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Bullshit

Brooks says:

Before we get lost in the policy details, let's be clear about what this Social Security reform debate is really about. It's about the market. People who instinctively trust the markets support the Bush reform ideas, and people who are suspicious oppose them.
I say: Bullshit. One of the things I do at The American Prospect is write items for our front of the book feature called "Devil in the Details." It's a good idea. Politics is all about broad themes and narratives, but policy is all about the details.

Markets are good. I don't "trust" or "distrust" them -- they're not people, they don't betray you or show you loyalty -- but they are efficient ways of maximizing consumer satisfaction relative to the available resources. For the purposes of retirement security, I think it would be a good thing for the government to set up a situation where everyone who spends their life working winds up with a set of real assets under their control and not just a promise of money from the government. At the same time, I think it would be a bad thing if the government suddenly amassed a huge quantity of debt. I also think it would be a bad thing if people whose investments proved unwise or unlucky were simply left to starve on the streets. I did a post about the sort of private account system I could support a while back.

Bush has not actually put our any "reform ideas." Instead, he's stated his intention to divert an unspecified quantity of younger people's payroll tax receipts into private accounts without cutting expenditures on current retirees or raising anyone's taxes. He's also strongly suggested that he wants future benefit cuts to be across the board rather than based on a means test. These details matter. My plan would leave a minimal safety net for the long-lived, the unlucky, and the inept in combination with a pre-funded defined-contribution pension plan under individual control for everyone else. Bush's plan would lead to a financial crisis, an inadequate safety net for the unlucky or unwise, and still leave the government absurdly transferring huge quantities of money from young people to old people irrespective of whether or not the older recipients need the money. Those details make all the difference in the world.

December 11, 2004 | Permalink

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» Concise and accurate from City Comforts Blog
Matthew Yglesias call Bullshit on David Brooks. Of course that's too-often easy so maybe I shouldn't even take notice. But someone, for the record, has to do it and it's Yglesias turn. What really galls me is Brooks' statement: [Read More]

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» Bullshit from David Brooks from Brad DeLong's Semi-Daily Journal: A Weblog
Matthew Yglesias reads one of the New York Times's op-ed columnists (and why can't we have a better press corps?) and his bullshit detector goes off. In the case of this particular columnist--David Brooks--this is a regular, twice-a-week occurrence: Ma... [Read More]

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Tracked on Dec 12, 2004 5:12:18 PM

» Yglesia's BS detector goes off from The Dead Parrot Society
here, in response to a new David Brooks column. Bush has not actually put our any "reform ideas." Instead, he's stated his intention to divert an unspecified quantity of younger people's payroll tax receipts into private accounts without cutting expend... [Read More]

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» John Quiggin says it best from jasper emmering
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» Letter to the Paper XXXVI from Flit(tm)
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Comments

What effect would it have on the market if a boomer population cashed in its portfolio's upon retirement. Dumping that much stock at once can't be a good thing. This isn't about saving SS. It's about padding the pockets of Cheney's cronies, but isn't that what everything in this administration is about? Welcome to Russia.

Posted by: pablo | Dec 11, 2004 12:45:02 PM

Here is the high point of the Brooks piece:

The government would essentially borrow at 2 percent in real terms, invest that money through regulated private accounts in the market and get a return, based on conservative historical averages, of about 4.6 percent. Those returns would, over time, cover the $11 trillion in liabilities that threaten to bring down the system.

In other words, the federal government can generate any amount of cash it might happen to want by issuing bonds and investing the proceeds in the stock market. Don't believe me? I guess that's because you don't trust markets.

Posted by: alkali | Dec 11, 2004 12:46:42 PM

The fundamental issue here is whether or not we allow these goons to destroy the federal government. The don't believe in markets and never have.

Posted by: SAO | Dec 11, 2004 12:58:28 PM

No doubt the only two reasons for the Social Security changes Bush is pushing are to kill the program and to shift still more of our dollars to the pockets of his wealthy backers. Neither reason is in our best interests.

We need to stop thinking of SS as a savings plan. It never has been one. Any moderate inflationary rate would make such a plan a failure - the amounts saved during the first 20 years of employment would be trivial after inflation drives up the costs of everything, and the amounts saved in the last 10 years of employment would never be enough to pay for a pension for the next 20 years of retirement. SS is a safety net, provided by the government, paid for by current workers.

Individual investment accounts are a good idea, and IRA's and 401k savings plans already provide such accounts, with favorable tax rates on the saved money. Anything that encourages more use of those accounts is good, but merging them with Social Security is mixing oil and water.

Posted by: Vaughn Hopkins | Dec 11, 2004 12:58:44 PM

This is one of your better posts. This post and Paul Krugman's past two columns should be faxed to every Democratic talking head and mailed to every democrat.

Posted by: jerry | Dec 11, 2004 1:15:29 PM

I instinctively trust markets, a lot more than most readers of this site. And I'm deadset against the Bush plan.

Posted by: digamma | Dec 11, 2004 1:17:20 PM

Bush's plan would lead to a financial crisis, an inadequate safety net for the unlucky or unwise, and still leave the government absurdly transferring huge quantities of money from young people to old people irrespective of whether or not the older recipients need the money.

And the Democratic plan is what, again? Every time one mentions the term "means testing" in left of center blog threads, one gets the impression one has just given the vapors to both the blogger and nine-tenths of the commenters. Face it, Matt, the Democratic party has become the faction of the calcified (and inadequate) status quo. By ceding the whole subject of reform to the GOP, Democrats are effectively denying the country the alternative arguments it needs (indeed that even the Republicans need, though they may not realize it).

Posted by: P.B. Almeida | Dec 11, 2004 1:21:59 PM

Good man. I was sufficiently offended by that very paragraph that I began to look for the rebuttal. It's the worst kind of fake argumentation, similar to Bush's language that "SOME don't believe Muslims want to be free." Brooks becomes more and more a partisan hack and this kind of article will marginalize his voice. What the hell was he thinking?

Posted by: Jeff | Dec 11, 2004 1:24:36 PM

An excellent post. But one thing that bothered (infuriated) me about Brook's column is the way it traded on an ambiguity in the phrase "trust markets." It's one thing to believe that, as you say, markets are "efficient ways of maximizing consumer satisfaction relative to the available resources." LIberals are often accused of failing to "trust markets" in this sense. But it is quite a different thing to believe that the stock market can be relied on to make lots of money for you. This is the sense of "trust" that seems to be at issue here. Unless, as a non-economist, I am making some elementary error, trading on this ambiguity is a particularly egregious form of the slipperiness we have come to expect from Brooks. Your post touches on this, but I think the point deserved to be hit harder.

Tim

Posted by: Tim Scanlon | Dec 11, 2004 1:27:09 PM

Markets are good. I don't "trust" or "distrust" them -- they're not people, they don't betray you or show you loyalty -- but they are efficient ways of maximizing consumer satisfaction relative to the available resources.

Markets are good for one task only: mass-production of consumer goods; producing a lot of identical cheap stuff.

For everything else markets don't work well at all. Whether you need cancer therapy or painting for your livingroom, or new hairstyle or kitchen remodeling - you don't go to the market, you ask people you trust to recommend someone.

Posted by: abb1 | Dec 11, 2004 1:28:38 PM

Well, there's trusting "markets" and then there's trusting the stock market. Since the latter has been controlled and manipulated by corrupt and dishonest insiders for decades and isn't about to change, those are not quite the same thing.

Posted by: SqueakyRat | Dec 11, 2004 1:38:39 PM

Follow the money. Who benefits from this massive, radical change. THE BASE!!!! Expensive attorneys, investment bankers, accountants, fiduciaries, brokers. Wall street. The beneficiaries of corporate welfare, the people who get the big tax breaks. This puts trillions into their pockets. This was likely the price of their financing of his campaign.

The professionals who will be necessary to enact Bush' social security ideas will rob us all blind....just as Halliburton has in Iraq. It's the identical circumsance. "Fixing" a problem with the services of his fat cat friends.

I was a "Big Eight" CPA auditor for years. Follow the money. It's always explains motive for Bush/Cheney. (I just wrote about this at my blog, too.)

Posted by: Debi | Dec 11, 2004 1:40:15 PM

You're right PB! Sure there really isn't a problem but Bush is going to do something that makes things worse! That's leadership! I mean what kind of party likes the status qou?

Posted by: Rob | Dec 11, 2004 1:40:44 PM

The beneficiaries of corporate welfare, the people who get the big tax breaks. This puts trillions into their pockets. This was likely the price of their financing of his campaign...The professionals who will be necessary to enact Bush' social security ideas will rob us all blind....just as Halliburton has in Iraq.

Yup, that David Brooks sure is being shrill and inaccurate when he characterizes Bush's critics as advocating not liberalism but "conspiracyism".

Posted by: P.B. Almeida | Dec 11, 2004 1:51:25 PM

So Brooks makes a pean to the market in order to undertake socialism? Thats what this is, taking governemnt money and putting it in the stock market. Government ownership of capital! See there is a reason Republicans got Red!

Posted by: Rob | Dec 11, 2004 2:01:11 PM

And the Democratic plan is what, again? Every time one mentions the term "means testing" in left of center blog threads, one gets the impression one has just given the vapors to both the blogger and nine-tenths of the commenters.

No offense, but this also sounds like bullshit to me. Can you cite any examples of left-of-center bloggers who are categorically opposed to means testing?

Posted by: JP | Dec 11, 2004 2:32:14 PM

The real question is not whether you believe in markets, but whether you believe in magic.

Posted by: praktike | Dec 11, 2004 3:18:46 PM

Before we get lost in the policy details, let's be clear about what this Social Security reform debate is really about.

Before we get lost in the details of what David Brooks has to say, let's be clear about one thing: Brooks shows occasional wit as a pop sociologist and can write an amusing composite sketch, but asking for his view on a quantitative policy question makes about as much sense as asking him to come fix your plumbing.

Posted by: Paul Callahan | Dec 11, 2004 3:43:31 PM

PB---It's Halliburton all over again. Big bucks for Bush's base. Very big payback bucks. Mark my words. Bush doesn't give a damn about our families' retirement liquidity. He clearly cares nothing about social issues.

(If people are worried about the market, then ERISA-like security is a must for all private investments of social security funds.)

Posted by: Debi | Dec 11, 2004 4:15:58 PM

I trust the market for a lot of things. I also trust the American people. Placing one's trust in social security is not the same thing as trusting the faceless, bureaucratic "government" and its and its often inefficient agencies - in the way you might trust the government to, say, regulate the highways, collect taxes or clean up toxic wealth. It is placing one's trust in the next generation of Americans. I trust the American people, who are connected to me by bonds of fellow citizenship and public spirit, more than I trust the body of capitalist financial markets, productive though they are, who are connected to me only by the bond of perceived self-interest.

There are two general approaches that a society can adopt to the care of its elders.

According to one durable tradition, it is the obligation of the generations of healthy adults, who are capable of working and producing, to support the older generation that cannot work now, but did in the past. Call this the "inter-generational obligation" system.

According to an alternative approach, it is the responsibility of the individuals in a given generation to create and save enough wealth in their productive years to take care of themselves in their later years. Call this the "intra-generational self-reliance system".

In most societies, there is some mix of inter-generation obligation and intra-generational self-reliance. But for what it is worth, all of the great moral teachers and civilizational traditions have put most emphasis on intra-generational obligation: Plato, Aristotle, Philo of Alexandria, the Bible, Confucious.

Aside from the distinction just described, and logically independent of it, is a second distinction between individualized sytems and socialized systems. With an intra-generational obligation system, you can either legally or morally require individual workers, or small family units, to figure out on their own how to support their elders - the individualized approach - or you can require all of those workers to contribute to a collective system of support for the older generation. This is the socialized approach. The same distinction can be applied to the intra-generational self-reliance approach. You can require individuals or families to save their own money for their own futures, or you can socialize the system and require everyone to pool their money into a mutual fund. This is the main innovation the Republicans want to introduce - they want to replace socialized intergenerational obligation with socialized intra-generational self-reliance.

The inter-generational social security system builds a national community, by requiring people to place their trust in other Americans outside the boundaries of their own extended families. It also creates important inter-generational public incentives. Because each generation depends on the wealth of the succeeding generation to support them, they have a powerful incentive to support the education and health of America's children - not just their own children -and to support public investment in the long-term health of the American economy - the big public projects that private enterprises don't have.

What the Republicans seem to want is mainly a combination of voluntary, individualized inter-generational obligation and and intra-generational self-reliance, augmented by a system of socialized intra-generational self-reliance. The community-building power of inter-generational obligation holds no attraction for them.

The Republicans also seem to want to shift more American income from consumption to investment, thus generating more capital for economic growth. Instead of giving our money to our elders, who will only spend it all on food and heating oil and medicine and gasoline and diapers, they want us to give it to capitalist investors who will invest it to create wealth. The capitalists promise to give it back to us, with interest, when we ourselves are old. Our obligation to other people's grandmas and grandpas is severed.

The idea, I suppose, is that all this forced savings will flood our capitalist system with new, abundant capital and generate economic growth. The investors, of course, would love to get their hands on more of our money for their own reasons, to make money from it themselves.

But it is not clear to me that we will really be better off, even in the limited financial bottom line sense of being richer. maybe some economists can help me. Is there a serious problem in America with long-term capital shortage? If you increase savings and depress consumption too much, don't you just end up with a lot of unproductive saved money lying around, without enough consumption driven demand to spark the new enterprises the money was supposed to be invested in? Is it always better to save more? Don't some other countries have problems with excessive savings rates and low consumption?

But also, to support one's elders - either on our own or through our FICA taxes - we all have to work harder during our productive years. And we have to save and invest money to increase our wealth. If we either eliminate those taxes, or convert them into forced personal savings, then we in effect all get a raise for doing nothing new. So we don't have to work as hard.

The excessive Republican love of individualism and self-reliance, and disparagement of community and generational obligation flies in the face of many traditional values. It is a further extention of the society-corroding, go-it-alone social Darwinism of industrial and post-industrial capitalism. It breeds selfishness, isolation and inter-generational negligence, and fosters a ghettoized, atomistic America rather than a national community. Democrats should fight to defend social security on the traditional values front. It fits better with the community and familiy values of main street, rather than the commercial values of Wall St.

Posted by: Dan Kervick | Dec 11, 2004 5:40:31 PM

Placing one's trust in social security is not the same thing as trusting the faceless, bureaucratic "government" and its and its often inefficient agencies - in the way you might trust the government to, say, regulate the highways, collect taxes or clean up toxic wealth.

I meant toxic waste.

Posted by: Dan Kervick | Dec 11, 2004 7:15:12 PM

As one of the first baby boomers, I have a problem. I have accumulated some personal wealth, now invested largely in the U.S. stock market. The problem is, I need someone to buy my stock back at a really good profit to me.

I know! I'll support privatization. That will create a whole generation of greater fools (I mean, new investors, wise in the ways of markets and selflessly seeking their own wealth) to buy my stocks, so I can enjoy myself in Paris. France.

Posted by: masaccio | Dec 11, 2004 7:33:51 PM

There is an argument that Brooks and the Bush administration want to ignore. Does SS really need fixing? Does it need a big fix or just a tweak. Is privatization the best fix/tweak or is some other plan better?

Posted by: bakho | Dec 11, 2004 10:06:13 PM

I nail Brooks but good in my blog, showing that he is simply wrong about the relationship between "trusting the market" and Bush's plan. Key part of the argument: "Brooks claims that the idea of having the government issue debt to buy stock is supported by faith in markets, and seems ill-advised only if you don't trust markets. But issuing $X billion of debt and buying $X billion of stock does not mean trusting markets - it means holding a position that financial markets value at zero." See the rest at http://danshaviro.blogspot.com/

Posted by: Daniel Shaviro | Dec 11, 2004 10:26:36 PM

I actually think the Democrats should reframe the debate by coming up with their own plan to raise enough revenue to make Social Security fully funded (or maybe just "partially funded," if you will). No, it's not going to be put into law in the current political environment. And it will not come at too much political cost if the Democrats can make the plan super-progressive and sell it as such. They must sell it as a PRECONDITION for any "reform" that Bush or anyone else may want to do. This must be done in order to reframe the debate.

The core of the policy debate here is that Social Security is *pay-as-you-go*. Today's payroll taxes are mostly used to pay the benefits of today's retirees, and the rest of it -- that is, the present excess of payroll taxes over benefits -- is the so-called Social Security Surplus. In a few years, current benefit payouts will begin to exceed current payroll tax revenues. Today's Social Security surpluses (and additional revenues from elsewhere) are needed to cover that coming shortfall. By diverting today's payroll taxes into private accounts for the future retirements *of current payroll tax payers* and away from benefits *for current retirees*, the Republicans exacerbate this coming shortfall. That is, they are making this excess of benefit payouts to current retirees over current payroll taxes even worse, by reducing the amount of payroll taxes available for those payouts. The only way to avoid this shortfall is to cut benefits or raise taxes.

Democrats must promote the latter, but only a very progressive tax increase would do politically and they must sell it as progressive first and foremost (maybe even decreasing the tax burden at the bottom while increasing revenues as a whole by raising it a lot at the top). Democrats must put such a tax increase under the label of "FULLY FUNDING" Social Security. They must always repeat that "Unless you want to cut benefits, you can't have any social security reform -- ie. private accounts -- without fully funding Social Security." If asked whether "Fully funding" isn't just a tax increase, Democrats must say no and frame it in terms of its progressivity -- that is, the rich bear most or all of the burden while it is lessened or kept the same for the manty. Democrats should find a religious way of stating this and use "values" rhetoric in order to sell this policy.

The Republicans want people to believe erroneously that Social Security is already fully funded. They were even able to fool David Brooks, who I thought was better informed. By fooling people into believing this fallacy, they trick them into thinking falsely that it's a debate of "markets vs. government."

In summary, the Democrats must create a plan to "fully fund" Social Security and call it that, selling it as the *necessary precondition* for so-called reforms, unless Republicans plan to cut benefits. This refocuses attention away from the fake stock market debate and towards the hard budget math that must be considered when evaluating Dubya's plans for Social Security. If the media can be made to focus on the budget math -- even on a superficial level -- just by people on TV repeating the words "well it's gotta be fully funded" without quite knowing what that means, this could derail the Republicans' plans.

Posted by: Bobby | Dec 12, 2004 2:30:55 AM

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