WASHINGTON POST EDITORIAL (2/1/05): [F]uture beneficiaries would receive more, in inflation-adjusted dollars, than they do today because of the way benefits are adjusted for wage growth. When Mr. Bush says that the system then "will be flat bust, bankrupt," he is flat wrong.Yes, the term bankrupt is flatly misleading. But will somebody tell Post reporter Jim VandeHei? In todays paper, he reports on SS. And in his own voice, he uses the term that the editors say is flat wrong:
VANDEHEI (2/1/05): With most Democrats opposed to the president's proposal, Bush intends to use the State of the Union speech to begin to detail these ideas, and to argue that new Social Security accounts will be highly regulated and voluntary—and necessary to keep the system from going bankrupt decades from now.VandeHei isnt quoting Bush there—and if he did quote Bush saying bankrupt, he ought to provide some clarification. An accurate statement would have been just as easy—this accurate statement, for example:
VANDEHEI REVISED: With most Democrats opposed to the president's proposal, Bush intends to use the State of the Union speech to begin to detail these ideas, and to argue that new Social Security accounts will be highly regulated and voluntary—and necessary to keep the system from developing funding shortfalls decades from now.Whats in a word? The editors call the word bankrupt flat wrong—but VandeHei uses it in his report. Accurate statements are just as easy. When will these dudes start to type them?
THE STATE OF AMERICAN DISCOURSE (PART 4): Weve all heard this twaddle, gloriously unrebutted, over the course of the past twenty years. The Social Security trust fund has already been spent. Theres nothing there but a pile of IOUs. Indeed, the fund doesnt even exist. How familiar are these scary old saws? On Sunday, Steve Rattner dragged them out on the Washington Post op-ed page; indeed, he even proclaimed that the much-touted Social Security trust fund is, in reality, a myth (see THE DAILY HOWLER, 1/31/05). And on the January 17 Talk of the Nation, Stephen Moore played the same tune:
MOORE (1/17/05): The big [problem] is that there is no trust fund, and you were talking, Neal, earlier about this, but—that the money that has been borrowed from the fund is irretrievable; there's no getting it back. So Dean [Baker]s numbers only add up if there were some way we could magically go into a bank vault and 500 to a trillion dollars that we've already borrowed from the fund were somehow available to us. But it's not; once it's spent it's gone forever.Weve heard these claims for twenty years; the money is gone, and we cant get it back. Since Democrats are going to have to learn what to say in situations like this, lets recall the exchange that ensued before Conan sought Bakers analysis:
CONAN: Let me ask a question about something you said there, Stephen Moore, and we'll also go back to Dean Baker on the same point. There's no money in the trust fund; the government has already borrowed it. There are bonds.Correctly, Conan said the SS trustees are holding (more than) a trillion dollars in government bonds. But Moore kept saying the trillion dollars had already been spent. How could the government get back the money when it had to repay the trustees? And that was the question that Conan, still confused, posed to his other guest, the estimable Baker. Dean, where's the money? he finally asked. Where's the government going to get the money to pay back the bonds?
MOORE: It's already spent—you know, it's already spent.
CONAN: But there are bonds.
CONAN: There are physical bonds owned by—
MOORE: Right. That's right.
CONAN: —the Social Security trust fund, a trillion and a half dollars, something like that.
MOORE: That's right. Yes.
CONAN: OK. What you're saying is that—
MOORE: But the point is—
CONAN: —by political choice, Congress won't want to pay that money back.
MOORE: Well, what I'm saying is where is the government going to get the money to pay back the bonds? In other words, it's almost like if I borrowed—
CONAN: All right. That's exactly—
MOORE: —money from myself.
CONAN: All right. Dean, where's the money? Where's the government going to get the money to pay back the bonds?
Duh! The answer to that question is perfectly obvious, and we recommend that Democrats give it. Heres a start-up answer wed recommend the next time you hear Conans question:
RECOMMENDED ANSWER: Easy! Almost surely, the government is going to borrow the money, as it has done for the past forty years whenever it pays back previous loans. Neal, as every listener knows, the federal government has borrowed large sums of money almost every year for the past forty years, and most of that money hasnt been borrowed from the Social Security trust fund. The government borrows from individuals and entities all over the world, and when it comes time to repay those loans, the government routinely borrows more money to conduct the transactions. The government does this every year! You may think thats an OK idea, or you may think that the government shouldnt borrow at all. But the government has borrowed for the past forty years, and no one uses asks how its going to pay the loans back until it comes time to pay back the money it has borrowed from Social Security! When the government repays Ross Perots bonds, for example, no one says, Oh, were sorry, Mr. Perot, but the money you loaned us has already been spent—Although, of course, it obviously has. Duh! Thats why the government borrowed it!—and no one calls Mr. Perot on the phone and tells him were very sorry but he has nothing in his portfolio but a pile of worthless IOUs. But in the case of Social Security, these ridiculous claims are suddenly offered, and this is done for an obvious reason—to mislead the public, to create the sense that some sort of crisis exists and that Social Security has gone belly-up. But that just isnt true. Where will the government get the money? Neal, it will borrow the money, just as it has done for years, and will continue to do, whenever it pays back its loans.Long answer—and no, that answer would not shut down this twenty-year debate. Spinners like Moore would continue to fight, trying to create the false impression that something disturbing has occurred in the use of those Social Security funds. So no, that answer wont end all debate. It will only start to do so; it will start to let voters see the logic of this gonzo debate. But readers, over the course of the past twenty years, there has normally been no answer—no answer at all—when sophists like Moore have peddled this bilge. Why is Conan still confused? Simple—because for the most part, he has never heard any response when spinner like Moore start pimping this bile. So readers, keep it clear in your heads: The money has already been spent whenever the government pays back a loan! And the government has repaid trillions of dollars in such loans—and will continue to do so, quite nicely.
And by the way, one important point: If the government hadnt borrowed that money from Social Security, it would have had to borrow it from someone else. And guess what? Those debtors would have been repaid, just as the government always repays its debtors. You may not like the fact that government carries debt, but that has nothing to do with Social Security. The federal governments always pays back its debts, and it will pay back these debts in the usual manner. Stephen Moore understands all this as well as he knows his own name.
But Neal, one final point, and this is extremely important: Stephen is making these silly, scary claims for the purpose of confusing the public. Stephen understands how debts get repaid; he understands where the money comes from. He knows that, whenever the government repays a loan, the money has always already been spent. Hes raising concerns that he knows are absurd in order to frighten and mislead the public. Its time we called a spade a spade and asked him and his associates to stop.
For twenty years, weve heard these gong-show spins, deceptions devised in pseudo-con spin shops—and weve essentially heard no reply from our political, academic or journalistic elites. Why is Conan still confused? For twenty years, hes heard these slippery claims, claims that were hatched in conservative shops—and hes rarely heard a reply. Result? As we heard, hes still confused. Sadly, of course, so is Marilyn.
TOMORROW: Who is Stephen Moore? And: We respond to your e-mails.
NEXT WEEK: Something we were withholding made us weak, Frost declaimed. Next week, we analyze our current weakness.
WHAT BAKER SAID: Yes, but what did Baker say to Conan? Given the risible standards of this twenty-year gong-show, his answer was better than most. On the other hand, we dont think it was adequate:
CONAN: All right. Dean, where's the money? Where's the government going to get the money to pay back the bonds?The major problem here is obvious—Baker doesnt answer the question. Where will the government get the money? Baker doesnt ever respond. Nothing he says is false or wrong. But it doesnt quite answer the question, and by the end of this short passage, hes already wandering toward incoherence. Do you understand his last three sentences? Do you really think Marilyn does?
BAKER: Well, Neal, my guess is you probably own some government bonds. I own some government bonds. My guess is Steve probably does. We don't ask where the government's going to get that money. Social Security is a separate program. That's under an act of Congress. Those bonds are just like any other bonds that you or I or anyone else hold. Unless, you know, Steve may want to push to have government default on its debt; it's never done that. It'd be rather outrageous, I think, if it did. He's welcome to do that. I don't think he'd find a lot of takers. We should treat Social Security as said; it's a separate program. You can't say it runs a shortfall when the taxes aren't sufficient, but when it has a surplus we threw that money away. You know, that's nice game-playing, but that's not the law.
Let us make it perfectly clear—we dont mean this in any way to be a criticism of Baker. Baker and Weisbrot are heroes of this war; as weve said before, you should read their important book, Social Security: The Phony Crisis. But Baker and Weisbrot are economists, and people who are trained as economists wont necessarily have the skills required to unpack carefully-crafted deceptions. That requires a different skill-set. Indeed, economists may not even know the range of spin-points being used to mislead the public.
In our view, theres one other problem with Bakers reply; he doesnt directly call Moore a sophist. But alas! Dems and liberals lack a Master Narrative, a narrative in which the days varied events actually start to make larger sense. Republicans know to yell liberal bias in even the most ridiculous settings. But the other party has never bothered developing an accurate Larger Picture. They need to start telling a Larger Story, however much it might distract them from their parties, recreations and their fund-raising ventures. Because theyll never get it right on their own, well start to show them how to do it in our four-parter next week.
ALLEN GETS IT RIGHT: Holy cow! After twenty years, the logic of this inane debate is starting to dawn on a few major pundits. In U. S. News, Jodie Allen laid out a bit of the logic of these gonzo claims about the mythical trust fund. [M]uch of the current sound and fury signifies less than reigning politicians may want you to believe, she wrote. Then, remarkably, this:
ALLEN (1/24/05): Take, for starters, the myth of the "mythical trust funds."... "The trust fund is just an accounting exercise," warned Congressional Budget Office Director Douglas Holtz-Eakin recently, echoing similar cries. In fact, the extra money has been used to cover other federal spending—things like defense and education. All the trust funds hold is a bunch of treasury bonds. IOUs. Mere paper.Duh! And lets make that one additional point. If the trustees had kept that trillion bucks in a lockbox—if they had buried the money out on the mall—then Congress would have been forced to borrow the same amount from somebody else! In short, the government would have carried the same amount of debt. Bury the money in a gold box? Loan the money to the feds? It doesnt make a lick of difference. Democrats need to learn to lay these points out—and they need to learn to go after sophists like Moore when they do so. Unless, of course, they just dont care, which often looks like their problem.
This is true. But, and I don't want to disillusion you too much, the same is also true of that account you have at your local bank. No, there is no lockbox full of gold bars in the bank's repository with your name on it—just the bank's promise to pay up. In fact, hold on to your hat, the whole modern economy runs on mere paper...