by Bruce Webb
Those who ignore history are bound to repeat it. The otherwise estimable Ezra falls into the trap.
Bipartisan Policy Making Hertzberg is wrong at so many levels and so many points that you hardly know where to start. I have bolded some of the really wrong-headed claims.
Rick Hertzberg notices some Republicans calling for a payroll tax cut amidst the stimulus and proclaims it a Good Idea. It is a good idea! And I like the endgame, too:
Liberals have been reticent, too. The payroll tax now provides a third of federal revenues. And, because it nominally funds Social Security and Medicare, some liberals regard its continuance as essential to the survival of those programs. That’s almost certainly wrong. Public pensions and medical care for the aged have become fixed, integral parts of American life. Their political support no longer depends on analogizing them to private insurance. Besides, the aging of the population, the collapse of defined-benefit private pensions, the volatility of 401(k)s, and pricey advances in medical technology mean that, no matter what efficiencies may be achieved, Social Security and Medicare will—and should—grow. Holding them hostage to ever-rising, job-killing payroll taxes is perverse.
If the economic crisis necessitates a second stimulus—and it probably will—then a payroll-tax holiday deserves a look. But it’s only half a good idea. A whole good idea would be to make a payroll-tax holiday the first step in an orderly transition to scrapping the payroll tax altogether and replacing the lost revenue with a package of levies on things that, unlike jobs, we want less rather than more of—things like pollution, carbon emissions, oil imports, inefficient use of energy and natural resources, and excessive consumption. The net tax burden on the economy would be unchanged, but the shift in relative price signals would nudge investment from resource-intensive enterprises toward labor-intensive ones. This wouldn’t be just a tax adjustment. It would be an environmental program, an anti-global-warming program, a youth-employment (and anti-crime) program, and an energy program.
If we had a serious public sphere in which legislators actually wanted to solve problems and were genuinely committed to the public policy ideas they claim to support rather than the industries that fund their reelection, this is the sort of discussion we’d see.
Just shoot me now. Or follow me below the fold while I explain why this is just wrong, wrong, wrong and worse muddle-headed.
Since Alf Landon and the presidential campaign of 1936 the Republican Party has always had the destruction of Social Security as close to openly at the center of their policy goals as they have dared to make it. And after 1965 that has been true of Medicare as well. Because the programs has been very politically popular they have rarely dared to make an open assault on either. That is why Newt had to backtrack on his “Wither on the vine” comment and lamely claim he was not talking about Medicare itself but only HCFA. His proposal which disguised real cuts to Medicare (after calculating in medical inflation and growing numbers of covered beneficiaries) by nominal increases in dollars spent was a clear attempt to cripple Medicare over time until it was weak enough to drown in Grover Norquist’s bathtub. This is what he intended and every observant people knew it, yet he got away with claiming that those nominal increases not only were not real cuts but that people who claimed different were simple liars (something the MSM accepted like gospel.)
And that is why Bush’s attempt to privatize Social Security ultimately fell apart. His attempts to sell it based on “Ownership society” and “Private control” and “Inheritability” for lower income workers didn’t hold up to examination. The semi-official Posen plan (floated but never explicitly endorsed) with its clawback and annuitization provisions was a crappy deal for workers, once you ran the numbers, something those in on the game on both sides knew from the beginning. I want to repeat a quote from Dean Baker’s Phony Crisis that I have put up before:
We have a chance, said President Clinton, to “fix the roof while the sun is still shining.” He was talking about dealing with Social Security immediately, while the economy is growing and the federal budget is balanced. – – –
The roof analogy is illuminating, but we can make it more accurate. Imagine that it’s not going to rain for more than 30 years. And the rain, when it does arrive (and it might not), will be pretty light. And imagine that the average household will have a lot more income for roof repair by the time the rain approaches.
Now add this: most of the people who say they want to fix the roof actually want to knock holes in it.
This is the situation facing Social Security, and it is well known to those who have looked at the numbers.
Moral: beware of Republicans bearing hammers.
Just as conservatives say about conservatism, Social Security can not fail, it can only be failed. And felled. And killed. If the Republicans can find a chink in its armor they will strike. Social Security’s historical defense has been the wall between FICA payroll tax and the General Fund. Certainly there is a gate in that wall that allows money to flow through in controlled fashion, but the key is control, you don’t want people willy-nilly busting holes in Social Security’s perimeter wall.
Even with the current barrier in place and Social Security safely supplied until 2041 or 2049 Republicans and Blue Dogs are arguing that we have no choice but to cut benefits by changing initial benefits from being adjusted for real wage to being adjusted for prices. Because in their world view there is no wall at all between the Trust Funds and the General Fund or for that matter between the Trust Funds themselves. They don’t see an OASI and a DI and a HI, no they see some OASDIHISSISMIPartBPartD monster. And one they want to kill. The notion that there is no danger to Social Security because Newt and Bush over-reached is dangerous nonsense, Hertzberg’s claim that “public pensions and medical care” no longer need the political protection afforded by the wall that keeps them positioned as insurance simply flies in the face of the 74 year history of periodic efforts to kill Social Security.
In these matters the Republican Party relies on two standard rhetorical moves. One they divide all government spending into two categories: money we can’t NOT afford, which includes pretty much anything military, and money we CAN’T afford, which is just about everything else. (It is why they can’t be concerned by weapons programs that continue to go billions of dollars over budget, because gosh those F-22s might be vital one day, but get all indignant at proposals to put $50 million towards the Arts or $1 million towards cricket control.) And two they insist that “temporary” tax cuts are actually in practice permanent and that allowing them to lapse is just a huge tax increase. We see this daily in their response to the prospect of Republican supported tax sunsets actually being allowed to occur on the schedule they themselves set. Anyone who doesn’t think that same logic won’t be applied to a “temporary” payroll tax holiday is in my view delusional.
Once Republicans are allowed to blow even the smallest hole through the payroll tax wall they will certainly point to decaying figures for TF solvency as ‘proof’ that the Republican and Blue Dog plan for bleeding Social Security dry over time is just something we will have to do, because you can bet that Social Security will ‘regretfully’ be placed in the category of ‘spending we CAN’T afford’. Because there will never come a time when lifting that ‘temporary payroll tax holiday’ will not be presented as a job killer and a huge regressive tax on lower income workers. That kind of bait and switch is what they do.
Klein and Hertzberg are implicitly claiming they can outplay the Republicans here. As if these guys hadn’t been playing and planning this game for decades before these kids were born. And all with the naive belief that the answer to everything is to tax stuff you don’t like: “things like pollution, carbon emissions, oil imports, inefficient use of energy and natural resources, and excessive consumption”. Yep and you can pay for the whole thing simply by a combination of lifting payroll tax and rebates to lower income workers. All without any risk to the programs heretofore financed by that walled off revenue.
Given the historical record of Republican hostility to the establishment and continuation of Social Security and Medicare and indeed anything that smacks of Social Democracy (say things like paid FMLA) it is just a horribly risky gamble to tinker with the carefully constructed wall that is FICA as currently configured. (For example the payroll cap is an important buttress to that wall, it keeps an important and immensely influential population segment willing to support the wall as opposed to tearing it down.)
As currently configured Social Security fundamentally owes nothing to the people who control capital because to date it has drawn nothing from them. (At worst it required them to pay down the TF in the early sixties and the seventies, in effect repaying money borrowed in earlier decades.) Breaking down that wall or just punching holes in it in effect turns over part of the defense over to the people who historically have been intent on leveling the entire Social Security city. It is called a Trojan Horse, and those bearing this particular ‘gift’ should not be assumed to be acting in good faith. Not given the historical record.
The tendency of these post-Reagan liberal market and consumption tax loving fan-boys to think they are smarter than FDR is dangerous. The people who designed Social Security knew what they were doing and things like financing it entirely through wages and keeping contributions capped are important features and not just bugs to be swatted away.
Revised moral: Beware of twenty-something liberals bearing fly-swatters before they enable the Republican/Blue Dog hammer bearers. The roof isn’t perfect, but it keeps the rain out. And that is not a bug.