Guest Post: The Budget is Not an Appropriate Place to Try and Solve All the Country’s Problems
Tzimiskes offers some thoughts on the budget process (hat tip Run75441, and re-posted with author’s permission) Tzimiskes has been blogging for more than 3 years on economics, politics, and public policy. He holds a Masters of Political Science from SUNY Albany, and worked in New York State government for four years before returning to the private sector. He currently resides in the metropolitan Detroit area.
The Budget is Not an Appropriate Place to Try and Solve All the Country’s Problems
The Washington Post’s coverage of the budget, the debt, and the deficit has been overall pretty terrible, once you exclude Wonkblog at any rate.
A couple of posts today particularly stood out for for their awfulness.
First of all, the editorial board posted an editorial that hits some good points but really falls down hard in a couple of places.
The real doozy was this:
It is on the issue of entitlements that the Democrats’ document really disappoints. There is literally nothing — not a word — suggestive of trimming Social Security, whether through greater means-testing, a more realistic inflation adjustment or reforming disability benefits. The document’s fuzzy call for $275 billion in “health savings” is $125 billion less than the number President Obama has floated.
Does anyone recall that just a few years ago we spent a rather large amount of legislative time on health care reform? Does anyone really think that Social Security reform should use less time? Isn’t it just as sensitive of a topic? Why in the world should this be done in a budget? Sure, Ryan’s budget tries to do this, but that seems evidence against this approach rather than for. And nevermind that most economists seem to think that Social Security is basically in balance with only some minor adjustments needed. While minor, given how important this program is it deserves its own debate. As for health care, same thing. Remember PPACA? If we’re going to fix health spending that was just the tip of the iceberg. The Democrats deserve points for separating this from the general budget, they shouldn’t be berated for exercising common sense.
Michael Gerson’s column, however, is a train wreck.
First of all:
Ryan’s budget proposal is similar to his previous two in both strengths and failures. It deserves everlasting fiduciary fame for proposing a plausible Medicare reform plan, essential to the future of the program and the long-term stability of the federal budget.
This is nonsense. All Ryan does is pass the hard work onto states, the diverse set of interests in the health care industry, and individual patients. This is buck passing, not a plausible Medicare reform plan. There’s no coherent logic that would say that passing the buck from the Federal government to other stakeholders would solve diddly squat.
Second,
Congressional Democrats, in turn, have emerged from nearly four years of budgetary silence with their own ideological caricature — a proposal combining heavy taxes, budgetary gimmicks, a net increase in spending and a strident refusal to consider meaningful entitlement reform. The silence was more responsible.
Again, why is meaningful entitlement reform part of the budget process? Don’t the biggest programs in America deserve their own separate hearings? I can see some reason for a grand bargain as a start to these discussion but the next step would be working on each independently to get a final result. Trying to fix the whole thing at start would be like trying to build a manned mission to Alpha Centauri tomorrow without bothering with all the annoying steps in between. It’s silly. I wonder what he would think of the House Progressive’s Budget?
Further,
But the broad contrast in approaches is instructive. The Republican argument: Given demographic and fiscal trends, if you want to provide income and health-insurance support to the elderly and poor, and preserve a meaningful American role in the world, government will need to become less of an all-purpose service provider and to refocus key programs, such as Medicare, on helping those in the greatest need. The Democratic argument: We can do it all — as long as you don’t look beyond the 10-year budget window. Republicans get the better of this disagreement.
Huh? Why can’t we do it all? We always knew that it was impossible for health care costs to follow the trends we saw through most of last decade, there’s growing evidence that the curve has already been bent. Since growing health care costs were the bulk of the problem, the changed demographics only being a minor part, if these projections hold we probably can do it all within historic levels of taxation. And we can probably do an awful lot more if we raise taxes a percent or two of GDP to pay for something more ambitious, like the House Progressive Budget. Gerson is badly wrong on the choices the data points towards us facing.
Gerson then concludes with:
A serious budget, of course, lies somewhere in the vast gap between the Ryan and Murray budget proposals. And much about the Republican future will depend on taking the part of the budget document that many conservatives regard as boilerplate and turning it into a governing agenda, demonstrating a concern for the common good.
This is the sort of nonsense that comes from journalists who rely on simply listening to experts who regurgitate party line nonsense without understanding what is actually being said or the facts behind the debate. This is silly. If you’re going to do this “balanced” kind of journalism at least say “a serious budget, of course, lies somewhere in the vast gap between the Ryan and House Progressive budget proposals.” That statement could lead to some real interesting proposals and analysis of trade-offs between radically different ideological starting points. But the Murray budget is far from a partisan fantasy, it’s really a yawn and not at all ambitious.
I don’t believe that Ryan’s budget bears any relationship to an actual empirical analysis of our country or its prospective problems. But even if you disagree you have to admit that Gerson’s positioning moves the goalposts very far to the right. If you want to be centrist, it is the House Progressive budget you need to use to reach the middle, not the Murray budget.
These sort of distortionary assumptions need to be pointed out more frequently. Why can’t the Post see the shallowness of their editorial line? They have a lot of folks smarter than this at Wonkblog, use them.
[Edit: fixed a mistake ]
Posted by Tzimiskes
Oh, “Why Can’t the Post…?”
Because their job has nothing to do with proposing plausible “solutions.”
Their job is to create an unbreakable link in the public mind such that “Social Security is OBVIOUSLY” broken.” and “it is irresponsible not to fix (cut) it.”
And this works. Keep repeating a lie as if it were the obvious truth, and after a while even “honest” people begin all of their “reasoning” by assuming the lie as a starting place.
well, just from me, here is the obvious truth if you take the trouble to understand it:
Social Security is not broken. If the costs of retirement go up faster than the wage base, then the “tax” rate would need to go up to pay for those costs. The probable increase needed would be about eighty cents per week per year while wages are going up about eighty dollars per week per year. There is NO other solution that does not destroy Social Security either by cutting it below a level where it provides meaningful retirement “security,” or by “taxing the rich” which would turn it into welfare as we knew it… exactly what Roosevelt, who knew what he was doing, insisted it not be.
The situation with Medicare is similar, but complicated by the fact that Medicare has already been partially turned into welfare by making the rich pay for it. That means that every year there is pressure to cut it. Clever ideas to force the poor elderly to come up with ways to pay for their current high medical costs with their current low incomes… when they could have paid for ALL their costs with an affordable dedicated “pay as you go” tax while they had the incomes that could afford it.
So we will have, in both programs, an insidious lowering of benefits below “enough” in order to “save” the workers from a tax that would be pennies more in the case of Social SEcurity, and maybe a few dollars more in the case of Medicare… subject to real reform of the way Americans pay for medical care.
I wouldn’t hold my breath waiting for that real reform. But if we are going to need the medical care, the sanest thing to do is pay for it with “pay as you go” for ALL of it, in a way that the people “own” it, which is not subject to the political lie “we (the rich) can’t afford it.”
typo
the projected rise in real wages is eight dollars per week per year, not eighty.
the needed increase in the payroll tax to match SS income with expenses is still eighty cents per week per year.
This is ridiculously cheap. The lying by the left to obscure this fact is as reprehensible as the lying by the right to obscure it.
The difference is the right wants to kill Social Security for ideological reasons. While the left wants to change Social Security into welfare for ideological reasons.
I agree with all that.
I do think that the issue of the perception of pay as you go programs is just as complicated as that of progressive taxation and benefits.
While I like this method of funding, in my experience a lot of people have an issue with the fact that their taxes are being used to fund the retirement and/or the disability payout for someone else and that the dollars that pay for their own retirement/disability will ultimately be paid by someone else, leading to a lot of empty rhetoric about the children. Nevermind that this is intrinsically how insurance works or that this is far more efficient than the alternatives.
A second issue is that many people have can’t wrap their heads around the idea that these programs might be good on efficiency grounds. I hear a lot from older right wingers about how their grandad worked till he was (insert implausibly high age here). What they don’t seem to realize was that in a lifetime employment culture businesses tended to just absorb the losses from supernumerary workers, at least at higher wage brackets (the poors would be socially productive and well treated at the workhouse). Sure, an 80 year old man might be showing up to the office every day but other than schmoozing with some clients from their glory days probably didn’t do much. The doddering old man at the company is a bit of a stock character in a lot of older literature, there’s a reason for this. Business today has grown used to not having this burden, things wouldn’t turn out the same.
But given the belief that we should be able to break down these programs into purely individual, rather than social, accounts as well as the belief that that these programs are reducing the workforce (true, to some extent, but they are also removing the burden of workers who are no longer worth their pay, I don’t know what the net impact is on pure efficiency grounds) and I think there is more to the left’s motivations than simply a desire to change them into welfare. While I think it’s wrong, I don’t think that it is obvious that pay as you go is much different from transferring between the wealthy and the rest and I don’t think the politics of pay as you go are any better than the politics of tax and transfer.
All that said, I agree that a more even, higher, tax burden as well as stronger benefits on a pay as you go basis would be superior. But I think it is the divergence of how social programs work as opposed to how household budgets work that is providing the hook for the pressure to create changes from both sides. I see the left’s desire for changes as rooted in this, rather than an ideological goal of changing the program to welfare, and I don’t see pay as you go as being more stable without a cultural change to be more accepting of national level solutions. I think it is the difficulty of thinking in national rather than household terms that is the problem here not so much ideological issues on the left (I do see the right’s issues as being ideological, however).
Tzimiskies
i don’t think pay as you go is an ideological or cultural problem. it’s an intellectual problem for some people… including people with ph.d.’s. there is no difference between pay as you go and putting the money into a stock (where it goes to pay someone else immediately) and selling the stock later (to someone who pays you at that time for what you need).
and yes it’s true that SS “reduces the work force.” That is the whole point. For the first time in history working people can actually expect to be able to retire. That used to be a privilege of the rich or at least “successful.” That may be part of the reason they hate SS.
Do we really need to have everyone working right up to the point they are ready for the glue factory?
I don’t expect it will happen: the rich have never had a big problem with seeing people out of work. but if they succeed in raising the retirement age, and don’t succeed in finding ways to fire older workers (they have been making great strides), you can expect to see a lot of old folks with good — not hard labor — jobs who are, ah, not very efficient, but able to keep younger workers from “moving up.”
well, there is a difference: safety. pay as you go finesses the inflation and market loss problems.
without even subtracting from the money available for “investment.” the money avail for investment will always be net of the money paid out to those who live on their dividends or cash out their stocks.
SS just eliminates the middleman in this transaction. money over and above what is needed for basic living in old age is still available for “investment.”
as far as the ideolgoy of the left. … i ahve talked to some of these people. i can see no sign of intelligent understanding. i do see an emotional commitment to “tax the rich” that precludes honest thought about “worker pays.” even Roosevelt had to guide the hands of his Commission to get them to make SS “worker pays.” Apparently even very smart liberal actuaries can’t help themselves when they think of the cosmic justice of making the rich pay.
I think we’re in basic agreement on a lot, the main areas where I see difference is on whether to define resistance on pay as you go as a cultural problem or something else. I see it as more of a cultural problem because the flatter tax and benefits schedule in Europe has widespread support in Europe, and many other places, but sees resistance here under slogans along the lines of “burdening our children” and so forth. I see this sort of thing as cultural because I believe it has a lot to do with the trend towards wanting to individualize everything, Americans push to understand everything as just an aggregation of individual action rather than understanding national level action as fundamentally distinct from individual action (I’m overgeneralizing and leaving terms a bit fuzzy, but I think the broad strokes of what I’m trying to communicate are clear enough). But I think unpacking this further would require a greater degree of specificity than is likely to be easily communicated in blog comments.
Regarding the left, I’ll admit my sample is probably a bit biased, lately my casual contacts have generally been more right leaning while those further left I know tend to be people I’ve known for a while and that tend to be better informed than is probably average. That said, my impression has been that the tax the rich tends to be favorably viewed as an alternative to intergenerational transfers (which is how some see pay as you go as operating) which ties back to the cultural problem I mentioned above. As to how many people would get to the point of making this distinction without some prompting, I don’t really know. I may be off base as to how the less informed left leaning folks think about this since I just don’t have enough casual contact with left leaning folks how aren’t willing to become fairly well informed. I’m much better informed regarding casual right-leaning views through the workplace.
I’d also add that SS as workforce reducing isn’t something I regard as all that clear cut. It used to take a lot of household labor to take care of elderly family members. SS has allowed a lot of this to be outsourced to the market, almost definitely at a great efficiency gain. While I think on net this remains workforce reducing it is probably substantially less so than the number of retired people would indicate. Care of dependent adults is hard and would take a lot of prime age adults out of the labor force if the elderly did not have some financial independence. This isn’t to say that I don’t think it’s great that people have a chance to have part of their lives be free from market work just to add that on top of this there are substantial efficiency gains from putting in place a social policy that substitutes market labor for household labor.
Generally (there are exceptions), I think economists do a poor job noticing the substitution of market production for household production facilitated by social programs. It’s well accepted that moving from inefficient non-market, non-specialized subsistence farm labor to specialized market labor is critical to economic efficiency, I think the efficiency gains from social programs leading to a shift from non-market, non-specialized household labor to specialized market labor deserves the same treatment. That there are social, non-efficiency gains as well is just icing on the cake (from an economists point of view, efficiency gains are probably the less important component for most individuals).
”So we will have, in both programs, an insidious lowering of benefits below “enough” in order to “save” the workers from a tax that would be pennies more in the case of Social SEcurity, and maybe a few dollars more in the case of Medicare… subject to real reform of the way Americans pay for medical care.”
And it is that basic//
People in this country have been stupified by decades of false advertising in re. SS, just as has been the case with the federal deficit and debt. I know that I’ve been able to convince 3 [perhaps 4] people out of, on avg., 50 and this is a pitiful percent whe we’re speaking to old age standards of living. You know, all those ellderly who have been made wealthy through generational transfer payments and the ”ownership society.”
Keep it up Coberly, you and Bruce and Dean Baker [and for a long time the esteemed Professor Eisner] definitely help whether you know it or not.
Time for the wealthy to stop stealing or be ready to be stolen from on large scale.
thanks juan. from you that is encouraging.
Tzimiskies
no. not really “clear enough.”
as for the “better informed” left.. i am talking about the professional, ph.d. social sciences left.
i don’t mean to be rude, and used to try hard not to be, but as “better informed” as these people are, they are not up to the level of actual thinking that it takes a farmer to stay out of bankruptcy.
SS is a “generational transfer” if you insist… just like the “young” have taken care of the “old” for the last two million years of human evolution. but it’s a unique form of “generational transfer” when the money “benefit” is tied directly to how much “tax” you paid.
gee, is it possible it’s both a candy mint and a breath mint?
but please note.. when you put your money in the bank and it is borrowed by the guy who wants to build a house, and then forty years later you take your money plus interest out of the bank.. money that comes into the bank that day from people paying the mortgage on that house, perhaps… THAT is a generational transfer too.
what SS does is take the risk out of it by eliminating the “middle man,” WITHOUT decreasing the amount of money available for investment. the money the “investor” eventually takes out and spends on consumption is exactly the amount of money SS pays in benefits. instead of coming from future customers of the “company” it comes directly from future beneficiaries. the money that would be available for investment comes from money NOT needed for payout to beneficiaries.. or bond holders.
Coberly,
Sorry, been really busy the last few days, it’s late enough you probably won’t see this.
As I said, I think we’re basically in agreement as to the benefits of social security. What I am getting at by individual vs. national is that I think most Americans have some notion of their individual dollar contributions sitting around locked in a box somewhere and that they’ll eventually be getting those very same contributions back, + interest. They’re not really comfortable that they’re getting new dollars transferred from younger workers in the future; to some people this makes it seem like it’s not really “their” money (and you don’t have to argue with me that this is nonsense, I know this, I’m just trying to communicate how I try to understand opposition I’ve heard to this program, I hear a lot of blather that basically breaks down to not really feeling they “own” it if it’s simply pay as you go based on prevailing wages and not some kind of account that earns interest like a bond; the feeling being the important part no matter how intellectually indefensible).
I do of course agree that the same thing is happening with a bank. Again, however, I think a lot of people are uncomfortable with this if confronted with the idea. If pressed, of course, people will realize this isn’t what is happening but at the gut level I think a lot of people have some vague notions of the ones and zeros in their bank account being stored in some kind of electronic locked box; even though they know this is ridiculous if it is pointed out to them.
I think a lot of the issues people have with social security stem from being forced to recognize that their “savings” aren’t something that can be stored in a coffee can in the freezer. They don’t like that it all ultimately comes from these national flows of income and taxation. This creates an opening that can be exploited by opponents of Social Security. That the same thing is happening in banks isn’t something these people feel like bringing up.