Wednesday, December 15, 2004

Doing the Math

Josh Marshall at Talking Points Memo has two excellent articles on the future of Social Security. The first is about how the Democrats should – and shouldn’t – approach Bush’s proposals to revamp it.

The Social Security “crisis” is manufactured; there is no crisis. To the extent there are long-term financing problems, the president’s plan will gravely worsen them. The problem we face isn’t over Social Security, which continues to run up huge surpluses (just as it was intended to under the early-80s reform), but that our non-Social Security budget continues to run massive structural deficits. Or rather, it has returned to running massive structural deficits after getting into the black in the late 1990s through the combined exertions of a Democratic president and a Republican congress. Social Security isn’t the problem, but rather George W. Bush’s reckless fiscal policy.

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One thing that Democrats must understand is that they cannot win this battle legislatively. At one level what I mean by that is simply the math we can all see. The president has comfortable majorities in both chambers and in his first term (when he was a minority president and had smaller majorities) he commanded historic levels of party discipline. If he can hold those caucuses together, he can pass this and sign it and that’s it. Doesn’t matter what Democrats do.

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So point one is party unity. The Democrats don’t just need to keep their caucuses overwhelmingly together on this issue. They need to avoid even a single defection in the House or the Senate. From what I hear from knowledgable sources this is already pretty close to doable in the House; and probably no more than three or perhaps four are even in play in the Senate.

Such unity has the obvious advantage of giving Republicans less breathing room in putting together majority votes in both houses. But it does much more than that. Making the elimination of Social Security a strictly Republican gambit raises the political stakes dramatically. Many Republicans will be far more cautious without bipartisan cover. Democrats must deny them even the thinnest of fig leaves. Making it a strictly Republican affair will also provide valuable clarity in the coming election, rather than the muddled picture created by Democratic defections on the 2001 tax bill.

The second article is a guest posting by Michael Kinsley on the fallacies of Bush’s proposal to privatize the program.

My contention: Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless.

The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2) stocks don’t necessarily do better than bonds over the long-run, as proponents assume. But privatization won’t work for a better reason: it can’t possibly work, even in theory. The logic is not very complicated.

Read on, especially if you have any curiosity as to whether or not there will be anything left when you get old enough to retire. And the younger you are, the more concerned you should be. Old gaffers like me are pretty certain that Social Security will be there – I’m only thirteen years away from 65 – but if you’re in your thirties or twenties, you can be sure that if Bush gets what he wants, you run the risk of ending up with bupkus.