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?

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.

What the Election Means for Medicare Reform

Yesterday, Diane Rehm's panel included Julie Hirschfeld Davis, congressional correspondent for Bloomberg News, and Amy Walter, political director for ABC News. I didn't catch much of the show, but I did catch the following atrocious analysis. Starting with Walter:

However, fixing some things about Medicare certainly are doable. And, you know, we had a big fight in this election about Medicare. Now, the interesting point is, you know, both sides can see victory there. On the one hand, the Romney ticket lost and, of course, on that ticket was Paul Ryan, who made the issue of Medicare a centerpiece of his budget. The so-called voucherization as Democrats would say, premium support is how Republicans would argue, lost in one sense.

Given her position, it is difficult for me to believe that Walter is unaware of the fact that Paul Ryan himself referred to his reform proposals as creating vouchers. The reason that the Republicans don't want to use that term has nothing to do with its being a fair description of their plan, and everything to do with how it polls. We saw exactly the same game played back when G.W. Bush was trying to "reform" Social Security - the Republicans called their plan a privatization plan, and when the public recoiled at the term they started talking instead about "personal accounts" and purported that their own original description of the plan was a partisan slur.¹

By the same token, who used to refer to the Ryan Plan as a voucher plan? You guessed it.² "Premium support" is the poll-tested term he would have preferred be substituted for the one he personally originated in relation to his own plans, and which he knows to be accurate. A political director for the news division of a major network should clarify the facts, not play along with Ryan's semantic games.

On the other hand, it didn't lose that badly. I mean, it's not as if the issue was the defining focus of this campaign, and in some cases, while the president was ahead on Medicare, in the final tally, it was not by such a tremendous percentage that Republicans can look back and say, boy, that was really dangerous. We shouldn't have brought that up at all. In fact, they can say, we didn't get beat that bad on it.

Here, Walter is simultaneously arguing that Medicare was not "the defining focus of this campaign" - that is, the President's victory cannot be ascribed to his position on Medicare - and that the Republicans "didn't get beat that bad on it". You can't have it both ways. If most voters were motivated by issues other than Medicare, although you can draw the conclusion that proposals to voucherize Medicare aren't going to destroy a campaign as long as they remain in the background, it tells you nothing about what would happen if they were perceived as the defining focus of a campaign.

Then Davis takes the argument from bad to worse:

The other thing is that if you look at the groups that Mitt Romney and Paul Ryan won, seniors were a big part of it. I mean, it's been the case in the past that you couldn't talk about this without being really afraid that you were going to alienate an important voting constituency. It -- we didn't really see it happen in Florida or anywhere else, really, for Mitt Romney. And now, you could argue that Medicare wasn't the primary issue in this election. But it was certainly very much in the conversation.

And as Amy said, when Paul Ryan became the vice presidential pick, it was a major item on people's radar screen. And they didn't pay for it among older voters. So that is an indication, I think, for Republicans that they can maybe do this and maybe even for Democrats and not get -- pay such a huge political price if they do it the right way.

Surely Davis has a long enough memory to recall what actually happened. Romney promised not to touch Social Security for anybody who is presently retired or will be retiring over the next decade. Sure, some were smart enough to figure out that he intended to voucherize the program for younger workers, but many did not, and many who did either didn't care about the younger workers or felt that Romney's procrastination put the issue so far into the future that it wasn't relevant to their vote. On top of that, Romney engaged in shameless demagoguery about Obama's proposed cuts to Medicare spending, pretending that they were cuts of benefits to seniors and that the President wanted to take away the benefits of good, retired people who had earned them in order to give health insurance to lazy, poor people.

You cannot draw the lesson from Romney's campaign that it is safe to propose major changes to Medicare without risking alienating "an important voting constituency", namely the seniors who presently receive or who are about to receive Medicare, because Romney did not actually take that risk. A courageous political leader who sincerely believed Medicare needs to be turned into a voucher program for the good of the country might have done so, anyway, but Romney was anything but courageous and it remains difficult to discern whether he has any sincere beliefs.

Also, Davis has to know that before the election Ryan was a relatively obscure person outside of the Beltway and Tea Party circles, that his "budget" is hogwash, and that most voters don't believe accurate descriptions of what Ryan proposed to do through that budget. Ryan's selection as Romney's running mate meant about as much to Medicare policy as Palin's selection meant for foreign policy. The election is over - there's no need to pretend otherwise.
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1. G.W. Bush wrote in "Decision Points,

Democratic leaders alleged I wanted to "privatize" Social Security. That was obviously poll-tested language designed to scare people. It wasn't true. My plan saved Social Security, modernized Social Security, and gave Americans the opportunity to own a piece of their Social Security. It did not privatize Social Security.

As should be needless to say, the term "privatization" came from organizations like Cato and FreedomWorks, not the political left. Further, when he created the President's Commission to Strengthen Social Security, back in 2001, the members of the commission understood that the President wanted them to at least partially privatize the system. Here's an exchange between Committee member Leanne Abdnor (straight out of Cato) and Roger Hickey, from the Institute for America’s Future:

MS. ABDNOR: But just real quickly. In your statement you said that our mandate, as given to us by the President is, in other words, to privatize Social Security?

MR. HICKEY: That is the way I understood it.

MS. ABDNOR: My question is does that mean that a total -- does privatization mean that the President wants to dismantle, completely dismantle the program? Is that your understanding?

MR. HICKEY: No. I think I have specified that he has mandated you to partially privatize the system.

MS. ABDNOR: But not dismantle the system. Correct?

MR. HICKEY: I don’t think the President intends to dismantle the system. No.

MS. ABDNOR: I’m sorry?

MR. HICKEY: I don’t think the President intends -- thinks that he is giving you a mandate to --

MS. ABDNOR: Okay. And the reason I say that is because a lot of people, when they hear the term privatize, they interpret it as we are going to do away with Social Security and dismantle it all together and replace it with that. I just wanted to be clear what your interpretation of that was. So, thank you.

MR. HICKEY: no. My point that I tried to make in my testimony clearly is that I think when you go down this road, when you pull on the string on part of an integrated system, the whole thing does start to unravel. Nobody has explained to me how you are going to be able to maintain survivors benefits, for example, and disability benefits when you are tampering with the retirement benefit, if, in fact, you do that. I do think that there is a danger of going down the road of private accounts, that the whole system starts to unravel and that you have something akin to dismantling of the system. But I think that you have been asked to look at privatizing a portion of the Social Security system, and I think -- I hope that you will think through the implications of that.

MS. ABDNOR: Absolutely. But if I understand your answer, no, you don’t mean to say that you believe the intention of the commission of the President is to completely to dismantle, but it could lead to that?

MR. HICKEY: Yes.

Ms. Abdnor was aware of the possible public reaction to the term "privatization", but she accepted the term as a fair description of the President's goals for the Committee.

2. And in the manner of G.W., Ryan accused people who used his words to describe his plan as using "a poll tested word designed to scare today's seniors".

The Truth From Robert Samuelson

“The Washington Post didn’t hire me to tell you what they wanted you to hear. The Washington Post elected me to tell you the truth.”

- Robert Samuelson at the... Okay, he never said it.

Today, Robert Samuelson plays the game that "If only the presidential campaigns told the truth, they would agree with me on everything" game. He asks, "Is anyone in America gullible enough to believe this?" Assuming he's speaking of his spin, I expect that he believes so. Let's revisit the words he puts into the candidate's mouths, recognizing both that they're Samuelson's words and that, for all of his talk of truth serum, Samuelson could use a dose of his own medicine.

"Fellow Americans. For years, your beltway pundits — including me — have misled you. We insist that your government has made more promises than it can keep, even if the economy returns to full employment. We then tell you that even if your taxes go up, your public services are going down.

"As you know, the great driver here is that we live in a bubble in which septuagenarians can tap out two columns a week and make a six to seven figure annual income, with gold-plated employer sponsored health insurance. We are likely to complain that between 2011 and 2025, the number of retirees on Social Security will grow by nearly 50 percent to 66 million people; Medicare experiences a similar rise. We insist that resulting spending surge will perpetuates huge budget deficits. We tell you that the Congressional Budget Office estimates that if nothing changes, the budget picture will only get worse.

"I have no credible plan to control Medicare and Social Security spending. That is to say, there is a credible plan to control Medicare costs, but my biggest fear is that it will be implemented and I will no longer be able to advocate an end to Medicare. I'm a smart man, I know how things work in the rest of the world, and I know that the people of every other developed nation pay far less money for health care with similar, sometimes better, outcomes. I know that even if all we did was adopt one of those programs to replace our current government-sponsored insurance plans, or even better if we took the best elements and combined them into a new, American plan, we would see an immediate, massive reduction in healthcare expenditures.

"If we reduced our per capita health care spending to levels similar to those of Canada, Japan, or the better health plans of Europe, we could save more than a trillion dollars per year. You heard that correctly. It would not all come in the form of reduced government spending, it would also benefit businesses that provide insurance to employees and individuals who purchase their own insurance coverage. But I would rather waste that trillion dollars every year than endorse a system that contradicts my personal philosophy that our society owes its members no duty to ensure access to adequate medical care, and that the government should simply defer to market forces.

"You have probably noticed that I always speak of Medicare and Social Security. In fact, if you read nothing but my columns you might believe that I'm talking about a single program called 'Medicare and Social Security', even 'MedicareAndSocialSecurity', rather than two distinct programs. The reason for this is simple: healthcare inflation in this nation ensures that, absent reforms, Medicare spending is likely to continue to grow at an unsustainable rate. On the other hand, it would take modest adjustments to Social Security to have it be fully funded for another seventy-five years or century, even with conservative estimates of economic growth. I address the two issues together, as I want to use the budget projections for an unreformed Medicare program to take out Social Security, and I'm deliberately trying to confuse you about the relative financial stability of the Social Security retirement program.

"By cutting programs I oppose, I can ensure that there will always be money for programs and government ventures I support. You hear people complain about corporate welfare? Excessive military spending? The high cost of wars of choice? Pocket change, I tell you. And it's my firm belief the government should pick that change out of your pockets so that the programs and military adventures that I support can continue unabated.

"Also, frankly, I can keep tapping out two columns a week until the day I die, so I don't understand why everybody else can't do the same thing, even if they're manual laborers. I mean, typing is manual, so in a sense I'm a manual laborer, right? Ask any of my friends: Work isn't hard and as far as we're concerned people don't need to retire.

"You can disagree with me if you would like, but I will never cede an inch.

"I have also misled by suggesting that a modest, progressive tax increase to a level that history tells us won't impede economic growth represents some form of class warfare against millionaires and billionaires pay their fair share will solve much of the problem. It isn’t. I complain that modest tax increases on the nation's wealthiest earners, such as the President's plan, is estimated to only raise $440 billion over a decade. I complain that a modest increase in the capital gains tax, a tax Republicans used to argue should be taxed at the same rate as wages, will 'only' raise $236 billion over a decade. Now if we were achieving that type of boos from cutting Medicare or Social Security, I would be all over it. But we're not picking your pocket here - we're picking mine.

"I have repeatedly attempted to mislead you by pretending that we're not in a recession, and that the only possible source of new government revenue over the next decade would be that modest tax increase. I don't mention a return to a healthier economy and lower unemployment, because I want to complain that taxes on people like me won't be sufficient, in and of themselves, to balance the deficit and thus should not be imposed. I expect you not to notice that if we can save $70 billion per year by cutting Medicare benefits, no cut is too small. When I complain that 'projected deficits total $10 trillion' I expect you not to figure out that I'm talking about less than we could save right now by transitioning to what would still be a high quality national health insurance plan.

"You may have noticed that my argument isn't based in much of anything other than not wanting to have my tax bill go up. I offer no reason why I can't pay more. If I tried, you would probably start laughing. So instead I'll insist that even if we substantially raise taxes on the rich we still won't balance the budget, and hope that you don't notice that I'm still begging the question.

"I argue that we should reduce benefits for healthier retirees, hoping that you won't pay attention to the fact that retirees are more likely to maintain their health when they have access to quality health care. I argue that we should reduce benefits for wealthier retirees because I expect that once people of my class are getting less it will be easier to convince them to cut benefits for everybody else. And as we're keeping our pocket change - and trust me, we have a lot more than you - and often have gold-plated supplemental health insurance policies to cover the difference, none of us will have go to without. The point being, I'll argue that I want to minimize deficits, but my primary goals are to avoid other program cuts and tax increases."

Next we can revisit Samuelson's "President Romney" speech....

"Fellow Americans. The budget outlook is not as bad as I like to claim. Here's the truth: I want to cut programs that benefit you, because I don't need them. I'm rich, I'm well insured, I have a phenomenal income for a job I can easily perform for many years to come, and I thus simply don't care about programs like Medicare or Social Security. Yet if we preserve those programs without adopting the cost-saving measures taken by every other developed nation, even if my taxes go up a few percent, something I find unacceptable, we cannot balance the deficit without cutting programs that I believe to be important programs — military spending, including the ability to spend hundreds of billions or trillions of dollars on wars of choice in the Middle East and South Asia, and... I'll list a few programs that I would prefer not to cut and pretend that they're my real focus: the FBI, highways, the Centers for Disease Control and Prevention, the Border Patrol and others. The cost of cutting spending that I like the would be too great, whereas it's no skin of my nose to cut the programs you like but I don't care about. You've figured me out: I talk a lot about having to make 'tough choices,' while quietly chucking to myself, 'tough for you.'

"Did I forget to include education in that list of programs that I don't want to cut? The EPA? Nope. I'm perfectly happy to cut them. If I complain about school funding, you can expect that my argument is against teachers' unions or how to shift spending from state-run schools to the private sector where my peers - and my employer - can extract profits. My peer group loves to talk about the failure of public schools, but for the most part we send our kids to private school. Sure, we want some basic level of environmental protection, but we don't much care if coal mines destroy landscapes or pollute remote parts of the country we'll never visit, if brownfields in the inner city remain toxic, or even if the planet warms. We do genuinely care about global competitiveness, but we don't like to admit that where you see pollution we see a potential expense that could lower profits - and thus lower share prices and dividends. When we balance your interests against ours, we want to maximize the growth of our portfolios and profits.

"For the past 40 years, federal spending has averaged 21 percent of GDP, so I'll pretend that the world is static and that we can arbitrarily cap government spending at a slightly lower level than that average without examining what government actually does. And by imposing that arbitrary cap, I have grounds to arbitrarily cut other programs that have a low-priority for me, such as Amtrak. Unfortunately it's not enough to cut small programs that don't benefit me, as those savings will be more than offset by an aging population and health costs.

"As you know, I roll Social Security and Medicare into what sounds like a single program so I can pretend that they both must be slashed. For example, I make comments like, 'From 1972 to 2011, Social Security and major federal health programs averaged 7 percent of GDP; in 2020, they’re estimated at 12 percent of GDP.' I use that as the foundation for making hyperbolic statements like, 'Unless we control these programs, they will strangle the rest of government.' Truth is, I oppose reforms of Medicare and health insurance that could save our nation a trillion dollars a year on ideological grounds, and I know that some modest tweaks will leave Social Security solvent for the indefinite future, but I don't want to fix these programs - I want to slash them and, ideally, burn them.

"I will tell you that you should forget tax cuts, but don't let that fool you: I want the so-called 'Bush tax cuts' extended, so that I don't have to pay more taxes. I may demagogue that the scheduled expiration of that temporary tax cut represents a tax increase, imply that it's 'soak the rich' class warfare, or that the amount of money it would raise is insufficient to justify the burden on me, but don't get distracted. It's your tax cut I don't care about. I care very much about mine, and I intend to keep it.

I will argue that it is obvious that we should try to simplify the system and spur economic growth by cutting top rates and ending tax breaks, because that sounds good even though I can't make the case that it would work. Frankly, the biggest problem with my wish to cut taxes on people like me is that would require cutting tax breaks that provide a significant benefit to people like you, such as the mortgage interest deduction — and you'll probably object. But to balance the budget, we’ll still need to raise more, not less, tax revenue from the income tax or other taxes and, as the saying goes, better you than me. Since 1972, tax revenue has averaged only 18 percent of GDP and I should have been more honest with you over my tenure as a columnist that I want you to feel the pain of the tax increases and benefits cuts necessary to bring the budget into balance because the unacceptable alternative would be that I and my wealthy, insulated peer group feel some of that pain.”

A revision to Samuelson's closing:

As long as their remains a chasm between my Op/Ed rhetoric and governing realities I will do my utmost to haunt whoever wins. My traditional positions highlight a dilemma of democracy. People want their opinion leaders to tell the truth, but they are often misled by carefully crafted, deliberately misleading rhetoric. Somebody who is truly interested in helping our government form good policy might escape this trap by persuading public opinion to acknowledge distasteful problems. For example, it's much easier to demagogue against 'socialized medicine' and complain that Medicare - or should I say MedicareAndSocialSecurity - are going to bankrupt the country, but the truth is that adopting a quality program of national health insurance could bring the budget to near balance while giving us many more years, even decades, to work on ways to tame healthcare inflation. I'm not arguing that a national health insurance plan, even one that utilizes private insurance companies, private hospitals, and privately employed physicians, is an ideal solution, but I am going to abandon my lie by omission - those programs do exist and they represent a real solution we could implement right now.

"Alas, in my line of work, that level of candor in commentary is rare. Most pursue self-interest over truth even if this deepens long-term public mistrust. Sure, if you work hard for the people and point out the truth behind my brand of 'tough choices' sensationalism, you can be the big man on campus, and I literally mean on campus. But some of us didn't work hard enough to get Ph.D.s, let alone write textbooks or win Nobel prizes. You won't normally hear it from us, but there's a lot of luck in getting a nationally syndicated column, most of us don't actually have special qualifications that make us any better at analyzing these issues than you are. And once you have this job, if you play your cards right you'll be topping up your 'six figures for two columns a week' salary with five to six figure speaking fees, promises that your next book will be purchased in bulk or distributed through partisan book clubs such that you can command massive retainers and royalties, and you can rub shoulders with the most powerful political and business leaders in America.

"If I appear to favor Wall Street over Main Street, and Main Street over you, that's in part because that's the culture in which I'm immersed - that's actually the way my friends and I think. But when my values and priorities conflict with the wealthy and powerful interests whose favor I seek or want to keep, I'm going to be on their side. And that, pretty clearly, is why I'll tell you that we 'must' slash programs that benefit you, in order to preserve tax cuts and programs that benefit us, and won't mention alternatives that would work to your advantage and advance my stated goals but really, truly antagonize the people who keep columnists like me afloat on a giant sea of cash.

"You've surely noticed that my arguments on what government should do focus on dollars and deficits, not how we should evaluate and weigh competing priorities, certainly not on the human cost of the type of spending cuts I favor. Honestly, it's easier to get you to swallow this type of argument when I leave that stuff out, and my argument tends to fall apart when I have to start defending my priorities in concrete terms." If I scare you it's on purpose, because if you start thinking you're going to start seeing the holes in my arguments.

Update: Roger Cohen's latest column reminds me of a combination of what Ignatius was saying a year ago, combined with the comments Frum referenced. I criticized Cohen a few weeks ago for what I believed to be an unfair criticism of Obama; this column seems a bit soft on Obama. I want to be fair, myself, but it really is time for our nation to form and articulate a coherent policy on the Middle East and South Asia, as well as moving our formalized relationship with Europe out of the cold war era.

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.

Social Security Disability - Incentives vs. Job Opportunities

Charles Lane is troubled by Social Security Disability Insurance, the benefit that goes to a person who has a history of employment but who becomes disabled. As presently funded, there is an actual problem with the sustainability of SSDI, and the CBO has observed,

A number of changes could be implemented to address the trust funds projected exhaustion. Some would increase revenues dedicated to the program; others would reduce outlays. One approach to reducing expenditures on DI benefits would be to establish policies that would make work a more viable option for people with disabilities. However, little evidence is available on the effectiveness of such policies, and their costs might more than offset any savings from reductions in DI benefits.

So we have a bit of a conundrum: it may be possible to help more SSDI recipients return to the workforce, but that positive step could increase the cost of the program.

Charles Lane appears to be confused the entire concept of disability insurance,

Social Security Disability Insurance, however, pays people who can show that they are too mentally or physically impaired to remain in the labor force. In short, for many workers, SSDI creates a quasi-right not to work.

I'm not sure how to respond to that. Yes, if you are disabled from work to the point that you qualify for disability insurance, public or private, you can receive those benefits in lieu of the salary you're no longer able to earn. But if you're not able to work, to call that a "quasi-right not to work" is to completely miss the point.¹ Also, as Lane notes, the benefits are far from generous,

The average monthly benefit is $1,100, slightly less than the average Social Security retirement check, but after two years on SSDI, beneficiaries also get Medicare. Indeed, SSDI added $80 billion to the cost of Medicare in fiscal 2011.

Recall, we're talking about people with sufficient work histories and credits to qualify for the program. How many adult workers does Lane believe look at an average $1,100 per month benefit, an amount that may actually be as low as $500 per month depending on their work history, and conclude, "That's a sweet deal."

Lane observes that after two years of disability an injured worker can qualify for Medicare. If he wants to argue that Medicare is not free, agreed, Medicare is not free. But what does he propose as the alternative? Leaving a significant population of disabled adults uninsured? Does he imagine that being unable to get the treatment and medication they need will render disabled more employable over time?

As is the wont of a certain class of Social Security reform advocates, Lane believes that the history of the Social Security program is "haphazard" and did not properly consider the consequences of giving disability benefits to workers. His evidence for that contention? The program initially treated disability benefits as "an early-retirement program for people with cancer, heart disease and other grave physical conditions", but in the 1960's the program was modified to include all adults with a sufficient work history who "suffered from a condition rendering them unable to 'engage in substantial gainful activity' for a year or more".

You'll note at this point that there is nothing "haphazard" about that history. Congress simply found that the need for disability insurance was greater than it first thought, and expanded the program to a larger pool of working adults. And this happened half a century ago.

Lane suggests that this resulted in "undeserving"² adults obtaining disability benefits, emphasizing at various points in his editorial, "mental and musculoskeletal ailments"³ and "people claiming crippling back aches and depression". He complains,

Both the Carter and Reagan administrations tried to cull undeserving cases, but the resulting backlash was so strong that Congress actually liberalized the rules in 1984.

The short version, in the midst of one of the worst recessions in U.S. history, realizing that the number of workers signing up for disability insurance had reached new heights, President Carter became concerned about removing people who are capable of working from SSDI, and Reagan continued that push. They pushed back, and Congress took the side of the disabled worker. Perhaps that's what Lane sees as "haphazard", that Congress would actually side with disabled workers? Perhaps he believes that any time Congress rejects a President's preferred policy, even after years of back-and-forth, the outcome is "haphazard"? Because once again the process of reform does not appear to have been haphazard.

The changes Lane describes occurred as part of a deliberate process over a period of decades. If Lane wants to argue that they were unwise, he should work on making that case.

Lane notes something that is in no way surprising, and is in fact a repeat of the phenomenon that inspired Carter to suggest reform:

Applications spike during serious recessions, as laid-off workers turn to SSDI when unemployment benefits run out. Thanks to the Great Recession, applications spiked in 2010 to an all-time high of 2.94 million, before declining slightly last year.

Let's note that the percentage of adult workers who self-describe as having a disability has not changed. What changes during a prolonged recession is that larger numbers of disabled workers apply for SSDI benefits. In relation to those workers, Lane won't even endorse the arguments of the Presidents Carter and Reagan Administrations, that a significant population of disabled workers should be booted off of SSDI. If he agrees with the outcome, it's difficult to see why Lane devoted a third of his column to a clumsy clumsy criticism of the program's evolution.

I don’t mean to imply that all, or even most, SSDI beneficiaries are malingering. Indeed, some of the recent increase in enrollment would have occurred anyway due to the aging of the population.

Lne previously argued, "There’s no evidence that workers in general are substantially less healthy than they used to be", but now he's asserting that's not actually the issue. He's arguing that older workers with genuine disabilities, unable to find work, will apply for SSDI benefits when their unemployment runs out. That's consistent with Lane's apparent belief that SSDI should primarily serve as "an early-retirement program for" disabled workers.

1. "Employers pay nothing when their workers go on SSDI." - I commented on this when Peter Orszag wrote a weak argument for turning SSDI into some sort of private insurance program. Within the context of Lane's argument, if the problem is that people who actually have qualifying disabilities seek SSDI after years of unemployment, when their UI benefits run out, it would be an odd sort of employer-sponsored disability insurance plan that would remain available to them.

   If the goal is to turn SSDI into a form of worker's compensation, or to roll it into worker's compensation, you would create an incentive for workers to seek benefits when faced with job discipline or immediately upon losing their jobs, and would likely impose a massive cost on employers who employ marginal workers. Lane can talk all he wants about how "Under the ADA, employers who refuse to hire or promote the disabled may be liable for money damages in federal court", but employers already find ways to screen disabled workers out of the candidate pool.⁴ If you make them pay a percentage of a disabled worker's future disability benefit, without regard to whether the worker's disability has any relation to their job, you can expect to significantly shrink the number of job opportunities for workers who are suspected to have present or future disabilities, and can pretty much give up on the idea of getting present SSDI recipients back into the work force - if things don't work out, why would the employer want to bear the cost? ("We didn't reject the applicant because of his disability. We rejected him because he had a hole in his employment history.")

2. "[F]or many workers... the alternative to a steady SSDI check (and, often, Medicare) would be a minimum-wage job, possibly one without insurance." - Given that SSDI benefits are low, as Lane points out on average only $1,100 per month, for a great many recipients a minimum wage job would be a step up. For those whose work histories entitle them to benefits at the higher end of the scale, it seems quite unlikely that they see SSDI as a desirable alternative to their former salaries.

   I'm not sure what Lane is trying to suggest in relation to Medicare. I expect he understands both why people with physical and mental disabilities benefit from being able to access adequate medical care, and why it is generally more difficult for somebody to return to work if they have unaddressed medical needs.

   If Lane is arguing that we should give continued benefits to workers during a transition period, let them try to return to work without losing their benefits or Medicare if things don't work out, well... guess what.

3. "The program has no training or rehabilitation component." - The program does include some components designed to help or encourage recipients to transition back into the workforce. But as the CBO noted, there's scant evidence that programs meant to transition disabled workers back into the workforce are effective, and they can easily cost more than simply continuing their benefits.

   If Lane is taking the position that it's worth it - even if it requires raising taxes and paying for programs, the human benefit of helping injured workers get back to work with decent wages justifies the expenditure, it's unlikely that he'll get any push back from the community of disabled workers. What's he waiting for?

Lane's attempt to soft-pedal his views on SSDI are, perhaps, betrayed by his rhetorical questions,

More than 6 percent of the U.S. working-age population is on SSDI. Does that statistic represent laudable social solidarity, a scandalous excess of the welfare state, or a tragic but unavoidable idling of human resources? Or is it an expression of this country’s understandable ambivalence about exactly what we should expect from the disabled, in an age when we know that depression really does disable some people — and that a man with two prosthetic legs can run in the Olympics?

If somebody is actually disabled by depression, the analogy is not to "a man with two prosthetic legs [who] can run in the Olympics". A better analogy would be to that same guy trying to run the same race without his prosthetic legs.⁵ I would like to think that buried somewhere in that thought process is the idea that we should provide people with mental illness with the support, treatment and medication they need to avoid leaving the workplace, or get back to work, but somehow I don't think that's what Lane has in mind.

Lane suggests that we have "conflicting goals and sentiments" about SSDI that must be balanced. But if you are of the position that SSDI represents "laudable social solidarity" (whatever that means) or "a tragic but unavoidable idling of human resources", what's to balance? In the former case it's a net positive, and in the latter case it's in Lane's own words "unavoidable". By "balance", Lane means that those who view SSDI as a good thing or those who believe we can't do better, need to compromise by agreeing to somehow pare the program back, to make it smaller and more affordable. It's fine to argue that if you believe that SSDI is "a scandalous excess of the welfare state" or if you take a step back from any of Lane's conflicting sentiments and simply note that the present system is not financially sustainable, but if you don't believe the system is on the whole a negative, and the budgetary issue doesn't even make your list of "conflicting goals and sentiments", it's difficult to see why you would be pushing reform as an absolute necessity. You might argue, "Let's raise taxes," or "Let's cut somewhere else."

Lane suggests at the end of his column that our society should provide "a sufficient safety net for everyone who needs it", but given that he has already told us that SSDI provides a very low benefit, how much less does he propose it can pay while remaining "sufficient"? Lane argues that SSDI needs to be administered "in a more cost-effective way", but his only proposed improvement, providing better support and services to help disabled workers return to employment, is likely at best cost-neutral and is likely to require increased expenditure. And while Lane speaks of "SSDI’s growth", let's be clear that he has conceded that the present "growth" principally results from the early entry of some disabled persons into the system because of the economic downturn. The percentage of disabled workers who receive SSDI may rise during a prolonged recession, but the percentage of disable workers remains constant.

If Lane wants to reduce spending, he pretty much rules out programs that will attempt to maintain employment and facilitate return to work for people who might otherwise enroll or continue collecting SSDI. If Lane wants to provide "a sufficient safety net", it's difficult to see how reducing benefits would be acceptable to him. If we are to believe that he actually believes most SSDI beneficiaries have bona fide disabilities, seeking out and cutting off the few who don't doesn't seem like a significant money-saver. So, what does Lane have in mind?
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1. Lane gets sick days at work, I assume - if he contracts gastroenteritis, does taking a sick day constitute... a queasy-right not to work? Seriously, what's the difference? A vacation day might be a quasi-right not to work (on that day), but a sick day is driven by physical incapacity.

2. The question of who is "undeserving" is, at heart, quite political. Then, as now, the primary impetus for defining who is or is not "undeserving" and trying to get them off of SSDI seems driven primarily by the desire to cut program costs. If Lane has a proposed redefinition of "disability" that he believes will protect disabled workers while making it easier to identify those who could resume work without additional assistance, what's he waiting for?

3. Lane appears to believe that "mental and musculoskeletal ailments" didn't qualify workers for SSDI prior to 1965. In fact, if such conditions were permanent, workers could qualify for SSDI on their basis from the program's inception. The change to the program was that workers could become eligible for SSDI even if their conditions weren't permanent.

4. Lane also argues that "The Americans With Disabilities Act... enshrines the notion that every American can and should hold a job regardless of physical or mental limitations." The ADA, of course, does nothing of the sort. The purpose of the ADA, in simple terms, is to reduce barriers that keep disabled persons out of places of public accommodation and impede employment and that, when it's not unduly burdensome to do so, employers must offer "reasonable accommodation" to workers who suffer from a covered disability. If the disability genuinely prevents an applicant or employee from performing a necessary job task, an employer faces no liability concerns for declining to hire or promote a disabled person into that job.

5. It would also be appropriate to acknowledge that in both cases we're talking about exceptions - most SSDI recipients are not receiving benefits due to being diagnosed with major depression, and most people with two prosthetic legs are not running in the Olympics.

How Justice Roberts Saved Social Security Privatization

We all know that the Republican Party loved the idea of a health insurance mandate before they learned to hate it. But it was not so long ago that a significant number of Republicans embraced another mandate: Social Security privatization. Rather than having the Social Security Administration invest in government bonds, the idea was that taxpayers would be given a list of private investment accounts and be required to put at least some of their money into those private accounts.

Before today it was difficult to see how you could reconcile the idea that a health insurance mandate was a horrendous abuse of the Commerce Clause, but forcing taxpayers to invest in private accounts remained constitutionally viable. Now, just as the penalty behind the mandate is shrugged off, "It's a tax, and the government is allowed to try to influence behavior through taxes," it seems that the same sort of distinction can be made in relation to Social Security. If there is no, um, public option - if one of the choices available is not "keep investing in government bonds" - that position may be a bit weaker; but if such an option is available, even if there is a penalty to sticking with that option (e.g., for every $1 you can put in a private account, you get only 75 cents to put into bonds), under Roberts' holding it's simply an exercise of the power of taxation.

As for justices who might try to hold Social Security privatization unconstitutional, they would have the choice of endorsing the Court's view that the "activity/inactivity" distinction is constitutionally valid, in which case Roberts would agree but assert "but this is a tax, so that's irrelevant", or they would have to work within the confines of tax law, to which Roberts could respond, "This is far less coercive than the health insurance 'tax', yet you voted to uphold that tax."

I'll grant, Social Security privatization is not imminent. G.W. pushed the idea, attempted to rebrand it when it proved unpopular, and was ultimately unable to convince a majority of the members of his own party to pass legislation. Right now it's a dream, but proponents of privatization should be grateful to Justice Roberts for keeping the dream alive.

So Much for Social Security Privatization?

Paul Krugman makes a good point,

Indeed, conservatives used to like the idea of required purchases as an alternative to taxes, which is why the idea for the mandate originally came not from liberals but from the ultra-conservative Heritage Foundation. (By the way, another pet conservative project — private accounts to replace Social Security — relies on, yes, mandatory contributions from individuals.)

Social Security and Tax Increases

If you asked Robert Reich, "Do you believe Social Security should be a form of insurance or a social welfare program," this editorial suggests that his answer would be "yes". That's not entirely unreasonable, given that Social Security does have aspects of both: It's an insurance program for workers, helping in the event of disability and providing a return on money paid into the system that's based in part upon the amount you pay in. But it's also a social welfare program that provides a much better return to workers at the low end of the income scale than those who make the largest contributions.

Reich proposes that Social Security can be made solvent for the longer term, as Reich proposes, by increasing the ceiling for payroll taxes from $106,800 to $180,000. But beyond economic viability, the taxpayers who would be hit hardest by that increase are among those whose support is needed in order to ensure Social Security's long-term political viability. The more money you take from higher wage earners to pay for Social Security, the less appealing it becomes to them.  And while few cry bitter tears for households earning enough to be hit by that increase, it is fair to observe that it would be yet another example of tax policy that has no appreciable impact on the wealthy but disproportionately affects working professionals.

My concern with this type of proposal remains that if you shift public perception of Social Security away from that of a program that guarantees a basic safety net to all workers, and toward "just another welfare program," you'll undermine support for the program and thereby upset its long-term political viability. Reich should consider for a moment that, even though every commentator from left to right found the metaphor to be inane, the New York Times treated as serious the question, "Is Social Security a Ponzi Scheme?"

What about something other than a tax increase? What if, for example, we were to implement policies that buttress and expand the middle class? Frankly if we've given up on that, we are admitting that our economy has systemic problems that cast doubt on whether even raising the payroll tax ceiling will create the sustainability that Reich predicts.

Why an Offer of Social Security Cuts May Benefit Obama - And the Democrats

Given the negative reaction I've seen to President Obama's apparent willingness to negotiate Social Security cuts as part of a debt ceiling deal, I think it's a good idea to remember a couple of things.

First, President Obama's incentives in this negotiation are not the same as those of the Democrats in Congress. Just as they refused to stand behind his agenda during his first year in office out of concern for the midterm elections, he now has his own reelection to worry about. The mainstream media and beltway pundits have made Social Security reform the hallmark of seriousness - so working out a deal will help establish Obama as "serious" about budget deficits and structural reform; rejecting a deal that offers Social Security cuts may earn the Republicans a larger dose of the treatment recently dished out by David Brooks.

Second, there could be a significant benefit to Obama - and to Congress - if he manages to work out a reform of Social Security. He doesn't have to offer much - and he can offer the cuts as part of a take-it-or-leave-it package. If the Republicans take the deal, he can announce that "Social Security is now in balance through [2075 or some other date well into the future]" and for the duration of his presidency both he and the Democrats in Congress can express that the reform is a done deal and further cuts are off the table. Better yet, by opposing the deal, House Democrats can blame any compromise on the Republican majority while still benefiting from the fact that reform can be declared a "done deal". And they can run campaign ads, "The Democrats proposed a deal that would preserve Social Security for the indefinite future, protecting your benefits while ensuring its financial stability. The Republicans rejected that proposal, insisting that retiree benefits be cut to the bone."

Reforming "Funny Money"

While listening to NPR, I heard about a series of Boston Globe articles on SSI for children, how the number of cases has exploded, and raising questions about both whether the current criteria for SSI eligibility are appropriate and the extent to which the system is abused by people looking for "no strings attached cash aid" to supplement their family's welfare benefits or modest earnings.

The interview took a "You may not be aware of this, but..." approach to the explosion of child recipients of SSI, but it's not exactly a closely held secret that many people who were removed from welfare rolls as a result of 1990's-era welfare reforms ended up on SSI. A lot of that transition was legitimate. But as with any system, some were quick to attempt to exploit the system.

I believe I first heard the term "funny money" in the early years of welfare reform from a classmate who had moved to a Bible Belt state, and who related that the term was being used by people who wanted their kids, whatever the reality, to be classified as disabled. That idea is more than a bit creepy - find a way to have your child classified as mentally ill (that's a lot easier to do, after all, than getting a classification of physical illness) so you can significantly boost your family's income. And it was not unusual for families who played this game to have multiple children, perhaps all of their children, collecting "funny money".

The Globe covers some of the consequences - parents who get upset when their children's mental health improves because it could mean losing the money, teenagers who are fully capable of working part-time jobs who are instead pressured to remain idle lest their employment result in a reduction or the end of their SSI checks. It's hard not to be judgmental. One article opens,

Geneva Fielding, a single mother since age 16, has struggled to raise her three energetic boys in the housing projects of Roxbury. Nothing has come easily, least of all money.

Even so, she resisted some years back when neighbors told her about a federal program called SSI that could pay her thousands of dollars a year. The benefit was a lot like welfare, better in many ways, but it came with a catch: To qualify, a child had to be disabled. And if the disability was mental or behavioral — something like ADHD — the child pretty much had to be taking psychotropic drugs.

Fielding never liked the sound of that. She had long believed too many children take such medications, and she avoided them, even as clinicians were putting names to her boys’ troubles: oppositional defiant disorder, depression, ADHD. But then, as bills mounted, friends nudged her about SSI: "Go try."

Eventually she did, putting in applications for her two older sons. Neither was on medications; both were rejected. Then last year, school officials persuaded her to let her 10-year-old try a drug for his impulsiveness. Within weeks, his SSI application was approved.

"To get the check," Fielding, 34, has concluded with regret, "you’ve got to medicate the child."

That's a pretty sympathetic spin, but I'm not buying it. It didn't occur to Fielding that perhaps the reason her oldest two children didn't receive SSI was because they didn't have qualifying disabilities? That pushing them onto medications they don't need in order to try to get them on SSI would represent bad parenting?

I would propose a simple reform: instead of issuing a "one size fits all" check, the Social Security Administration should assess how much money a typical family might be expected to spend, above and beyond its normal budget, for the condition at issue, while otherwise maintaining Medicaid eligibility rules such that medical costs aren't an issue. Then, rather than issuing $700 checks, they could issue payments that range from quite small (e.g., for the toddlers who are now being pushed into the system over "delayed speech" who will often already be eligible for a free and full set of services through the public schools) while being able to offer more significant benefits to families that are dealing with disabilities that have more substantial costs attached or require a parent to become a full-time caregiver. For some disabilities (e.g, delayed speech) there should be an automatic sunset date for benefits at which time, absent a new diagnosis, benefits will end. Such modifications will not only better direct financial help where it is most needed, it will significantly reduce the financial incentive to push normal kids into the disability system.

When little Alfonso tried a full sentence it came out in a swirl of sounds, often followed by a major league tantrum when he realized he was not understood. And so his mother, Roxanne Roman, was not surprised when the 18-month-old was diagnosed by a specialist with speech delay.

It came as a shock, however, when she learned from relatives that Alfonso’s problem might qualify him for thousands of dollars in yearly disability payments through the federal Supplemental Security Income program. For Roman, pregnant with her second child at age 17 and living at her mother’s, the extra income was attractive. She wanted to rent her own place.

Within three months, the boy’s application was approved. Alfonso receives $700 in monthly cash benefits, plus free government-paid medical coverage. Roman said her relatives told her she can pretty much count on the disability checks for Alfonso, now 5, to keep arriving in the mailbox for the rest of his childhood.

"They don’t ask many questions about the child once you’re approved," Roman said.

Some questions are well overdue.

I understand the argument that a lot of the families who game the system are living well below the poverty line. It was suggested on the radio program that the average family that gets a SSI check for a child doubles its income based upon that check - that is, if there even is a wage earner in the family we're talking part-time, minimum wage work. But I can't see the abuse of the disability system to be justified by the inadequacy of other aspects of the social safety net. Leaving the taxpayer aside, it's unfair to families who are trying to live within the rules, it sets a terrible example for other families, and it isn't healthy for the children. And, of course, it opens up the entire welfare system to attack as overly generous and beset with fraud and abuse. (Unless you truly believe that proponents of welfare reform care, please don't tell me that such an attack would be misleading and unfair. Do I need to remind you about Cadillac-driving welfare queens?)