Tag Archives: social security

The Most Important Takeaway from the NBC-Facebook Debate

By Luke Brinker

Willard Mitt Romney is going to be the Republican nominee, and barring the release of a sex tape or the discovery that he’s been running an abortion mill out of his New Hampshire country house, it’s hard to see what could change that. Romney’s financial juggernaut far surpasses that of his rivals. While Newt Gingrich may mar him as a “Massachusetts moderate,” Romney boasts a solid lead in conservative South Carolina, a primary won by every eventual GOP nominee since 1980. Conservative forces may talk of mounting an Anybody But Romney effort, but they can’t even agree on who the conservative alternative should be. The question is no longer whether Romney will win the nomination. It’s whether he’ll have it wrapped up by the end of the month.

Forgive me, then, if I wasn’t particularly interested in the fireworks between the candidates at this weekend’s debates. Instead, I was struck by a line of questioning pursued by moderator David Gregory in this morning’s NBC-Facebook debate. Gregory, mouthing platitudes about the “age of austerity” in which we live, asked Jon Huntsman to name three steps he’d take that would make Americans “feel pain.” Were the economic implications of the austerity regime demanded by Gregory not so disastrous, the spectacle of a lavishly paid talking head asking a candidate what he would do to make Americans “feel pain” would be rather amusing. (The loss of millions of jobs in the recession apparently wasn’t painful enough.) But one doesn’t need to be a bleeding heart to see the foolishness of Gregory’s argument. A passing familiarity with economics would suffice.

The dangers of premature austerity are well-documented. The lessening of government support from a fragile economy removes a crucial source of investment and economic stimulus. Consider the effects of President Franklin Roosevelt’s 1937 austerity regime, which halted the recovery from the Great Depression before FDR reversed course later in 1938:

For a more recent example, look no further than the case of Great Britain, where Prime Minister David Cameron and Chancellor of the Exchequer George Osborne are implementing a harsh set of austerity measures, as the Fiscal Times reported this summer:

The first year of austerity has not gone well for the Cameron government. In the public sector, where cutbacks are most severe, the figures for Cameron’s five-year plan are startling: a 68 percent cutback in government housing subsidies, a 31 percent cut in the budgets for the environment and rural support programs. Culture and sports, justice, local government, job training: All of these departments are looking at spending reductions of 25 percent or more.

Osborne’s commitment is plain: Long-term growth can be achieved only through cuts in spending. In essence, it is a replay of the phrase that made Margaret Thatcher famous among Britons back in the 1980s: “There is no alternative,” commonly abbreviated as TINA.

The Tories have options the Greeks do not enjoy, and not all has gone south. Since Britain controls its own currency, it can let the pound drop to stimulate exports. Unemployment is high, at 7.7 percent, but that is a stable figure and a marginal improvement since the spring, achieved even in the face of public-sector layoffs of more than 100,000 and counting.

But it is now clear that growth is a long way off. The economy has been stagnant since autumn, and all the major institutions—the Organization for Economic Cooperation & Development, the IMF, and a raft of private-sector forecasters—are dropping growth predictions to the range of 1.4 percent to 1.5 percent, even as Osborne sticks to a (relatively rosy) 1.7 percent estimate for the current fiscal year.

A more telling figure is the measure of retail sales. They fell by 1.4 percent in May, the most recent month reported, and we no longer have to wonder why British businesses are not investing. Why should they? The Cameron cuts are intended to restore business confidence, but why should deflationary fiscal policy make anyone confident when Britons are now demonstrating that they are too uncertain to spend?

So the results are coming in on Britain’s austerity crusade, and Americans should pay especially close attention, because we are contemplating what can now be established as the same mistake. It is this: Thinking austerity by itself will work.

Add to this a 2011 International Monetary Fund paper finding that “a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent,” and it’s clear how disastrous the economic implications of Gregory’s sadomasochism would be.

But aren’t Social Security and Medicare – the “entitlements” that Very Serious People are always calling on policymakers to “rein in” – bankrupting us? Health care costs must indeed be contained, but the solutions put forth by the Very Serious People would do nothing to solve the problem. Paul Ryan’s scheme to privatize Medicare would raise health costs for seniors, as Medicare is far more cost-efficient than private insurance. Shifting costs is ducking the problem of rising health care spending (on unnecessary tests, procedures, insurance company administrative costs, and so on), not solving it. As for Social Security, the Congressional Budget Office conducted a study in 2010 finding that a two-percentage point increase in the payroll tax paid by both employers and employees over 20 years would make up for the program’s 75-year shortfall. Lawmakers could also change the fact that only the first $90,000 of income is subject to the payroll tax.

The Village’s vapid utterances about the need to hunker down and “get serious” about “putting our fiscal house in order” have been repeated so often that their veracity is, unfortunately, taken for granted in all too many circles. But a cursory acquaintance with facts – the things David Gregory would have us believe he relentlessly pursues – puts the lie to the austerians’ economically illiterate arguments.

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Racism and the Tea Party’s Selective Opposition to Government

By Luke Brinker

Conventional wisdom holds that the Tea Party arose in opposition to the bailouts and economic stimulus programs enacted under Presidents George W. Bush and Barack Obama. Motivated by a principled opposition to “big government,” Tea Party protesters took on establishment politicians of both parties, supporting candidates committed to lower spending, minimal government intervention, and decreased taxes.

While Tea Party supporters still cling to this narrative, it’s been obvious for some time now that it doesn’t withstand scrutiny. In April 2010, CBS and the New York Times conducted a poll finding that Tea Party respondents were just as likely as non-supporters of the Tea Party to argue that Social Security and Medicare – paragons of big government – were worth the cost. “Small government” sounds blissful in theory, but here’s how Tea Partyers deal with its practical implications:

But in follow-up interviews, Tea Party supporters said they did not want to cut Medicare or Social Security — the biggest domestic programs, suggesting instead a focus on “waste.”

Some defended being on Social Security while fighting big government by saying that since they had paid into the system, they deserved the benefits.

Others could not explain the contradiction.

“That’s a conundrum, isn’t it?” asked Jodine White, 62, of Rocklin, Calif. “I don’t know what to say. Maybe I don’t want smaller government. I guess I want smaller government and my Social Security.” She added, “I didn’t look at it from the perspective of losing things I need. I think I’ve changed my mind.”

More recently, Harvard government professors Theda Skocpol and Vanessa Williamson interviewed Tea Party sympathizers across the country. Skocpol and Williamson’s findings corroborated the results of the CBS-Times poll:

In our interviews and group discussions, however, we found Tea Party members to be quite inconsistent about government. At the abstract level, all of them decry big government, out-of- control public spending and ballooning deficits. But when governmental specifics come into view, it’s a different story. Tea Partiers aren’t opposed to all kinds of regulation or big tax-supported spending. Rank-and-file Tea Party participants evaluate regulations and spending very differently, depending on who or what is regulated, and whether those who benefit from various kinds of public spending are considered hard workers or freeloaders.

The current Tea Party distinction between freeloaders and hardworking taxpayers has undertones that distinguish it from a simple reiteration of the long-standing American creed. In Tea Party eyes, undeserving people aren’t defined simply by a tenuous attachment to the labor market (USURTOT) or receipt of unearned government handouts. Worthiness is a cultural category, closely tied to certain racially and ethnically tinged assumptions about American society in the early 21st century. Tea Party resistance to giving more to people deemed undeserving is more than just an argument about taxes and spending. It’s a heartfelt cry about where they fear their country may be headed.

Drawing distinctions between the “deserving” and “undeserving” poor is nothing new. (The English Poor Law of 1601 enshrined such distinctions in statute.) For Tea Partyers, “undeserving” usually means “racial minorities.” In 2010, Newsweek carried a story on Tea Party participants’ appalling views of African Americans:

So a new poll by researchers at the University of Washington caught my eye. The findings are sure to fan the flames further. “People who approve of the Tea Party, more than those who don’t approve, have more racist attitudes,” says Christopher Parker, a University of Washington professor who directed the survey. “And not only that, but more homophobic and xenophobic attitudes.” For instance, respondents were asked whether they agreed with various characterizations of different racial groups. Only 35 percent of those who strongly approve of the tea party agreed that blacks are hardworking, compared with 55 percent of those who strongly disapprove of the tea party. On whether blacks were intelligent, 45 percent of the tea-party supporters agreed, compared with 59 percent of the tea-party opponents. And on the issue of whether blacks were trustworthy, 41 percent of the tea-party supporters agreed, compared with 57 percent of the tea-party opponents.

Of course, Tea Partyers don’t deny racism. Far from it: a 2010 survey by Public Religion Research found that while 44 percent of Americans overall saw “discrimination against whites as being just as big as bigotry aimed at blacks and other minorities,” 61 percent of Tea Partyers subscribed to that view.

While rank-and-file Tea Party supporters tend to be older, white, socially conservative Americans with outdated views on race, this is not to say that establishment figures who appropriate Tea Party rhetoric about “small government” are all motivated by racial bias. House Budget Committee chairman Rep. Paul Ryan, for instance, put forth a plan to end Medicare as a public program and replace it with a voucher system for private insurance within 10 years. As flawed as the plan was, it was certainly scaled-back government in action. How did rank-and-file Tea Partyers respond? Seventy percent of them opposed the Ryan plan.

It would be unfair to assert that the Tea Party is entirely driven by racial bigotry. Partisanship explains much of the Tea Party’s reflexive opposition to President Obama. In an August op-ed for the New York Times, Notre Dame political scientist David Campbell and Harvard public policy professor Robert Putnam noted that Republican affiliation was the “strongest predictor” of Tea Party participation. Tea Partyers oppose “Obamacare,” even though it’s modeled on a plan drawn up by the conservative Heritage Foundation in the 1990s; rail against the president’s cap-and-trade proposal on climate change, even though John McCain and Sarah Palin supported cap-and-trade as a conservative, market-based approach in 2008; and denounce the “Buffett rule” to end government preference for capital gains-based income as socialism, even though conservative saint Ronald Reagan raised the capital gains tax to 28 percent, which was then the top income tax rate. (The capital gains rate is now 15 percent.) There’s nothing wild-eyed about these Obama proposals, but because a Democrat is proposing them, the Tea Party screams.

In short, the Tea Party favors smaller government except when it disadvantages them and supports market-based health reform and climate change solutions, except when they’re endorsed by Nobama. In fact, government is okay as long as it doesn’t waste too many resources trying to help lazy blacks. And to think that critics labeled Occupy Wall Street incoherent and unfocused.


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Washington Post Fudges Facts on Deficit Debate

By Luke Brinker

Lori Montgomery has what economist Dean Baker rightly terms a “front page editorial” in today’s Washington Post. Montgomery laments that for all of the new Congress’s talk about decreasing the federal budget deficit, lawmakers took little action to actually reduce it. The piece contains two overarching flaws: its tacit assumption that not solving the deficit nownownow is something to mourn, and its analysis that to save the republic, seniors’ Social Security benefits must be cut in the future.

Montgomery ignores the empirically proven fact that harsh austerity regimes aimed at reducing a country’s budget deficit worsen the country’s economy (thereby leading to diminished tax revenues and even higher deficits). A July 2011 paper from the International Monetary Fund looked at 173 instances of austerity and determined that “a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent.” (h/t Ezra Klein).

The article asserts that “Social Security and Medicare pose a long-term threat if there are no constraints on benefits.” As economist Christina Romer might say, this claim is “oh so wrong.” Let’s start with the latter program. Montgomery makes the all-too-common mistake of conflating Medicare with the problem of rising health care costs, which are indeed driving long-term budget deficits. The solution is not to cut Medicare, with its much more efficient spending, and replace it with a less-efficient “premium support” model (like, say, the  Ryan-Wyden plan), which would only shift costs without addressing their underlying causes (too many unproven and unhelpful procedures, fee-for-service medicine, and so on).

By arguing that cutting Social Security is essential to the nation’s fiscal health, Montgomery certifies her status as a Very Serious Person among the Peter G. Peterson Foundation crowd. What she doesn’t do is display a basic comprehension of how the program actually works. Here’s Baker:

The piece also includes several comments to the effect that Social Security and Medicare will break the budget. In fact, Social Security’s costs are rising very gradually. Furthermore, its projected benefits are fully paid for through the year 2038 with no changes whatsoever in the program. Even after that date, if Congress does not change the law, Social Security cannot contribute to the deficit. It would only be able to pay out about 80 percent of scheduled benefits (roughly 10 percent more than the average benefit received by today’s retirees).

Moreover, economists at the Congressional Budget Office conducted a study last year finding that a two-percentage point increase in the payroll tax paid by both employers and employees over 20 years would make up for the program’s 75-year shortfall. (It’s also worth noting that only the first $90,000 of income are subject to the payroll tax. This means that working- and middle-class families pay a dramatically higher proportion of their incomes into Social Security than the affluent.)

Unless the Post commits itself to budget reporting that bears some relationship to reality, it’s unlikely that its flagging fortunes will be revived anytime soon.

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What the Social Security Fight Tells Us About the GOP

By Luke Brinker

Last month, historian Rick Perlstein wrote in Time that if Democrats are serious about winning the 2012 elections, they’ll tout their record as the party of cherished social programs like Medicare, Medicaid, and Social Security. Voters will rally behind candidates who pledge to protect the safety net, not dismantle it, Perlstein argued.

While the prescription was aimed primarily at President Barack Obama – who has indicated a willingness to slash Social Security as part of a deficit reduction package – it seems Mitt Romney took note of voters’ affinity for social insurance. In last night’s NBC News/Politico Republican candidates’ debate, Romney assailed Rick Perry for labeling the program a “lie” and “Ponzi scheme.”

In a line that would have met hearty applause at a Democratic pep rally, Romney said, “A candidate should be committed to saving Social Security.”

To be sure, Romney’s line of attack doesn’t tell us much about his specific proposals to shore up the program. After all, George W. Bush promoted his ill-fated 2005 privatization scheme under the guise of “saving” the program. But if we know one thing about Mitt Romney, it’s that his core conviction is that Mitt Romney should be president. After witnessing the debacle that ensued from Bush’s 2005 privatization efforts, it’s unlikely that a President Romney would pursue such a polarizing proposal.

Moreover, there’s no need to drastically remake Social Security in order to solve its projected shortfalls. The inestimable Ezra Klein explains:

Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP (pdf). If we increase its revenues by that amount — which could be accomplished by lifting the cap on payroll taxes — or reduce its benefits by that amount or do some combination of the two, Social Security is back in the black. Here are 30 policy tweaks that could get us there.

Why does Social Security show a shortfall? As Stephen C. Goss, the system’s chief actuary, has written, Social Security projects an imbalance “because birth rates dropped from three to two children per woman.” That means there are relatively fewer young people paying for the old people. “Importantly,” Goss continues, “this shortfall is basically stable after 2035.” In other words, we only have to fix Social Security once. After we reform it to take account of modern demographics, the system is set for the foreseeable future.

Of course, none of this matters to Rick Perry, whose brand of Tea Party politics frowns upon the New Deal/Great Society welfare state (even if most rank-and-file Tea Party members actually support Social Security). It’s irrelevant whether a particular welfare program works. To Perry, it’s a moral wrong for the government to even be involved in retirement security.

Ultimately, the Perry/Romney divide on Social Security offers an illuminating contrast between the two GOP frontrunners. One candidate is so committed to ideological purity and sees politics as the grounds for a contest between absolute good and absolute evil. The other sees politics as an arena for compromise, problem management, and pragmatic policymaking. The outcome of this primary, then, will tell us much about the GOP’s future as a serious governing party.

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