I agree with Ed Kilgore and disagree with Paul Krugman and Duncan Black
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. Knowck me down with a wrecking ball.
He then asserts "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." OK Paul if you have evidence that conservatives want the FICA ceiling raised, put it on your blog, I'm all eyes.
Fortunately, I mostly agree with Kevin Drum except for the minor bit about what is to be done. For some reason, which I'm sure he has explained but I missed it, Drum is opposed to raising the ceiling.
On that question, I guess the view is that a middle class tax increase will free up funds which will be used for tax cuts for the rich (at least compared to what they would otherwise pay). To me this is a starve the beast argument that the worse things are the better they are and should appeal to those who admire both David Stockman and Vladimir Lenin.
The assumption appears to be that the Republicans will be in charge so any spare money will be given to the rich. Quite frankly, I don't see how anyone with that assumption hasn't given up on the whole opinion leading business. There is no way that progressives can obtain a decent outcome if the Republicans are in charge.
However, it is possible that they will be in opposition for a long time. The Democrats will not be allowed by filibustering Republicans, pundits and the gullible public to expand programs while there is a huge deficit (starve the government spending beast worked fine when Clinton was President).
It will be relatively easy to increase taxes paid by the super rich. Once that debate is in the open, the Republicans can't win it no matter how much money they get from rich pundits.
It is very hard to increase taxes on the middle class, yet, I think that will be necessary to fund medicare let alone universal health insurance. Calling it a Social Security crisis when it is a medicare crisis is a small price to pay for convincing people to pay what they have to pay to live in a decent society.
Paris is worth a mass and medicare is worth a fake social security crisis.
update: Welcome economist's viewers
I have more as a comment there. I will put it here too.
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.
update II:
I agree with everything Krugman says here. In fact I agree with everything he wrote about Obama except for who is playing whom for a fool. I think Obama is outsmarting the villagers.
Robert, the problem is that one party strongly desires to destroy the system. This also means that they are totally willing to renege on any deal, since they don't mind trashing the place.
ReplyDeleteIf you ever feel that the GOP is trustworthy in such things, merely consider that the Greenspan plan collected a god-awful amount of money, which the GOP happily spent on tax cuts and wars.
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?
ReplyDeleteUnder 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.
Obama can do what the privatizers themselves have been unable to do for the past 2+ years--push the "Social Security crisis" back onto the political radar screen. What he can't do--regardless of how wonderful his Social Security Pony Plan may be--is dictate how the problem will be addressed.
ReplyDeleteA side note: If you think Dems have any stomach for significantly raising taxes on the rich, check with someone on the Senate Finance Committee (where they just had a hearing on the estate tax at which the chairman advocated full repeal). If not for Charlie Rangel in the House, we probably would've seen more tax cuts for the rich this year.
The dynamics could always change somewhat by 2009, but ostensibly clever manipulation of the public that presumes such a change is a recipe for trouble.
The man who said that Paris was worth a mass ended up assassinated, and the tolerant policy he enacted was repealed. There is something to be said for achieving one's goals using honest means.
ReplyDeleteBarry
ReplyDeleteI don't propose to trust the GOP. I want to destroy them. A middle class tax increase "to save social security" creates slack that the Republicans could use for wars and tax cuts for the rich. It also creates slack that Democrats can use for health care (and maybe a bit of development aid please). Dealing with the general fund deficit is a way to make the debate about taxes a debate about progressivity not total revenue required. I think such a debate would cripple the Republicans for a decade or more.
Denis, I did not say that I think there is a social security crisis. I said it was a useful lie.
Anonymous
What Obama says will be very important only if he is elected which would change the dynamics a bit. Charles Rangel does exist and people who want to stop his bill will have to debate it. I don't think they will survive politically .
Max Baucus represents the Democratic party about as much as Joe Lieberman does. There is good reason to hope that in 2009 there will be at least 53 Senators clearly to the left of him (Ben Nelson is questionable).
Robert: "Denis, I did not say that I think there is a social security crisis. I said it was a useful lie."
ReplyDeleteWhich plays into my point - it's a far, far, *far* more useful lie to the party which (a) has gotten away with sh*t that the most dishonest Democratic politicians could only dream of, and (b) wants to destroy the system.
- Barry
It's pretty amazing that Krugman is taking this stance in light of what he himself was writing in 1996.
ReplyDeleteRobert if Medicare and Social Security were being funded out of the same pot then raising the cap on Social Security as a backdoor way of rescuing Medicare might make some sense, but they are not. Social Security doesn't need the money over the short to medium term, Medicare Part A probably will need more money over the medium term (though HI Trust Fund depletion continues to be pushed back in time, it was projected in 1992 to be deplete by 1999, today that has been pushed to 2019) if so it would make sense to simply increase that portion of the payroll tax, perhaps as a surcharge on the wealthy (since Medicare isn't capped to start with).
ReplyDeleteGiven the current state of the financing and Social Security being in cash surplus, lifting the cap simply increases future General Fund obligations at the expense of current workers. Conceptually it may seem sensible and progressive, when measured in dollars and cash flow it simply ends up being unfair to better off wage workers while giving capital a free pass.
It is not a useful lie. It is in fact counterproductive to the progressive agenda. Social Security 'Crisis' is in my view the single biggest barrier to Universal Health coverage. The very last thing we need to do is to reenforce the meme 'Big Government is the Problem'. How about we transform that message to something like 'Social Security Works, Single Payer Can Too' which among other things has the advantage of being true.
As to what Krugman wrote in 1996, I quote Maynard Keynes "When the facts change, I change my mind. What do you do, sir? " Since 1996 we have learned of a surprising productivity growth speed up which will improve the actuarial balance of the SSA (if it is ever reflected in real wages) because after the first check (indexed to wages) a single persons pension goes up proportional to prices.
ReplyDeleteI am going to add another heresy. I don't care much about the social security trust fund. If it were in a lock box it would matter, but even if congress makes the lock, it can make a key. The combined deficit matters, because deficit spending creates the illusion of wealth and reduces saving. I don't think the designation of a tax as for social security old age and disability pensions matters much. It certainly hasn't made any difference in the past 7 years.
Do this to save social security is the most powerful rhetorical weapon in the USA. The fact that the Republicans have used it doesn't mean that only they can use it.
I have to admit I don't grasp your explanation for Krugman's drastic, 180-degree turn-around on this issue. Do the factors you mention account for such an about-face? In any event, it seems that the one consistent thing about Krugman here is that he overstates his case.
ReplyDelete