Find it here: http://weeklysift.blogspot.com/ or http://weeklysift.blogspot.com/2011/01/coping-with-future.html
--Kim
Monday, January 24, 2011
Coping With the Future
The present is already too much for me. I can't cope with the future as well.-- Salman Rushdie, Shalimar the Clown
In this week's Sift: Two kinds of people look ahead 75 years: actuaries and science fiction writers. We need to be a little bit of both to avoid getting stampeded into a "middle way" solution.
Social Security
This week the second supposedly bipartisan or nonpartisan plan for fixing Social Security came out, and it looks a lot like the first one (see slide 45): Dire warnings of what will happen if we do nothing, followed by calls for a higher retirement age, means-testing benefits, lowering cost-of-living increases, and a variety of other measures, including raising benefits for the poorest recipients to avoid looking like Scrooge.
This plan comes from the Third Way organization, which claims to "advance moderate policy and political ideas" that are not "defined by the rigid or outdated orthodoxies of both the left and right."
Because Third Way and the co-chairs of President Obama's bipartisan budget commission are saying the same things, there's a possibility that this plan could cascade. The media could pick it up as the consensus of reasonable people, and nonsupporters would have to explain why they were being unreasonable. The assumptions behind the plan could become part of what "everybody knows" -- the way we all "know" that tax cuts promote growth or government is full of waste or the US has a responsibility to police the world. When you challenge such ideas, you don't get evidence in response; people just chuckle at how uninformed you are.
Does this view of Social Security deserve that kind of status? I don't think so, but to explain why I have to back up and give a primer on how to look at these kinds of things.
Getting Started. Only two kinds of people look 75 years into the future -- actuaries and science fiction writers. When you think about the future of Social Security, you need to keep a handle on both points of view. It's the actuary's responsibility to answer the question: "What if we keep doing what we're doing for a long, long time?" And it's the sci-fi writer's responsibility to remind us that in fact we won't. We never do.
It's like drawing up a 10-year household budget. The best you can do is imagine that your income and expenses will stay steady or continue increasing at the same rate they have been increasing for the last several years. They won't, of course. It's ten years; you're bound to have triplets or inherit Uncle Lester's fortune or change professions a couple of times. Something will make sure that you don't wind up with the net worth the budget predicts.
Which is not to say that long-term projections are useless; you just have to know how to use them. They aren't plans or even predictions, really. They're reference points. The question they really answer is: If we could keep doing what we're doing for a long, long time, what would happen?
You also need to understand one other thing: Any time you assume recent trends will continue into the distant future, you wind up with an exponential graph -- the kind that starts out almost flat and then goes wildly up or down. That's just math; it's got nothing to do with the topic, whatever it is. Exponential graphs make you giddy if they're going the way you want, and scare you silly if they aren't, because they always wind up at some astronomical number, either positive or negative. But that's not how reality works; it's just an artifact of the current-trends-continue assumption.
The $44 Trillion Hole. So, for example, the Third Way folks display this horrifying graph, where the Social Security Trust Fund winds up $44 trillion in the red by 2085. $44 TRILLION!!! Oh my God! We have to do something drastic immediately!
But slow down and think like a science fiction writer for a minute: Even adjusted for inflation, $44 trillion might be pocket change by 2085. 75 years ago was 1936. Imagine telling somebody from 1936 that people of 2011 can be overweight and have color TVs and cell phones and still be considered poor.
Third Way gets its data from the Social Security Trustees report. But it doesn't sound nearly as bad there:
- For the combined OASDI Trust Funds to remain solvent throughout the 75 year projection period, the combined payroll tax rate could be increased during the period in a manner equivalent to an immediate and permanent increase of 1.84 percentage points
- In 2010, there were 3.5 taxpayers per Social Security recipient. By 2030, the ratio declines to 2.5 per beneficiary, and holds constant for several decades.
The most relentless thing in the American economy is productivity growth, which continued right through the recent recession. Improved technology keeps giving us more output per hour worked. So as a society, we can either consume more and more all the time, or work less and less. Working less can mean either longer retirements or higher unemployment (as it has recently). So I think a future in which Americans work for 30-40 years and then have the option to retire for 20-30 years sounds pretty reasonable.
Again, the Trustees' Report presents the same data more calmly:
- OASDI cost is estimated to rise from the current level of 4.8 percent of GDP to about 6.1 percent in 2035, then to decline to 5.9 percent by 2050, and to remain between 5.9 and 6.0 percent through 2084.
The Shell Game. Scary exponential graphs are not the only tricks to watch out for in this discussion. The most common is the entitlement/Social Security switch. Third Way does it like this:
- Social Security reform must be achieved in the context of an entitlement system that is dangerously on autopilot.
Conclusion. I think we're being stampeded into "fixing" something that is working reasonably well, and we're being herded in the direction of spending cuts when tax increases on the well-to-do make more sense. (Third Way acknowledges that "many on the progressive side" believe Social Security can be fixed by eliminating the rule that exempts earnings over $106K from Social Security taxes. It never refutes that point, but instead brushes it away with calls for unspecified "growth-oriented investments" instead.)
Worse, supposedly "progressive" elements of the reform package -- means testing, extra benefits for lower-income people -- undermine the we're-all-in-this-together aspect of Social Security and make it more of a welfare program for old people who didn't save enough. Once that's done, Social Security beneficiaries become a "them" rather than an "us". Then the demonization can start -- listen to what they've been saying about unemployment insurance recipients -- and then benefits can be cut further.
Conservatives have always hated Social Security, because it's a big government program that works and is popular. They'd rather that it not work and be unpopular. Any "middle way" that compromises with them is not good for the program.
State Bankruptcy Gains Support
An idea that I mentioned last week but didn't take very seriously -- establishing a bankruptcy process for states -- is apparently getting serious attention in Republican circles, according to Thursday's NYT. The story's lead attributed the interest to "policymakers", but the only names that come up are Senator Cornyn, Newt Gingrich, and Harry Wilson -- all Republicans. An article in the conservative Weekly Standard is mentioned, and I linked to a column on the conservative Townhall.com site last week. It's a Republican idea.
The point is basically for a state to get out of debt by voiding the contracts it has with state workers, possibly even renegotiating "existing pension benefits" according to the Weekly Standard article. Breaking union contracts is an important reason corporations go bankrupt, and Republicans want states to have the same option.
Let me explain why this idea is loony. In a corporate bankruptcy, the underlying idea is that the corporation can't come up with all the money it is committed to pay. Corporate money ultimately comes from customers, and the customers aren't committed to anything. So if the corporation tried to raise its prices to get enough money to meet its obligations, the customers would just refuse to buy.
In a state, however, the customers and the stockholders are the same people -- the citizen-taxpayers of the state. What stops the state from coming up with more money is that its citizens (through their representatives in the legislature) are refusing to pay higher taxes. So basically, a state bankruptcy allows the citizens to refuse to pay the people who work for them just because they don't want to.
It would be one thing if we were talking about some massive external disaster -- a hurricane, an earthquake, a plague -- that was unimaginable when the contracts were signed. But nothing of the sort has happened, and in states like Texas or Arizona, the fiscal problems follow large tax cuts.
The only reason state bankruptcy makes sense to anyone at all is that the Right has done a such marvelous job of demonizing government workers over the last several decades. But government workers are not fundamentally different from any other kinds of workers, and they have as much right to paid for their work as anybody else. If promises were made to them, those promises should be kept. A comment on the NYT story said it well:
- I am a state employee nearing retirement age. All of my life, especially in the 90's, I have heard this: "Well, if you work for government (God love you, you poor dumb little country mouse) you will never get rich, but at least you have good benefits and a steady job." Starting in the 80's, we heard that American workers needed to become more productive - and we did, by every measure.
Chris Edwards of the libertarian Cato Institute :
- Total state spending jumped 69 percent from the 2000-01 budget to the 2008-09 budget. So while the budget is flat now, it�s after a large run-up.
So in the "large run-up" between 2000 and 2008, the average Texan saw the real value of her portion of state spending "jump" 1.8% per year. It sounds a little less impressive when you put it that way, doesn't it?
What conservatives Heflin and Edwards ignore but liberals Mann and McCown point out is that the current "crisis" was a predictable and predicted consequence of an irresponsible tax cut in 2006. Accounting tricks and federal stimulus money kept the structural deficit hidden until now.
Nevada. Here's new Republican Governor Sandoval's plan to deal with Nevada's deficit :
- cut spending by consolidating government programs, allowing the university system to raise its own tuition and fees, and shifting more responsibility for social services onto cities and counties.
- thousands of residents on the brink of homelessness are vying for depleted aid that will diminish further when social services are cut. The programs offer rental assistance and other means for keeping the destitute off the streets and out of jails and emergency rooms, [Clark] county officials say.
Arizona. Anderson Cooper interviews a man who can't get a heart transplant because of Arizona's budget cuts: "I'm a good citizen," says Doug Gravagna, "and I should get another chance at life. It shouldn't be taken away from me. She [Gov. Brewer] shouldn't be able to decide whether I live or die."
"For the last three months," says an Arizona Democratic legislator, "the governor has essentially been a one-person death panel."
While the transplant issue has gotten all the press, Arizona has also been cutting services for the mentally ill. The CEO of the Arizona Foundation for Behavioral Health sums up how pound-foolish this is:
- The reality is cutting services does not cut demand. Individuals who can no longer get services through the state will wind up getting services through emergency departments . . . or they'll get those services through the Maricopa County jail.
Conservatives Start Eating Their Own
From a political operative's point of view, the great thing about crazy people is that they have lots of energy. They're dedicated. They don't give up. If you can get them focused on your opponent -- demanding to see his real birth certificate, say, or making him out to be part of a deep conspiracy that goes back to some James-Bond villain like Woodrow Wilson -- it's gold for your side.
But conservatives are discovering the problem that arises when you court the lunatic fringe: Once you give the crazies legitimacy, there's no telling what they'll do with it.
CPAC and Grover Norquist. Frank Gaffney is the type of loon who sees Muslim terrorists under the bed. Like Communist subversives in the 1950s, Muslim terrorists and Sharia law are everywhere, infiltrating everything. Gaffney has been very useful to conservatives in flogging the bogus "Ground Zero Mosque" issue and making President Obama appear to be supporting terrorism.
Well, now there's a problem. The American Conservative Union (which puts on the popular CPAC conference) has a Muslim board member, Suhail Khan, formerly of the Bush administration. So the conservative movement itself has been infiltrated by the Muslim Brotherhood. As Gaffney-ally Paul Sperry says:
- Suhail is the firstborn son of the late Mahboob Khan, a founding father of the Muslim Brotherhood movement in America. Suhail has been a consultant to CAIR [The Council on American-Islamic Relations] and served on committees at ISNA [the Islamic Society of North America], both of which the government says are fronts for Hamas and its parent the Muslim Brotherhood.
Anderson Cooper summarizes the story, and then interviews Gaffney and Khan side-by-side. I'm not proud of my vindictiveness here, but I found it delicious to watch a conservative deal with the same kind of conspiracy-theory charges that are routinely unleashed on liberals.
Governor Christie. You know who's also conspiring with the terrorists? New Jersey's Republican Governor Chris Christie, occasionally mentioned as a presidential dark horse.
Christie -- you'll never believe this -- appointed a Muslim judge!! The guy's name is Sohail Mohammed, and he committed the unforgivable sin of defending detained Muslims who were never charged with anything. And he's on the board of the American Muslim Union which " has interlocking leadership with a group that has allegedly raised funds for Hamas and hosted as a guest speaker last year an alleged Hamas member." So the judge knows a guy who knows a guy who might belong to Hamas. And Christie knows him.
I'm reminded of Lewis Black's summary: "It's six degrees of Kevin Bacon, except that there's just one degree, and Kevin Bacon is Hitler." Or, in this case, Bin Laden.
Short Notes
During the campaign, we kept hearing that the Tea Party was focused on economic issues rather than the culture wars. But now it looks like restricting abortion is a top priority after all.
The Jesus-Hates-Obama ad is too much even for Fox.
The first bill to create government-run health centers and mandate health insurance coverage wasn't Obama's. It was John Adams'.
Here's the point that needs to be made about calls for across-the-board budget cuts or return to 2008 or 2006 levels or other sound bytes: Republicans ran on the idea that government waste is everywhere, and yet, now that they have the power to pass a budget in the House, they can't identify that waste.
Eric Cantor isn't a birther himself, but he's not going to criticize people who are.
The Onion News Network is on TV now, and as good as ever: Judge Rules White Girl Will Be Tried as Black Adult.
Sarah Palin fans need to think about this: A PPP poll has her leading Obama by just one point in Texas. In other words, if Palin is the nomineeTexas is a battleground state.
I don't care what they all say, Keith Olbermann going off the air just before Comcast takes control of NBC is too much of a coincidence.
Is Obamacare a "job-killer"? No.
The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at gmail.com. Or keep track of the Sift by following the Sift's Facebook page.
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