Antisocial security (8/3)

Republicans who argue that savings accounts can save Social Security are hiding the risks -- and the true costs.
By Ben Fritz
[First published on Salon.com (Salon Premium subscription required)]

Selling a policy idea on its merits is apparently passé these days in Washington. It's much easier to distort the alternatives instead so that the one you favor becomes the only way to avoid hard choices.

This is how a number of Republicans and conservatives are trying to sell private savings accounts in Social Security, framing them as the fiscally responsible alternative to the politically unpopular options of raising taxes or cutting benefits.

It's an increasingly common tactic to gain advantage in the long-running debate over Social Security reform. According to a summary of Social Security's finances written by the system's trustees, expenditures will exceed revenues beginning in 2017. This shortfall is expected to be met with Treasury bonds from the Social Security Trust Fund -- which are paid with general taxes -- until those bonds are exhausted in 2041. Most politicians agree some changes should be made in the system soon to avoid potentially major problems in the future, and many Republicans see private savings accounts as the solution.

"[T]he reality is that there are three options available," White House Press Secretary Ari Fleischer said in a press briefing on July 24. "One is to raise taxes, which was done before and hasn't worked. The second is to cut benefits, which is something the president doesn't support. And the third is exactly the president's proposal, to allow younger workers [the] right on a voluntary basis to put a portion of their Social Security taxes in other investments."

David John, a Social Security research fellow at the Heritage Foundation, repeated this three-choice framing in an appearance on CNNFN's "Market Call" yesterday. "[W]e have only three choices in Social Security reform," he stated. "We can raise taxes, which doesn't achieve that goal [saving Social Security], dollar for dollar. We can cut benefits, which certainly doesn't. Or we can do what 20, 25 countries around the world have already done, which is to allow people to invest their money."

Rep. Patrick Toomey, R-Pa., speaking on the Fox News show "Hannity and Colmes" on Monday, made a similar accusation against opponents of private accounts. "You guys are advocating -- what you guys are advocating is nothing," he said, "which means you're advocating a benefit cut or a tax increase."

In an Op-Ed for the Washington Times, former Delaware Gov. Pete DuPont outlined the choices as "cut benefits," "do nothing, which really means raise FICA taxes," or "replace some benefits with personal retirement accounts," which he calls "the only method that adds up to a solvent, long-term solution."

An Op-Ed in the Manchester Union Leader by Ronald Fraser made the same case. "The alternative [to private savings accounts] is for Congress to continue to raise payroll taxes in the future," Fraser wrote, "and perhaps cut benefits to keep the current system afloat."

These all fail to note, however, that adding private accounts to Social Security would almost certainly require raising taxes, cutting benefits or taking money from other programs in order to fund the huge cost of switching to such a system. Specifically, individual accounts divert revenues needed to meet Social Security's obligations to current retirees, thus worsening -- rather than solving -- the system's financial shortfall. In fact, the president's own Commission to Strengthen Social Security acknowledged that the version of private accounts it supports would worsen the program's actuarial balance over the next 75 years.

Heritage's John admitted in a recent UPI article that the hard choices he and his colleagues claim private accounts avoid are actually inevitable. "It's true that money going into [personal accounts] will not pay current benefits to our parents," he stated, "but filling that gap will have to be done by the hard choices mentioned above [cutting benefits or raising taxes]. It will just happen sooner."

John would do well to acknowledge that more often, and Fleischer, Toomey, DuPont and Fraser would do well to join him. But they seem to prefer the facile argument instead.

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8/2/2002 11:08:05 PM EST |

Ignore, ignore, ignore (8/2)

White House staffers underestimated the cost of the Bush tax cut. Why can't they just admit it?
By Brendan Nyhan
[First published on Salon.com (Salon Premium subscription required)]

Mitch Daniels, the former political operative and pharmaceutical executive who now serves as director of the Office of Management and Budget in the Bush White House, has quickly made himself and his agency notorious in Washington for irresponsible attempts to deceive and manipulate. In the latest saga, an incorrect claim by OMB about the cost of the Bush tax cut has simply been erased from history.

As the Center on Budget and Policy Priorities (Adobe PDF file) and New York Times columnist Paul Krugman have pointed out, a July 12 press release from OMB contained a major factual error.

The release was a preview of an OMB report called the Mid-Session Budget Review, which showed a projected federal budget deficit of $165 billion for fiscal year 2002 and a decline in the estimated 2002-2011 surplus from $5.6 trillion at its peak to $1.7 trillion today. In the third bullet point of the press release, OMB attributed figures pertaining to the 2002 budget to the wrong surplus estimate, claiming that "the recession erased two-thirds of the projected ten-year surplus (FY2002-2011)" and that the tax cut "generated less than 15% of the change."

The OMB's data itself, however, shows that those figures are incorrect. As CBPP points out, "Data in the mid-session review shows that the tax cut actually accounts for 38 percent of the deterioration" from the $5.6 trillion 10-year surplus projection in February 2001.

The administration is fully aware that the press release was incorrect. The Council of Economic Advisors chairman, Glenn Hubbard, was even directly questioned about it during a Joint Economic Committee hearing on July 17. He admitted that 40 percent sounds "about right" for the portion of the decline in the 10-year surplus attributable to the tax cut, not 15 percent.

Rather than issue a correction, however, OMB has shamelessly slipped an altered version (Adobe PDF file) of the release onto its Web site in place of the original. There is absolutely no indication that it has been changed -- the offending bullet point is simply gone.

The error in the original release may have been inadvertent, but why can't OMB just admit its mistake and openly correct the record?

Update 8/6 1:15 AM EST: Paul Krugman cites this post in his New York Times column today.

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Related links:
-Spinsanity on OMB Director Mitch Daniels

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8/1/2002 08:01:19 PM EST |

Democrats distort the budget (8/1)

By Ben Fritz

As criticism of President Bush heats up and corporate misconduct dominates the front pages, Democrats are pushing the federal budget to the forefront of the national debate. But they're playing sloppy with the numbers and kicking in new, unfounded comparisons to Enron to boot.

Most notably, former Vice President Al Gore drew on what has become a staple of Democratic rhetoric last week to link Bush’s fiscal policies to Enron. "Everything Enron did -- to mislead people about the extent of that company's future liability in order to grab the money for the benefit of those at the top of the corporation -- that is pretty much the same formula that this administration has taken on the national budget," Gore claimed. Not only is the comparison factually questionable, but it intentionally uses the associations of the company’s name to attach a whiff of illegality and dishonesty to Bush’s fiscal policy.

A second Democratic strategy has been to falsely blame the tax cut passed in May 2001 for the current $165 billion budget deficit. According to the White House Office of Management and Budget, the tax cut accounts for $41 billion in lower revenues in fiscal 2002; the balance comes from economic factors, increased spending and lower than expected tax revenues (even accounting the slow economy). While the tax cut is the single biggest factor in the total decline in the ten-year surplus, Democrats are intentionally misrepresenting its one-year impact in order to make political headway against Bush. Typical was Rep. Eliot Engel’'s (D-NY) claim last week on "Hannity and Colmes" that "I think the tax cut has a large reason to do with the fact that we had record surpluses, and now we're back at big deficits. $165 billion at last estimate."

In her response to the President’s weekly radio address last weekend, Rep. Rosa DeLauro (D-Conn.) combined both of these attacks into one seamless whole. Segueing from a discussion of Enron and corporate reform into fiscal policy, she claimed, "we must hold the Federal government to the same standards we will now demand from our corporations. The federal budget has been mismanaged -- and the numbers were misestimated and manipulated -- to justify a $2 trillion tax cut primarily for the wealthy. Largely because of that, we went from a $5.6 trillion budget surplus over the next ten years to a $165 billion deficit this year that will raid the Social Security trust fund."

Understanding the federal budget is hard enough without politicians misrepresenting it for political gain. Let's hope the press helps the public keep things straight.

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8/1/2002 06:46:04 PM EST |

Stocks in bull stay high (Brendan Nyhan): Partisan spinning of the markets continues. On Monday, CNN "Crossfire" co-host Paul Begala was busted by co-host Tucker Carlson for his claim that Bush's speech caused the market to decline for several days earlier this month. Carlson asked if the President was therefore responsible for the market's gains last Wednesday and on Monday. Here's Begala's absurd response:

George W. Bush promised he would give a speech to rally the markets. While he gave that speech, the markets tanked. The markets recovered today. Why? Bush shut up. And he said he's going on vacation. If he resigns, the Dow would go to 20,000. That's the strategy, Mr. President.

Bush actually spoke about the economy twice on Monday, however - first at a welfare reform event and then in a speech at a political fundraiser. Begala is peddling nonsense.

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7/30/2002 08:18:34 PM EST |

Mitchell's metaphor (Brendan Nyhan): In May, I criticized Daniel Mitchell of the Heritage Foundation for comparing the plight of US corporations, who under pending legislation would be prevented from rechartering in other countries for tax purposes, to slaves who escaped to free states but were still considered the property of their previous owners under the Supreme Court's infamous 1857 Dred Scott decision.

Well, he's at it again. In an op-ed in the Washington Times Friday, he writes that the "anti-inversion" legislation is "popularly know [sic] as the 'Dred Scott Tax Bill' since it assumes corporations belong to the IRS and are not allowed to escape bad tax law."

Of course, a search of the Nexis news database reveals that Mitchell is actually the only person to use this offensive and bombastic formulation in print. Let's hope he'll stop soon.

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7/28/2002 01:07:32 PM EST |

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