Matt Yglesias

If Wishes Were Horses Then Bipartisan Commissions Would Reach Reasonable Accommodations

Kevin Drum wants a Social Security grand bargain:

I’m entirely in favor of a Social Security commission, similar to the 1983 commission, tasked with producing a conventional basket of small revenue increases and small benefit cuts that would balance Social Security’s book in the long term. This is, admittedly, a relatively small thing, since Social Security’s fiscal condition has improved over the past few years and is now projected to eventually go out of balance by only about 1.5% of GDP. But aside from the virtue of even small acts of fiscal rectitude, it would also have the huge virtue of taking Social Security off the table as a political issue. If we could, at long last, get the Washington Post and the Wall Street Journal and the Peterson folks to quit droning on endlessly about this, we might actually clear the way for discussion of some real issues. And it’s the kind of thing that can be put in place now and credibly be expected to unfold as planned.

I’m not in favor of this, but I’m not against it either. Which is to say I don’t think appointing such a commission would be a good idea, but if Barack Obama did appoint me to the commission I’d agree to a package like that. Or if I were a member of congress and a bipartisan bill enacting this kind of program were on the floor, I would vote for it. But would any Republicans?

I feel like people keep forgetting about this, but the post-1992 conservative movement absolutely refuses to vote for tax increases. I’m not sure what the ideological justification for this posture is supposed to be—Saint Ronald Reagan signed a number of tax increases—but it’s clearly part of the catechism, has been for years, and will likely be formally enshrined in the new RNC purity test. This was the problem with the whole farcical spring/summer quest for a bipartisan health care bill. You couldn’t possibly do a deficit-neutral universal health care bill without raising taxes, and conservatives won’t vote for tax hikes. But if Republicans won’t vote for tax hikes, then you can’t have a bipartisan agreement to raise taxes and trim benefits growth.

Kevin’s plan is going to play out along the lines of a familiar script. First, Barack Obama proposes something sensible and centrist like a balanced package of benefit cuts and tax hikes. Then this becomes defined as the extreme left pole of the debate. Then because Max Baucus and Kent Conrad are moderates, it needs to be balanced further in the direction of spending cuts. Then the administration embraces that proposal and it becomes defined as the extreme left pole of the debate. Then because Evan Bayh and Blanche Lincoln are moderates, it needs to be balanced even further in the direction of spending cuts. Then because the package is more than zero percent tax increases, it passes with at most the support of Olympia Snowe and Susan Collins, and conservatives denounce the Democrats as tax-and-spend liberals who want to punish workers and seniors alike in order to finance giveaways to ACORN and death panels. Then Alan Greenspan applauds politely, and then when the GOP gets back into office they propose large cuts in income taxes on the wealthy and he applauds that loudly.

I say: No thanks. Some day the Chamber of Commerce may become concerned about the looming bankruptcy of the United States of America and start delivering conservative votes for a balanced approach to the long-term fiscal gap. And when they do I and all responsible liberals will support such an approach. But until then what’s the point? To sound reasonable? Okay. I’m reasonable. But you can’t have a one-party bipartisan compromise—that’s silly. So as long as conservative politicians claim to believe that future taxes should be lower than current taxes, there’s really not much for a commission to do.

In Semi-Defense of Obama’s Social Security Pandering

Recipients of Social Security get automatic cost of living adjustments pegged to the rate of inflation. That makes sense. If there’s a lot of inflation, a retired person might need a lot more money. If there’s a little inflation, then a retired person might need a little more money. And what if there’s no inflation? Well, the logic here is easy enough to follow—no inflation = no COLA. And right now we have no inflation, so the formula that determines the Social Security COLA indicates that there should be no COLA. Well, can’t have that, so instead the Obama administration is proposing a $13 billion one-time bonus payment to seniors.

As public policy this reeks of opportunism. That said, you should read the Center on Budget and Policy Priorities’ detailed case against a 2010 Social Security COLA. They make the point that if congress is determined to do a COLA anyway, it’s much more fiscally responsible to do it as a one-off payment than to make a permanent upward adjustment. If you accept that political reality wasn’t going to allow the no-COLA scenario to happen, having the administration get out in front of a one-time payment may help preempt congressional pressure for a worse idea.

What’s more, the saving grace of this is that if Obama said “we need $13 billion in additional stimulus” then every Republican and the bulk of moderate Democrats would say “no way.” But if Obama says “we need a $13 billion giveaway to Social Security recipients” then the vast majority of Republicans and moderate Democrats are going to say “you betcha.” And judged as economic stimulus, what the administration is proposing isn’t a totally ideal use of $13 billion but it works pretty well.

Social Security and Suicide

Social Security Administration building, Washington, DC (cc photo by Ken Mayer)

Jacob Weisberg discusses various pro-death initiatives from the American right and brings this interesting factoid about Social Security and suicide rates:

Other GOP policies promote death for senior citizens with more modest incomes. Take the conservative push to privatize Social Security, which George W. Bush proposed and failed to get Congress to pass in 2005. Social Security has driven life expectancy up and death rates down since it was instituted. It has an especially pronounced impact on suicide rates for the elderly, which have declined 56 percent since 1930. Had Bush prevailed, we would now be undoing income security for the elderly. Those who gambled on the stock market and lost would be less able to afford medicine, food, and heating for their homes. In aggregate, they’d presumably die younger and commit suicide more often.

Whenever you read, whether in the context of the United States or Japan or Europe, about the “problem” of population aging and demographic shifts it’s really worth reflecting on the fact that these are good problems to have. That old people live longer these days, with better medical care and radically less suicide, is a good thing. The fact that our wealthier societies allow people to spend more years in retirement after a few decades of productive work is a good thing. There are certain policy challenges associated with this, but it shouldn’t really be seen as a bleak scenario or an overall negative situation.

I’ll Stop Calling it “Destroying” Social Security When They Stop Trying to Destroy Social Security

Gail Collins offers a bit of the own pox on both houses:

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”…

Look. Social Security is projected to face a deficit over the long haul. Expenditures, in other words, are projected to exceed revenues. People concerned about this problem will be proposing some mixture of higher revenues and lower expenditures. The more conservative you are, the more inclined you’ll be to want to do this through lowering expenditures rather than raising revenues. But what George W. Bush and his administration proposed to do was not to close the gap between Social Security’s projected revenue and projected expenditures through any mix of revenue enhancements or expenditure reductions. Instead, they proposed to, over time, phase Social Security out and replace it with a differently structured program of mandatory savings.

That was a proposal to destroy Social Security, not a proposal to reduce its project deficit. And it certainly wasn’t “any attempt to contain the cost of entitlements.” It was a very specific and narrow set of proposals; the administration said they wouldn’t consider any ideas that didn’t involve privatizing Social Security. The Diamond-Orszag balanced approach to Social Security was an effort to contain the cost of entitlements. Bush didn’t propose anything of the sort.

Status Quo Bias and Extremism

On the top secret “Journolist” yesterday we were plotting world domination debating the fine points of political procedure, and some folks were making the case that progressive filibuster critics like me were being shortsighted. After all, the very same factors that make it hard to create a universal health care system would also make it difficult to disband one once it’s created. Maybe without the filibuster George W. Bush would have privatized Social Security? On the Social Security point, I think the claim is just empirically wrong. I saw no evidence that there were 50 Senate votes for Bush’s plan. It’s worth remembering that the GOP didn’t so much as get a privatization bill to clear a single committee in either chamber. The whole thing was a congressional non-starter.

And in general, I think the politics of the welfare state are asymmetrical. There are a lot of different sets of political institutions out there, some with more veto points and some with fewer. But you don’t see any instances, not even in the UK where there are very few checks on government authority, of a country dismantling a national health care scheme and deciding that sick people should be left to the tender mercies of the free market. What you do see is a ton of diversity in terms of when national health care is adopted and what it looks like, with both of those factors plausibly being shaped by political institutions.*

But the other thing is that my belief is that if the United States were the kind of country in which presidents who win elections are generally able to implement their campaign promises that Bush simply never would have promised Social Security privatization in the first place. Margaret Thatcher, after all, didn’t try and fail to dismantle the National Health Service; she simply never espoused it as a goal. Presumably not because she was unfamiliar with free market critiques of the NHS, but out of political caution.

One thing to ask about American politics is why it is that, say, Barack Obama and John McCain offered such dramatically different health care proposals during the campaign? Totally contrary to predictions based in things like the median voter theorem, both candidates proposed radical changes in the American health care system and both were proposing quite different radical changes. Even stranger, they both did that even though the overwhelming majority of voters tell pollsters that they’re perfectly happy with the health care they already have. I think that at least part of the answer is that the American political system is habituated to the idea that policy proposals aren’t actually going to be implemented. In a world of fewer veto points and stronger party discipline, you’d have to take campaign promises more seriously, and thus candidates would need to promise proposals more in line with public sentiment. Something like Social Security privatization was never a popular idea, and you just wouldn’t campaign on it.

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Growth, Taxes, and Retirement Programs

There are a number of different ways to characterize the findings of the latest “trustees report” for Social Security and Medicare, but the bottom line is that at some point in the future taxes are going to have to be higher.

Right now we’re set to be buried under a torrent of health care cost inflation, which highlights the need for health care reform. Tweaking Medicare in isolation is unlikely to be the most effective approach since Medicare costs track private sector health care cost shifts:

That said, controlling health care cost growth through systematic reform is necessary but not sufficient. We’re not realistically going to get health care cost inflation down to zero. And even if we did, demographic shifts imply higher expenditures for Social Security, Medicare, and Medicaid. In other words, unless we radically scale back our commitment to providing a secure and dignified retirement for senior citizens, some of this will have to be done on the tax side.

Meanwhile, note that the trustee’s report suddenly looks a lot worse because of the recession. That’s because even though these trends are driven by health care economics and demographic changes, they’re also quite sensitive to questions about economic growth. A relatively small boost in the growth rate, if sustained over time, makes our existing commitments much more affordable. One lesson of this is that even revenue-neutral tax reforms—efforts to curb deductions and loopholes in exchange for lower rates—can help a lot with this program. Another lesson is that when the time does come to talk about tax increases, it’s important to focus on tax increases that are economically efficient. Evidence suggests that the administration’s proposals to limit deductions for high-income taxpayers fit this bill as do some of the ideas about taxing public health hazards that have been vaguely leaking out around the Hill. But a broader, deeper, more fundamental reform would be highly desirable during these next few years before we shift into a higher tax equilibrium.

Rose DeLauro Says Budget Conference Won’t Tinker With Social Security

I noted late last week that there was some chance that the conference committee appointed for the 2010 budget was going to attempt some funny business with Social Security. After all, there are indications that Senate Budget Committee Chairman Kent Conrad extracted a promise to do something with Social Security in exchange for agreeing to reconciliation for health care. And as one of the House conferees they picked Rep. Allen Boyd (D-FL), who was the only Democrat to support Bush’s Social Security privatization plan back in 2005.

Amanda Terkel spoke to Rep. Rosa DeLauro, one of the other conferees, yesterday and she said in reply:

DELAURO: As far as my understanding is concerned, is that there is not going to be any reference to Social Security. Social Security will be a discussion that will come in our overall health care debate, but my understanding is that at the moment, it is not part of the budget conference.

That’s fairly reassuring, though I don’t really understand why Social Security is part of our “overall health care debate.” To look at it generously, if congress were to succeed in putting health care on some kind of sustainable trajectory, it would then be time to talk about how to do you pay for that sustainable trajectory, and perhaps Social Security should be part of that discussion. Thus far, though, I still think it’s far from clear whether or not we’re going to get a sufficiently serious health reform at all and I don’t think that dragging Social Security into the conversation improves those odds.