Krugman and Tanner Debate Social Security on its 70th Birthday

Today is Social Security's 70th birthday.  A debate was held between Paul Krugman and Michael Tanner as part of the events marking program's inception:

Social Security's future debated, By John Davis, Poughkeepsie Journal: HYDE PARK — About 1,000 people gathered at the Franklin D. Roosevelt estate Saturday to mark the 70th anniversary of the Social Security program, signed into law by President Roosevelt on Aug. 14, 1935. A debate on the future of the federal program, which provides a guaranteed income for the elderly and disabled, was the centerpiece of the outdoor event. … Most of those attending were seniors who are members of retired groups opposed to the proposals of President Bush and others who want to reform Social Security by allowing some private investments of payroll taxes. … It was hard to find anyone — young or old — Saturday who supported any of the plans to privatize Social Security. The exception was Michael Tanner of the Cato Institute, a Washington-based libertarian think tank, who was there to debate the future of Social Security with Paul Krugman, an editorial columnist for the New York Times.

"Every event needs a sacrificial lamb," Tanner said in taking his seat on the stage. "They'll be serving portions of me, I understand, for lunch."  Tanner argued workers who now pay 12.4 percent on their first $90,000 annual income in payroll taxes, should have more control over how their contributions are invested. "You have no legal right to those benefits at all," Tanner said. "There is nothing in the world that is less guaranteed than a politician's promise."

Krugman — the clear favorite of the crowd, based on applause — said despite the rhetoric coming from the White House and other quarters, Social Security is not in need of reform. "The fact that we're here celebrating Social Security shows some politicians' promises are worth more than others," Krugman said. "Social Security as it is currently constituted is very efficient. We're talking about a system that really works quite well."

Tanner called for allowing workers to invest their share of the annual Social Security payroll tax surplus, which, he said, would put an end to the federal government borrowing and spending that money. "That surplus is being spent on everything the government does from rutabaga research to the war in Iraq," Tanner said. "If Congress is going to spend like a drunken sailor, take the bottle away from them."

Krugman, however, said the surplus is needed to offset a decline in federal revenues augmented by the Bush tax cuts. "Those tax cuts, rather than the spending binge, are the primary cause of the (federal) deficit," Krugman said. The debaters fielded a number of questions and comments from the gathering. …

This line from Krugman is my favorite from the debate, "The fact that we're here celebrating Social Security shows some politicians' promises are worth more than others."  The whole idea that personal accounts are needed because of the inability of congress to act in their constituents best interest, because congress is morally bankrupt, always rings hollow to me.  Don’t change the system, change congress. If congress is going to "spend like a drunken sailor" then throw them out of the House.  If they thought you'd actually vote them out for this stuff, they’d behave differently, but they don't think you will.  Why is that?

Update:  Here is Krugman's NY Times column on Social Security turning 70:

Social Security Lessons, by Paul Krugman, NY Times: Social Security turned 70 yesterday. And to almost everyone's surprise, the nation's most successful government program is still intact. Just a few months ago the conventional wisdom was that President Bush would get his way on Social Security. Instead, Mr. Bush's privatization drive flopped so badly that the topic has almost disappeared from national discussion. But I'd like to revisit Social Security for a moment, because it's important to remember what Mr. Bush tried to get away with.

Many pundits and editorial boards still give Mr. Bush credit for trying to "reform" Social Security. In fact, Mr. Bush came to bury Social Security, not to save it. Over time, the Bush plan would have transformed Social Security from a social insurance program into a mutual fund, with nothing except a name in common with the system F.D.R. created. In addition to misrepresenting his goals, Mr. Bush repeatedly lied about the current system. Oh, I'm sorry - was that a rude thing to say? Still, the fact is that Mr. Bush repeatedly said things that were demonstrably false and that his staff must have known were false. The falsehoods ranged from his claim that Social Security is unfair to African-Americans to his claim that "waiting just one year adds $600 billion to the cost of fixing Social Security." Meanwhile, the administration politicized the Social Security Administration and used taxpayer money to promote a partisan agenda. Social Security officials participated in what were in effect taxpayer- financed political rallies, from which skeptical members of the public were excluded. I'm writing about this in the past tense, but some of it is still going on. Last week Jo Anne Barnhart, the commissioner of Social Security, published an op-ed article claiming that Social Security as we know it was designed for a society in which people didn't live long enough to collect a lot of benefits. "The number of older Americans living now," wrote Ms. Barnhart, "is greater than anyone could have imagined in 1935." Now, it turns out that an article on the Social Security Administration's Web site, "Life Expectancy for Social Security," specifically rejects the idea the Social Security was originally "designed in such a way that few people would collect the benefits," and the related idea that the system faces problems from "a supposed dramatic increase in life expectancy in recent years." And the current number of older Americans as a share of the population is just about what the founders of Social Security expected. The 1934 report of F.D.R.'s Commission on Economic Security, which laid the groundwork for the Social Security Act, projected that 12.7 percent of Americans would be 65 or older by the year 2000. The actual number was 12.4 percent. Despite Ms. Barnhart's efforts, however, privatization seems to be dead for the time being. The Democratic leadership in Congress defied the punditocracy - which was very much in favor of privatization - by refusing to cave in, and the American people made it clear that they like Social Security the way it is. But the campaign for privatization provided an object lesson in how the administration sells its policies: by misrepresenting its goals, lying about the facts and abusing its control of government agencies. These were the same tactics used to sell both tax cuts and the Iraq war. And there are two reasons to study that lesson. One is to be prepared for whatever comes next on Mr. Bush's agenda. Despite the tough talk about Iran, I don't think he can propose another war - there aren't enough troops to fight the wars we already have. But there's still room for another big domestic initiative, probably tax reform. Forewarned is forearmed: the real goals of reform won't be as advertised, the administration will say things about the current system that aren't true, and the Treasury Department will function in a purely partisan capacity. The other is that the public's visceral rejection of privatization, together with growing dismay over the debacle in Iraq, offers Democrats an opportunity to make an issue of the administration's pattern of deception. The question is whether they will dare to seize that opportunity, when for some of them it means admitting that they, too, were fooled.

Just one comment.  Krugman is more optimistic than I am that private accounts are dead.  I see one last concerted effort coming this fall.  I hope he's right.

Comments

[Lee A. Arnold]

Redistricting?

[Lee A. Arnold]

I think after all is said and done, it IS a political argument about a promise, as I tried to put into my little movie at http://ecolanguage.net/ (Shameless plug: even if you've already seen the Social Security movie, go on over there, there's a few more goodies.)

[anne]

The point of each bill passed by Congress is generally to insure re-election of the majority. Bills just passed will take us to the election years with a significant spending stimulus. The last election the majority did not provide for a stimulus before the elction and that could well have proven damaging. There will be no such mistake this time.

[anne]

I do not believe that Congress will dare to cut Social Security benefits before the coming election, but AARP and other solvency mongers are doing the best they can to ease the way to cutting benefits. AARP, by the way, is run by a conservative Republican would would prefer that not be mentioned.

[Bruce Webb]

"There is a disturbance within the Force"

If the stakes were not so high it would be amusing. I actually had a prominent privatizer economist e-mail me explaining the weak points of Low Cost, trying to argue that solvency meant rolling ten sevens in a row. Well no, if we hold nine of those constant and meet or beat the tenth we get there.

I don't pretend to understand Productivity. Its numbers seem to be all over the map depending on the context: Bernanke here, Labor Dept there, and VoxBaby somewhere else. All I know is that is you compare last years Report with this year's numbers, whatever the hell they mean, we are beating them. And the same has been true in each of the last eight years.

I am in the position of a guy looking at a bar graph. Each year it goes up while all the smart guys argue that it has to go down. You can call me Forrest. You can call me Gump. You can even call me Mr.Gump. But stupid graph is what stupid graph does. Economically speaking I may not be the sharpest crayon in the box but I know enough to lick my finger and put it up in the wind. It is blowing in the direction of Solvency.

[jml]

And let us suppose Bruce Webb is wrong. Even so, whey should a working person who depends on social security for some or all of their retirement favor a reform based on sketchy semi-descriptions of a possible future plan? And especially when you run the numbers on the existing semi-descriptions of possible future plans, the average working person would do better if they just let the current system go out of actuarial balance and take the resulting benefit cuts? Unless of course each one individually, or the country as a whole, does come up several sevens in a row over the next 75 years.

The popular opposiiton to the current reform proposals seem completely rational to me, given the reform plans presented so far.

[Bruce Webb]

We are in Iraq, doing nothing is not an option. We can argue endlessly (and do) whether the Democratic Party should have signed on to the Iraq War policy or not. Okay fine, Peter Beinart made his choice and I made mine.

But given the numbers Social Security is a no-brainer. No one signed up in the War on Social Security, we are by no means mired in the quagmire, a simple look at the numbers shows that we are in a fully fortified castle at the top of the hill. With a bunker full of ammo, unlimited rations and a well that is gushing fresh water.

You can pick scenarios that put Social Security at risk. Unfortuantly for privatizers most of those require the US to resemble "Road Warrior" or my favorite "A Boy and His Dog"

[jml]

I'd be *very* interested in Bruce Webb's detailed opinion on the set of break-even numbers for security solvency. It would be interesting to set down set of breakeven numbers and ask one of the social security reform folks where we will fall short. That might make for an interesting debate. What were the ten seven's in a row we had to role, according to the advocate who e-mailed you? And what would the "realistic numbers" imply about the returns to a stock market scheme?

[Bruce Webb]

Jml I guess I will just have to refer you to the Seven Samurai, known in America as the Magnificent Seven. We have Secretary of Treasury John Snow, Secretary of HHS Michael Leavitt, the ever delectable Secretary Elaine Chow of the Labor Department, and Jo Anne, John, Tom and Jim. The cast varies but like any Broadway Show the result comes out the same Low Cost Alternative

I am not sure where you are coming from so forgive me if I am getting this wrong. It is late and I am tired. If you want a really cool version of what I am trying to say then link to this Vote the Rock Flash Social Security: Don't get played

Or you can grind it out alongside me with Social Security is not broke: by the numbers

[cl]

Mr. Tanner:

I would like a say on how my 12% payroll taxes are spent. I would like:

1. Payroll taxes not to be spent on the war in Iraq.
2. Payroll taxes not to be given away as large tax cuts for the rich.

If they would just do this, it would make me happy.

[Barry]

Excellent point, 'd'. The people who are emphasizing choice on SS are, in general, the same people taking your money right now and doing whatever they please with it. But we're supposed to trust them?