Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging)
8/19/09 12:39 PM
Grasping Reality with Both Hands The Semi-Daily Journal of Economist Brad DeLong: A Fair, Balanced, RealityBased, and More than Two-Handed Look at the World J. Bradford DeLong, Department of Economics, U.C. Berkeley #3880, Berkeley, CA 94720-3880; 925 708 0467; delong@econ.berkeley.edu. Weblog Home Page Weblog Archives Econ 115: 20th Century Economic History Econ 211: Economic History Seminar Economics Should-Reads Political Economy Should-Reads Politics and Elections Should-Reads Hot on Google Blogsearch Hot on Google Brad DeLong's Egregious Moderation August 13, 2009
Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging) I read Gail Collins writing: I like partisanship. What I don’t like, and what nobody likes, is the brain-dead variety we see in Congress where the minority party would rather make a bill worse in the hopes that it would fail than make it better in case it passes. So the Republicans make it impossible for the Democrats to put cost controls in the health care plan by howling “rationing!” And back when the Democrats were in the minority, they made sure that any attempt to contain the cost of entitlements was immediately branded “destruction of Social Security”... And I think... hmm... what have Republicans tried to do over the past decade to contain the cost of entitlements? Well, there was the unfunded Medicare Part D-that doesn't count. And then there was the 2005 Bush Social Security Plan... what was that about? And I remember: The Bush 2005 Social Security Plan was a proposal to wind up Social Security over the next two generations and replace it with mandatory definedcontribution individual retirement accounts. And I remember that it was very hard for the Bush administration to even claim that the numbers made sense--they were, after all, leaving on the table (a) the benefits from diversification across individual portfolio strategies, (b) the benefits of diversification across time, and (c) the backstop risk-bearing capacity of the government. In short, they were planning the destruction of Social Security. Now there are reasons to destroy Social Security, at least partially, and replace it or supplement it with a system of mandatory defined-contribution individual retirement accounts: http://delong.typepad.com/sdj/2009/08/why-oh-why-cant-we-have-a-bet…ess-crops-have-i-dropped-into-an-alternative-universe-blogging.html
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Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging)
8/19/09 12:39 PM
retirement accounts: 1. The existence of the Social Security Trust Fund within the government's accounts is a force decreasing pressures for rational fiscal policy. 2. There is an equity return premium--now, especially, going forward boy is there an equity return premium! And a system that offers the poorer half of Americans access to the premium risk-adjusted returns from equity investments would be a good thing to implement. 3. There might be a demonstration effect: if the government makes you save some in an IRA-like vehicle, that might induce people who ought to be saving even more in similar vehicles to do so. I could get behind a well-thought-out and well-implemented "ownership society." But the game was the "ownership society," wasn't it? And the goal of the "ownership society" was the destruction of Social Security as we know it, wasn't it? That was supposed to be a feature of the Bush program--that the existing Social Security system had too many disabilities and drawbacks. So from my perspective it makes sense to criticize the Democrats for dismissing the critiques of Social Security--the tendency of congress to spend the trust fund or use its balances to lower present taxes, the fact that under the current system the poorer half of Americans are effectively shut out of equity investments, the possible demonstration effects from moving to an explicit forced-savings plan in vehicles similar to those private investment companies offer. But it makes no sense at all to criticize Democrats for saying that Republicans plotted the "destruction of Social Security." They did plot it. RECOMMENDED (5.0) by 6 people like you [ How? ] You might like:
Matt Zeitlin Needs to Learn to Stop Respecting Social Conservatives(this site) I’ll Stop Calling it “Destroying” Social Security When They Stop Trying to Destroy Social Security(Matthew Yglesias) 2 more recommended posts » Brad DeLong on August 13, 2009 at 09:03 AM in Economics, Economics: Finance, Economics: Fiscal Policy, Information: Better Press Corps/Journamalism, Political Economy, Political Economy: Social Security | Permalink TrackBack TrackBack URL for this entry: http://www.typepad.com/services/trackback/6a00e551f0800388340120a4efbd27970b Listed below are links to weblogs that reference Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging):
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Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging)
8/19/09 12:39 PM
The problem with the U.S. Congress has nothing to do with majority vs. minority. The United States Congress today consists of a tenuous coalition government made up of a center-left and center-right coalition partner, with all the drawbacks of such a combination, and a 40-strong clownshow (178 in the House). Posted by: ogmb | August 13, 2009 at 09:15 AM There is an extremely simple rejoinder to Collins' point that doesn't even touch on social security: There was never a bill. Bush never submitted one, committee chairs didn't work on one, nothing. No bill was proposed anywhere ever. Had a bill been proposed, we could discuss whether Democrats were constructive; as it wasn't, we can only hypothesize. The best way to hypothesize should be to look to Medicare part D, where Dems tried to get cost reductions into the bill. They failed. So what does the record show again? Posted by: Dennis | August 13, 2009 at 09:46 AM the fact that under the current system the poorer half of Americans are effectively shut out of equity investments Might I suggest that poor people don't save much money because poor people don't *have* much money, and that a return to the Great Moderation might be a nice prerequisite for expecting more savings from the working class? That issue aside, though, isn't the equity premium primarily a risk premium? (Otherwise you seem to be saying that you can *reliably* beat the market over the long term, which is the financial equivalent of perpetual motion.) Is it reasonable for poor people to take a more riskembracing investment strategy? (Keeping in mind that Social Security is the opposite of means-tested: the less money you made while working, and therefore the less money you had an opportunity to save while working, the *less* Social Security you get.) Posted by: Chris | August 13, 2009 at 10:25 AM >Better Press Crops? I'm disappointed, I expected something of a more agricultural nature. Posted by: Anon | August 13, 2009 at 10:44 AM One additional benefit, as argued by Moynihan, is that poor people could finally build up wealth that they could pass on to the next generation. My understanding is that lots of literature says that one of the key problems causing cyclical poverty is that the poor, obviously, leave no wealth at all to their children. Privatizing Social Security could (might) partially address that situation. Two problems with that, though. First, the benefit would be 70-100 years down the road. It's probably very difficult politically argue for a benefit whose payoff is that far off. Second, most people -- rich and poor -- are awful at making investment decisions. While personal accountability might be necessary (and preferred) for most financial issues, it's unacceptable when playing with Social Security, a phrase whose key term is "Security." So I think privatization works only if there basically is no choice: contributions are automatically invested in a "life cycle" fund in which the bond allocation increases with age. Fat chance Republicans will ever argue for or support that concept. Posted by: James Cody | August 13, 2009 at 12:21 PM If the problem is that the poor leave not enough money to children, isn't there an obvious solution? Simply institute a draconian inheritance tax and redistribute the income via trust funds equally to all children. That seems only a minimum starting point if you want to claim we're a country with equality of opportunity. http://delong.typepad.com/sdj/2009/08/why-oh-why-cant-we-have-a-bet‌ess-crops-have-i-dropped-into-an-alternative-universe-blogging.html
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Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging)
8/19/09 12:39 PM
we're a country with equality of opportunity. The fact that abolishing the estate tax is considered mainstream while my suggestion is considered socialist craziness gives a fair account of who's winning the class war. Posted by: dan p | August 13, 2009 at 01:22 PM Couldn't the arguments against having a social security fund just as easily be put towards arguing that social security should always be paid out of current taxes, which would then have to be increased when there are more retirees and decreased when there are fewer? Posted by: Bram Cohen | August 13, 2009 at 04:24 PM As far as I could tell, ogmb is correct. The Bush administration never did tell us any concrete details about how they were going to rescue Social Security. The actions of the Bush administration often were so weird that it's not clear exactly what they were thinking. In the case of Social Security, I suspect that their intent was to loot the Social Security Trust Fund over time by means of administrative fees on individual retirement accounts. One problem was that changing Social Security was unpopular. But a more important problem I think is that Social Security being pay as you go, there turned out to be very little actual cash money in the trust fund to loot. Once they figured out that they would be buying a lot of grief and not getting huge of financial returns for their efforts, they moved on. That sounds incredible, but given the Bush administration's record in, for example, managing occupied Iraq, it's difficult to say that it is too mindless to be true. Posted by: vtcodger | August 13, 2009 at 07:37 PM Defined contribution plans were the next great retirement vehicle, problem being Wall Street has melted the market in fits of malfeasance twice in the past ten years. Equity premium? Only for insiders and professional traders, the rest of us are just suckers in the great con game. (If you look around the room and you can't spot the sucker, you are the sucker.) Posted by: save_the_rustbelt | August 13, 2009 at 08:37 PM
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Why Oh Why Can't We Have a Better Press Crops? (Have I Dropped into an Alternative Universe? Blogging)
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