, and those who advocate its merits either do not understand it or share Ryan's political goals.

Ryan has scurried away from certain elements of his budget, particularly the manner in which he proposed privatizing and voucherizing Medicare, without any explanation for how his new voucher program is superior as a matter of policy - but it's pretty obvious how it's superior as a matter of politics.

3. First up, "He could vow to double down on green energy and green technology." Republican Ad: "Soyndra, Soyndra, Soyndra, Soyndra. Soyndra! Soyndra, Soyndra. I'm Mitt Romney and I approve this message."

4. First up, "He could vow to strengthen unions". No mention of how that might work, save in Republican attack ads.

5. Brooks laments,

I wish he’d rise above the petty tactical considerations that have shrunk him over the past two years.

Now what was it that happened two years ago that made things in Washington so petty... We had an election and then something happened that let the Republican agenda dominate in the House of Representatives and (further) stymie Obama's agenda... oh, what could it be....

Saving the Middle Class By Hurting the Middle Class

A few days ago, Robert Samuelson wrote an odd column addressing the middle class. He points to the two candidates,

Republicans will accuse Barack Obama of destroying the middle class through policies perpetuating high joblessness and feeble economic growth. Democrats will portray Mitt Romney as a tool of the rich who doesn’t understand the middle class.

Samuelson responds,

This is mostly political symbolism. The idea that anyone can “save” the middle class assumes that it’s in danger of disappearing, which it isn’t, and that presidents possess sufficient powers to resurrect it, which they don’t.

Let's take a step back. Samuelson has told us that he expects the Republicans to (continue) accusing the President of "destroying the middle class through policies perpetuating high joblessness and feeble economic growth", and that he believes that claim to be false. He compares that to the anticipated Democratic Party argument that "Mitt Romney [is] a tool of the rich who doesn’t understand the middle class", an assertion that is fairly described as "mostly political symbolism", but which is not an economic argument. That is, Samuelson's attempted parallel between that statement and what he describes as a fabricated economic narrative from the Republicans fails, because they address different issues. He's also comparing a statement of opinion about Romney, one with which he expresses no actual disagreement, with what he claims to be a false statement of fact about the economy. A better comparison would be if Samuelson had said, "Democrats will portray Mitt Romney as a tool of the rich who wants to cut taxes for the rich while implementing policies that make life harder for everybody else." Samuelson could argue that such a position would be an exaggeration - for example, Samuelson might believe that we need only make life more difficult for a huge swath of the population, not for the entire middle class - an argument he makes later in his editorial. But his attempt to analogize a false statement of fact on economics to a statement of opinion on personality does not hold up. Samuelson next tells us why the parties are attempting to connect with the middle class - or at least to create a rift between the middle class and the other party,

Still, the symbolism is potent because most Americans equate the middle class with the kind of society we are and ought to be. It is a society where hard work and personal responsibility are rewarded — where “getting ahead” is expected; where economic security and social stability are enjoyed; and where privilege is minimized.

Samuelson then proceeds to fumble between two competing arguments, the first being that "the middle class is fine, thank you very much" and the second being that the middle class is in serious peril. He does not attempt to reconcile his competing thoughts. In support of his position that the middle class is fine, Samuelson argues:

1. Most Americans think of themselves as middle class - "Only 7 percent of Americans called themselves “lower class,” although the government’s poverty rate is 15 percent.... Despite decades of rising inequality, only 2 percent put themselves in the “upper class.... Nine of 10 Americans locate themselves somewhere in the middle class.”

   The problem with that argument is that it does not rely upon either fact or economics. If I go to a prison and survey the inmates, and 90% of the inmates tell me that they are innocent, would Samuelson truly conclude "Therefore the vast majority of prisoners are innocent," or would he say, "We need a better measure"?

2. Some people with pretty high incomes think of themselves as middle class - "Many Americans with incomes of $200,000, $300,000 or more refuse to count themselves as rich."

   As previously noted, the self-report is not what matters. There are plenty of reasons why people at the lower end of the upper income brackets may say that they're "middle class" instead of "upper middle class" or... would Samuelson say "upper class"? They are likely to live in houses and drive cars not much different from those of their middle class peers, they may be burdened by large amounts of student loan debt, they may have very little in the way of accumulated assets. Also, as many have pointed out, the distance between those in the 95th to 99th percentile of income has expanded to the degree that the concept of what constitutes "wealth" has shifted - If your household income is $300K and you compare yourself to a family earning minimum wage, you might feel rich, but if you compare yourself to the class of people who are unquestionably rich, your lifestlye seems objectively middle class. Definitions and points of comparison matter.

3. A big part of the problem is "confidence" - "The middle class can’t regain its self-confidence and financial health without a strong economic recovery. But the economy can’t recover strongly without a financially healthy middle class, which provides most consumer spending."

   I know that economists like to speak of consumer confidence as a measure of how willing people are to make large expenditures, buy on credit, and the like, but the debt overhang to which Samuelson alludes diminishes the role of confidence. You can be certain that the economy is going to recover, but if your house is upside-down, your income is down and you can't get credit, you won't be spending money. Samuelson nods to that fact, "Not surprisingly, the economic expansion is glacial", but assumes that the government is powerless to assist. I suspect that if you were to point out possible interventions - debt forgiveness, across-the-board mortgage write-downs and the like Samuelson would speak of moral hazard. That type of relief, it appears, should be reserved for the financial industry and the unquestionably rich people who mismanaged them to the point of collapse.

4. Being "middle class" is a state of mind - Samuelson argues, "Personal responsibility and a strong work ethic still matter and suggest a durable middle class. It will survive today’s economic setbacks — and political pandering."

   The problem here is that there are plenty responsible, hard-working individuals who are falling out of the middle class, or who lack the skills, education, or toehold they need to pull themselves up the proverbial economic ladder. Samuelson's point reminds me of one of my pet peeves about Nicholas Kristof and his defense of sweatshops - yes, it's true that people work in sweatshops because the other options available to them are worse, but that doesn't mean the problem is solved. The idea that "[p]ersonal responsibility and a strong work ethic" should be enough to get you into the middle class is, as Samuelson notes, an American ideal. But its truth is diminishing.

A fair response to Samuelson is that the middle class is not a state of mind. If you're not in the economic middle class, your thought to the contrary will not change that fact. Your strong sense of personal responsibility and good work ethic may help you get and hold jobs, and get promotions, but personal virtues and "confidence" do not, of themselves, generate income.

Also, while it is true that if you define "middle class" as a strata of wealth between "poor" and "rich" it will in some sense always exist, that's not the issue we're confronting. The issue is, can we can maintain the ideal that every American who demonstrates the virtues Samuelson describes will have a chance for a bona fide, secure middle class lifestyle, or are we transitioning into a country with a smaller, less financially secure, less stable middle class. Are we going to be a nation in which most people want to be rich but are content to call themselves middle class, or a nation in which people at the lower end of wealth become, statistically speaking, the "middle class" between the ultra-rich and the working poor? Let's not forget, when you look at history, the modern world's experience with a large, robust middle class is the exception.

Samuelson also describes problems faced by the middle class,

1. People are no longer confident that they will achieve or sustain a middle class income: "The financial crisis and Great Recession subverted two core beliefs: that hard work ensures “getting ahead” and that being middle class provides security."

   Perhaps that's the "confidence" to which Samuelson was alluding, as opposed to "consumer confidence", but either way it remains the case that the present problem is not a state of mind. If people are no longer feeling secure, it's because the reality of the past few decades is that they are less secure. They can be less confident about how much they will earn, income growth, being able to afford a conventional "middle class lifestyle", how long they'll be able to keep their jobs, whether they'll be able to save for retirement.... And let's note at this juncture, the big "fixes" Samuelson keeps pushing for the nation's budget, specifically cuts to both Social Security and Medicare, will worsen that insecurity.

2. Unemployment is high and people are losing their homes: "True, they don’t affect everyone (about 5 million unemployed have now been jobless for more than six months; from 2007, completed home foreclosures total 4.5 million, reports Moody’s Analytics). But the demonstration effect is strong.... This psychological pall is compounded by widespread wealth loss."

   I'm reminded of a place I once worked where, during a previous economic downturn, any time an employee inquired about a raise the head honcho would pull a stack of papers out of her desk drawer, "These are unsolicited resumes from people who want your job, and they will work for less than you're already getting." It's not just that people are looking at the population of workers who cannot find jobs - it's that an increased population of workers realize that they're on the razor's edge. Their jobs could be outsourced, domestically or internationally. Their skills may be deemed obsolete. Samuelson should note, one of the reasons for middle class wage stagnation is that the middle class lacks the economic clout to force higher wages, and that's a problem that existed considerably before the start of the 2008-2012 recession.

3. People can't afford to save or invest, and there is a debt overhang in housing: I extrapolate from Samuelson's statement, "Wealth is slowly rebuilt through higher saving and stock prices — and the hope that home values will follow."

   I know that "on paper" many people were (and probably still are) "saving more" because they can't get credit, but even that's far from enough to "rebuild" their wealth. Samuelson alludes to the housing bubble, and the fact that much of the spending of the G.W. Bush era involved people cashing out "'paper wealth and housing wealth' — which went poof" when the housing market collapsed. Samuelson can't bring himself to say it, but he's implicitly arguing that the problem he describes dates back at least to the start of G.W.'s presidency and was masked by the housing bubble. Further, absent significant income growth or a new asset bubble, we're not going to see both significant increases in saving and investment and significant spending that will drive a strong economic recovery. It's not clear how Samuelson proposes that we achieve "higher saving and stock prices" for the benefit of the middle class, and in fact it appears that he's offering no solution beyond "keep waiting and keep hoping".

Samuelson then turns to a class warfare argument - not a war between classes, but a war he hopes to see played out within the middle class:

There is also a larger conflict. Sooner or later, broad-based tax increases will be needed to reduce budget deficits. How large depends on how much federal spending is cut. This creates an unavoidable conflict between workers and retirees, because workers are the biggest taxpayers and retirees are the biggest beneficiaries of federal spending. Which middle class deserves support? Cut Social Security and Medicare and help workers. Raise taxes and help retirees.

And we're back to one of my long-term frustrations with Robert Samuelson. To Samuelson, the only path to national financial stability is to cut programs he doesn't care about so we can afford to spend hundreds of billions of dollars in "pocket change" to support discretionary spending he endorses. Even if he underestimates he cost of government ventures he supports, even if by a factor of ten, twenty or more, they're still worth it. But if he doesn't support the program, don't look at the actual economics, don't examine reforms, certainly don't look at how other nations are providing similar programs at much lower cost - just cut 'em to the bone.

Social Security doesn't matter to Robert Samuelson, as he's a wealthy man. He can get by without it, and so can all of his friends, so it apparently doesn't enter his consciousness that many middle class Americans rely upon those benefits to make ends meet during retirement. It similarly appears to be outside of the scope of his experience that some people work a lifetime in jobs that don't generate enough income to allow them to accumulate significant wealth, or work in jobs that involve activity more strenuous than going to a comfortable office, sitting at a desk and typing on a keyboard. Samuelson is in a position in which he could reduce his work to one day a week and he would still pull in six figures; he does not appear to fully understand that most Americans don't have that luxury.

Samuelson has a similar history of decrying any effort to reform Medicare or rein in its costs, and rejects the idea that we should look at how other developed nations are able to achieve similar, sometimes better, health care outcomes while serving their entire populations, at considerably less expense than the U.S. system. He diminishes or criticizes efforts to limit the growth in healthcare expenditures, even though (or perhaps because) that's how we could make the present system sustainable, while providing no criticism of programs that would arbitrarily cap Medicare spending or replace the present guaranteed benefit program with a voucher program, without regard to whether retirees would be able to afford the care they need.

The only conclusion that can be drawn from Samuelson's refusal to acknowledge basic facts on the economics of Social Security and Medicare is that he is philosophically opposed to the programs, or perhaps supports them if they provide only the most basic of safety nets, and if people can't afford to retire or can't get needed healthcare, well, too bad. His "solution" is purely numbers based, after all who cares about good policy formation, and is built on the false premise that retirees are somehow depriving the "middle class" of a decent lifestyle. Never mind that middle class workers might hope to one day retire, or might not be rich and blessed (as is Samuelson) with gold plated employer-sponsored health insurance during their senior years.

Samuelson also appears to believe that healthcare spending does not impact the economy, never mind that healthcare spending is a huge portion of our nation's economy. He does not explain how Medicare cuts will not result in a reduction in healthcare spending, how the cuts will translate into middle class workers being able to afford to engage in more consumer spending, or how the two might balance out. For that matter, if we're overspending on Medicare and Social Security, Samuelson should be able to identify yet another internal inconsistency in his argument - the subsidy results in an increase in middle class spending (albeit by middle class retirees) over what would otherwise be the baseline and program cuts to help balance the budget will result in a net reduction in middle class spending.

Samuelson offers no explanation for how the cuts he repeatedly endorses will benefit current workers, as he is not proposing FICA tax cuts. Similarly, when Samuelson says "Raise taxes and help retirees" he's talking about income tax - not FICA - and his objection is to the expiration of G.W. Bush's temporary tax cuts (never mind that they did not deliver the promised economic boom) that benefit him. I don't recall Samuelson overtly playing the game of pretending that the only taxes Americans pay are federal income taxes, but when he conflates all tax increases in this manner his approach is not much different. It is very possible to increase taxes in a manner that puts the cost of maintaining Medicare and Social Security directly upon those who will eventually benefit from those programs, but Samuelson's concern appears to be that it will be his economic class, to which the benefits form those programs are literal "pocket change", that will be asked to share the burden.

Samuelson's "solution" is for workers to keep on paying what they're presently paying, but to receive considerably less upon retirement. That's from from cutting "Social Security and Medicare [to] help workers". It's cutting those programs to either reduce the deficit or to fund the continuation or expansion of tax cuts for the wealthy, and so Samuelson can continue to endorse enormously expensive discretionary spending programs or wars on the basis that we can easily afford the added debt.

Samuelson knows he's a rich man. He's simply not honest enough, perhaps with himself and certainly not with others, to admit that the class war he endorses is not within the middle class, but is instead between himself and his wealthy, like-minded peers and the middle class. Samuelson and his peers will feel no pain from the cuts he proposes, and apparently would prefer to keep Social Security and Medicare in somewhat precarious states such that they can hand-wring about the "necessity" of reform, rather than implementing meaningful reforms that would undermine the case for cuts.