First of all, with transition costs of privatization, the real hole in SS finances is more like $15 billion, $10 billion in SS itself (most of which occurs after 2075, I might add, so a pretty shaky estimate to begin with; imagine trying to do an SS budget for today in 1929), and $5 billion for the transition costs of paying current levels of benefits to current and near-retirees while diverting revenues.
Secondly, I don't think you can separate the proposals out so easily, because covering that hole depends critically on the benefit cuts that Brooks talks about earlier. The government payout is supposed to be replaced by stock market returns.
Notice also that Brooks claims a 4.6 real return on stocks, but with a current stock market price-earnings ratio of 26, the real rate of return on stocks (assuming 60% of profits are paid out as dividends or used to repurchase stocks) would be more like 2.3%.
David Brooks takes on the Social Security issue in Saturday's NYT.
The Conservative frame?
Democrats are anti-business:
It's about the market. People who instinctively trust the markets support the Bush reform ideas, and people who are suspicious oppose them.
"The people setting the tone for the opposition to the Bush Social Security effort depict the financial markets as huge, organized scams where the rich prey upon the weak. Their phrases are already familiar: a risky scheme, Enron accounting, a gift to the securities industry, greedy speculators preying upon Grandma's pension. . . . Now the Democratic Party's tone is much more populist and even antibusiness.
Democrats are tinfoil-hat wearing extremists:
What you hear these days is not liberalism. It's conspiracyism. . . . This is Michael Moore-ism applied to domestic affairs . . .
Democrats are stuck in the past:
You already see some Democrats growing concerned over the perception that their party is trying to build a bridge to the 1930's. . . .
This is not 1932 any more. This is not the age of big, static state institutions. This is actually about building a bridge to the 22nd century.
Social Security is in dire straits, and Privatization is the only way to save it:
Plans to create private Social Security accounts aren't sops to the securities industry. They use the power of the market to solve an otherwise intractable problem.
The outline of the problem is clear. When the Social Security program was created, there were 42 workers for each retiree. Now there are about three workers per retiree, and in 2030 there will be two.
The White House is heading toward a reform plan that would tie the benefit levels to prices rather than wages, which is a serious benefit cut. It would then use the power of the markets to compensate retirees for those cuts and to create a reserve fund to make the system solvent.
The government would essentially borrow at 2 percent in real terms, invest that money through regulated private accounts in the market and get a return, based on conservative historical averages, of about 4.6 percent. Those returns would, over time, cover the $11 trillion in liabilities that threaten to bring down the system.
How do we confront these arguments?
The last set of arguments, about the alleged troubles of social security should be the easiest to rebut, with arguments like:
Social Security has enough assets dedicated to it to reamin solvent through 2042;
If you look at the "dependency ratio," that is, the number of children and retirees as a proportion of workers, that ratio is remarkably constant over the next several decades. So more retirees to support, but fewer kids.
We must emphasize at every turn the fact that the Bush plan involves benefit cuts.
It's also pretty clear that we must paint the privatizers and abolishers of Social Security as the real extremists here.
Finally, we must block the idea that Social Security was great for your grandparents, but not appropriate for the 21st century.
Again, emphasize that the program has the resources to meet benefits, without changes, for the next 38 years. By then the oldest baby boomers will be 78 years old.
Emphasize the riskiness of essentially placing your whole retirement at the mercy of the stock market. Compare this to the guaranteed benefit that Social Security offers. A nice life jacket in an increasingly risky and unstable world.
Also emphasize that Social Security is also a life insurance and disability insurance plan whose benefits are not tied to the stock market. If SS is abolished, so are these benefits.
Finally, the Democrats ought to think seriously about offering their own "Social Security Plus" individual account program.
Unlike Bush's plan, the Democratic plan should not involve diverting any of the SS payroll tax. It would be a stand-alone plan to supplement Social Security. People would be allowed to invest an additional 2% of their incomes into individualized investment accounts. Poor and lower-middle-income people could have their contributions matched by the federal government, which would help these folks build much-needed savings. Variations of such a plan have been proposed by economists such as the late Robert Eisner, who is no conservative.
LAPHAM: Are there any issues that could speak to a larger part of the electorate? Of do most Americans now think of politics as something that only happens in the Balkans?
PHILLIPS: The obvious thing is the mess that the Bush Administration is making in Iraq. The imperial approach has lost us credibility all over the world. If this can't be used as an indictment against Bush, then I don't know what can. The man is the least competent military leader since James Madison let the British bum Washington. Other issues moderates are concerned about are deficit spending and campaign finance. You've got to assemble a new progressive movement with disaffected elements of the existing Republican coalition. . . .
PHILLIPS: There are four or five progressive stands today that actually speak very well to a lot of dissident Republicans. Remember that since 1992 it has been the Republicans, as well as the Democrats, who have produced presidential candidates running on various progressive lines: Ross Perot, Pat Buchanan, and John McCain. You had opposition to imperialism overseas, particularly from Perot and Buchanan. You had concern about globalization--from Perot and Buchanan--and you also had concern about the deficit, from McCain and Perot. All three urged campaign-finance reform. McCain and Perot ran against the religious right far more articulately and courageously than Democrats ever have. It would be alien to the Democrats to think that they should be courting a whole lot of people from the Republican side. But if you're going to form a national progressive majority, you've got to attract members of the G.O.P. who have favored progressive presidential candidates and themes. . . .
Ross Perot won 19 percent of the national vote, and in some states he won 25, 30 percent of the vote. These votes were pulled mostly out of the Republican coalition. In the 2000 primary, McCain was able to beat George W. Bush in several states, partly by attacking corporate misbehavior and Republican tax policies, and by blasting the religious right.
PIVEN: Kevin, do you see the Republican backlash against the religious right as happening on libertarian grounds?
PHILLIPS: No, no, I see it on more cultural grounds. If moderate Republicans have one thing besides Iraq that makes them want to vote against Bush, it's all these fundamentalists coming out of the woodwork from Armpit, Alabama. It's this biblical worldview in which Baghdad is the new Babylon. The average Presbyterian Republican in suburbia thinks those people are wackos.
LAPHAM: Are there really enough Republican dissidents to form the critical mass in a new progressive majority?
PHILLIPS: Maybe only 15 to 20 percent of the Bush coalition, but it would be a big swing. And the other thing to remember about the three dissident Republican candidates is that they all succeeded in increasing electoral participation, especially Perot. Perot increased voter turnout from 50 to 55 percent. Jesse Ventura raised turnout in Minnesota too. No liberal movement could possibly increase turnout to that extent, but populist conservatism can. The type of person who can command a major-party nomination is more likely to be a conservative populist who can get the turnout up. . . .
A lot of independent-leaning Republican voters are unhappy with Bush on a lot of issues that are compatible with the Democratic side. But there's no institutional force; nothing to manage it, to mold it. The Democrats seem entirely unaware of the fact that the two parties have areas of overlap. Pat Buchanan beat Bob Dole in the New Hampshire primary on jobs and corporations; John McCain won in Michigan by raising concern about the Republican Party and the religious right. So there's obviously a big group of votes there. But the Democratic progressive community has essentially no lines of communication to it.
Here's what Kevin Phillips said, from "How Kerry Can Win," The Nation, August 2 2004:
". . . the Democrats of 2004 would find it particularly worthwhile--to focus on the GOP's "unbase." This, in essence, is the 20-25 percent of the party electorate that has been won at various points by three national anti-Bush primary and general election candidates with Republican origins: Ross Perot (1992), John McCain (2000) and, in a lesser vein, Patrick Buchanan (1992). Most of the shared Perot-McCain issues:
* Campaign and election reform,
* Opposition to the religious right,
* Distaste for Washington lobbyists,
* Opposition to upper-bracket tax biases
and runaway deficits,
* Criticism of corporations and CEOs
are salient today and more compatible with the mainstream moderate reformist Democratic viewpoint than with the lobbyist-driven Bush Administration. Perot and Buchanan's economic nationalism (anti-outsourcing, anti-NAFTA) and criticism of Iraq policy under the two Bushes is also shared by many Democrats.
Taking things somewhat further, these members of the "unbase" of the Republican presidential coalition ought to be the Democrats' key target because (1) they have some degree of skepticism about Bush and (2) they are the segment of the GOP coalition most logically open to recruitment for a progressive realignment, short-term or otherwise. That is the way small or large realignments work: by wooing the most empathetic part of the current coalition."
A US annexation of Canada and Latin America? I wonder what the people who live there think of that idea?
And his ideas about American success in "exporting security" to the rest of the world? Not working so well in Iraq right now. Didn't work too well in Vietnam either. Worked better in post-WWII Europe and Japan, every neocon's favorite examples. How replicable is that?
At least he voted for Kerry, so he must be somewhat reasonable, but still . . .
Robert Pollin, Contours of Descent: US Economic Fractures and the Landscape of Global Austerity
critiques both the Clinton and Bush II economic policies and presents an outline of a populist-progressive ecoonmic program.
Doug Henwood, After the New Economy
debunks the myth of a "new economy," with chapters on work and labor, income and wealth inequality, and globalization; a sort of economics companion to Thomas Frank's earlier "One Market Under God," which was more of a cultural critique of the new economy idea. Henwood also criticizes left-wing anti-globalizers and anti-technology econuts.
"Rich people (Americans) are not putting the redistribution of wealth at the top of their agenda."
You have got to be kidding me. What do you think the tax cuts for the rich were? Gutting labor and workplace safety regs? Energy and environmental laws written by the industries that are supposed to be regulated? Skyrocketing executive compensation? Corporate waste, fraud, and abuse? Need I go on?
Do you realize what has been happening to wages, and the income and wealth distributions in this country over the last 30 years? Or maybe you just don't care.
One question, though: conservatives seem to be able to appeal to people by selling what they (I mean, the conservatives) want, whether or not people really need these things or not (do people really need privatized public schools or more tax cuts for the rich?). How?
Am I just making your point even further here? People will respond to an articulated social vision and set of values, even if it's not in their immediate self-interest (e.g. people like(d) Bush, or Wellstone, not because they necessarily agreed with their world-view, but just because they HAD a world-view)?
One issue here is whether the inflation of the 1970s was best dealt with via Volcker-style "shock therapy," or a more moderate combination of deficit reduction, interest rate increases, and what European social democrats call "incomes policy" (negotiated wage restraint among business, labor, and government) that would not have sent unemployment to 10% and decimated our manufacturing base. It's not clear that the American approach here is superior to the European one, either.
As for point two, if Democrats would stop letting Wall Street investment bankers have a veto on party economic policy, we could have a more populist and audacious set of policy proposals (Full-employment fiscal policy? Higher minimum wage? Labor law reform? Financial market reforms to direct more capital to priority areas like job creation and affordable housing? A new set of pro-growth rules for the international economy?) that would actually help working class people.
Inflation does not seem to be a problem right now, but if and when it does become one again, we ought to look to an American-style version of "incomes policy" as an alternative policy tool to fight it.
PS I completely agree that "laundry lists" of policy proposals are not enough to restore the Democrats to power; they are not sufficient, but they are necessary.
. . . but it is doing a pretty live imitation of a corpse right about now (to paraphrase that old political master G. W. Plunkitt).
The reason that people do not believe that social democratic policies offer them very much is not because these policies have failed. On the contrary, by many measures (productivity, life expectancy, poverty rates, economic mobility) European social-democratic capitalism has now matched or surpassed the performance of American conservative capitalism.
The reason people (mistakenly, in my view) see social democracy as discredited is that there has been a 40-year campaign by the Right (conservatives and their business allies) to discredit activist government, essentially to line their own pockets.
There has been no countervailing campaign by the left to defend these policies. Instead, we have too many people who accept conservative premises too easily and argue that we have to "find a new ideological basis" or a "third way" or move "beyond left and right" or whatever.
Conservatives are never this craven. They never make this mistake. They find ways to put idiotic policies like (God forbid) privatizing the public schools on the national agenda.
What we need, in part, is an equally ambitious organizing, media, etc. campaign in this country to make social democracy credible again. I think (hope) that's part of what people like Chris Bowers mean when they speak of "growing liberalism."
The "obstinacy" that Russo refers to is Kucinich's refusal to privatize Cleveland's municipally-owned electric utility in 1978. The muni's privately owned competitor, and their bankers, wanted Dennis to sell so that they could form a private electric monopoly.
Of course, the banks also held Cleveland's debt, and gave Kucinich an ultimatum: sell, or we will force the city into default. This despite the fact that Cleveland was in no worse financial shape than many other cities at the time (in much better shape than, say NYC).
Kucinich refused to sell, and so Cleveland became the first US city since the 1930s to be forced into default, which played a huge role in his 1979 loss to Voinovich.
Subsequently, studies have shown that Kucinich's refusal to sell Cleveland Muni has resulted in millions of dollars of savings for Cleveland-area electricity rate payers due to competition holding rates down. In fact, Kucinich won election to the Ohio Senate in 1994 largely on that issue.
As I already pointed out, Kucinich won his House seat in 1996, in a substantially white-working class district, by beating an incumbent Republican (as he did in 1977 when he became Mayor of Cleveland).
How has Kucinich been able to connect with these voters that have been abandoning Democrats elsewhere, while remaining true to his progresive values? Perhaps the successful integration of religious and spiritual themes into his speeches has something to do with it. These would seem to be useful traits for Democrats of whatever stripe to learn more about, not flippantly dismiss as Russo does.
If you are going to continue to write crap like this blaming the "far left" for every Democratic defeat, could you at least consign it to the diaries?
This is nonsense. Every Democratic candidate for President since Carter in 1976 has run to the center. Carter and Clinton were the most conservative Democratic Presidents since Grover Cleveland. And yet we have still lost 7 out of 10 Presidential elections.
When are you people going to learn that chasing a center that constantly moves to the right is a recipe for getting us labeled as the party that doesn't stand for anything - the party of "flip-floppers" and pansies that can't be entrusted with managing the economy or national security?
People, listen to Chris Bowers, not Tim Russo. The only chance the Democrats have of long-term success is to do what Republicans have been doing to us over the last 40 years - turn "conservative" into a dirty word, and begin to pull the center back toward the left. Build the institutions that can make the material and moral case for social democracy in this country.
Oh, and the idea that Kucinich "destroyed" the Ohio Democratic Party is sheer lunacy. Ohio dems haven't elected a governor since 1986, long before Kucinich won his Congressional seat in 1996. In fact, Kucinich beat an incumbent Republican to win his working-class Cleveland-area district; he just won it again with 60% of the vote. The Ohio Democratic Party, and the nation, needs more people like Dennis Kucinich.