Friday, March 11, 2011

The Good, The Bad, and The Ugly

The most quoted, and arguably the best, movie title of all time well describes a short exchange between Dave (David) Greg (Gregory) and presidential Chief of Staff Bill Daley on Meet The Press (transcript here):

MR. GREGORY: The big driver of the, of the deficit, as you know, Social Security, Medicare, those are the real budget busters. And it was interesting, Speaker Boehner gave an interview to the Wall Street Journal. I'll put a portion of it on the screen. This is what he said. Speaker Boehner said Thursday, "...he's determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks, and that Republicans will try to persuade voters that sacrifices are needed. In an interview with The Journal, Boehner said House Republicans would offer a budget for the next fiscal year that gets goals for bringing the programs' costs under control."

Is this an opening here? Did the president and Boehner talk about this and say, "Look, let's do something here together?"

MR. DALEY: Well, the president's been saying for quite a long time that we, we've got to, not only address our current budget problems, we've got to get to these large--I would take some exception with your statement. Social Security is not the big driver of the deficit right now. We've got to strengthen Social Security for the recipients of that, but the--but you correctly said it's Medicare and Medicaid that's the major driver, as we have an aging population, increased healthcare costs.

Imprinted upon the membership card as one of the requirements of membership of, as Digby refers to it, "the Village," is "Whenever there is mention, or inference, of the national debt, holder of card must demonstrate Seriousness by invoking Social Security." Gregory faithfully complied, claiming "The big driver of the, of the deficit, as you know, Social Security, Medicare, those are the real budget busters."

As any journalist- anywhere- should know (and most probably do, though pretending otherwise), Social Security has nothing to do with the deficit. It has- indirectly only- at times diminished the deficit, but directly it has no effect, and indirectly it hasn't affected the debt, and legally cannot do so. Greg Anrig notes that during the administration of Bush 43 and

continuing to this day, federal deficits would have been much worse if Social Security had not been collecting substantially more in payroll taxes than it paid in benefits. The federal debt would be much higher than it currently is. So, no, Social Security didn’t create the deficit.

The year 2010 was the first one since 1983 in which the program’s total expenses (for benefits and administrative costs) exceeded its income from payroll taxes plus the income taxes collected on some Social Security beneficiaries. That temporary imbalance of $41 billion was a consequence of reduced revenues attributable to the economic downturn. The gap was covered by a small slice of the interest owed on the Treasuries in the trust fund, which is payable from general revenues. That interest would have been owed by the general fund whether or not current payroll tax revenues fell short of benefit commitments....

The actuarial projections show that aside from the temporary payroll tax cut, the Social Security gap will shrink in 2011 and return to surplus in 2012. Then in 2015, revenues from payroll taxes and income taxes owed by retired beneficiaries on their Social Security income will fall short of benefits of owed and continue to fall short going forward. That will again require some of the trust fund’s interest income to cover the gap. But even still, according to the actuaries, the trust fund will continue growing for another 10 years because it will be earning more than enough interest to finance benefits owed.

Bill Daley realizes this and corrects Gregory: "I would take some exception with your statement. Social Security is not the big driver of the deficit right now" (the good). Admittedly, he left open the possibility that Social Security contributes to the deficit but merely "is not the big driver." But that would have been rude to his host if he had exclaimed "David, as anyone who understands Social Security at all knows, it does not add to the deficit" or "David, you big lummox, stop with the Republican talking points."

However, while Daley understands the connection- or rather, lack thereof- between the deficit/debt and Social Security, he adds "We've got to strengthen Social Security for the recipients of that" (the bad). When the Administration urges, as it periodically does, that "Social Security" be "strengthened" (or any variation of that word), it does not mean its benefits, but the system. Barack Obama appears to recognize the need for a greater percentage of income to be captured by FICA which, presumably, would necessitate raising the cap beyond merely being raised pursuant to inflation, which it has been.

But when the President speaks of the solvency of the system, he is inferring that the pressure of paying out benefits puts pressure on the entire framework as payments gobble up an increasing share of national income. (It would be cutting benefits in order to preserve the program, a modern-day, domestic version of "destroying the village in order to save it.") Anrig undermines that myth, pointing out "We know that Social Security’s burden is going to rise very gradually, from just below 5 percent of GDP today to just over 6 percent by 2030, and remain at that level indefinitely thereafter. That’s a relatively modest and manageable increase, particularly compared to the anticipated explosion in health care costs." Nevertheless, Dick Durbin, Obama's de facto representative on the debt reduction commission and in the Gang of Six, months ago spared the President political risk by himself remarking that he would consider increasing the eligibility age.

Credit the White House with refusing to bolster the fairy tale of the nexus between Social Security and the deficit. (Daley didn't, regrettably say anything about the debt.) As with other issues, President Obama is weak but far preferabe to a reactionary opposition, a far cry from "si se puede" and more like "No estamos tan mal."

1 comment:

just jake said...

Well, maybe the Democrats should come right out and say what is the driver of the rising deficit, heh?

Why don't they do that? Why do they go along and tangle themselves up in the nonsense talk framed by Republican talking points?

You'd think that since Obama is in the White House, he'd use the bully pulpit and set the framework of the discussion. But he hasn't done that. Why not?

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