Tuesday, March 10, 2009

Charleston Post & Courier: Opposition not enough for GOP

The Charleston, SC Post and Courier, whose editorial board has had a long interest in Social Security reform, weighs in on President Obama's plans to reform Medicare:

President Obama's major entitlement-reform offensive strikes on the Medicare front. He proposed, in his speech to Congress, to deliver "quality, affordable health care for every American" while also bringing runaway costs under control. That challenging goal contradicts the president's contention, in the same speech, that he doesn't believe in "bigger government."

But just as Democrats, including then-Sen. Obama, shouldn't have rejected President George W. Bush's Social Security reform proposals without offering coherent counterproposals, Republicans who oppose President Obama's health-care ideas should offer tangible counterproposals on Medicare reform, too.

In 2005, there was little public or media pressure on Democrats to put their own Social Security reform plan on the table; it was sufficient that they merely oppose President Bush's plan. I suspect the same won't be true for Obama's health proposals, so those who wish to take a different path on health care shouldn't be complacent that opposition is enough.


Bruce Webb said...

Democrats had a coherent counterproposal. It just was too simple to be comprehended by the Post and Courier.

Take 1.89%. Add four years of 'Nothing'. Result? 1.7%

Now you can take other starting and ending points. For example I could take 2004 and 2006 and get the results 1.89% and 2.02%. Or I could change measures and use 2004 and 2008 to yield 2042 and 2041. And then if you like do some elaborate calculations to calculate the savings or loss in current dollars of not implementing a fix in 2004.

No one has to agree with Dean Baker that this is just a Phony Crisis promulgated by people "who say they want to fix the roof (but) actually want to knock holes in it". And there may be some force in the argument that unfunded liability over the Infinite Future Horizon creates serious issues of inter-generational inequity that will need to be addressed at some point or another. (Personally I am with Dean and think the latter argument is hooey.)

But wherever you land on the fundamental question the twin assertions of "We can't afford to wait" and "The cost will only get greater if we delay" just are not supported by the historical record from 1997 to 2008. Now oddly they were supported by that record from 1993 to 1996 and retrospectively they may end up being supported by the record from 2008-2011. But from the actual standpoint of March 2009 there just isn't a whole bunch of the "Fierce urgency of Now" operating.

The 2006 Report was quite the disappointment, the outlook as a percentage of payroll having darkened significantly since 2004. Did this mean the "There is no Crisis" people of spring 2005 had egg on their face? Well not really because you could calculate with some precision the Cost of Inactivity between any two time points. And knock on wood for all 'current participants' in all years and for all 'future participants' in every year but 2006 the cost of sticking with the Democratic plan of "Nothing" as a plan for Social Security has been negative, that is workers have been left dollars ahead.

"Nothing" is not a particularly compelling plan, it doesn't fit neatly within the conventions of reporting on policy. Which doesn't mean it has not proved to be a numerically sound plan. Since 1997.

Andrew G. Biggs said...

Here's one way to look at it: stock returns during the 1990s were extremely high. Does that mean they'll always be that high? Of course not, as we've now experienced.
Likewise, it won't be unusual to have a string of small changes in the Trustees Report that push the solvency number in a given direction for a while -- as you note, the trend was negative for a while, then positive.
The question is, where do we expect the trend to go in the future? The main reason for the decline in the long-term deficit was a change in methodology regarding immigration. That chance can't happen twice, so I'm not sure of the logic that would call that part of a trend.
Or put this another way: enter your best guesses for future wage growth, mortality improvement, immigration, fertility, etc. Those will surely be more optimistic than the Trustees, but that's fine. Given those assumptions, chosen by you, what will tend to happen if we wait to fix Social Security? The deficit will increase, by around 4% each year. So, even using your own chosen assumptions, there is a cost to waiting.