Paul Krugman: Played for a Sucker

Barack Obama tries to earn his "badge of seriousness," but ends up "being played for a fool":

Played for a Sucker, by Paul Krugman, Commentary, NY Times: Lately, Barack Obama has been saying that major action is needed to avert what he keeps calling a “crisis” in Social Security... Progressives who fought hard and successfully against the Bush administration’s attempt to panic America into privatizing the New Deal’s crown jewel are outraged, and rightly so. ...

To understand the nature of Mr. Obama’s mistake, you need to know something about the special role of Social Security in American political discourse. Inside the Beltway, doomsaying about Social Security ... is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.

Consider, for example, this exchange about Social Security between Chris Matthews of MSNBC and Tim Russert of NBC, on ... “Hardball.”

Mr. Russert: “Everyone knows Social Security, as it’s constructed, is not going to be in the same place it’s going to be for the next generation....”

Mr. Matthews: “It’s a bad Ponzi scheme, at this point.”

Mr. Russert: “Yes.”

But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, ... our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”

How has conventional wisdom gotten this so wrong? Well, in large part it’s the result of decades of scare-mongering about Social Security’s future from conservative ideologues, whose ultimate goal is to undermine the program. ...

Fortunately, the scare tactics failed. Democrats in Congress stood their ground; progressive analysts debunked, one after another, the phony arguments of the privatizers; and the public made it clear that it wants to preserve a basic safety net for retired Americans.

That should have been that. But what Jonathan Chait of The New Republic calls “entitlement hysteria” never seems to die. ...

Which brings us back to Mr. Obama. Why would he, in effect, play along with this new round of scare-mongering and devalue one of the great progressive victories of the Bush years?

I don’t believe Mr. Obama is a closet privatizer. He is, however, someone who keeps insisting that he can transcend the partisanship of our times — and in this case, that turned him into a sucker.

Mr. Obama wanted a way to distinguish himself from Hillary Clinton — and for Mr. Obama, who has said that the reason “we can’t tackle the big problems that demand solutions” is that “politics has become so bitter and partisan,” joining in the attack on Senator Clinton’s Social Security position must have seemed like a golden opportunity to sound forceful yet bipartisan.

But Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders. And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want.

We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists — which is the case for many issues today — you end up being played for a fool. And that’s what has just happened to Mr. Obama.

Update: Robert Waldmann disagrees with Paul Krugman.

Update: PGL at Econospeak adds this update to his comments on the return of entitlement hysteria:

Greg Mankiw chastises Paul Krugman for that criticism of Senator Obama. But I don’t get what Greg is trying to say here. OK, back in 1998 we may have been forecasting that the Trust Fund reserves would be depleted by 2029. But I hope Greg has kept up with the revised forecasts that Paul was mentioning today. And Greg should know that what President Clinton was saying in 1998 is a far cry from the rightwing spin that Paul noted. Seriously – if one wants to attack Paul Krugman for something he said, one should be more accurate with what the argument was. And one should also use updated forecasts – and not some forecast from a decade ago.

Comments

[James Killus]

I never much cared for Tom Hayden, but I fear that he has Obama's number:

You were ten years old when the Sixties ended, so it is the formative story of your childhood. The polarizations that you want to transcend today began with life-and-death issues that were imposed on us. No one chose to be "extreme" or "militant" as a lifestyle preference. It was an extreme situation that produced us. On one side were armed segregationists, on the other peaceful black youth. On one side were the destroyers of Vietnam, on the other were those who refused to submit to orders. On the one side were those keeping women in inferior roles, on the other were those demanding an equal rights amendment. On one side were those injecting chemical poisons into our rivers, soils, air and blood streams, on the other were the defenders of the natural world. On one side were the perpetrators of big money politics, on the other were keepers of the plain democratic tradition. Does anyone believe those conflicts are behind us?

If you're in a war, it's always a pleasing to think that it could all be worked out if everyone would just be reasonable. But if everyone were reasonable, you probably wouldn't be in the war in the first place. Foreign wars for the U.S. are just projections of domestic politics, "the continuation of politics by other means," a mixture of Clausewitz and Freud. The real was is the one taking place within the body politic of the U.S., and the lines are pretty clearly drawn. Anyone who does not recognize them is is unfit for public office.

[Bruce Wilder]

digby at Hullabaloo recently posted for comment a statement Barack Obama made to the Daily Kos community about tone in politics, which may be worth a look:Tone, Truth, and the Democratic Party

There are two problems, that I see here.

One arises, because the ideological split between the Parties means that the Republican Party is now dominated by crazy people, with whom no "bipartisan compromise" is possible on the merits.

The other, related problem, is that politicians like Barack Obama cannot be fire-breathers and still get elected or govern. It is all fine for Tom Hayden to lecture, but his brand of politics failed miserably, failing to end the Vietnam War in a timely fashion, and killing the New Deal coalition's presumptive majority, in the midst of its last hurrah in the Great Society.

Lots and lots of people have resentments, just waiting to be exploited by the Right. Democrats need to find ways to soothe those resentments, and bring the better angels of our natures into politics, instead. That's what I hear Barack Obama hoping to do.

I think there are two issues here.

One is that Democratic politicians have not figured out how to make use of irate Moderates of the Democratic Party, or of the liberals, who actually care about the issues. They need some variation on "good cop, bad cop," which will increase their leverage in fights with the Republicans.

Instead, they fall back into 70's style triangulation, blaming the dirty friggin' hippies, and the "radical Left" (as if there were such a thing, we should all be so lucky, Paine could start doing poetry readings on You-Tube) and voting to criticize MoveOn.org ads.

Or, like Hillary, they play it safe, signalling to business their openness to run-of-the-mill corruption. I guess the assumption here is that Bush will wear off fast, and the Media will still be controlled by the Plutocracy, so why take chances. Any one of the Democratic candidates could be taken out by a haircut or a scream of a "gaffe" at any moment.

It is a sad and pathetic state of affairs.

[anne]

http://krugman.blogs.nytimes.com/2007/11/11/why-barack-why/

November 11, 2007

Why, Barack, Why?
By Paul Krugman

The great Social Security debate of 2005 was a seminal moment for American progressives. Conventional fiscal wisdom in the Beltway was that the aging population is THE big problem — when the truth is that grim long-run fiscal projections mainly reflect projected health care costs. And conventional political wisdom was that the Bush administration's fear-mongering on the issue would work.

But a determined defense by progressives in the media, on the blogs, and in Congress beat back one spurious argument after another, while the American people made it clear that they really want a program that guarantees a basic retirement income that doesn't depend on the Dow. And Social Security survived.

All of which makes it just incredible that Barack Obama would make obeisance to fashionable but misguided Social Security crisis-mongering a centerpiece of his campaign. It's a bad omen; it suggests that he is still, despite all that has happened, desperately seeking approval from Beltway insiders.

Substantively, this is wrong — and the tone-deafness is hard to understand. Tim Russert doesn't vote in Iowa.

[ilsm]

Political strategy should emphasize the elephants in the room.

There are many and hidden in the debate, they stay quiet.

The social security debate overshadows the deficit elephant, which is not so quiet and used to con the public.

The deficit reported by treasury is the net of cash receipts over cash expenditures. Checks cashed and checks written.

The other elephants in the room with social security are medicare which still contributes to the surplus of cash in versus cash out. However, soon it will go negative, a whole lot steeper than social security.

The other elephant is the war machine which gets cash from both payroll and income taxes and does nothing for the health of the economy, and only makes the insecure feel 'secure'.

The crisis is that the cash managers lose surpluses and will either have to cut or find new cash.

The deficit; how it is reported by treasury and handled by the spinners should be debated.

The crisis in the beltway is: soon payroll taxes are not raising enough cash to keep the phoney deficit figure "tame".

[macquechoux]

Krugman sure seemed to believe there was a problem back in 1996, from the New York Times:

Where is the crisis? Just over the horizon, that’s where … In 2010 … the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits. The budgetary effects of this demographic tidal wave are straightforward to compute, but so huge as almost to defy comprehension.

[anne]

Happily Paul Krugman was completely wrong in 1996. Happily there has been a wonderful surplus in Social Security sonce 1996, a surplus that is massive and growing and that will continue to grow for years. Krugman recognized that the Social Security fiends were bent only on destroying the legacy of Franklin Roosevelt and were wrong in any event.

There is no Social Security problem, and conservatives have failed in the attempt to invent a problem and destroy the program. Barack Obama has made a serious mistake in listening to those few bizarre Democrats who are worried about nothing.

Of course, there is a current matter of worry that conservatives have set on us and that is the insane spending on war and occupation. Worried about deficits? Then, leave Iraq immediately and completely.

[anne]

http://rjwaldmann.blogspot.com/2007/11/i-agree-with-ed-kilgore-and-disagree.html

November 16, 2007

I agree with Ed Kilgore and disagree with Paul Krugman and Duncan Black
By Robert Waldmann

I think it is good politics and good policy for Barack Obama to claim there is a social security crisis and propose to raise the FICA ceiling.

This is seriously alarming. I actually agree with everything Kilgore wrote, so I don't have much to add.

Krugman doesn't even get around to mentioning Obama's proposal. He argues, convincingly, that Obama's framing of the issue is not completely honest proving that not everything politicians say is the unvarnished truth. Knock me down with a wrecking ball....

[Me, I think Robert Waldmann is as dense as a wrecking ball. Worry about the war in and occupation of Iraq, worry about health care, and not Social Security and proposing a tax increase for a program that is massively in surplus. Worry about the insane spending for Iraq, and not for Social Security.]

[Don Quijote]

Lots and lots of people have resentments, just waiting to be exploited by the Right.

And by the left if it had not been bought out by big business. A little class warfare can go a long way, if you have any doubts, look at Huckabee's campaign.

You could start by asking Joe Sixpack what happens when he loses his job?
And why corporate executive who destroy millions of dollars worth of equity walk away golden parachutes?
And why the vast majority of the kids getting their asses shot at in Iraq and Afghanistan are from the wrong side of the tracks?
And why if these war are against existential threats to America with aren't Jenna and Not Jenna, Chelsea and all the other children of our political elites in uniform fighting on the front lines?

Democrats need to find ways to soothe those resentments, and bring the better angels of our natures into politics, instead.

Good Luck!!! Call me when it works...

That's what I hear Barack Obama hoping to do.
And that's one of the reason he won't be the nominee.

[Dirk van Dijk]

There is a minor problem with SS long term. Obama's proposal would more than solve it. As a matter of Tax fairness its not a bad idea. As currently structured the tax is about as regressive as any you can find, but a total repeal or the cap would provide far more revenues than are needed. Personally, rather than immediatly remove the cap I would have it increase at 3x the rate of inflation. Less potential shock to the economy and probably enough of a change to cure the problem. However, much of the problem is the framing of things as "socialsecurityandmedicare" or "entitlements". Sort of like the conflating of chemical, biological and nuclear as "WMD's" as if some canisters of WWI mustard gas with no viable delivery system were the same thing as a MIRV'ed ICBM. The real problem is medicare which needs an overahul (or rather the health care system as a whole needs an overhaul to contain ever rising costs which are the core of the medicare problem) SS just needs a little tweaking. Gradually raising the tax cap would be enough of a tweak.

[ken melvin]

After lo these many years is there anything that will change the minds of those opposed to Social Security? These same minds that so wanted to refight VietNam? These that would bomb Iraq into glass and kill every Iraqi in order to not lose this misbegotten, immoral, illegal war? We are talking about a serious psychosis here folks. One that thinks the civil war isn't over; it is just half time.

[eightnine2718281828mu5]

waldman:

---
what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want." OK Paul if you have evidence that conservatives want the FICA ceiling raised, put it on your blog, I'm all eyes.
---

It's not that Republicans agree with Obama's solution, it's that they agree with his framing of the issue. ie, there's a crisis in SS.

They want their framing to be accepted so that the electorate believes there is no choice but to accept their solution, and that's where Obama deviates from the script.

The pundits are happy to buy into both the frame and the 'Republican bipartisan' solution of benefit cuts, while the electorate seems to have bought the frame and rejected the Republican solution.

[kharris]

Krugman gets accused of lots of faults, and in many cases, the accusers are just trying to poison debate. One fault he clearly does have, and I think it may be getting worse, is that he is not a careful writer.

"We all wish that American politics weren’t so bitter and partisan." If that were true, then we wouldn't have to wish. It's a throw-away line, and not true. Waldman gets Krugman for being less than careful when Krugman asserts that "compromise" in DC parlance means giving conservatives what they want, at the same time he is talking about a proposal that most conservatives do not want. That failure to write carefully gives poisoners ammunition. They already have an audience, so we face a bad combination. An excuse that I have heard is that Krugman's NYT editorials are not his core work - he dashes off 700 words a few times a week and that't that. It's the freakin' NYT. Standards aren't what they should be, but that's no excuse for not setting one's own standards high.

He's right on substance, though. We need first to stop pretending that an SS fix deserves to be a high priority. Then we can worry about whether a higher cap has technical merit.

macquechoux,

I suspect that the context of your Krugman quote is an argument to keep the Treasury budget in better balance, because Treasury would stop getting money from the SS Trust. If that is the case, Krugman's argument today is fully consistent with his argument then. Only if Krugman in 1996 was arguing for a change in the structure of Social Security, rather than overall fiscal policy, is there an inconsistency. Can you post a link or the full text?

[anne]

http://query.nytimes.com/gst/fullpage.html?res=9403E4D6133EF933A15753C1A960958260

October 20, 1996

Demographics and Destiny
By PAUL KRUGMAN

WILL AMERICA GROW UP BEFORE IT GROWS OLD?
How the Coming Social Security Crisis Threatens You, Your Family, and Your Country.
By Peter G. Peterson.

THE AARP
America's Most Powerful Lobby and the Clash of Generations.
By Charles R. Morris.

In this silly season politicians are once again promising that we can have it all -- that we can cut taxes, spare every popular spending program from even the smallest cut and still balance the budget. Nobody really believes them; if the public is willing to indulge such fantasies, it is because it does not, when all is said and done, really take the budget deficit seriously. After all, we have run huge deficits year after year as far back as anyone except economists can remember, and the sky has not fallen. Where is the crisis?

Just over the horizon, that's where....

[Paul Krugman was wrong in 1996, paying attention to hysterical Scoail Security bashers, but Krugman has been right ever since.]

[David in NY]

Am I not right that Social Security is completely, perfectly fine until 2042? Thirty-five years away?

And what do the models about global warming say will be happening in 2042? That the Artic Sea will be be ice-free, right? See, http://www.news.com/Study-Most-Arctic-sea-ice-could-disappear-by-2040/2100-11395_3-6142705.html.

Which has the greater potential to be a real "crisis"?

Why should I give a damn about politicians who hold up the first "crisis" as a "terrible-thing-we-must-deal-with- immediately" (when it is subject to easy remedies at any point) but adopt a do-nothing or go-slow attitude to the second?

[anne]

The idea that Paul Krugman is not a careful writer is, of course, utter nonsense. Compromise in Washington means precisely giving conservatives, giving Republicans just what they want.

Modern Republicans are thoroughly beyond compromise but always pretending otherwise as they continually deceive voters. Simply notice the astonishing unity in Republican Congressional votes. Republicans shout of family values while sneering at millions of needy children who for a mere few days of Iraq spending could be given health insurance. There is no compromising with such compassion-less deceivers.

[Don Quijote]

"We all wish that American politics weren’t so bitter and partisan."

"Bipartisanship is another name for date rape,"

Sow the wind, reap the whirlwind.

[ken melvin]

To borrow from Feynman's to Gell-Mann; I thought communication was the objective. Is, or is he not effective?

[Brooks]

Mark Thoma or Anyone,

Krugman writes "Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs".

I would like to learn more about this assertion, and policy implications, particularly:

1) What are the numbers and assumptions?

2) He refers to "our country's financial health", but to what extent does his assertion apply to our projected long-term FISCAL imbalance (of the Federal Government)? (I know Medicare is the largest contributor to the projected growth in this imbalance, but how much is that driven by "the growth rate of per capita health care costs" (for the population as a whole, and in particular, for Medicare recipients) as opposed to the increase in number of recipients as the baby boomers retire.

3) To what extent is the projected growth rate of per capita health care costs a function of the aging population (i.e, DRIVEN by the "coming retirement of the baby-boom generation" from which he distinguishes it)?

4) To what extent could projected per capita health care costs be reduced under various policy alternatives? And to what extent would that mitigate the projected long-term fiscal imbalance?

I'd appreciate any info and links that you can provide. Thanks.

[pgl]

Robert W. points us to a Ed Kilgore endorsement of Obama's proposal to lift the payroll tax ceiling. Obama tried to lecture Clinton last night on the best way to tax the rich. Over at EconoSpeak, I explain why Obama has this all wrong. Cliff Note version - tax all income (including capital income) and not just labor income.

[anne]

"Bipartisanship is another name for date ----,"

Sexist references are sexist references, and are demeaning and need not and should not be used. Get it?

[kharris]

anne,

Thank you, anne, for calling my views utter nonsense. Having till now tried to defend you from sniping in places like this one, I will in the future feel free to side with those who snipe. It hasn't always been an easy decision to defend you, given your preference for haughty dismissal over discussion. Now, I feel at liberty to take the low road, just as you do.

Meanwhile, if you intend to call my views utter nonsense, at least have the good grace to address what I have written in some substance.

[Denis Drew]

Something like one-tenth of one percent a year hike in payroll tax until sometime around 2040 (after which S.S. outgo forever flattens) would cover the baby boomers -- as average income increases an average of two whole percent a year: a crisis?

Under the current setup an equivalent amount of income tax will go to cash in Trust Fund bonds to cover the payroll tax shortfall -- beginning sometime around 2017. If we are back in Clinton style surplus mode by then no one will notice. If we are in deficit we will face the choice of either raising the income tax (or some other on-budget tax -- tarrifs? :-]) just a mite or selling just a few more bonds to cover the TF bonds we are cashing -- some crisis.

By 2040, by current projections, we will be paying S.S. retirement about three-quarters out of payroll tax and one-quarter out of income tax -- clunky but, hey, this is government. At whatever point the TF bonds are all cashed in we can decide whether to go on with the same clunky setup or whether to add a few points to payroll tax (at a point in time when average income will have doubled) while making an equivalent chop in the income tax (who cares).

Cutting benefits to avoid doing either will be about as sane a possibility then as would be today (less so -- there will be relatively more seniors). What a crisis.

[anne]

The health care math is simple:

In Massachusetts Blue Cross/Blue Shield health insurance for a single person costs $595.52 a month or $7146.24 for this year. There is a $400 deductible added, which meand $7,546.24 for effective insurance and co-pays in addition for any and every thing save for a flue shot.

The alternative is health insurance for $200 aq month or $2,400 a year with a $5,000 deductible, which means $7,400 before insurance coverage begins.

That means for a Massachusetts couple effective health insurance costs either $15,092.48 for merely flawed coverage or $14,800 for gambler's insurance before co-pays. This is insane.

Do the math.

[save_the_rustbelt]

Much of the political flim-flam is possible because of the federal government's long standing accounting flim-flam.

Put the feds on a real accural basis and we can see the real numbers.

Neither political party would go for that though.

[anne]

"And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want.

"We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists — which is the case for many issues today — you end up being played for a fool...."

Precisely written and precisely so. All Barack Obama is doing is giving conservatives an opportunity to justify bashing and slashing Social Security. Solcial Security is fine and will continue to be fine.

Thank you, Paul Krugman.

[macquechoux]

Anne says, “There is no Social Security problem.”
“Happily Paul Krugman was completely wrong in 1996. Happily there has been a wonderful surplus in Social Security since 1996, a surplus that is massive and growing and that will continue to grow for years.”

Thanks for setting me straight there, Anne. You need to let the Trustees know about this, however. Some believe a little tinkering is called for:

http://www.ssa.gov/OACT/solvency/provisions/

Anyhow, now that we have Social Security cleared up what needs to be done about Medicare & Medicaid?

[anne]

Since 1936, the dream of extreme conservatives has been to destroy Social Security as a further means of completely undermining the New Deal legacy. Social Security however has a massive surplus, a growing surplus, a surplus that will grow for at least a decade to come and that will suffice for full benefits for decades beyond.

The idea of complaining about Social Security and speaking of tax increases that are needless to pay for Social Security, all before a national election, simply plays to conservative bashing and slashing.

Try pitching to protect the health of 3.8 million needy children for a mere $7 billion a year which would be covered by tobacco taxes. Try pitching to restore this summer's cuts in Medicaid for disabled children and adults.

[Brooks]

Mark Thoma or Anyone,

Correction to my comment above:

I attributed that quote to Krugman. Krugman was actually quoting Orszag. Also, I see that I should have included the prior sentence as well. All my questions remain as is (not affected by this correction)

"As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”"

[Movie Guy]

Satchel Paige Obama.

I give credit to Senator Barack Obama for using the Social Security crisis political soundbite to draw attention to his campaign - as he reaches across the political spectrum of voters, not only within the small core of the Democratic Party but also the Centrists or those in the middle of the issues voting spectrum, regardless of party affiliation.

That Senator Obama is framing the "crisis" differently deserves credit as well. Far too many Demopurists missed his point, not surprisingly.

Regardless of the merits of what I label "SS crisis II", the news media and the blogs are talking about his statements, not those of other political candidates. Objective achieved. And will be again.

The Social Security system absent a firewall and a few other restraints is a problem, just one that will not be raised seriously until the Medicare swarm kicks in around 2012 and beyond. At some point, Obama's call for action will breathe new life, on both sides of the aisle.

Senator Obama is slowly and carefully learning the game of presidential baseball politics - and that's what this is during an election cycle. He hit a pretty good foul ball with this latest tactic. Some of his detractors, including Paul Krugman, are only catching air, which is why they would make weak players in mounting and carrying through a political campaign on the national stage.

Satchel Paige Obama is up against Babe Ruth Clinton. He will have to use a few curve balls to catch the corner of the plate. His campaign team is fully aware of that.

Throw another curve, SP Obama. See if you can get the Babe to swing wildly. If not, work on your fast ball. You will need it.

[anne]

The Social Security trustees are merely conservative Republicans, and I could care less about the pretended worries they have which really all amount to not being able to slash and bash Social Security. Funny thing about having a massive Social Security surplus in the midst of an insane war and occupation that are insanely expensive but the conservaitve focus is Franklin Roosebvelt and the dread massive Social Security surplus. This is what conservatives are about, all war and occupation and the heck with the social needs of Americans.

[Michael Cain]

Brooks,
One starting point is Kotlikoff and Hagist's NBER paper "Comparing Government Healthcare Costs in Ten OECD Countries", which breaks the blame down to about 25% demographics and 75% cost increases. The demographic piece is even smaller than that for the US, which is aging more slowly and has fewer cost controls than the other countries in the study. Note that this is quite different in tone than "The Coming Generational Storm", Kotlikoff and Burns' earlier popular treatment of the problem.

[anne]

http://krugman.blogs.nytimes.com/2007/11/09/good-sense-from-the-cbo/

November 9, 2007

Good Sense From the CBO
By Paul Krugman

Two important articles co-authored by Peter Orszag, the director of the Congressional Budget Office.

The first emphasizes a point I've also tried to get at: *

"The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country's financial health will in fact be determined primarily by the growth rate of per capita health care costs."

In other words, Social Security is not the big problem (and it's not in "crisis," Sen. Obama); it's Medicare and Medicaid, and their problems are wrapped up in a general health-care crisis.

The second has a lot to say about controlling costs, and also explains succinctly, albeit in slightly obscure terms, why "consumer-directed" care, which is at the core of all the Republican plans, won't work: **

"On the consumer side, higher deductibles would encourage patients to be more prudent in their use of services, but they also raise concerns about the financial burden on persons with major health problems. Furthermore, the concentration of health care spending among a relatively small percentage of the population with very high costs limits the effect on total spending of increased cost sharing for initial charges."

In short, making people pay more for things like doctors' visits is going where the money isn't. The big bucks go for big expenses like cardiac surgery — and either these things are paid for by insurance, or not at all.

* http://content.nejm.org/cgi/content/full/357/18/1793?ijkey=d016a4ba45489a1d98c8c00d31b0f51b7fe229d4&keytype2=tf_ipsecsha

** http://content.nejm.org/cgi/content/full/357/19/1885#R1

[hari]

The beltway debate around cocktails is what DavidBroder calls Billary case - how to derail her campaign and allow someone like Barak to pass her to the finish line!

TRussert will invariably ask Broder to come on MTP - may be next Sun - to discuss his damaging attack on Billary!

You can imagine, this stuff in Beltway is properly discussed and coordinated to get massive media attention and provide readmeat to political discourse - mainly against Democrats!

CMathews will spend the whole week commenting on Baraks attack on Hillary's position on SS!

This is HOW US politics is managed for the benefit of the (disenfranchised!) electorate - who in the final analysis must choose the side...

If any country needs DEMOCRACY, in the right sense of the word, it's the (great statan) USA!

[Robert Waldmann]

What "bipartisanship" means depends on which party controls the White House and the majority in congress. It always means reaching agreement and, in 1995, that clearly meant Democrats signing on to a Republican initiative. Things said by a presidential candidate are mostly important if that candidate becomes president. I think it is fairly clear that the main problem for president Obama or president Clinton will be the filibuster (it was the only thing that saved us from Bush to the very limited extent we were saved). A filibuster is definitely not bipartisan.

Obama is using the word now, because he thinks it will be useful to him if he is elected. Planning on Republicans always having the initiative makes no sense. Assuming that "bipartisanship" will continue to mean giving in to conservatives is assuming that the way Washington works can't be changed. If one assumes that, why would one bother to run for President ?

Some above thinks Krugman writes hastily. I think he writes brilliantly. My problem (if any) is that he is being honest. He wrote a column about whether there is a social security crisis, not about whether it will be useful to Democrats to pretend that there is. If Obama were as frank as Krugman, he would say that there is a medicare crisis and it can't be solved just by taxing the super rich so upper middle class people who want to be guaranteed health insurance when they are old better be willing to pay more in taxes, oh and by the way, while we're at it it will be no big deal to provide health insurance to all (which for all we know will save money in the long run as fewer people reach 65 after decades of untreated high blood pressure and diabetes (treated before age 65 but after years or decades of damaging kidneys and eyes and stuff)).

OK so you people who think Krugman writes sloppily, how about the sentence above (the one with nested parentheses (one pair inside the other)). Now *that* is writing sloppily.

Obama is a politician, Krugman is a commentator. Obama is using claims which poll well, Krugman is calling them like he sees them. Neither one is making a mistake. They are each playing different socially necessary roles brilliantly.

[Lee A. Arnold]

Senator Obama, who knows very well that he is unlikely to be the nominee for 8 or 12 more years, serves the country and the Democrats by posing to Hillary a rhetorical question, which she is to answer by explaining why Social Security is NOT the big crisis, and why health care IS, and needs a solution. This is perfectly played. This is how it is accomplished.

[Lee A. Arnold]

Dammit Robert, you beat me by four minutes! Love you.

[anne]

Robert Waldmann, thank you for explaining. Excellent!

[MarkT]

The Krugman column makes no sense. It argues:

1) Obama says there is a crisis on Social Security
2) There is no crisis on Social Security
3) People who criticize Obama over his position on Social Security are wrong.

Just nutty.

[Denis Drew]

"Anyhow, now that we have Social Security cleared up what needs to be done about Medicare & Medicaid?"
macquechoux,

About 40 years out S.S. retirement will grow to 7% of GDP (when per capita GDP will have doubled -- not even counting free gifts of technology like surround picture TV for $600).

About 80 years out medical care will grow to 75%* of GDP (300% of today's GDP! -- if population remained the same) when we will have 4 times the per capita GDP to pay for it. That is, if we don't get it down to 50% of GDP with Medicare for everyone.

I don't know if old people, 80 years from now, will be sprouting propellers or young people will be leaping tall buildings with single bound thanks to better medical care (or whether there wont be any distinction between young and old at all) but we should have between the same and twice as much money as today to spend on everything else (not even counting 3D surround TV for $600).

Isn't it the normal expectation that the future should get better and better?

[* The economy grows 4 times as fast as the population (per capita) and the cost of medical care grows 5 times as much as the economy. Ergo, by the time population doubles, medical care costs will have grown (4X5) 20 times (per person) at the current rate which couldn't get much higher unless medical care gets better even faster.]

[Movie Guy]

Robert Waldmann - "Obama is a politician, Krugman is a commentator. Obama is using claims which poll well, Krugman is calling them like he sees them. Neither one is making a mistake. They are each playing different socially necessary roles brilliantly."

Paul Krugman certainly missed, as did others, the political point that Senator Obama was making. In fact, they are slapping Obama down. Krugman and others are attempting to make Obama look like a fool, when his play is very bright indeed.

All of which goes to the point that I made in my post above.

This is presidential political baseball and Senator Obama hooked the plate with a fine Satchel Paige curve ball. The soundbite will help him in the long run, whether in the Senate or the White House. He comes across as the negotiator of difference interests. Paul Krugman swings and misses politically...by a country mile.

[Movie Guy]

That should read "different interests".

[William Smith]

I think Prof. Krugman gives Sen. Obama too much credit in his column. Obama's responses on Social Security have been responses to either direct criticism or questions during interviews, which is why he is throwing fuel on the fire. The key to understanding Obama is that he does not like confrontation, or at least that is the image he has projected. So when Sen. Obama is confronted by a question with the explicit assumption of Social Security in crisis, he does not argue, or 'confront', the assumption and the question but seeks to answer the question despite its flaw.

[Bruce Wilder]

Robert Waldmann - "Obama is a politician, Krugman is a commentator. Obama is using claims which poll well, Krugman is calling them like he sees them. Neither one is making a mistake. They are each playing different socially necessary roles brilliantly."

They do have different roles in politics, but I don't think the play is necessarily well-coordinated, and it will have to be, to be politically potent. Unfortunately, I'm not sure what well-coordinated play would look like.

A critical problem is that the mainstream media (MSM) refs are playing for the other Team. So, it may well be, that the Democrats will be best served by painfully awkward plays. Obama has to draw attention and draw distinctions, and he needs attention from a MSM (and a low-information public), which is accustomed to the right-wing Republican frames.

Hillary, for better or worse, has made herself the candidate of the Plutocracy -- the traditional model of business-friendly, Republican-lite politics that promises a continuation of the populism-when-we-can- afford-it politics that her husband championed.

Most of Hillary's voter support is not paying close enough attention to recognize that she will pay a price for the support of the plutocracy, and that price will be the interests of those who vote for her.

I see both Obama and Edwards trying to find a way to expose the implications of Hillary's committment to the plutocracy. Maybe, this SS flap will contribute in a good way to that. Maybe, it will even contribute to creating the kind of discussion, which would allow Hillary to slide a bit to left, to estimate that we can afford just a tad bit more populism.

But, the safest bet, by far, for getting the nomination, is Hillary's strategy, for the time being. The full-bore assault on the plutocracy, represented by Krugman's column, does not reach all that many voters, sadly enough, and only a very small proportion of the voters, who matter most in a general election.

Lord knows, the Media pundits -- the Tim Russerts, Ron Brownsteins, David Broders, Wolf Blitzers -- who represent themselves as neutral voices, while catapulting Republican propaganda, do not know enough or care enough about the policy dynamics, to report or inform -- and they are paid to lie, even when they do understand.

American politics is a sad and pathetic thing, when a Democrat cannot even play bridge.

[johnchx]

Brooks, et al:

The CBO report on the topic is here. Other relevant links can be found here.

[Anon]

Ron Paul, anyone?

[Patricia Shannon]

What difference does it make if Social Security is solvent if the rest of the federal budget is not? The U.S. national debt is $30,000 per person and rising. Do you really think that won't cause problems? Do you really think that is a good thing to do to our children and grandchildren? Blah, blah, blahing about how we shouldn't have spent so much money on the war isn't going to change the fact that it's been spent. We need to fix it.

I remember in 1988 being with a large gathering of Democrats, on the night of the elections, watching the election results on TV. When Bush was announced winner, there it were obviously mixed feelings. We were disappointed because we had worked hard for the candidate we strongly believed was the better choice. But we also relieved, because we knew that Reagan's big national debt was going to cause a recession in the not-distant future, and whoever was president at the time would be blamed. And that is exactly what happened. That is the reason Bush senior did not get reelected in 1992. At least this time, people are aware of problems before the election next year.

[Don]

Yes, Anon...that or secession, again.

[Arne (not anne)]

Brooks,

Take a look at the CBO report.
http://www.cbo.gov/ftpdocs/69xx/doc6982/
12-15-LongTermOutlook.pdf
Figure A-2 shows that if per enrollee spending grew at the same rate as GDP per capita, there would be no increasing fiscal imbalance. (Not that I believe that will come about).
The Concord Coalition is using the worst case projections from the CBO report, which has Medicare growth higher than trustees predictions, and has revenue lower than current law.

[Bruce Webb]

"There is a minor problem with SS long term. Obama's proposal would more than solve it."

The first sentence is debatable. The second one is simply wrong. Opponents of Social Security actually have one valid point amidst their general dishonesty. Future benefits will have to be paid for out of future productivity, the Trust Fund is at some level simply intergenerational accounting. It is as real or unreal as our political power to enforce past claims on future generations. But pumping up its nominal value over the short term does nothing in the long run except shift the responsibility for repaying borrowed surpluses from the country at large, most definitely including Capital, back onto wage workers, in this case higher earning ones. Raising the cap effectively means giving a tax cut to the ultra-wealthy at the expense of the fairly well-off. I don't see anyone suggesting some surcharge on capital gains here, instead we have a plan that removes a tremendous future liability from the top 1%.

Hopefully Waldman will think this through and maybe Obama will come to his senses and stop listening to his advisor Jeffrey Liebman (an author of the grossly worker unfriendly Liebman-MacGuineas-Samwick Social Security Plan). If you want progressivity in both taxation and policy then find some way to fund SCHIPS. You will do a lot bigger favor for the guy scheduled to retire in 2041 by providing health care and education funding to his kids today. Given trend growth 2041 takes care of itself, Obama has managed to focus his attention on the one area of government that does not in fact need attention at any time prior to 2027.

Social Security is in 'Short Term Actuarial Balance' defined as having more than a year of projected reserves in each of the next ten years, the record of the last ten years shows that the point that it is projected to fall out of actuarial balance has been pushing out in time at more than a year per year and is now set for 2027. We have no legal obligation to do anything until 2027, we have all kinds of unmet societal needs, just leave Social Security alone.

[Bruce Webb]

http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2007.pdf

Brooks this link will get you to the 2007 Medicare Report which will give you 220 juicy pages stuffed with data tables and figures and analysis thereof.

[pgl]

Uh oh! Time for another Mankiw alert. Greg attacks Paul for attacking Obama. Had to update my EconoSpeak post to capture why I think Greg's attack is way off base. Greg reaches back to a forecast made 10 years ago (duh) and then basically mischaracterizes what Paul was trying to say. But the latter is an old trick. Paul says A, some critic of Paul claims he said B, and then the bash Krugman machines rears its ugly head again. Just stupid!

[anne]

Bruce Webb, thank you so much. Robert Waldmann is as dense as he suggested and I thought.

This is the way to smash and slash Social Security that Liebman-MacGuineas-Samwick have pretended is a way to save Social Security. The magical mystery always fair smashing slashing bipartisan machine.

Social Security is fine and suggesting otherwise allows Franklin Roosevelt despising conservatives to further attack the New Deal legacy that built middle class America. Social Security is fine, and no tax increase is needed as an excuse for further attacks on the system.

Paul Krugman is completely right.

[Bruce Webb]

Let me repeat this again. Because some really smart and informed people simply don't get it.

Social Security only faces a theoretical problem under unrealistic projections. No one, and I mean no one is explicitly defending Intermediate Cost assumptions. They use dates drawn from an economic model whose details they simply refuse to discuss. If someone could point me to an informed discussion of whether 1.7% productivity, given what we knew at the end of 2006 was in fact a proper median projection for 2007, along with 4.8% unemployment, and 2.6% Real GDP, then I would appreciate it. I am not saying that these were impossible numbers, a bad Q4 as projected by some at the Fed would bring them about, but as a median? Were the odds really fifty/fifty that the economy would perform worse than these numbers in 2007?

The discussion is simply not happening at the data level for current and short term projections. Will productivity simply crash to 1.7% by 2013 and remain there forever? Will Real GDP permanently decline from the 3.0% plus levels typical of the last decade to 2.2% in 2013 and then drift slowly down from there to ultimate 2.0%? Do we really believe that in the face of a 'crisis' defined in large part by a shortage of workers, that the number of combined legal and illegal immigrants will decline in real terms? If so why?

Forget extrapolating out Social Security or Medicare to 2041 or God help us Infinite Future. How have the projections matched the reality over the last five years? What are likely median growth rates for the next five years? Does the Intermediate Cost projection over that period really model probable reality? Where are those discussions?

Answer? No where. People simply refuse to engage the near term numbers. Now I have pointed to them many times, you can't say I haven't led many horses to water, until they actually take a drink I am not going to concede that the problem is metaphorical thirst.

Maybe there is a secret website out there where people merrily throw Table VI.F7 numbers back and forth in light of the assumptions in Tables V.B1 and V.B2. If so I would like to join the club. I'll even buy my own secret decoder ring. Until then I am not convinced that opponents of Social Security are either serious or honest.

[macquechoux]

For Kharris, I’m sorry but I cannot give you a link. About two computers ago I had cut & pasted a chunk or two of that article, usually with the information you seek. The only thing that survived was this blurb and a few more sentences. Inasmuch as I am an old man collecting Social Security I had a keen interest and was concerned then and s I am now about Social Security. I sleep well at night, however. I hate to speculate now as the exact context.

To me the non-problem/problem (Take your pick) is rather straight forward.
Fewer people are paying in. Significantly more people are collecting and will do so for some time and more than likely they will do so for quite some time. Congress spends and has spent the money over and above the current demands. The exact date when incoming and outgoing has moved around a bit over the last ten years or so but not significantly. Anne’s silly remarks about the Trustees aside, both they and the CBO say the Trust Fund will run out. They differ on the date, currently about by 8 years. I think these points are non-political and important to any discussion about Social Security.

Finally, Anne was the Social Security Trustees a bunch of conservative Republicans all eight years of Clinton’s term?

[anne]

Greg Mankiw fought to undermine Social Security for George Bush, and is fighting to do so as economics adviser to Mitt Romney. So, suddenly Republican Social Security smashers and bashers are in love with Barack Obama in the midst of fearing they are in terrible election trouble. Poor Republican sweeties. Imagine my surprise.

[calmo]

Such an interesting thread...and hello Movie! great baseball analogy [Now some may know that there may be reasons why Movie might not trust calmo's (possibly self-inflicting) adjudications of Movie...but after kharris' commanding (possibly careful, possibly just unleashed) response to anne, I feel like the leash is off, you know?].
So, before the lights go out (this would B me passing out from exposure to yo'all's brilliance) [You see how it is when the leash is off. Damn it's bright here!], I need to note my own footing (like yers: little curly toes an a Big Stub) so far removed from Bruce Wilder's note earlier about the public footing...the Media will still be controlled by the Plutocracy... The difference between responding personally here in this smallish public space (the less care the better...the more dedicated, the more intimate...as demo'd by kharris on anne) and judging [wuz you or wuz you ain't as careful as kh? as Robert? as Bruce?]; the difference between engaging that person [Ok, my toes deserve a far handsomer Big Stub] and "sending a message" that could care less about some haywire person [Please observe that although Big Stub is not a Beauty, he takes a beatin...infatuated as he is with his cute little buddies.]
So the baseball game, condensed to the pitcher/hitter matchup --so signature Movie Guy, is alright but I am distracted by the audience...so much less concerned with posture (looking right and proper...and of course, not too dim) [bein a respectable adult] --so much closer to home.
I could B reverting to my childhood on purpose, you?

[Bruce Webb]

"Krugman sure seemed to believe there was a problem back in 1996, from the New York Times:"

Well it is no longer 1996. The outlook for Social Security worsened with the 1997 Report, while the date of depletion remained at 2029, it move backwards a bit within the year, and the payroll gap edged up from 2.19% to 2.23%. The 1997 Report was the first I read in real time and in looking at the numbers one thing was pretty clear. If the economy put forth a sustained period of growth at 1996 rates or better then total Social Security Solvency was a clear possibility, perhaps even more likely than not. But it was perfectly reasonable, given the overall budget situation at the time, to be concerned about the long term health of Social Security. Krugman at worst was being a little pessimistic in context of what we knew.

As it turns out we did have a sustained string of years at growth rates above what had been considered a pretty good 1996 year and two things happened by 2000. The General Fund went to surplus and Social Security was placed on the glide path to solvency. Claiming Social Security Crisis in 1996 was legitimate, although overstating the extent of the problem. By 2000 any talk of 'Crisis' was illegitimate and bordering on lying. By 2004 that border was crossed.

Pulling up quotes by Clinton or Krugman in 1996 is simply irrelevant given the economic numbers since. It is 2007 and fully time to engage the numbers as they are today and not where they were thought to be going a decade ago.

[James Killus]

Hmm. Obama is afraid of confrontation (I assisted in building that case). Hillary is in the pocket of the plutocrasy. No one has said anything about Edwards, thereby completely writing off the only Anglo white male (and making Edwards the stealth candidate), or Richardson, who is actually running (and very well) for Vice-president.

I have a theory, not one that I hold to strongly, but one that I do entertain, and that is that Presidential aspirants are all cynical politicians who will not let their campaign ploys get in the way of their real agendas. I just don't know what Obama's agenda is. When Bill Clinton had a Democratic Congress at his back, he got progressive tax increases and tried for universal health care (and learned that the Congress at his back had a knife ready for implantation). If Hillary just manages those to domestic policies, I think she will have justified herself.

As for those who think that she's a total warmonger, I suggest that it's hard to envision her vetoing bills that demand troop withdrawal timetables, or the solid Republican bloc ever voting to assist her in any way.

Every jihadist in the Middle East knows that a Democratic President will withdraw from Iraq. Watch and see how their strategy over the next year plays to this reality. Bin Laden actively assisted Bush in his re-election, by releasing a videotape at a crucial time. It will be interesting to see what sorts of manipulations occur next year in the election runup.

[James Killus]

James Killus, I would say the fact that the MSM is ignoring Edwards, after attacking him didn't work, is for the very reason that they believe he is the one most likely to be a force for real change, and not be the puppet of the power structure.

[Patricia Shannon]

Whoops. Sorry, James, I accidently started my comment in the Name: box.

And hopefully, you will know that my comment is no disagreement with what you've said, just an addition.

[pgl]

anne captures why we Democrats should shun Obama's attempt at bipartisanship. It makes as much sense as those Democrtats in October 2002 trying to work with Sec. Powell to give some teeth to our diplomacy with Saddam. It would seem Powell thought the game plan was hard negotiation but in reality the Oct. 2002 vote was the excuse for Cheney to lead us to war. Obama blasts Clinton for that vote - and yet Obama is playing into the domestic variation of this. If anyone thinks this crop of GOP leaders is serious about real reform ala Andrew Samwick's sensible suggestions, I have a bridge to sell them (or was that a subprime portfolio).

[Bruce Webb]

PGL, Samwick's suggestions, at least as they show up in the Liebman-MacGuineas-Samwick Non-Partisan Social Security Reform Plan, are not sensible. A better word would be punitive.

Currently the payroll gap under Intermediate Cost assumptions is 1.95% (1.92% when the Plan was drafted). That is immediately increasing payroll tax by that amount would deliver a 100% benefit to everyone through the 75 year window. So what does LMS propose (with payroll tax equivalents).

Payroll tax increase of 1.5%
Lifting the cap to the 90% wage level for another 1.0%

Well lets pause here. LMS is throwing a equivalent of 2.5% in tax increases at a problem that is only 1.95%. Do workers get a better result? Well no, certain upper income workers might, this would be offset quite a bit by the cap increase. Lower income workers would actually fare better by taking the tax increase and foregoing the rest of the plan. Because LMS is not over.

Raise retirement age for .68% equivalent
Cut benefits for a 2.02% equivalent

Does LMS accomplish some useful goals? Yes. Do any of those goals actually produce direct benefits for wage workers? Well no. Sure they end up with a so-called Personal Retirement Account but the plan calls for all returns from it to be annuitized. That is the value of the plan is not inheritable.

What LMS does is shift the responsibility for repaying the Trust Fund right back on workers and away from Capital. Perhaps Samwick has some parallel plan that could be described as 'sensible'. If so it doesn't seem to have left any marks in his Social Security archive at Vox Baby. In total the LMS plan represents a huge tax break for the wealthy. Not only did they get their tax break funded in part from payroll tax surpluses, under LMS they don't have to pay large parts of the obligation back.

Thanks but no thanks. Moreover I would like to see the economic assumptions made explicit. I suspect they are a little better than Intermediate Cost and it would be interesting to rescore Social Security under them.

[David in NY]

Not only did they get their tax break funded in part from payroll tax surpluses, under LMS they don't have to pay large parts of the obligation back.

That's a winner -- the poor pay the payroll tax to fund the tax break for rich, and then they pay an additional tax to fund their own retirment, and the rich pay nothing.

[ilsm]

The scary issue with SS is the two trillion in "debt" is going to be paid out in benefits over the next 35 years or so.

Scary for low income tax adherents.

That is the income taxes are going to be raised to pay what payroll taxes covered since Greenspan and Moynihan built the surplus to pay for the boomers.

The crisis is bait and switch.

It is not SS that is in crisis it is the income tax dependence on patroll tax surpluses that is in crisis.

However, Krugman has been quite consistent on the underlying issue that if medical costs are not reined in medicare goes from surplus to zero quite quickly.

A switch on the SS assualt is to muddle SSA funds with HHS medicare funds.

The right has always asserted that payroll taxes should bear the burden for medicaid and that all payroll taxes should be mixed.

Fungible money is an easy way to run a con.........

[Brooks]

Michael Cain, Johnchx, Arne, Bruce Webb,

Thanks for the links.

[Brooks]

Bruce Webb,
May I email you? If so, please email me so I have your email address (I didn't see it on your web site).

[Bruce Webb]

Brooks by not including my website in this comment clicking on my name should give you my e-mail. If not it is firstname dot lastname2 @ verizon.net or altenatively firstname . lastname @ mac.com

[boss]

I would like to see a moratorium on quoting Mankiw. His intellect is for sale, and he couldn't take the heat from his commenters.

[Lafayette]

Article: " ... our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs"

Which is why we should be looking at Health Care costs in terms of seriously reducing them -- by controlling prices, if necessary. Not simply expanding them to complete coverage for the rest of the population (about 17%) who never get it.

Not only that, but of the remaining 83% who supposedly are covered, one must look at the devil in the details. That safety-net is damn thin for some of them. Maybe only 60% of the population have adequate coverage.

Expanding hilariously expensive Health Care only undermines our financial viability of supporting it into the future.

Act now. Your kids -- who will have to pay for YOUR Health Care in YOUR old age -- will be grateful for it.

[Movie Guy]

Hay, calmo. How are you doing?

No hard feelings from me. Not a one.

All the best.

[Movie Guy]

It's interesting how intense the godly worship and defense of Krugman is. Close to goose stepping in the 1930s.

I don't have a technical qualm with Paul's point, but his failure to address the political positioning is the mark of an amateur.

A simple comparison comes to mind: Earlier this week, I received a cell call from my service provider, Verizon Wireless. All fine and good. That is, until the script kicked in with not one but two representatives. And God did they adhere to the lockstep training. Repeating their statements as if they were eight track tapes ('member them?). This was a conversation about service plan and billing options. Somewhere in the first two conversations, I asked as I do frequently now where the representatives were based (located). The first one was in Tennessee; the second in Florida. Neither had particularly good manners, polish, nor patience, and this is what I have learned to expect from East Coasters - North, South, and Middle. Later that day, I called another Verizon number following up and, fortunately, talked to an individual in Tucson, Arizona. Whole different ballgame, including the general state of happiness and contentment. I was promptly assisted, and the issues were resolved - none of which occurred with the first two individuals.

A large chunk of life is about attitude as well as watching the minutes click by and determining how best to use the limited amount of time we have in our lives. Senator Obama has the right attitude. So what if he pitched Senator Clinton a curve ball? We don't need Paul Krugman and his blind chorus of followers to bark foul every single time. Sometimes it's a wise observer who sits back for a while and understands the political game in play. Krugman doesn't have that kind of patience (and I like him) nor do his puppy followers singing his glory every week. No, they're busy being the nannys of the Internet.

Senator Obama committed no major foul. And he certainly is dead on the mark regarding the political polarity that is tearing apart the U.S. Congress and elements within the American society. This blog among many thousands of others proves that point every week. The polarity has reached into the rafters of the absurd.

Throw another pitch, Senator. And stand tall, regardless of whether you're politically correct or not. Many of us are sick to death of the nanny nazis and wannabe nannys of the USA and world. Keep on keeping on. Address the issues that you have concerns about.

Score one for American freedom, over Krugman & Co's typical childish objections.

We're in the political baseball season. Buy some popcorn. Have a beverage of your choice. And I recommend ignoring the locksteppers. The Game is more entertaining. Something good may actually come out of it - and if Senator Obama helps achieve that end, good for him. Pitch again, Senator. And ignore the clowns in the opposing cheap seats. They bitch about everything and everyone.

[anne]

"Close to goose stepping in the 1930s."

Notice the language; notice the crazed viciousness.

[ken melvin]

The Democratic Party perforce is bi-partisan. I'm old enough to recall the dems in name only dixiecrats. Witness what they did to Jimmy Carter, recall that a good number supported impeaching Clinton, and, currently, forty some of the House are blue dogs who vote with Bush. The NYT has at least a couple reporters/columnists who think DiFi is a liberal democrat.

[Anon]

Here's another fundamental point that people need to start talking about more.

All of SS's long-term deficit is a function of Congress's decision to pay out benefits to early beneficiaries that exceeded the benefits that would have been justified by their payroll contributions. In effect, FDR established a welfare program within a social insurance program -- a temporary welfare program that would pay out most of its benefits within a few decades. Yet he charged the costs of that welfare program to the Social Security Trust Fund.

The point of the trust fund was to establish a mechanism to match contributions with payments, consistent with the vision of Social Security as self-financing insurance program. Yet the new system was forced to pay welfare payments that have nothing to do with social insurance and that should have been financed not with payroll taxes but with general revenues.

Peter Orszag has called these extra welfare-like payments Social Security's "legacy debt." Alternatively, one could characterize it as a "welfare raid" of Social Security.

This welfare raid is the cause of Social Security's long-term shortfall. If not for the welfare raid, over the next 75 years Social Security would be permanently solvent.

What's the solution? Well, the general fund essentially raided Social Security to pay welfare. How about having the general fund pay it back? This would make Social Security what FDR claimed it would be: a social insurance system that is entirely self-financed.

[Lee A. Arnold]

Paul Krugman's article is exactly right in substance and politics. There are plenty of functioning intellects here, and no worship or undue defense of Krugman. However, we might still be in need of some sort of "Fatuity Award" for the commenters bloviating about the lessons of life.

Social Security should stay off the table. I agree with Bruce Webb. Raising the cap is another transfer of wealth upward, this time from the upper-middle to the topmost, via taxation. Robert Ball thinks the "90% of income" rule should be honored -- perhaps this is largely out of tradition, but it isn't politically wise at this time. Any reconsideration of Social Security will open the floodgates to every half-cocked proposal that came up in Bush's privatization drive. I think we can count on it: the rightwing thinktank loonies will disgorge from their darkened caves en masse, giggling and slobbering, socks half pulled up, remotes scotch-taped on Fox, and it will be "open season" on Social Security.

BUT -- we have come to a moment that could be very important, and Hillary Clinton should step up to make it. The national mainstream rhetoric on this needs to be turned around; everyone agrees. It's been little tugboats pulling at a monolith. One way to help it big-time is with a drama. She turns to Obama and says: "We are leaving Social Security alone. It looked like it was in trouble ten years ago, but it's back to doing fine. And we need another Clinton Administration to watch things carefully, and fix the rest of the problems."

What does this provide? A short list:

Hillary shakes up the mainstream talking heads. She sides with the truth, and it can be proven. It gives her an entry into one of her great issues: the 10x impact of future healthcare costs, and the ways in which her medical overhaul can start to lessen that impact. She puts her foot down and says "This is It," because she has to start becoming an Iron Lady.

For the Democratic Party would be smart to make Social Security their banner, their flagship, and adjust every other government expenditure in relation to it. This is a political no-brainer. The Dems need to be rid of this continuous cloudy rhetorical drift: please stand up for something real, soon! The flatheads are going to vote for Giuliani just because he stands up for something, even though (1) it doesn't matter what he stands up for, (2) he doesn't make sense, and (3) they wouldn't understand it in any case. Social Security is a simple, well-designed program. Stick with it. It is going to become economically far more necessary as time goes on.

[anne]

http://krugman.blogs.nytimes.com/2007/11/17/long-run-budget-math/

November 17, 2007

Long-Run Budget Math
By Paul Krugman

Some commenters have asked for more about Social Security’s role in the long-run budget problem, and in particular an explanation of my assertion that the Beltway obsession with Social Security reflects ignorance. So here’s a quick, informal explanation.

Start with the current position. Last year, federal spending on Social Security, Medicare, and Medicaid was 8.5 percent of GDP, equally divided between Social Security and the health care programs. Dismal long-run projections, like those of the GAO, have this total rising by 10 percentage points of GDP by mid-century.

So, how much of this is a Social Security problem? Pundits like Tim Russert love to point out that in its early days Social Security had 16 workers paying in for every retiree receiving benefits. But this is irrelevant; looking forward, we’ll see the worker-beneficiary ratio fall from about 3 to 2 as the baby boomers retire. This will raise the percentage of GDP spent on Social Security from about 4 to 6 — that is, a rise of about 2 percentage points of GDP, which is a small fraction of the entitlements problem. See, for example, this chart * from my NY Review of Books piece on the subject.

What’s more, Social Security has already been strengthened to deal with this rise. In 1983 the payroll tax was increased and adjustments made to the retirement age, so as to build up a trust fund. According to the “intermediate” projection of the Social Security trustees, this trust fund will be exhausted in 2041 — but they also present a more optimistic scenario, based on economic assumptions that don’t seem at all outlandish, in which the trust fund goes on forever.

This brings us to the claim that the trust fund doesn’t exist, because it’s invested in government bonds. The full explanation of why this is sophistry is here. **

The bottom line is that Social Security is just not the major problem.

Now, part of the projected rise in Medicare and Medicaid costs represents the effects of an aging population. But as a new report from the CBO explains, *** demography is only a minor factor — mainly it’s rising health care costs. What’s more, the proposed “solutions” for the Social Security problem have no relevance to the issue of rising Medicare costs — even if privatization were a good idea, which it isn’t, it would do nothing to solve the problem of rising medical bills.

The Beltway obsession with Social Security is a classic case of a little knowledge being a dangerous thing. People have picked up a few facts about demography, and think they understand the long run budget problem. They don’t.

* http://www.nybooks.com/images/tables/20050310img1.gif

** http://www.truthout.org/docs_05/010305F.shtml

*** http://www.cbo.gov/ftpdoc.cfm?index=8758&type=1

[RW]

"Close to goose stepping in the 1930s."

"Score one for American freedom, over Krugman & Co's typical childish objections."

Pretty crude Movie Guy; you losing your touch? Moving from the far right to the center will doubtless involve a touch of overshoot, perhaps even a moment of real progressivism now and then perish the thought, but your mimicry of political balance used to be more subtle.

It really would lesson the pleasure of the show if an agent provocateur such as yourself devolved into a mere troll.

[RW]

Make that lessen rather than "lesson" (sic) although the latter is not devoid of meaning as slips go.

[Bruce Webb]

The point of the trust fund was to establish a mechanism to match contributions with payments, consistent with the vision of Social Security as self-financing insurance program. Yet the new system was forced to pay welfare payments that have nothing to do with social insurance and that should have been financed not with payroll taxes but with general revenues.

Peter Orszag has called these extra welfare-like payments Social Security's "legacy debt." Alternatively, one could characterize it as a "welfare raid" of Social Security.

This welfare raid is the cause of Social Security's long-term shortfall. If not for the welfare raid, over the next 75 years Social Security would be permanently solvent.
This is simply dumb. People who retired in 1936 and who got pittances anyway are long dead. As for the most part are the people who started paying in in 1935, an eighteen year old who entered the work force and had his check exposed to Social Security taxation would have retired in 1982 and be 90 years young today, the legacy costs have long been amortized, real checks today are much improved over what they were in decades past. The claim that the 'long-term shortfall' (which probably doesn't exist) is due to this 'welfare raid' is numeric nonsense.

[Movie Guy]

The simple truth is that Obamam committed no major foul. It wasn't a terrible political move. There is no question the Social Security's long term future will be discussed in the chambers of Congress prior to 2012 and thereafter.

The whinning kicked in. And yes, there is the worship following of Paul K. It is recorded in the archives of a number of blogs including Mark's. This is the same type of instant defense that posters like anne and others mounted for Alan Greenspan long ago on this blog.

I happen to like Paul Krugman. He's a good guy, but he's not walking on water. Politically, he remains a bit naive which has always surprised me. I've spent far too many hours defending him in private and public forums, including addresses to businesses and college groups. But he takes an unnecessary overreaching shot at Senator Obama. Do as he will, and the followers will certainly lockstep behind him. That's par for the course. But while some are whinning about Senator Obama, the focus on whacking ANY of the Republican presidential candidates is lost.

As for the Social Security system, it certainly is vulnerable. I have had the opportunity to discuss such concerns with members of Congress during testimony on other matters. They know that the system is not firewalled nor is it bulletproof as some continue to pretend. We'll see who is correct some time between 2012 and 2016.

Let the presidential baseball politics continue. Some of us can rest assured the backseat nanny types will continue to whine about every little indiscretion while ignoring the larger picture. No big deal, as that type of banter is to be expected.

says...

"Close to goose stepping in the 1930s."

Notice the language; notice the crazed viciousness.

"Some of us can rest assured the backseat nanny types will continue to whine about every little indiscretion while ignoring the larger picture."

Notice then the language of prejudice, because prejudice is ever so important when we are out to bully.

[anne]

So that we know I am not afraid of bullying, though my name-dropping computer seems to be, that was me.

[Anon]

Yes, Bruce, the early beneficaries may be dead. But their legacy is a dramatically lowered balance in the trust fund.

The money taken out of the system for benefits beyond what would have been justified by contributions (plus interest) has drained the trust fund of about $11.5 trillion. (http://bostonreview.net/BR29.2/diamondorszag.html)

This has not been "amortized." It's reduced the trust fund balance.

This is a separate issue from whether there is a shortfall in the future and, if so, what the shortfall is. No matter what shortfall may exist under certain assumptions, it would be smaller/nonexistent if not for the legacy of welfare-like payments.

This is not to criticize Congress's decision to provide such welfare payments. But since the decision was made, it's undercut the trust fund -- reducing its balance to pay for benefits that should have been paid for by the General Fund. Why not ask the General Fund (funded by taxes far more progressive than FICA) to pay back the trust fund, and make it whole?

[Lee A. Arnold]

Anon, see:

http://www.youtube.com/watch?v=Tts2uTWt6e8

[Brooks]

My goodness, "solvency", "shortfall", much of this discussion is focusing on a non-factor in our policy choices (whether or not to reduce SS benefits/eligibility, raise SS taxes, both or neither). SS "solvency" is IRRELEVANT. (PLEASE see post at that link and think about it)

We have a projected OVERALL long-term fiscal imbalance that greatly threatens our future standard of living, all the more so the longer we wait to change policies to mitigate that imbalance. ANY reduction in projected spending or ANY increase in projected revenues reduces that imbalance. We need to choose which sacrifices to make based on economics and our values/morals. But whether or not a program with a dedicated tax at a particular tax rate applied to particular income generates enough revenue as currently structured to cover projected spending is irrelevant -- it's simply a function of how much of future tax revenues we CHOOSE to set aside for that program. We can set aside more or less. We can spend more or less. And if we want to maintain, for administrative purposes, essentially a separate bank account for that particular category of spending, we can put whatever amount we need to into that account to cover the costs (i.e., to maintain "solvency") by adjusting the dedicated taxation up or down. So "solvency" has nothing to do with whether we should spend more or less on SS, or with whether we should raise or lower SS taxes. Why isn't that obvious to everyone?? See my illustrations and elaboration at the link above.

[Brooks]

Second try at that link SS solvency is IRRELEVANT

[Brooks]

To expand on my comment above (and please do see the post at the corrected link)...

Imagine if, starting tomorrow, all payroll tax revenues went to general funds. Instantly, SS "solvency" under current benefits/eligibility would exist for only a few years, after which SS would be completely out of funds. So there would be no long-term (or even medium-term) SS "solvency" (if I'm off on the "few years", I'm sure someone will correct me, but certainly SS wouldn't stay solvent at projected spending levels for decades). Would that all of a sudden mean that we should be MORE inclined to drastically cut benefits/eligibility due to this new lack of "solvency"? Of course not! We still have the same TOTAL revenues and TOTAL expenses. How we've shuffled around the revenues is IRRELEVANT to our priorities and choices among policy alternatives. See??

And along the same lines, to someone who uses a claim of a LACK of long-term SS "solvency" as an argument for reducing projected spending, I would ask, what if tomorrow we tripled the SS FICA tax rate (and reduced other income tax rates to make the changes revenue-neutral). All of a sudden, he couldn't claim, even arguably, that there was any problem with SS "solvency". In fact, we could substantially INCREASE SS benefits and/or eligibility (maybe we could LOWER the retirement age to, say, 55). So does that mean we should be LESS inclined to reduce projected SS spending or even maintain current policies as opposed to INCREASING projected spending? Of course not! We would just be creating "solvency" at the higher spending level simply by raising one tax rate and lowering another. It has NOTHING to do with our policy choice.

[Sandy]

Brooks has it right. SS stays "solvent" in the future by requiring large income-tax increases or (ha ha) spending cuts. The issue is basically the dependency ratio in the years to come, which has nothing whatever to do with current SSA holdings of Treasury debt.

Of course, that doesn't mean that Medicare liabilities 20 years from now won't be a bigger problem than SS liabilities.

[anne]

"Ha ha," since the initial budget of George Bush in 2002 spending on social benefit programs has increased more slowly than the economy has grown. Ha ha, Social Security and Medicare are more affordable now than in 2002.

Ha ha, if we continue this way we could even increase social benefit programs with no problem. Like, say, to protect the health of millions of needy children with no budget problem by using the tobacco tax. Ha ha, we could even protect of the health of millions of needy veterans and families with no insurance.

Remember the veterans; the veterans who, like, served America? Ha ha.