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The Revolution Devours Its Children

Cato's "daily debunker" takes on yet another blinkered defender of the status quo . . . Senator Lindsey Graham, author of the erstwhile compromise legislation thought to have some vague chance of passing the Senate. I'd like to see a three-way Graham-Tanner-Ferrara cage match. Last man standing gets to take a 3 basis point annual commission on whatever private accounts may or may not emerge!

March 10, 2005 | Permalink

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Comments

Wouldn't it be fun to watch Stephen Moore actually eat Lindsey Graham on live TV?

I'd pony up for a pay-per-view.

Posted by: Petey | Mar 10, 2005 9:31:39 PM

Incredibly stupid and arrogant of Cato and the Bush crowd. Senator Lindsay Graham had one of only two Republican compromise Social Security plans that had an inkling of a chance to start talks involving both sides of the aisle. (The other is Senator Chuck Hagel.)

Posted by: Deborah White | Mar 10, 2005 9:54:36 PM

Hmmm...the tone of that was so nasty that will relay a little cryptic remark of Tacitus to the effect that Lindsay Graham will never ever be President. Washington insiders know why.

Cato says there that with private accounts off the table, there necessarily will be either massive tax increases or massive benefit cuts.
They are of course, absolutely correct, tho it doesn't have much to do, at least directly, with private accounts of Social Security.

I do wish Democrats would start preparing for that argument.

Posted by: bob mcmanus | Mar 10, 2005 11:00:34 PM

"Cato says there that with private accounts off the table, there necessarily will be either massive tax increases or massive benefit cuts. They are of course, absolutely correct."

How do you figure?

Given that SSA's intermediate estimate has consistently been too conservative, I think it's more likely than not that the system will remain solvent with zero changes.

And even if changes are necessary 20 to 30 years from now, they likely won't involve massive pain.

Posted by: Petey | Mar 10, 2005 11:08:26 PM

"How do you figure?"

General fund deficit meets SS fund drawdown + baby boomers + Medicare/Medicaid

Matt & Josh & Brad like to say:"There is no SS Fund crisis....there is a general fund crisis."
Okay, duh. Still gonna be tax increases or benefit cuts.

Posted by: bob mcmanus | Mar 10, 2005 11:49:59 PM

"Still gonna be tax increases or benefit cuts.

You don't get SS benefit cuts because a general fund crisis. That's FDR's genius in keeping SS actuarially separate from the general fund.

And the tax increases will be income tax increases instead of payroll tax increases, which is fine by me. Income taxes are too low currently.

Posted by: Petey | Mar 11, 2005 12:07:40 AM

Of course, Petey, whatever was I thinking. No problem, income taxes are way too low. We'll just increase them. Silly me.

Posted by: bob mcmanus | Mar 11, 2005 12:29:27 AM

"No problem, income taxes are way too low. We'll just increase them. Silly me."

If you make a million dollars a year, you should be paying 40% instead of 33%.

Bush's reduction of the top rate is the entire reason we have a general fund crisis in the first place.

Posted by: Petey | Mar 11, 2005 12:40:17 AM

Why 40%? Why not 60% or 80%? That would be even better. It's not their money anyway.

Posted by: Dave S. | Mar 11, 2005 8:31:54 AM

Good idea, Dave S. Civic minded people should always be encouraged to donate more of their wealth to the commons if they so desire. Just think what they would be living on if they'd had the bad fortune to be born almost anywhere else. Odd, isn't it? Kalashnikov would be a rich man if he had only been born somewhere else. Maybe he will get lucky with his vodka.

Posted by: HG | Mar 11, 2005 12:41:05 PM

Good idea, Dave S. Civic minded people should always be encouraged to donate more of their wealth to the commons if they so desire. Just think what they would be living on if they'd had the bad fortune to be born almost anywhere else. Odd, isn't it? Kalashnikov would be a rich man if he had only been born somewhere else. Maybe he will get lucky with his vodka.

Posted by: HG | Mar 11, 2005 12:46:06 PM

Not to defend Tanner (I can't defend his incessant lies) but Lindsay Graham has flip-flopped. He used to believe in the free lunch of personal accounts. Now he says otherwise. But then maybe the Senator finally talked to someone who is really smart - like Robert Barro and Gary Becker who note why the higher expected return argument is not bad financial economic analysis.

Posted by: pgl | Mar 11, 2005 2:19:35 PM

Hey Petey Over Here

Republicans have not only been preparing for this upcoming war, they appear to have talked most of the Democratic Party into at best neutrality.

Mark Schmitt as usual one step ahead, and bless his heart, a few inches deeper in the muck.

Posted by: bob mcmanus | Mar 11, 2005 4:32:14 PM

Taxes as percent of the GDP may be an interesting number, but it's a view from far away. Who will be paying? For example, a guy who makes $10 million/year on dividends - is he paying $0? $1 mil? $4 mil? $9 mil? A janitor who makes $15K working two jobs, is he paying $0? $5K? This is the real battleground; Republicans don't mind high taxes, they just don't want their constituency to pay.

Posted by: MonarchyNow! | Mar 11, 2005 4:55:34 PM

Bob you need to do some basic math. Normal economic growth of 2% or higher means only nominal fund drawdown, under Low Cost only 15% of the Trust Fund needs to be redeemed over the years between 2020 and 2075, and the drawdown starts slow. Personally I don't believe the economy will perform down to the level of Low Cost, and if pressed to the wall you don't either.

The dishonesty of privatizers on this is stunning. Exactly no one is willing to actually defend the economic numbers of Alternative Cost, although God knows they have been given countless opportunities. And no one is willing to concede that better economic performance than predicted by Alternative Cost moves the numbers, even though links to charts that show precisely that effect have been presented over and over. EPI: Changes in Trustees Projections .

2004 happened, and the Trustees got it wrong. Again. For at least eight years in a row. And 2005 is happening as we speak. Third quarter is coming in at 4.0% on an annual basis, which means this quarter alone we have achieved over half of Intermediate's 2005 1.8% and just about half of Low Cost's 2.1%. 2004 Report: Economic Assumptions We are crushing even Low Cost which shows no gap at all.

There will be no Trust Fund draw down unless the US economy goes into permanent recession. Democrats will not compromise with Lindsay Graham or anyone else because we don't have to. The EPI table clearly shows that the cost of inaction since 1997 meant thousands of dollars left in my pocket in taxes not taken out to solve the "crisis", and yet a smaller bite needed going forward. 2004 numbers are in and they will push depletion out, they will lower the payroll gap.

Privatizers at this point have two choices. Admit that they were totally wrong about Social Security finances, or keep driving hellbent at the Third Rail hoping to get enough Democratic passengers to avoid total political flameout.

Doing nothing has been a proven policy winner every year, money left in the economy from taxes not collected, smaller payroll gap going forward. 2005 will be no different. Why we should listen to people who won't even put a single number on the table escapes me.

Posted by: Bruce Webb | Mar 12, 2005 12:12:10 PM

"Republicans have not only been preparing for this upcoming war, they appear to have talked most of the Democratic Party into at best neutrality."

Huh? I read the same articles as you, Bob, and I get very different things out of them.

I read and liked both Schmitt's post and Yglesias's comment. But they don't lead me to anything even vaguely resembling the conclusion you reached.

Posted by: Petey | Mar 13, 2005 5:01:42 AM

"Taxes as percent of the GDP may be an interesting number, but it's a view from far away. Who will be paying? ... This is the real battleground"

The GOP strategy to tax work instead of wealth serves two purposes:

It both serves to protect the Republican donor base, and it serves to create a political constituency for keeping taxes as a percent of GDP low.

Posted by: Petey | Mar 13, 2005 5:07:19 AM

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