This morning, Krauthammer marches to war, declaring that there are no cuts. Here is his opening salvo:
KRAUTHAMMER (5/6/05): On April 28 the president...propos[ed] a remarkably progressive reduction in the rate of growth of benefits.And yes, you read those quotation marks right—Krauthammer doesnt believe that Bushs ballyhooed cuts are really cuts at all. (Headlines which called them that were misleading.) What follows is Krauthammers full presentation on this point. And by the way—in the following passage, he makes the case as well as it can be made. Dems need to know how to answer:
The Democratic leadership, supported by misleading headlines around the country, denounced these "cuts" as the work of a party that never did believe in Social Security and now wants to kill it.
KRAUTHAMMER (continuing directly): Yes, these are cuts, but only in the growth of promised benefits in the future—based on formulas written in the pre-baby boomer retirement era that so inflate benefits that they are entirely unsustainable. They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees.No one gets cut, Krauthammer says—and he makes the case here as well as it can be made. Democrats badly need to know how to respond to this fusillade.
To simplify somewhat, the amount of your first check upon retirement is based on your average wages during your lifetime. Then a formula adjusts that number to wage inflation—which generally amounts to price inflation plus about 1 percent annually. The Bush proposal is to preserve this ever-increasing, ever-compounding benefit formula for poorer Americans, while gradually phasing out the extra 1 percent as you move to wealthy wage earners.
No one gets cut—either in nominal or real dollars. Everyone gets at least as much or more than any retiree today, with the poor getting progressively more every year.
Lets start by debunking some flat-out misstatements. In the first of these three quoted paragraphs, Krauthammer discusses the future benefits that Social Security currently promises. And uh-oh! He says those future benefits are entirely unsustainable. They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees. But this statement is plainly untrue; if we make fairly minor adjustments to existing taxes, it would be entirely possible to pay promised SS benefits over the next 75 years. As Chris Dodd noted on Sundays Meet the Press, less than one-third of Bushs sweeping tax cuts erases the projected 75-year shortfall. Clearly, taxpayers could support these benefit levels, if we decide we want to do it. Krauthammer may think this would be bad policy. But its absurd to say it cannot possibly be done.
But after he makes these flat misstatements, Krauthammers argument rallies. Its true! Under the benefit levels Bush proposed last week, future retirees would get at least as much or more than any retiree today—even if those future benefit checks are adjusted for inflation (in nominal or real dollars). For example, consider an average-income worker who retires in 2045. His monthly check will contain more dollars than the check sent to such retirees today. And his monthly check will be bigger than todays check even if you adjust for inflation! This is what Republicans mean when they say there are no cuts in Bushs proposal. If Dems want to win this fight on the merits, they need to know what to say when someone makes these basic points. Drums response (So what? Its less than Congress promised in 1983!) isnt likely to help in this fight.
So lets get at it. Why should Dems care about the benefit levels Bush has now proposed? Why should Dems complain if average retirees get more money in the future, even adjusted for inflation? Simple: Over the course of the next 40 or 50 (or 70) years, living standards are going to change a great deal; if retirees are going to be able to approximate the living standard they maintained while they were working, benefit levels have to reflect that. And Bushs proposal massively changes the ability of the average worker to do that. Heres the way former Clinton assistant Jeffery Leibman described this matter in a Harvard Magazine article (for the record, Leibman supports the use of personal retirement accounts. He also thinks we should raise replacement rates for average-income retirees):
LEIBMAN (3/05): Maintain replacement rates. The main function of Social Security is to prevent a large drop in living standards in retirement for people who, through bad luck or bad planning, do not reach retirement with sufficient savings. As wage levels rise over time, Social Security benefits therefore need to rise with wages. Otherwise, retirement standards of living would fall further and further behind those of the pre-retirement period.Others have rendered this point with more feeling, but we cant recall who at this time.
But lets get back to the heart of the matter: Under Bushs proposal, would the average retirees standard of living fall further and further behind that of the pre-retirement period? Would retired workers have a harder time maintaining something like their previous living standard? Yes, they surely would. At present, an average worker gets about 36 percent of his former income replaced when he opens his check from SS. But under Bushs plan, that replacement rate would drop dramatically—perhaps to 20 percent, perhaps farther (see THE DAILY HOWLER, 5/4/05). As weve suggested: Just mention this fact to an average worker. Trust us— you wont have to stage a debate about whether this is really a cut.
No, it isnt enough for Dems to say, Weve called it a cut, and that settles that! If Democrats want to win these semantic debates, they have to know what to say to Krauthammer. Once he gets past those outright misstatements, Krauthammer makes this case as well as possible. Ten years ago, Democrats rarely knew what to say about their use of the troubling word cuts. Will Democrats stumble and bluster again? Or will they go to school on semantics? Will they stop worthless fighting about the word cuts and talk up replacement rates?
KRAUTHAMMERS KOOL-AID: Krauthammer makes the case against the word cut as well as the case can be made. But uh-oh! After that, he gulps full glasses of bright red Kool-Aid, typing up the full kooky-con liturgy and going several steps beyond that. The SS trust fund? Its really a hoax. And amazingly, he even says this:
KRAUTHAMMER: Democrats have a wonderful smoke screen. These "cuts" are not only destructive but unnecessary, they claim, because the insolvency does not kick in until sometime in mid-century—the Democrats' latest comically precise number is 2052—when the "trust fund" runs out.Incredible! To state the obvious, that comically precise number the Democrats use is drawn from the official projection of the CBO, much like the comically precise number (2041) the president cites at every stop. (Bushs number is drawn from the forecast of the SS trustees, a forecast which is deeply gloomy.) Everyone works from numbers like these—and theres no earthly reason why they shouldnt. Its deeply bizarre—deeply bizarre—to see Krauthammer descend to this level. But then, just like that, he stoops even further! Try to believe he was willing to say it! And try to believe that the Washington Post puts nonsense so rich into print:
KRAUTHAMMER: The fiscal problem starts to kick in not in 2017 but in 2009. The Social Security surplus, which Congress happily spends every year, peaks in 2008. Which means that starting in four years (and for every year thereafter) a budgetary squeeze begins, requiring new taxation or new borrowing.Incredible. Using a comically precise number of his own, Krauthammer claims that a very serious fiscal problem starts not in 50 years, not even in 12 years, but in four years—in 2009.
If in 2010 tax revenue and spending remain exactly the same as in 2009, the Treasury will not end up with the same size deficit. It will end up with a larger deficit, because the amount of money it was receiving free and "borrowed" from the Social Security surplus will have shrunk.
That surplus shrinks from its peak in 2008 to zero in 2017 and goes negative after that. That is a very serious fiscal problem that starts not in 50 years, not even in 12 years, but in four.
Weve discussed this consummate nonsense before (see THE DAILY HOWLER, 3/16/05). What is the very serious problem which has Krauthammer up drinking Kool-Aid all night? Here it is: According to Krauthammer, Social Security will produce a smaller surplus in 2009 than it did in 2008. Make no mistake—the program will still be producing a surplus. Indeed, the surplus that year will be larger than the surplus SS is producing today! But so what? Because that surplus will be slightly smaller than the surplus produced one year before, Krauthammer declares a very serious fiscal problem. Its amazing to see a man like Krauthammer stoop to such ludicrous claims.
Back in March, using somewhat different numbers, Senator Judd Gregg (R-NH) claimed that this very serious problem will start in the year 2012. This is lunacy, pure and simple. (For a fuller discussion, see the March HOWLER linked above.) When people feel free to spout such nonsense, it means they feel free to do and say anything—even to make that ludicrous claim about the Dems comically precise number. But uh-oh! At the Post, pundits are free to do and say anything, no matter how utterly kooky or daft. Krauthammer, greedily gulping down Kool-Aid, establishes that today which each draught.
KINSLEY TOMORROW: We know, we know—we promised Part 3 on Michael Kinsley, whose heartfelt praise of Bushs honesty is cited today by Krauthammer. But Charles deserved a post all his own. Therefore, well finish Defining dishonesty down in a very-special Saturday HOWLER.
AND EVEN MORE AFTER THAT: We also plan to speak more directly to the flaws with Drums well-intentioned formulation, and we plan to address the Carpetbagger post Kevin cites. And not only that! We still owe you that comical look at Bushs two-sided use of cuts. Yep! You can call them cuts—or you can call them increases. And, depending on whether Bush himself has proposed them, thats exactly what he does! When he lies in the face of worried grandmothers, Bush behaves like a small, grimy man. But when he pick-and-chooses his spots with the troubling word cuts, the gods on Olympus enjoy mordant laughter. Well share that comedy, perhaps tomorrow. Today, though, we leave Charles in charge.
BONUS! WE ACCEPT A STREET-FIGHTING CHALLENGE: Meanwhile, the executive board has made its decision. Here at THE HOWLER, we plan to accept the street-fighting challenge laid down in this post (read all the way to the end for the challenge). And not only that—we plan to offer a street-fighting challenge of our own in reply! Excitement grows on our sprawling campus. For details, keep your eyes on this space.
LEIBMAN ON REPLACEMENT: Leibman would let some replacement rates fall. But he says we should try to increase replacement rates for roughly two-thirds of retirees:
LEIBMAN: There are, however, two serious arguments for letting replacement rates fall a bit over time—though not nearly as far as the administration seems likely to propose. As the population ages, the tax rates necessary to pay Social Security benefits will have to rise, raising the amount of economic distortion caused by financing the program. We may therefore want to have a Social Security system that provides a bit less protection, rather than incur all of the incremental economic costs of higher taxes. In addition, because income levels rise over time due to productivity growth, we may reasonably be a bit less worried about people suffering a drop in their standard of living at retirement—given that the amount of hardship caused by, say, a 40 percent drop in consumption is likely to be lower if the initial level of consumption is higher.
But these arguments assume that replacement rates are set optimally to begin with. As I mentioned earlier, we need to find a way to raise retirement-income levels for retirees who lack significant savings beyond Social Security. For the two-thirds or so of Social Security beneficiaries in this category, our goal for Social Security reform should be to have the sum of the traditional benefit and personal retirement accounts increase their replacement rates, not reduce them.