Howling Dog Graphic
Point. Click. Search.

Contents: Archives:

Search this weblog
Search WWW
Howler Graphic
by Bob Somerby
E-mail This Page
Socrates Reads Graphic
A companion site.

Site maintained by Allegro Web Communications, comments to Marc.

Howler title Graphic
Caveat lector

15 May 2002

Our current howler (part II): What? Them worry?

Synopsis: There were ways to examine the candidate's plan. The press made a point to avoid them.

Bush: Let workers invest their payroll taxes privately
Judy Keen, USA Today, 5/16/00

A bigger nest egg
David Gergen, U. S. News and World Report, 6/5/00

Bush Walks a Fine Line on Social Security
Glenn Kessler, The Washington Post, 9/28/00

William Neikirk, The Chicago Tribune, 10/26/00

Was May 2000 a season for spinning? Social Security proved it. On May 15, Candidate Bush delivered a major speech laying out his ideas for reform of the program. His proposal? Younger workers should be allowed to use roughly sixteen percent of their payroll taxes—the taxes that normally fund Social Security—to set up personal investment accounts. The money accrued in these accounts would be used for the individual’s retirement. One key point: As was widely noted in the press, Bush didn’t offer a fully-formed plan. "Bush offered few specifics about how his ideas would work," Judy Keen wrote in USA Today. The hopeful had only "outlined broad principles." But everyone agreed that Bush had endorsed the most sweeping reform in Social Security’s long history. In a rebuttal speech given two hours later, Gore opposed the use of personal accounts; he said the risks involved in private investment would "take the ‘security’ out of Social Security." Puffing and posturing as is its wont, your press corps swore that a "great debate" was surely going to follow.

That "great debate" never happened. Reporters did present the general outlines of Bush’s historic proposal. Bush pledged not to reduce Social Security benefits for current retirees or for those near retirement. He said that use of personal accounts would be voluntary for younger workers. He promised to keep Social Security surpluses "locked away" for the program’s sole use. And he wouldn’t increase payroll taxes, he said. Bush also explained what he did want to do. He would let workers put part of their payroll taxes into "steady, reliable" investments—investments that could be used "only for retirement or passed along as inheritance."

As such, the general outlines of the proposal were known. And why was this reform now needed? According to Bush, "We are nearing Social Security’s greatest test…If we do nothing to reform the system, the year 2037 will be the moment of financial collapse." His reforms would somehow address this problem (how, he didn’t specifically say). Meanwhile, the reforms would be great for younger workers. "The reforms I have in mind will actually increase their retirement income," he said. Indeed, workers would end up with substantially more money because of the personal accounts. "Right now, the real return people get from what they put into Social Security is a dismal 2 percent a year. Over the long term, sound investments yield about a 6 percent return…A worker who invests even a limited portion of his or her paycheck could, over a career, end up with hundreds of thousands of dollars for retirement." There was one last bonus in Bush’s speech; as noted, the money could be left to the worker’s heirs. Nothing like that was allowed under Social Security.

One thing was clear about Bush’s ideas; as presented, they were hard to dislike. Individuals would gain hundreds of thousands of dollars. They could pass the money along to their heirs. Meanwhile, the personal accounts would somehow extend the solvency of Social Security itself. Indeed, in the weeks which followed Bush’s speech, enthusiasts wrote paeans to his brilliant proposal. In a column in U. S. News, for example, David Gergen pictured a 25-year-old worker earning $30,000 a year. Under the current Social Security system, the money at question in Bush’s plan would earn that worker $153,000, Gergen said. Under Bush’s plan, the same money would earn $297,000—about twice as much. Unless Americans hated free money, it was hard to see what was wrong with this plan. "There is a good reason why Governor Bush is forging ahead," Gergen wrote. "He is becoming the candidate of fresh ideas."

But was anything suspect about those ideas? To be honest, not since the Music Man hit River City had anyone offered so much for so little. Indeed, Bush’s budget plan seemed to be nothing but gain. Individuals would gain large sums from Social Security reform; meanwhile, his across-the-board tax cuts meant that every worker would have to pay fewer taxes. Given this pair of rosy scenarios, the press would surely want to examine Bush’s Social Security proposal—especially since, in unveiling his plan, he had "offered few specifics about how [it] would work." It may have been that Bush’s ideas would work out just as he had described. But any press corps worth its salt would surely want to look at them closely. Surely, the Washington press corps began working hard to examine this key Bush proposal.

In fact, nothing of the sort occurred. How thoroughly did the press corps nap? Because Bush’s proposal lacked key details, it was hard to know just how it would work. But twenty-one countries around the world had experience with similar retirement plans; examination of the foreign experience could have been a source of valuable perspective. More significantly, six plans involving personal accounts had already been presented in Congress. Unlike Bush’s hazy offering, these congressional plans were fully formed. If the corps had examined these real-world proposals, voters could surely have gotten a better idea of how Bush’s "broad principles" might work.

How did the press corps handle the matter? For starters, no newspaper or magazine ever presented an article on the foreign experience. How had personal accounts worked in Chile? How had the system worked in Great Britain? There was simply no way to find out. For the record, in the few cases where some slight reporting was done, the foreign experience didn’t sound reassuring. "Chile’s plan thrived for a decade or more through an economic boom," the Chicago Tribune said in a brief May 7 report, "but has since suffered with a downturn in the economy." (On May 28, the Tribune interviewed Kenneth Apfel, U.S. Commissioner of Social Security. Apfel said that the Chilean government "had to urge workers nearing retirement to delay retiring because of the drop.") Meanwhile, a few scribes noted a significant problem with use of personal accounts in Great Britain; administrative fees had burned up roughly forty percent of individuals’ profits. But reporting on the foreign experience was extremely hard to find. The press corps simply took a pass on this possible source of information and perspective.

Much more remarkably, no one ever did a report on those real-world congressional plans. Rep. John Kasich (R-OH) had authored one plan; almost no one ever mentioned it. Democratic senators Moynihan and Kerrey had offered a plan; no paper or magazine ever explained it. How might personal accounts really work? There was simply no way for a voter to know. The simplest information was missing in action as the press corps yawned, napped, snored and slumbered.

Without question, the press corps’ refusal to examine these plans robbed voters of valuable insights. Indeed, as in the case of the foreign experience, some of the bloom came off the rose when one looked at these real-world proposals. When Kasich and others developed real plans, they were forced to deal with real-world concerns which Bush had ignored in his cheerful speech. And alas! Though the Texan painted a pleasing picture of younger workers raking in dough, the actual picture was substantially different when one looked at the real-world proposals.

On September 28, 2000, for example, Glenn Kessler penned one of the only reports on the Kasich proposal. Kessler, the Washington Post’s budget reporter, offered a mordant assessment. "The fine print of the [Kasich plan] might temper public enthusiasm for Bush’s Social Security approach," he wrote. "[A]ccording to the deputy chief actuary of Social Security, which evaluated the Kasich plan last year, some baby boomers would see little or no advantage from individual accounts, and workers who invested conservatively in bonds would fare relatively poorly." Another sobering assessment followed. "[T]he actuary’s report suggests the Kasich plan would bring relatively little gain in benefits compared with the current system, while adding a new element of risk," Kessler said. This picture, of course, was vastly different from the cheerful portrait painted by Bush. Kessler noted another fact; none of the six congressional plans had been able to honor all of Bush’s pledges against tax increases and benefit cuts. It was, of course, those very pledges which made his ideas seem so "fresh" in the first place.

One other paper mentioned Kasich’s plan; on October 26, the Chicago Tribune’s William Neikirk offered a bit more detail. Why would individuals gain so little? According to Neikirk’s brief report, the plan "would reduce the [guaranteed] Social Security benefits of future retirees by a total of about 45 percent." Ouch! But would income from the personal accounts replace the loss in guaranteed benefits? "[T]he accounts would for the most part earn back the cuts for workers and in some cases put them ahead," Neikirk wrote, citing Kasich staffers as his source. "In general, younger workers came out even or slightly ahead, while middle-age workers still did not earn back all their benefit cuts." And even this unexciting result was based on "an assumption open to challenge," Neikirk noted—the assumption that workers would earn a seven percent return on their investments. Need one other obvious point be made? Those who fared poorly on their investments could be faced with serious losses. These were some of the actual facts of one actual, high-profile plan.

None of this necessarily meant that personal accounts were a bad idea. Theoretically, Kasich’s large reduction in guaranteed benefits extended the life of the overall program; according to Kasich, he was seeking a real-world solution to funding problems which Social Security would eventually face. (For the record, many economists argue that predictions of Social Security’s "financial collapse" are hyperbolic and vastly misleading. Needless to say, this key matter was never discussed as the press ran its "great debate," either.) But Kasich was frank when he spoke with Kessler; some individuals would lose ground under his plan. But given the press corps’ hapless performance, American voters were almost never exposed to this kind of information—the kind of knowledge voters needed to conduct any sort of informed "great debate." Kessler and Neikirk penned brief accounts, but no one else, at any paper, ever discussed the Kasich plan, or any of the other plans which had been presented in Congress. The plans weren’t discussed in our major newspapers; they weren’t discussed in our news magazines. Were they ever discussed on programs like Hardball? Surely, we don’t have to ask.

As usual, the press corps’ aversion to substance was potent. In its place, a Dick-and-Jane discussion ensued, in which few attempted to get beyond a few standard factoids and soundbites. How did our "great debate" unfold? Bush appeared all over the country, describing the Texas-sized piles of money workers could gain from their private accounts. But he refused to answer the most basic question—he refused to say whether such accounts would force a cutback in guaranteed benefits. And the press didn’t show the slightest sign of wanting to flesh out this seminal point. Almost no one ever criticized Bush for refusing to speak to this critical matter. Instead, as we will see in a later HOWLER, he was widely lauded as a bold leader for presenting his free-sack-of-cash plan.

And now, according to Donald Lambro, Bush’s proposal will be back in the news (see THE DAILY HOWLER, 5/14/02). The corps will get another chance to provide "great debate" on this topic. But given the corps’ Campaign 2000 effort, it isn’t too soon to start insisting that the gang really function this time. Two years back, the press corps sleep-walked through its debate. Left on its own, it will slumber again. People who want a "great debate" will surely have to stand and demand one. And readers, please speak with a loud, clear voice. It’s hard to be heard for the snoring.

Next (appears on May 16): Instead of examining Bush’s proposal, the press corps spun well-crafted tales.


The Daily update (5/15/02)

What? Them worry? How thoroughly did the press corps nap? Eventually, a comical episode helped display their yowling indifference to matters of substance. In late June 2000, Newsweek budget honcho Allan Sloan reported an interview with Lawrence Lindsey, Bush’s leading economic adviser. In the interview, Lindsey acknowledged what should have been obvious; Bush’s plan would force a cut in guaranteed Social Security benefits. (Duh! In what other way could personal accounts extend the life of the program?) Sloan directly quoted Lindsey. "Reductions in the guaranteed amounts of benefits that will go to plan participants are absolutely obvious," Lindsey said. "So I will say it," the guru continued. Repeat: According to Newsweek, Lindsey said that benefit cuts would have to be part of Bush’s plan.

By any standard, this was news; Lindsey had settled a basic point which Bush had simply refused to address. The Gore campaign sent out press releases highlighting Lindsey’s statement. But did any of this push our "great debate" forward? Please. Three weeks later, Newsweek published a letter from Lindsey, in which he said that he had been quoted "in a misleading way." No decision on benefit cuts would be made until after the election, he now said. (The point was no longer "absolutely obvious," as he’d initially said.) But the budget adviser needn’t have worried about possible harm to Candidate Bush; the press corps had slept through his statement, as always. Indeed, in the three weeks following Newsweek’s report, no reporter in the country ever mentioned what Lindsey had said. No newspaper ever reported his statement. No magazine ever mentioned it, either. No editorial or op-ed column discussed it. In fact, according to a NEXIS search, Lindsey’s statement was cited just once—by Bill Press, on the June 26 Crossfire. Once again, the press corps’ aversion to substance was almost pathological. Again, the press corps failed to report the simplest facts about Bush’s important fresh ideas.

Readers, your press corps likes to discuss personalities. And your press corps simply loves to talk clothes. And make no mistake—your press corps is going to seek new ways to avoid examining Bush’s proposal. That’s why it’s time to let them know it—their group dysfunction, however amusing, will not be accepted again.