Elections in Iraq

The election in Iraq has left me feeling rather hopeful. No, the Sunnis didn't vote, but the Shiites who were elected are apparently inviting the Sunni parties to help write the constitution anyway. And, on NPR I heard from a representative of at least one of these parties that they will accept the invitation.

My uncle John, who is a professor of political science and a politician himself, nailed it when he said,

I think the election yesterday in Iraq was good news for Iraq, the Middle East generally, and for the U.S. Our loathing for George Bush and misguided American policies shouldn't lead us to forget that democracy is better than tyranny, nor does a successful election yesterday justify the lies and the base motives that led us to make war on Iraq in the first place.

Social Security FUD

My friends Dave and Aaron got to talking about Social Security after my last post. Dave calls it a "busted Ponzi scheme" and wonders why he should support Social Security "when there is virtually zero chance of me ever seeing a penny of it." Aaron calls it "unsustainable."

These ways of thinking about Social Security have been repeated over and over by the program's detractors. They represent an attempt to frame the debate about Social Security, trying to get people to assume that Social Secuity must be "reformed." But, they don't hold up to even modest scrutiny.

In fact, Social Secutiy is not a Ponzi scheme, it's a welfare program. It's a popular welfare program that works, and that's why Bush doesn't like it - he is ideologically opposed to welfare, so welfare that works is abhorrent to him.

It works because we all agree that old people should be able to live with dignity, and that they are no longer capable of providing for themselves. We can niggle about what age qualifies as old for this purpose, but people generally agree on these basic premises.

Under current law, the SSA predicts that the trust fund will run out in 2042, and that's with rather pessimistic assumptions about the future growth of the economy. The well-respected CBO predicts 2050 or so. (Anybody who thinks either of these can predict the economy 40 years out is an idiot, but these predictions are what the fuss is all about.) So, what happens then? The program collapses, right? Dave's checks stop coming? Not at all. Under current law, the SSA predicts that the payroll tax is enough to continue to cover 60-80% of promised benefits. (Which fraction is expected to total as much or more than current benefits, even in inflation adjusted terms. (This is because benefits are indexed to wage growth, not to inflation.))

Dave worries (quite rightly) about the fact that the rest of the government is spending the money borrowed from the trust fund. The rest of the federal budget is grossly out of balance. Social Security is over funded, to the tune of an accumulated trillion dollars. Tell me again how this demonstrates that Social Security is the problem?

Go to morningstar.com to see an evaluation of the risk vs. reward of the S&P 500. They compare the expected return of the stock market to the expected return of the safest investment they can think of. Is that gold? Or maybe Euros? No, it's T-bills, just like those held by the SS trust fund. Are you really suggesting that some politician is going to pass a law that defaults on the debt sold to the trust fund, thus impoverishing lots of hard-working, patriotic, American retirees? This while we continue to pay back the debt held by the Chinese and Japanese central banks?

Will we have to raise the income tax to cover all that debt? We might do that if we ever again elect a responsible politician. But, if we keep electing irresponsible assholes like Bush, we'll just sell the debt somewhere else. Just like we do to fund a war or a big tax cut.

The size of the predicted long-term gap between receipts and benefit payments is about 2% of GDP. Coincidentally, that is about the size of the Bush tax cut. We can afford to pay all the promised benefits if we have the political will to do so. If we don't want to pay those benefits, we can change the program.

Who will make that choice? People who vote. And who votes? Old people. As I come up on retirement age behind the bubble of the baby boom, I predict that Social Security will be better than ever. All those boomers will want their Social Security - they won't want it cut. They will get their AARP magazine every month, read about Social Security, and go out and vote for their benefits.

If there is a threat to my receiving Social Security when I retire, it comes from people like Bush - people who are ideologically opposed to the program and seek to eviscerate it.

Paul Krugman Is My Hero

Social Security privatization will be the most significant domestic policy debate of the next two years. The issues aren’t that complicated if you dig just a little bit, but much of the public debate will be carried out with buzzwords and FUD.

For example, the other day I heard President Bush say that Social Security will be in the black only until 2018. What he means is that the Social Security Administration has predicted that payments to SS recipients will first exceed income from the payroll tax in that year. What Bush didn’t mention is that the SS trust fund will have a trillion dollar balance in that year and will actually be growing, despite the imbalance in payments, because of interest on the bonds held by the fund.

Paul Krugman has written the definitive article on Social Security privatization. If you read only one article on the subject in all that time, you must read this article.

Krugman promises to continue to talk about Social Security in his NY Times column. You will also find ongoing commentary on the issue at Kevin Drum's Political Animal blog. Here, for example.

Krugman's is the best summary of the topic I have seen, but there is also lots of more specific analysis of Social Security in posts by Max Sawicky at MaxSpeak.org. Here, for example.

UPDATE: Josh Marshall of Talking Points Memo has also been following the privatization debate. He is especially trying to make sure that Democrats in Congress don't give in to Bush and compromise on a partial privatization, which would amount to acquiescing to a phase-out of Social Security.

His latest post covers the problem of government debt and how it relates to Social Security. Our debt is huge, but not because of Social Security, which is actually over-funded. The debt problem is with the rest of the budget, which has been thrown out of whack by Bush's gihugic tax cuts and profligate defense spending. (And by Reagan doing the same things in the 80's.)