Tag Archives: social security

1983 Adoption of Revolutionary/Insurgent Tactics by American Right in Social Security Debate

1983 Adoption of Revolutionary/Insurgent Tactics by American Right in Social Security Debate

The Prince,” by Nicolo Machiavelli, Medieval Sourcebook, AD 1513, http://www.fordham.edu/halsall/basis/machiavelli-prince.html.

Achieving Social Security Reform: A “Leninist” Strategy, by Stuart Butler and Peter Germanis, CATO Journal, Fall 1983, https://www.cato.org/pubs/journal/cj3n2/cj3n2.html (from Clean Cut Kid).

Boyd on al-Qaeda’s Grand Strategy,” by John Robb, Global Guerrillas, 8 May 2005, http://globalguerrillas.typepad.com/globalguerrillas/2004/05/journal_boyd_on.html (from Safranski on GG through tdaxp).

Chad at CCK pointed me to a 1983 article in the CATO Journal that calls for the adaption of revolutionary/insurgent tactics in the Social Security debate. While the authors incorrectly describe the style as “Leninist,” it shares more than a little with Maoist and Sandinist thought. Indeed, it is historical proof of explicit Fourth Generation Politics more than two decades ago. And I thought I was original when I saw fourth generation struggle in the Social Security fight.

I am pleased to find proof that at least some groups have purposefully applied revolutionary/insurgent tactics to modern politics. The remainder of the post are my comments on the first few pages of the article.

Marx believed that capitalism was doomed by its inherent contradictions, and that it would inevitably collapse—to he replaced by the next stage on the ladder leading to the socialist Utopia.

The first paragraph, and the authors identify the most important part of decades-long political struggle: a happy ending

Lenin also believed that capitalism was doomed by its inherent contradictions, and would inevitably collapse. But just to be on the safe side, he sought to mobilize the working class, in alliance with other key elements in political society, both to hasten the collapse and to ensure that the result conformed with his interpretation of the proletarian state. Unlike many other socialists at the time, Lenin recognized that fundamental change is contingent both upon a movement’s ability to create a focused political coalition and upon its success in isolating and weakening its opponents.

A step below Marx’s path-to-victory is Lenin’s grand strategy. Lenin recognized the need for a correlation of forces — creating a full array of friendlies who help pull the movement to victory. Likewise, Lenin’s “isolating and weakening” of the opposition is analogous to Isolation and Subversion in the famous PISRR model of conflict.

As we contemplate basic reform of the Social Security system, we would do well to draw a few lessons from the Leninist strategy. Many critics of the present system believe, as Marx and Lenin did of capitalism, that the system’s days are numbered because of its contradictory objectives of attempting to provide both welfare and insurance. All that really needs to be done, they contend, is to point out these inherent flaws to the taxpayers and to show them that Social Security would be vastly improved if it were restructured into a predominantly private system. Convinced by the undeniable facts and logic, individuals supposedly would then rise up and demand that their representatives make the appropriate reforms.

Simply good conflict preparation — drawing on the lessons of history. Lenin did his work in the 1910s. This article was published in the 1980s. A lifetime had passed, but the rules of ideological struggle remain the same. It is up to the wise historians to discover them, and it is up to the wise warrior to be a historian.

While this may indeed happen, the public’s reaction last year against politicians who simply noted the deep problems of the system, and the absence of even a recognition of the underlying problems during this spring’s Social Security “reform,” suggest that it will be a long time before citizen indignation will cause radical change to take place. Therefore, if we are to achieve basic changes in the system, we must first prepare the political ground so that the fiasco of the last 18 months is not repeated.

More wisdom. While the article suggests a way to hurry up the social security reform over what would naturally happen, the authors prepare the reader for a struggle that will take “a long time.” Bush’s misstep on the aircraft carrier in the Pacific was to imply that the war would soon be over. Butler and Germanis are not making that mistake.

Likewise, Butler and Germanis are preparing the battlespace. Foolish commanders fight where their enemy wants to fight. Wise strategists select the battlespace at a time and place of their choosing. An implication of this strategy is avoid direct confrontation until the battlespace has a friendly correlation of forces.

First, we must recognize that there is a firm coalition behind the present Social Security system, and that this coalition has been very effective in winning political concessions for many years. Before Social Security can be reformed, we must begin to divide this coalition and cast doubt on the picture of reality it presents to the general public.

More preparation of the reader. The authors are hyping the strengths of the status quoistas. This is building for a call to the fight in the way of the weak – guerrilla warfare.

Second, we must recognize that we need more than a manifesto— even one as cogent and persuasive as that provided by Peter Ferrara. What we must do is construct a coalition around the Ferrara plan, a coalition that will gain directly from its implementation. That coalition should consist of not only those who will reap benefits from the IRA-based private system Ferrara has proposed but also the banks, insurance companies, and other institutions that will gain from providing such plans to the public.

Another recognition of weakness. Butler and Germanis lay out their planned correlation of forces. They see what Nicolo Machiavelli saw nearly five hundred years ago

Those who by valorous ways become princes, like these men, acquire a principality with difficulty, but they keep it with ease. The difficulties they have in acquiring it rise in part from the new rules and methods which they are forced to introduce to establish their government and its security. And it ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, then to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly, in such wise that the prince is endangered along with them.

The no-changers have “the laws on their side,” but the Butler and Germanis are trying to minimize their other weakness — “the incredulity of men, who do not readily believe in new things until they have had a long experience of them.” The authors are presenting a slow, building plan that will give men long experience with the benefits of reform. Specifically, powerful men “those who will reap benefits from the IRA-based private system… but also the banks, insurance companies, and other institutions…”

As we construct and consolidate this coalition, we must press for modest changes in the laws and regulations designed to make private pension options more attractive, and we must expose the fundamental flaws and contradictions in the existing system. In so doing, we will strengthen the coalition for privatizing Social Security and we will weaken the coalition for retaining or expanding the current system. By approaching the problem in this way, we may be ready for the next crisis in Social Security—ready with a strong coalition for change, a weakened coalition supporting the current system, and a general public familiar with the private-sector option.

“Modest changes” help with the Machiavellian building of a favorable correlation of forces. While “expos[ing] the fundamental flaws and contradiction in the existing system… [to] weaken the coalition for retaining or expanding the current system” is another Isolation-Subversion PISRR attack.

Peter Ferrara’s “family security plan” provides a sound framework for reform.2 The Ferrara plan resolves the contradiction within the existing system and provides a realistic phase-in process for a private pension plan. Recent efforts to publicize and implement the Ferrara plan, however, only confirm the fact that a successful reform strategy must be designed within a framework of well-understood constraints and opportunities; otherwise we will fall into the same political traps that have discouraged many a would-be reformer.

Butler and Germanis are saying that having a plan for after victory is not enough, there needs to be a plan for victory. Good examination of the existing battlespace and history.

In an effort to identify a broad framework for Social Security reform, the Heritage Foundation (1982) gathered various experts, who discussed the essential ingredients of reform. The principles and observations that emerged from that gathering can now be summarized.

Calming Existing Beneficiaries

The sine qua non of any successful Social Security reform strategy must he an assurance to those already retired or nearing retirement that their benefits will he paid in full. It was irresponsible in the first place for the federal government to promise unrealistic benefits. But it would be even more irresponsible now to break faith with the millions of people who have based their retirement plans on these expected benefits. Instead of spreading widespread panic among our elderly, which will only undermine our efforts to reform the system,

The authors being by demanding an Isolation attack, separating existing seniors from younger defenders. Isolation is a critical part of struggle. Butler and Germanis’s focus on Isolation is reminiscent of the planning of war genius John Boyd.

From a purely political standpoint, it should be remembered that the elderly represent a very powerful and vocal interest group. This power was reflected in the recent bailout plan, which made no effort to address the system’s underlying structural problems. One congressman, with disarming frankness, implicitly evidenced that considerable power when he explained his position on Social Security reform: “I have no intention of trying to explain what needs to be done,just give me a vote on something that can save the damn thing until I retire.” ‘‘~

The authors recognize the power of greed in the social security atrophist camp. Again, to quote ol’ Nick

Nevertheless a prince ought to inspire fear in such a way that, if he does not win love, he avoids hatred; because he can endure very well being feared whilst he is not hated, which will always be as long as he abstains from the property of his citizens and subjects and from their women. But when it is necessary for him to proceed against the life of someone, he must do it on proper justification and for manifest cause, but above all things he must keep his hands off the property of others, because men more quickly forget the death of their father than the loss of their patrimony. Besides, pretexts for taking away the property are never wanting; for he who has once begun to live by robbery will always find pretexts for seizing what belongs to others; but reasons for taking life, on the contrary, are more difficult to find and sooner lapse. But when a prince is with his army, and has under control a multitude of soldiers, then it is quite necessary for him to disregard the reputation of cruelty, for without it he would never hold his army united or disposed to its duties.

Except Machavelli did not foresee the vampire quality of the current system: to rephrase for the modern environment, Seniors will sooner forgive the bankruptcy of the nation than being prohibited from stealing from their grandchildren.

Still, same lesson applies.

The political power of the elderly will only increase in the future. The proportion of the population over 65 will rise steadily, from 11.3 percent today to 18.3 percent by 2030. So any proposal aimed at cntting benefits will face increasingly stiff opposition from the elderly, undermining the prospects for genuine reform. Any plan to change the system must therefore he neutral or (better still) clearly advantageous to senior citizens. By accepting this principle, we may succeed in neutralizing the most powerful element of the coalition that opposes structural reform.

The authors see that the most powerful element of the correlation of forces opposing them — the elderly — are only increasing their power. A correlation is that isolating the elderly from Social Security atrophists is the best move the reformers can make.

The full article, which fully develops the plan, is available from the Fall 1983 edition of CATO Journal. Highly recommended.

CCK Sees Social Security Clearly (And Helps Bush)

John Thune Wants to Steal Your Social Security Money,” by Chad Shuldt, Clean Cut Kid, 29 April2005, http://www.cleancutkid.com/2005/04/29/john-thune-want-to-steal-your-social-security-money/.

Social Security’s Progressive Paradox,” by Julian Sanchez, Reason, 2 May 2005, http://www.reason.com/links/links050205.shtml (from South Dakota Politics).

Remember this?

Key: Blue, rejectionists; Red, reformers; Orange, rejectionists ready to deal; Dark Blue, extreme rejectionists; solid lines, mutual support; arrow lines, mutual opposition

It shows a successul 4GP network attack on a 2GP defending network. It shows the current state of the social security debate, with the (mostly Republican) Reformists splitting the (mostly Democrat) Rejectionist camp by offering progressive indexing.

The success comes from Bush splintering the Democrat network. While mainstream liberals such as the New York Times, USA Today, and Washington Post are urging Democrats to compromise, netroots such as CCK have different ideas

There is one proposal out there that is based around “progressive” indexing, and it’s likely to be presented to Congress since “everything is on the table” (other than keeping Social Security as close to possible in its current state). But make no mistake about it, progressive indexing is just another scheme to rob working people of the money they have already paid into the system through taxation on every dollar they worked to earn.

Now, CCK is right that progressive indexing is an attempt to re-welfare-ize social security..

Neither is the notion of Social Security as “insurance” terribly coherent, if it ever was. Even when Social Security was first instituted, over half of Americans who reached the age of 21 would survive past age 65. As of 1990 the percentages were over 72 percent for men and 83 percent for women. Aging is not a “risk” to “insure” against; it’s a normal part of life to plan for.

What worries liberals about progressive indexing, and about the shift to a more overtly welfare-like Social Security system, is that welfare benefits tend to be politically unpopular—and much easier to cut than benefits perceived as universal. Social Security, in other words, is a massive Rube Goldberg device, an ornate and utterly superfluous system of transfers from the middle and upper classes to themselves, the sole purpose of which is to construct—and conceal—a much smaller welfare machine for elderly retirees nestled deep in the guts of the meta-contraption. Some defenders of the status quo are now attempting—though they scarcely seem to believe it themselves—to argue that Social Security is no less vital for the middle class. But corner a progressive over a quiet drink and he’ll probably admit that, in fact, the only defensible purpose of Social Security is to ensure that nobody retires in poverty. There may be political reasons for cutting a monthly check to Bill Gates when he turns 65, but there are no sane policy reasons.

Yet here the irony. CCK sees the issue clearly — proressive indexing will “weaken” the ageist everyone-to-elderly income transfer aspect of Social Security. But his actions — begging the liberal leadership to get back in line and scaring the “masses” with pseudo-facts — disrupt his own network and make Bush’s job easier.

President Bush laid a political trap that SS Rejectionists jumped in to. That’s the power that comes from understanding modern politics clearly.

Network Politics, Part 4, 2GW/4GW: Social Security

Note: This is a selection from Network Politics, a tdaxp series.


John Thune Wants to Steal Your Social Security Money,” by Chad Shuldt, Clean Cut Kid, 29 April2005, http://www.cleancutkid.com/2005/04/29/john-thune-want-to-steal-your-social-security-money/.

The Greediest Generation,” by Nicholas Kristof, New York Times, 1 May 2005, http://www.nytimes.com/2005/05/01/opinion/01kristof.html.

Bush’s Social Security gamble puts pressure on Democrats,” USA Today, 1 May 2005, http://www.usatoday.com/news/opinion/editorials/2005-05-01-gamble-edit_x.htm (from Stanley Kurtz on The Corner).

In Praise of Bush’s Honesty (Honest),” by Michael Kinsley, Washington Post, 1 May 2005, http://www.washingtonpost.com/wp-dyn/content/article/2005/04/30/AR2005043000746.html.

The Challenge to Democrats,” Washington Post, 1 May 2005, http://www.washingtonpost.com/wp-dyn/content/article/2005/04/30/AR2005043000734.html.

Programs for the poor always turn into poor programs,” by DavidNYC, Daily Kos, 1 May 2005, http://www.dailykos.com/storyonly/2005/5/2/04027/69305.

Or, perhaps make it mandatory,” by Michael Forbush, Dr. Forbush Thinks, 2 May 2005, http://drforbush.blogspirit.com/archive/2005/04/29/private_accounts.html#c96453.

Welfare for Old People?,” by Kevin Drum, Political Animal, 2 May 2005, http://www.washingtonmonthly.com/archives/individual/2005_05/006230.php.

Until very recently the Social Security debate looked like this

Key: Blue, rejectionists; Red, reformers; solid lines, mutual support; arrow lines, mutual opposition

On the right you have a fourth generation political movement. The debate for personal accounts is part of the decades-old Conservative insurgency. The movement is basically horizontal, with no clear leader. Instead, it is driven by an ideological agenda…

On the left you have a second generation movement. A type of movement defined by media and mass mobilization, the 2GP had one message: “No!” Some are older liberals, some are anti-Conservatives, some are just worried about innovations.

Note that the left (2GP) network is more symetrical and “better” organized. The simplicity of its message allows it to focus on “better” organization, because individual members do not have to be indoctrinated or kept in some ideology. In contrast, the strength of the right (4GP) network is its ideology, so chain-of-communication is abandoned in favor of an immersive environment.

because for any new thing, all who would be harmed by it oppose it fully, and those who would be helped support it only half-heartedly, the rejectionist camp was much larger than the innovators. In a fair fight, the No!’s would quickly fun and the idea of social security personal accounts would go away.

Unfortunately for them, fourth generation movements do not fight “fair.”

Fourth generation movements are governed by ideology. Almost every proposal is just a means of furthering that ideology. With very few exceptions, for 4G movements direction matters more than speed. Unlike the rejectionists, who are married to a specific proposal (“No!”), the 4G ideologues can modify their proposals to break part the enemy network, so long as the direction of the proposal furthers their ideology. This can also be a weapon of politics, where network collapse becomes an operational objective.

In his Thursday press conference, Bush did exactly that. He heavily modified his original proposal to increase the payments for SS higher earners by only inflation, but SS lower earners by wages. Over the decades, this means there will eventually be only a flat SS payment for everybody.

What’s the effect?

Clean Cut Kid

There is one proposal out there that is based around “progressive” indexing, and it’s likely to be presented to Congress since “everything is on the table” (other than keeping Social Security as close to possible in its current state). But make no mistake about it, progressive indexing is just another scheme to rob working people of the money they have already paid into the system through taxation on every dollar they worked to earn.

This is highway robbery, and it’s just plain wrong. Some would say it is not very Christian.

Kevin Drum

Hear hear. In fact, when his aides presented him with their initial Social Security proposals 70 years ago, FDR balked: “No dole,” he said, “mustn’t have a dole” — because he knew instinctively that welfare programs are both fundamentally unpopular as well as corrosive to the human spirit. Conservatives understand this better than liberals, and know perfectly well that the best way to kill something is to convince the public that it’s actually a welfare program.

Michael Forbush

Since George W Bush actually wants to destroy social security he has proposed a two step process. First, get people to put their money in the stock market instead of a social security insurance plan. Then tell the people that it is stupid for the government to take your money and invest it for you, hence you should be free to invest it yourself. In fact, George’s new details recently explained at the press conference show that he is trying to erode political support for the program by means testing. This will result in turning the Social Security program into another welfare program and make it even easier to destroy in the future.

daily Kos

This so-called “Pozen plan” is a real Bush two-fer: Sock it to the middle classes now, while setting up a long-range plan to truly hose the poor later. Given how badly Bushco stumbled in trying to destroy Social Security with private accounts, I wouldn’t be surprised if means-testing has become the new avenue of attack because it polled better.

And oh, it’s a wily plan, alright – if Democrats oppose it, we can rely on our whore media to paint us as benefactors of the wealthiest. (The GOP will get a good chortle out of that.) Not means-testing Social Security has been one of the main reasons it’s endured so popularly for 70 years. Private accounts would eviscerate Social Security quickly; means-testing is a slower death, but I am sure a patient GOP would be content with that.

but also this

New York Times

In coming years, we’ll hear appeals for better nursing homes, for more Alzheimer’s research and for more wheelchair-accessible office buildings, and those are good causes. But remember that American children are almost twice as likely as the elderly to live in poverty, and that you get much more bang for the buck vaccinating a child than paying for open-heart surgery.

The solution is not to force the elderly to get by on cat food again. But we boomers need to resist the narcissistic impulse to ladle out more resources for ourselves. Our top domestic priorities should be to ensure that all children get health care and to get our fiscal house in order.

USA Today

Simply ignoring the problem, which is driven primarily by increasing life expectancy, is not a solution. Nor is touting private accounts as the answer. A good-faith, bipartisan effort to spread the pain as equitably as possible is the only viable option. Ultimately, the solution will have to involve some mixture of tax increases, benefit cuts and, perhaps, private accounts.

Bush’s willingness to begin addressing that unpleasant reality puts pressure on Democrats to do the same. They have refused to negotiate until Bush gives up on private accounts, but eventually they’ll have to do more than complain.

They don’t want Bush’s dessert course because it’s politically unpalatable. And they don’t want the spinach because the taste is too bitter. So what do they want? What dish do they intend to contribute to this political potluck?

Washington Post

For thepast three months Democrats have declined to engage in a debate over Social Security. President Bush proposed a way of giving workers the option, but not the obligation, of saving some of their Social Security money in personal accounts. While he was crisscrossing the country in an attempt to prepare voters for unsettling change, Democrats offered no proposals of their own, saying that Mr. Bush should first come forward with a plan to plug Social Security’s long-term deficit. In his news conference on Thursday, Mr. Bush took a first step toward offering such a plan. It is time for Democrats to reciprocate.

Washington Post (Again)

Above all, Bush was honest and even courageous about Social Security. Social Security is entirely about writing checks: Money goes in, money goes out. As Bush has discovered in the past few months, there are no shadows to hide in while you fiddle with it. The problem is fewer and fewer workers supporting more and more retirees, and there are only two possible solutions: Someone has to pay more in, and/or someone has to take less out.

Bush didn’t go from explicitly denying this to explicitly admitting it. But he went from implicitly suggesting that his privatization scheme is a pain-free solution to implicitly endorsing a plan for serious benefit cuts. For a politician, that’s an admirable difference.

Even more to Bush’s credit, the plan he’s backing is highly progressive. Benefits for low-income workers would keep rising with average wages, as now, but benefits for middle- and high-income people would be geared more toward merely keeping up with inflation. This allows Bush to say that no one’s benefits will be cut, although some people will be getting as much as 40 percent less than they are currently promised. But in the swamp of Social Security politics, that is really minimal protection from the alligators.

What has happened? Answer: fourth generation insurgents have disrupted and partially disintegrated a second generation network. Further, the conservative agents have turned part of the “Democrat” network against itself, simultaneously radicalizing and weakening their enemy while growing in strength themselves.


Key: Blue, rejectionists; Red, reformers; Orange, rejectionists ready to deal; Dark Blue, extreme rejectionists; solid lines, mutual support; arrow lines, mutual opposition

The Reformists have flanked the front-lines of the “No” camp, converting Statusquo leaders into fellow travelers for the reformers. More than just strengthening the reformist camp, this demoralizes and radicalizes some remaining rejectionists. They feel abandoned by their leadership, who are now making common cause with the enemy network. While the converted reformist leaders see themselves as “bridging the divide,” rejectionist true believers see them as traitors.


Key: Blue, rejectionists; Red, reformers; Orange, “weak-kneed” rejectionists; solid lines, mutual support; arrow lines, mutual opposition

This is exactly the same network as the last one, but seem from the radicalized rejectionists perspective. The only blue friendlies are those actively opposing the reformist agenda. The converted leadership are seen as full-fledged members of the opposition. And the remaining leadership that is not fighting the enemy network are seen as potential quislings — when Democrat netroots talk about “Washington Democrats,” they mean the loyal leadership that is willing to compromise with those who have compromised. Note also that extremists do not distinguish between extremists and moderates, but only between “fellow-fighters” and others.

What does this all mean?

George Bush is leading the social security reformers to victory. He is splitting the network of doubt that is opposing him into a divided and weak opposition. He is converting those who he can. And he is winning.

Update: Blogs for Bush notes that now the New York Times is ready to deal

Democrats like to portray Mr. Bush as King George or Marie Antoinette. But on Thursday night, when he promised to improve benefits for the poor while limiting them for everyone else, he sounded more like Robin Hood, especially when he rhapsodized about poor people getting a chance to build up assets that they could pass along to their children.

It was the kind of talk you might expect to hear from a Democrat, except that Democrats don’t talk about much these days except the glories of the New Deal. They know that Social Security doesn’t even have the money to sustain a program that leaves millions of elderly people in poverty. But it’s their system, and they’re sticking to it.

Update 2: Chirol at Coming Anarchy notes what is another type of network fragmentation and radicalization in the face of a net-attack.

Network Politics, a tdaxp series
Introduction: Net-Attacks and Counter-Attacks
Part 1, 0GW / 4GW: Iraqi Sunnis
Part 2, 0GW / 4GW: Christian Conservatives
Part 3, 1GW / 4GW: George Soros
Part 4, 2GW / 4GW: Social Security
Part 5, 4GW / 4GW: John Kerry

Protecting Retirement Savings

Supreme Court rules IRAs can be shielded from creditors,” CNN, 4 April 2005, http://www.cnn.com/2005/LAW/04/04/scotus.bankruptcy.ap/index.html.

Sometimes a kind policy and a wise the same thing. This is one of those times.

The Supreme Court on Monday ruled that creditors may not seize Individual Retirement Accounts when people file for bankruptcy, giving protection to a nest egg relied upon by millions of Americans.

The unanimous decision sides with a bankrupt Arkansas couple fighting to keep more than $55,000 in retirement savings. As a result, IRAs now join pensions, 401(k)s, Social Security and other benefits tied to age, illness or disability that are afforded protection under bankruptcy law.

IRAs should not be treated any differently because the benefits are tied to people’s age, the court said.

I can’t comment on the points of law, but this is a great decision. It is important to raise America’s savings rate, and retirement savings is a great way to do this. However, if individual retirement accounts were subject to bankruptcy seizures, less people would use them. If creditors could take them, this would increase their risk and decrease their attractiveness.

With this decision, the Supreme Court furthers a 21st century economy. Centrally controlled pension systems have had this protection for decades. Now individual investors also share in their benefits.

Designer Social Security

Designer Social Security,” by Dick Morris, New York Post, 29 March 2005, http://www.nypost.com/postopinion/opedcolumnists/43317.htm (from South Dakota Politics).

Social Security, Thune, and Schaff,” by Chad M. Schuldt, Clean Cut Kid, 23 April 2005, http://www.cleancutkid.com/2005/04/12/social-security-daschle-and-schaff/.

Our favorite Clean Cut Kid is worried that Bush’s plan is too risky

On the other hand, if we were to privatize Social Security as Bush and Thune would like, we would essentially dissolve the trust fund into tiny pieces, with risk concentrated in a segment of those who are part of the program. There would be some big winners, but there would be some big losers to be sure.

So, say what you will about investing a portion of the Social Security trust fund in the market … I’m not sold on the idea personally, but I do know risk for individual investors would be marginalized when compared to the scheme Bush and Thune want to see implemented. That’s why Professor Schaff’s retirement plan is set up in this very way … to minimize risk!

Well, no one is proposing privitizing social security, but that dishonesty confusion aside, President Clinton’s former political consultant Dick Morris may have a plan

We are all adults. We get the point that the Social Security system can’t pay us the benefits now on the books with the revenues slated to flow in during the coming decades. We know that something has got to give. That’s why we are hesitant to buy into privatization in the first place until Bush explains how he will solve the basic problems of the system.

So offer us options. For example:

Option A — No increase in taxes. No change in the retirement age. A cut in benefits.

Option B — No increase in taxes. A later retirement age. The current level of benefits.

Option C — An increase in taxes. No change in retirement age. The current level of benefits. (For those who can document higher income levels, there could be a further option of an increase in the ceiling of taxation or a raise in the rate.)

Throw the Bush choices into the mix — private investments in exchange for an added tax hike, benefit cut or increased retirement age.

Now there’s a compromise. Old-age security for all, with both a public and private component. The Morris Compromise would combined defined-benefit benefits (the current system) with an optional defined-contribution angle.

Let’s do it.

Prefunding Retirement (Paul O’Neill on Social Security)

A New Idea for Social Security,” by Paul O’Neill, Los Angeles Times, 15 February 2005, http://www.latimes.com/news/opinion/commentary/la-oe-oneill15feb15,0,3297856.story?coll=la-news-comment-opinions.

Former Treasury Secretary Paul O’Neill begins conventially enough…

To be clear, this is a decision for our society to make. The U.S. government is just the instrument to bring it into effect. There are two crucial facts that distinguish this idea from traditional Social Security. The savings would be owned by the individual, and every person would have an account. (Everyone born before the plan went into effect would remain under the current Social Security system.)

But then, the genius (assuming it’s not insanity that I’m not seeing clearly)

If we decided as a society that we were going to put $2,000 a year into a savings account from the day each child was born until he or she reaches age 18 — and if we assume a 6% annual interest rate — each child would have $65,520 at age 18. (The worst return for a 25-year investor in the stock market from 1929 before the crash to 2004 was an average of 6% a year.) With no further contributions, again with a 6% interest rate, those savings would grow to $1,013,326 at age 65.

If we began to do this now, the first-year cost would be $8 billion; that is $2,000 times the roughly 4 million children born each year. The second year would cost $16 billion and so on until we were contributing $2,000 per year to a savings account for every child from birth until age 18. When fully implemented, the cost would be $144 billion per year. To put this $144 billion per year into context, this year’s combined spending for Social Security and Medicare will exceed $750 billion.

A long-term solution for a long-term problem. I like it.

Social Security Personal Accounts

Message to Congress,” by Franklin Delano Roosevelt, New Deal Network, http://www.pbs.org/wgbh/amex/presidents/32_f_roosevelt/psources/ps_socsecspeech.html, 5 February 2005 (from Sibby Online).

Another politican comes out in favor of personal accounts. His approach is simlar to President Bush’s, and rests on three principles: one, those at or near retirement should be protected; two: the current public social security system which will function as an old-age welfare payment; and three: personal accounts that should make up half of retirement income.

“In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities that in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.”

I think FDR’s on to something.

Update: No Illusions is on the story too.

Surprisingly Good Guys

Benefits for tomorrow’s seniors cut under any Social Security overhaul,” by James Kuhnhenn, Knight Ridder, http://www.realcities.com/mld/krwashington/10667299.htm, 17 January 2005 (from Matthew Yglesias).

I’m no fan of Charlie Rangel, which makes his heroic stand all the more amazing

WASHINGTON – Whether or not President Bush succeeds in partially privatizing Social Security, any deal to overhaul the nation’s retirement system would make future guaranteed benefits less generous than they are now.

Even Democrats, who are assailing President Bush’s plan to remake Social Security, concede that any effort to improve the program’s long-term finances would reduce the growth of benefits, delay them or both.

“If Democrats were in charge, benefits would have to be altered,” said Rep. Charles Rangel of New York, the top Democrat on the powerful House Ways and Means Committee. “You cannot fix the system without pain, no matter how much money you borrow.”

There’s also word on AARP planning its compromise

How much pain and where it would be applied remain open questions. Proposals include indexing benefits to price inflation rather than national wage growth, increasing the retirement age, changing the formulas for calculating benefits or simply reducing benefits for new retirees across the board.

At the same time, however, some debate whether big changes are even required to fix the system.

And until the White House releases a specific plan, Democrats are reluctant to spell out what they might support for fear of alienating older voters and weakening their negotiating stance with the president.

Elderly advocacy groups such as the influential AARP are ruling out measures such as a higher retirement age, smaller cost-of-living adjustments or benefit adjustments based on income.

Still, even the AARP is trying to get a sense from its members of what benefit cuts might be acceptable. Organization officials point to the Social Security adjustments in 1983, when President Reagan and the Democratic-controlled House of Representatives negotiated a bipartisan deal that gradually increased the retirement age, delayed cost-of-living adjustments and accelerated scheduled increases in payroll taxes.

“If you just say to people, `Would you favor this one thing by itself?’ very few people are going to favor a benefit cut,” said John Rother, the AARP’s policy director. “But if you present it as part of a package that’s balanced, that seems fair, that protects low-income, then I think people will say, `Well, I’m not enthusiastic but I can see why this might be necessary.'”

Social Welfare

Democratic Underground is a wonderful site. Somewhere between the “Zarqawi is imaginary” rhetoric and hilarious hatred of Free Republic, it manages to come up with insightful comments. Below are three pulled from a discussion on social security. I agree (at least partially) with everyone one

When was the last time anyone felt proud to receive an SSI check?

means test and folks will be told by others that if they had pride they would leave the money for those that really need it.

Which hypocritical South Dakota Senator managed to provoke the greatest “anti-millionaire” campaign in the state since Steve Kirby lost last time, in spite of the fact that Janklow, Diedrich, and, er, everybody in South Dakota politics is either a millionaire or an aparatchick?

I heard Tom Dashle give an interview once and he bragged how his Mom uses medicare. I almost fell out of my fucking chair! He and his wife are millionaires!

Which party is on the wrong side of a demographic debacle, for short-term gain?

Then why is Ted Kennedy saying that….

there will have to be a 20% reduction in benefits?


The baby-boomers out number the gen-xers.

Which party supports a rich cabal?

The “dirty little secret” about age-based entitlements is that they generally benefit the rich. Eighty-seven percent of the wealth in this country (ie, real estate and securities) is owned by people 55 and above. And yet over two-thirds of government entitlements are going to the same folks. Do you lament that the rich are getting richer? The biggest culprit in increasing the disparity between rich and poor is the federal government, as they use our employment withholding to subsidize ocean view condos in Tampa Bay, plantation homes in Myrtle Beach and golf course haciendas in Sun City.

Social Honesty

A Question of Numbers,” by Roger Lowenstein, New York Times, http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html, 16 January 2005 (from slashdot).

Political Divisions Persist After Election: Nation Unsure, Hopeful About Bush, Poll Finds,” by Richard Morin and Dan Balz, Washington Post, http://www.washingtonpost.com/wp-dyn/articles/A16073-2005Jan17.html, 18 January 2005 (from The Corner).

Amid the New York Times’ dishonesty

The C.B.O. assumes that the typical worker would invest half of his allocation in stocks and the rest in bonds. The C.B.O. projects the average return, after inflation and expenses, at 4.9 percent. This compares with the 6 percent rate (about 3.5 percent after inflation) that the trust fund is earning now.

The “trust fund”‘s 3.5 percent return is meaningless. Nyt is conflating two different types of returns. In the second sentence the CBO projection of an average adjusted 4.9% return is for a “typical worker.” The 3.5% adjusted return is for the trust fund as a whole. It ignores the effective return of a typical worker under the current social security return.

The number of workers per retiree has been steadily decreasing over the long haul, while the years worked before receiving benefits has been increasing (every modern worker will have paid into SS for his entire working life, while the first social security beneficiary worked only three years before collecting). So while the lock-box’s adjusted return has been relatively steady, each worker’s return has fallen from many tens of thousands percent to much, much less.

But Nyt’s faces an uphill battle in its propaganda

At a time when Democratic leaders are preparing to challenge many of Bush’s major initiatives, nearly seven in 10 Americans agree that Bush’s victory means that congressional Democrats should compromise with him — even if it means compromising on their party’s principles.

But by 54 percent to 41 percent, the public supported a plan that would include a reduction in the rate of growth of guaranteed benefits and private savings accounts financed with a portion of payroll taxes. A proposal with those elements is under consideration by the Bush administration.

Americans divide equally over Bush’s proposal to index Social Security benefits for future retirees to increases in the cost of living rather than to wage growth as is now the case, a change that would effectively mean benefits would be lower than currently projected. A clear majority of Americans — 55 percent — support the president’s proposal to allow younger workers to put some of their Social Security savings into stocks or bonds. When packaged together, the two components draw the support of 54 percent of those surveyed.

The survey suggests that Democratic leaders may be out of step with their rank and file on the severity of the problems facing Social Security. Those leaders are attempting to thwart Bush’s plans by saying there is no immediate crisis. But two-thirds of all Democrats said they worry that there is not enough money to keep Social Security funded until they retire.

Depending on how the question is asked, polls can give different results. And I believe President Bush is not inclined to follow popular opinion much, in any case. But it’s heartening to see that even with a formerly reputable paper like Nyt abandoning honesty, the President can, at least for now, count popular opinion as a friend.