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Wednesday, July 09, 2008

A Disgrace?

Dean Baker:

For folks not familiar with Social Security, it is the country's biggest social program. It costs over $600 billion a year (20 percent of the federal budget) and has 50 million beneficiaries.

At a forum on Monday, after wrongly claiming that Social Security won't be there when young workers retire, McCain went on to say:

"Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed." [Transcript available from Congressional Quarterly]

Of course present-day retirees have always been paid their benefits from the taxes paid by current workers. That has been true from Social Security's inception.

Some folks might have thought Senator McCain's description of Social Security as a "disgrace" was worth a mention somewhere in the media, but the NYT, Washington Post, WSJ, and USA Today don't seem to have noticed. It's not like he said "bitter."


I was watching CSPAN yesterday, while I was eating dinner, and who should I see but John McCain. And he said the most extraordinary thing. It's the second paragraph of the excerpt that follows; I've included the rest so that you can see that there was no context that made it seem more reasonable...

Let me repeat the astonishing bit: "Americans have got to understand that we are paying present-day retirees with the taxes paid by young workers in America today. And that's a disgrace. It's an absolute disgrace, and it's got to be fixed."

The fact that we are paying present-day retirees with the taxes paid by workers, young or otherwise, is not a disgrace, or a scandal, or a new development. Social Security has been funded this way since its inception.  ... This is not a disgrace; it's the way the system operates. And it's certainly not a sign that we've mortgaged our children's futures, or that something has to be fixed.

One interpretation of this statement would be that McCain is being deceptive: trying to make a straightforward feature of Social Security seem like a scary new problem, in order to gin up support for his nonexistent plans to fix it. I tend to think that he just doesn't know how Social Security works. (This would explain why he doesn't see the problem with privatizing the system: the need to pay a generation's worth of transition costs.) However, it doesn't really matter which explanation is right: either one ought to be close to disqualifying. ...

More hilzoy:

Just one day after releasing an economic plan (pdf) that said that "John McCain supports supplementing the current Social Security system with personal accounts" (p. 5), McCain repeated his earlier claim that "I want young workers to be able to, if they choose, to take part of their own money, which is their taxes, and put it in an account which has their name on it."

Supplementing Social Security with private accounts is one thing. Allowing workers to divert their FICA taxes into private accounts is another. The first just gives workers more options; the second guts Social Security's funding. These are very, very different proposals. Unfortunately, McCain doesn't seem to understand the difference, perhaps because he doesn't understand how Social Security works.

And there's this:

Now, before you think, "Wow, that must be a slip of the tongue, he can't possibly mean that," please note that McCain said essentially the same thing to John Roberts on CNN this morning. ...

This is not the first time that McCain has hinted that he will follow in Bush's Social-Security-dismantling footsteps. In a Wall Street Journal interview published in March, he made his intentions explicit:

"I'm totally in favor of personal savings accounts," [McCain] says. When reminded that his Web site says something different, he says he will change the Web site. (As of Sunday night, he hadn't.) "As part of Social Security reform, I believe that private savings accounts are a part of it—along the lines that President Bush proposed.

(Months later, McCain still hasn't changed his website.)

Does McCain really think he can get away with having two different Social Security plans? Well, as ThinkProgress has pointed out, McCain was denying his history of supporting private accounts just last month. It seems he just can't make up his mind. But perhaps having two different positions makes political sense—especially if one of them has already failed.

It's becoming clear that McCain simply reads what's on the cards (and not very well), but he really doesn't get the finer details of policy and is thus susceptible to confusion, misdiagnosis, and to bad suggestions from those around him. Haven't we had enough of that over the last seven and a half years?

Update: Paul Krugman on McCain's knowledge of policy, doomsaying about Social Security as a badge of seriousness in Washington, and taking bad advice:

A disgrace, all right

Dean Baker points us to John McCain...

I’d guess that there are three things going on here.

First, McCain has no idea how Social Security works. That may sound hard to believe, but not to anyone who has spent any time in or around the federal government. Politicians, by and large, get where they are mainly by looking and sounding good; this may or may not go along with any actual understanding of governing.

Second, McCain lives in the Washington bubble; and as I wrote a while back,

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.

Finally, McCain has surrounded himself with people who hate Social Security. They probably tell him that it’s a doomed Ponzi scheme, and he believes them.

Kevin Drum notes McCain also spouted the usual tax cuts are self-financing nonsense. If he doesn't know this claim is false by now, he's not qualified to set economic policy. And if he does know it, and he must, what does it say about his character that he is willing to say it anyway?:

John McCain ... sure seems to think [Social Security's] funding mechanism is a disgrace, and last night he repeated himself... This is nuts. McCain is talking as if he just figured out that this is how Social Security works and he's scandalized by it. ...

But you want something even scarier? In the very same interview, McCain serves up the supply-side full monty to CNN's John Roberts: "You can't get over the fact that historically when you raise people's taxes, revenue goes down," he said. "Every time we cut capital gains taxes, there has been an increase in revenues." The second half of this statement is flat out wrong, and the first half is so wrong that we need a new name for it. This is Jonestown levels of Koolaid drinking.

But maybe we're being unfair. After all, 300 economists signed a letter enthusiastically supporting McCain's economic plan. Or did they? Kevin Drum again:

This is amusing. A couple of Politico reporters called some of the 300 economists who "enthusiastically support" John McCain's "Jobs for America" plan and found that their support was somewhat less enthusiastic than advertised:

In interviews with more than a dozen of the signatories, Politico found that, far from embracing McCain's economic plan, many were unfamiliar with — or downright opposed to — key details. While most of those contacted by Politico had warm feelings about McCain, many did not want to associate themselves too closely with his campaign and its policy prescriptions.

....Constantine Alexandrakis, a professor at the University of Massachusetts-Dartmouth, expressed second thoughts about signing. "I would describe myself as an Obama supporter," he explained. "Maybe I shouldn't have rushed into signing the letter."

Maybe he shouldn't have! As for the others, it turns out that they merely signed on to a brief statement of intent (low taxes, low spending, free trade, etc.), not the 15-page number-free plan that McCain released on Monday. So there's no telling how much of his plan they actually support. ...

Somebody who's not me ought to start dialing up the other 280+ signatories and find out just how much of McCain's plan they really support. Do they think the current Social Security funding mechanism is a disgrace? Are they in favor of a gas tax holiday? Do they think his multi-trillion tax cut will increase revenues? Inquiring minds want to know.

    Posted by on Wednesday, July 9, 2008 at 02:34 AM in Economics, Politics, Social Security | Permalink  TrackBack (0)  Comments (238)


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