Thursday, May 14, 2009

Michael Lind’s Social Security Straw Men

I have an article at The American, AEI's online magazine, digging through a piece by the New America Foundation's Michael Lind in which he claims to debunk claims that Social Security faces a significant shortfall. New America, whose founding premise was "radical centrism," surely has many analysts who still adhere to that approach. Lind's article, however, best fits under the moniker "lefty claptrap."

5 comments:

James said...

"There are at least two other choices that the deficit hawks never mention. One is more rapid economic growth, which would make it easier to pay Social Security taxes in the future without either benefit cuts or tax increases. The other option that the doomsayers never discuss is an infusion of money from other revenues, to supplement the payroll tax.

is iane. You could have made the "rapid economic growth" argument several years ago with no inkling of what was to ensue. That's policy by a hope and a prayer.

Regarding this:

"The other option that the doomsayers never discuss is an infusion of money from other revenues, to supplement the payroll tax"

Good luck. What sources when we're running record deficits for the next decade? It will be enough just to get lawmakers to cut discretionary spending or raise taxes just to lower these deficits to reasonable levels.

I don't have much regard for Lind's reasoning. It offers no proactive let alone prudent solutions, and relies mostly on hope. I also found the highly partisan blather distasteful. It's irrelevant to the discussion (and I don't happen to fit into any of his pigeon holes).

Bruce Webb said...

Butler and Germanis exists. It was published in 1983. It was pursued. It worked. As does hand waving by people employed by people paid to promulgate Butler and Germanis. At least for now.

Lind is not crazy. I am not crazy. Nobody put a bullet to anybody's head and enforced the publication of the Fall 1983 issue of the Cato Journal. Your former employers showed their hands. Oops your problem.

Andrew G. Biggs said...

Bruce,
You place WAY too much importance on the Butler-Germanis article. No offense to the authors, who I'm sure are members in good standing of the right wing conspiracy, but it's just not that influential an article. I WORKED at Cato and I've never read it. Do you think Bartlett or Samwick have read it? To you have any reason to believe, much less evidence, that people at the Concord Coalition have read it? Not likely; it's just not the way they see things.

All you need to make the arguments coming from the right of center are Trustees Reports, CBO studies, GAO analyses and the rest. And unlike folks on the left, who spend a lot of time arguing with the official government numbers, folks on the right pretty much accept them and work within their confines.

Andrew G. Biggs said...

One more thought: Butler and Germanis were overoptimistic regarding support for personal accounts from the financial industry and business in general. The financial industry has far less to gain from Social Security accounts than you'd think, principally because they'd be so highly regulated. Consider the Thrift Saving Plan, which is a close model for account administration. Barclays, which manages the investments for the TSP, makes only a couple basis points for their services, whereas for 401ks they'd make much, much more. Given that large personal accounts would substitute for 401k saving, they'd be cannibalizing their own businesses. I once told supporters of "big account" plans like Peter Ferrara's to say their plan wasn't about privatizing social security, it was about nationalizing retirement saving. While a joke, it's not that far from the truth, and I'm sure the financial industry knows that.

Business in general doesn't have a ton at immediate stake, given that it's workers who bear the burden of both halves of the payroll tax. While my guess is they're broadly supportive of reform, it's far from being a number one priority for them. So the presumed conspiracy between think tanks, Wall Street and big business really doesn't exist, and never existed.

Arne said...

I read the actuarial not on internal real rates of return, but I could not tell what rate they use to calculate present value. Would that be the smae as interest on Treasuries, CPI, or some other rate?