"The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected."
- G.K. Chesterton
Friday, July 3, 2009
Tuesday, May 12, 2009
Social Security Heading for the Red
In an article on Foxnews.com, they report that financial analysts are predicting that Social Security and Medicare will run out of money earlier than has been previously thought. According to the article, last year the Social Security trustees predicted that the program payouts would exceed revenues beginning in 2017, and the Social Security Trust Fund would be depleted in 2041. Evidently it's worse than that. Last year, the Congressional Budget Office predicted a surplus of $86 billion for 2010, now it's predicting a surplus of only $3 billion.
As bad as these numbers sound, the reality is worse. In fact, I think most people really don't understand how the Social Security system works. If they did, I think they would be outraged. The numbers above make it sound as if the real problem date comes when the "trust fund" is depleted. But the simple fact is, there is no trust fund. The trust fund is an accounting trick. Most of the revenue from the Social Security tax goes to pay current beneficiaries. In fact, if the predictions noted above are correct, in 2010, the tax will bring in only $3 billion more than it pays out to current beneficiaries in 2010.
The Social Security system has existed now for more than 70 years. And in those years the system has always brought in more revenue than it pays out. In theory, the surplus has been placed into a trust fund. But there is no big treasury full of Social Security money. The Federal Government has "borrowed" against the Social Security trust fund to increase revenue in the general budget. In return, the trust fund has received U.S. bonds. But these bonds can only be redeemed and paid back into the trust fund from other federal government revenues. In other words, once the program begins paying out more than it takes in, there will be nothing to draw on from the trust fund. The program will, instead, require additional spending from the rest of the federal budget in order to make Social Security payments.
Imagine you had two separate bank accounts. You borrow from one account to fund the other, and write yourself an IOU. That, in sum, is the situation you have. Social Security, is, and always has been, pay as you go. The trust fund is nothing but a collection of IOUs that the Federal government has written to itself.
Entitlement spending has, for years, been a ticking time bomb. Analysts and politicians have known for decades that, without significant reform, these program would come under greater and greater strain. Costs continue to go up. People live longer, and we are only now seeing the very first baby boomers begin to collect benefits. As that huge generation retires, the costs to Social Security and Medicare will grow dramatically. These costs will go up against a backdrop of a shrinking Social Security tax base; fewer workers per retiree to keep the program afloat.
While policymakers have taken no action to reform these programs, they have nevertheless described these programs as "entitlements" and made promises that they may not be able to keep that these programs will be available to retirees. However, while these programs have been characterized as entitlements, these benefits are not legally guaranteed to current or future recipients. As a matter of fact, the Supreme Court has held that beneficiaries have no legal claim to these benefits, and that Congress may alter or amend the program as it sees fit. See Flemming v. Nestor, 363 U.S. 603, 610-611 (1960).
A number of policymakers and policy experts have presented possible reforms, including partial or complete privatization of Social Security. Congress and the White House have dodged this politically sensitive issue for far too long. Reform is needed, but they are running out of time. If they don't address it soon, they may face a real crisis. Hopefully wisdom will win out over political expediency.
As bad as these numbers sound, the reality is worse. In fact, I think most people really don't understand how the Social Security system works. If they did, I think they would be outraged. The numbers above make it sound as if the real problem date comes when the "trust fund" is depleted. But the simple fact is, there is no trust fund. The trust fund is an accounting trick. Most of the revenue from the Social Security tax goes to pay current beneficiaries. In fact, if the predictions noted above are correct, in 2010, the tax will bring in only $3 billion more than it pays out to current beneficiaries in 2010.
The Social Security system has existed now for more than 70 years. And in those years the system has always brought in more revenue than it pays out. In theory, the surplus has been placed into a trust fund. But there is no big treasury full of Social Security money. The Federal Government has "borrowed" against the Social Security trust fund to increase revenue in the general budget. In return, the trust fund has received U.S. bonds. But these bonds can only be redeemed and paid back into the trust fund from other federal government revenues. In other words, once the program begins paying out more than it takes in, there will be nothing to draw on from the trust fund. The program will, instead, require additional spending from the rest of the federal budget in order to make Social Security payments.
Imagine you had two separate bank accounts. You borrow from one account to fund the other, and write yourself an IOU. That, in sum, is the situation you have. Social Security, is, and always has been, pay as you go. The trust fund is nothing but a collection of IOUs that the Federal government has written to itself.
Entitlement spending has, for years, been a ticking time bomb. Analysts and politicians have known for decades that, without significant reform, these program would come under greater and greater strain. Costs continue to go up. People live longer, and we are only now seeing the very first baby boomers begin to collect benefits. As that huge generation retires, the costs to Social Security and Medicare will grow dramatically. These costs will go up against a backdrop of a shrinking Social Security tax base; fewer workers per retiree to keep the program afloat.
While policymakers have taken no action to reform these programs, they have nevertheless described these programs as "entitlements" and made promises that they may not be able to keep that these programs will be available to retirees. However, while these programs have been characterized as entitlements, these benefits are not legally guaranteed to current or future recipients. As a matter of fact, the Supreme Court has held that beneficiaries have no legal claim to these benefits, and that Congress may alter or amend the program as it sees fit. See Flemming v. Nestor, 363 U.S. 603, 610-611 (1960).
A number of policymakers and policy experts have presented possible reforms, including partial or complete privatization of Social Security. Congress and the White House have dodged this politically sensitive issue for far too long. Reform is needed, but they are running out of time. If they don't address it soon, they may face a real crisis. Hopefully wisdom will win out over political expediency.
Thursday, May 7, 2009
Real Money?
I guess it's relative. Sure, $17 billion seems like a lot of money, even by Washington standards. As the congressman (not sure which one) once said, "a billion here, a billion there, pretty soon you're talking about real money." The President has dramatically announced $17 billion in spending cuts for next year's budget. This, from a projected budget of over $3.4 trillion. As Fox News noted these cuts would be roughly one half of one percent of the total budget. And of course this is from a budget that was dramatically increased in the past year, and a budget that may still be over a trillion dollars in the red. Consider a household with a total budget of $50,000. An equivalent cut would be $250. That ain't much. While the President's budget director Peter Orszag says this is not "chump change," it sure seems like it.
Thursday, April 30, 2009
Why Did He Have a Press Conference?
Having watched last night's presidential press conference, the first question that comes to mind, is what was the point of that? There was no breaking news, no overwhelming crisis that demanded his attention. The only reason for the event, evidently, was the fact that the President was assessing his own first 100 days. That's seems kind of like hosting your own birthday party. It seems odd, even for a vain politician, to do nothing but celebrate himself.
Nevertheless, a few of his remarks and answers struck me as I listened.
First, on the flu advice, while I'm sure that his speechwriters and the public health people meant well, it's a little silly for the President of the United States to instruct adult citizens to wash their hands. What's next, "look both ways before you cross the street"?
On the economy he claimed, "We began by passing a recovery act that has already saved or created 150,000 jobs and provided a tax cut to 95 percent of all working families." Okay, first, he's used that "saved or created" trick before. There is no way to determine whether any job has been "saved," and we all know that there have been damn few created as of late. Since we've lost hundreds of thousands of jobs since he took office, this number seems pretty paltry. And tax cuts, really? Any of you get that tax cut? I know I haven't. He also claimed that his housing plan had allowed many homeowners to refinance their mortgages, which, he said, "is the equivalent of another tax cut." Umm, no, it isn't. Mortgages aren't taxes. You choose whether or not to take out a mortgage or buy a home. You don't get to choose your tax rate.
I was very surprised to hear him say, "Our projected long-term budget deficits are still too high, and government is still not as efficient as it needs to be." Who is he kidding? He wants to bring down the budget deficit? He is seeking the single greatest expansion of the budget ever, adding trillions to the federal debt, and he is worried about deficits?
I think one of the most interesting exchanges was when Jake Tapper of ABC asked the president whether waterboarding was torture, and whether the previous administration had sanctioned torture. He said that he thought it was torture, and that was why his administration had stopped the practice. He went on to say,
Perhaps the most disappointing moment of the evening was actually the question posed by Jeff Zelezny of the New York Times, when he served up the fluffiest, silliest softball question imaginable. He asked, "During these first 100 days, what has surprised you the most about this office? Enchanted you the most from serving in this office? Humbled you the most? And troubled you the most?"
Now, this is the kind of question you would expect from a local morning TV host, or a precocious sixth-grader during a school visit to the White House. This was the New York Times! The self-proclaimed arbiter of of "all the news that's fit to print." The Times and the rest of the dying newspaper industry deserve to implode if this is the best that they can do.
I am humbled by the fact that my power is not absolute. (I know, isn't that annoying). Maybe a professor of constitutional law should have been slightly more aware of the limits placed on the power of the Presidency.
The President made a number of other surprising statements, indeed howlers, that would have been called such by a less obsequious press corps.
He stated, "I don't want to run auto companies. I don't want to run banks." Excuse me, if I don't believe that. Is there a distinction between running them and telling them how the companies should be run? He said that he didn't want to micromanage their products and operations, yet today he is trying to micromanage and guide a potential Chrysler bankruptcy.
But the biggest howler was this one: "And that's why I'm amused when I hear these, you know, criticisms of 'Oh, you know, Obama wants to grow government.' No, I would love a nice, lean portfolio to deal with, but that's not the hand that's been dealt us."
Seriously, who is he kidding? Does he think that even the suck-up press would believe that? Absolutely every single thing that he has done has increased the size and scope of government. He has proposed increasing federal control over health care, increasing regulation of industry through his foolish and unnecessary cap-and-trade plan, and a far larger federal role in education? We are supposed to believe that he was forced into this by circumstance? No matter what the problem, more government is always the proposed solution. I hope the President will excuse me if I don't believe that he would rather have a "lean portfolio" to manage.
Nevertheless, a few of his remarks and answers struck me as I listened.
First, on the flu advice, while I'm sure that his speechwriters and the public health people meant well, it's a little silly for the President of the United States to instruct adult citizens to wash their hands. What's next, "look both ways before you cross the street"?
On the economy he claimed, "We began by passing a recovery act that has already saved or created 150,000 jobs and provided a tax cut to 95 percent of all working families." Okay, first, he's used that "saved or created" trick before. There is no way to determine whether any job has been "saved," and we all know that there have been damn few created as of late. Since we've lost hundreds of thousands of jobs since he took office, this number seems pretty paltry. And tax cuts, really? Any of you get that tax cut? I know I haven't. He also claimed that his housing plan had allowed many homeowners to refinance their mortgages, which, he said, "is the equivalent of another tax cut." Umm, no, it isn't. Mortgages aren't taxes. You choose whether or not to take out a mortgage or buy a home. You don't get to choose your tax rate.
I was very surprised to hear him say, "Our projected long-term budget deficits are still too high, and government is still not as efficient as it needs to be." Who is he kidding? He wants to bring down the budget deficit? He is seeking the single greatest expansion of the budget ever, adding trillions to the federal debt, and he is worried about deficits?
I think one of the most interesting exchanges was when Jake Tapper of ABC asked the president whether waterboarding was torture, and whether the previous administration had sanctioned torture. He said that he thought it was torture, and that was why his administration had stopped the practice. He went on to say,
I am absolutely convinced it was the right thing to do, not because there might not have been information that was yielded by these various detainees who were subjected to this treatment, but because we could have gotten this information in other ways, in ways that are consistent with our values, in ways that were consistent with who we are. (Emphasis added).Now, I think that the issue of torture is deeply troubling. As a civilized nation we must be better than our opponents, and extreme interrogation tactics should never be used lightly. Indeed, there is a very good argument that it is never appropriate to use waterboarding or other similar techniques. Nevertheless, I believe it is a dishonest, bad faith argument to assume that the information obtained through the use of such techniques would necessarily have been obtained in another way. Indeed, the reason this issue is troubling to many people is that they are afraid that if these techniques are not used, we may not get the information at all. And if the information obtained by these methods prevented attacks, again, it is disingenuous to make a blanket assumption that the attacks would have been stopped anyway and the American people would have been as safe. As I said, there is a very strong moral case to be made that these techniques should never be used. But it is dishonest to assume that you may not be sacrificing some intelligence in so doing. This trade-off may well be worth making, but it is insincere to argue that there is no trade-off at all.
Perhaps the most disappointing moment of the evening was actually the question posed by Jeff Zelezny of the New York Times, when he served up the fluffiest, silliest softball question imaginable. He asked, "During these first 100 days, what has surprised you the most about this office? Enchanted you the most from serving in this office? Humbled you the most? And troubled you the most?"
Now, this is the kind of question you would expect from a local morning TV host, or a precocious sixth-grader during a school visit to the White House. This was the New York Times! The self-proclaimed arbiter of of "all the news that's fit to print." The Times and the rest of the dying newspaper industry deserve to implode if this is the best that they can do.
I am humbled by the fact that my power is not absolute. (I know, isn't that annoying). Maybe a professor of constitutional law should have been slightly more aware of the limits placed on the power of the Presidency.
The President made a number of other surprising statements, indeed howlers, that would have been called such by a less obsequious press corps.
He stated, "I don't want to run auto companies. I don't want to run banks." Excuse me, if I don't believe that. Is there a distinction between running them and telling them how the companies should be run? He said that he didn't want to micromanage their products and operations, yet today he is trying to micromanage and guide a potential Chrysler bankruptcy.
But the biggest howler was this one: "And that's why I'm amused when I hear these, you know, criticisms of 'Oh, you know, Obama wants to grow government.' No, I would love a nice, lean portfolio to deal with, but that's not the hand that's been dealt us."
Seriously, who is he kidding? Does he think that even the suck-up press would believe that? Absolutely every single thing that he has done has increased the size and scope of government. He has proposed increasing federal control over health care, increasing regulation of industry through his foolish and unnecessary cap-and-trade plan, and a far larger federal role in education? We are supposed to believe that he was forced into this by circumstance? No matter what the problem, more government is always the proposed solution. I hope the President will excuse me if I don't believe that he would rather have a "lean portfolio" to manage.
Wednesday, April 29, 2009
100 Days: Where Do We Stand?
The talking heads and President Obama's adoring press have been making a lot of noise about the fact that today is the President's 100th day in office. (100 days is an asinine benchmark derived from FDR's first term, but we'll leave that discussion for another time). Hundredth day or not, I think the U.S. has reached a very interesting place in its history. And it seems to be suffering from a bout of self-hatred, which I believe the new President exemplifies.
I believe that ours is a nation that is an example to the world. We have achieved prosperity, success, and power that is unprecedented in the history of the world. Our nation was founded on the promise of life, liberty, and the pursuit of happiness. We sought, to paraphrase John Adams, to build a nation of laws, and not merely of men. We fostered free enterprise, and honored the self-made man. We gave hope to the immigrant, and lit a beacon for the rest of the world to see; one to which all could aspire. We used to call all of this "American Exceptionalism." This was the idea that America was unique, and offered a singular example to the world. But just lately, we seem to be suffering a crisis of confidence.
President Obama does not seem to regard America as exceptional. Responding to a question from the press during a recent trip to Europe, Obama said, “I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.” That is to say, he does not believe in any such thing. In fact, he has had very little good to say about the nation he was elected to govern. Instead, he seems interested in actually diminishing the prestige of the United States. America is, at least to his way of thinking, a negative force in the world.
At home, he has set a very ambitious agenda. I think he has made clear that he intends to transform the United States. The notions of free enterprise and limited government seem not to his liking. Instead, he is setting out to drastically expand the role of government in the lives of his fellow Americans. I think that this is a very dangerous direction for this country. He has already dramatically increased the federal budget. And this increase will almost certainly be permanent. Though the "stimulus" spending has been characterized as necessary to deal with the current economic situation, the spending will far outlive the current recession. It has been decades since federal spending has actually decreased from one year to the next. The increase in spending, therefore, and the accompanying ballooning of the federal debt must, therefore, be regarded as permanent. Even if he did nothing more, he will have dramatically inflated the federal budget and federal power. And though he has made promised to lower taxes for most Americans, this is a promise that he will not, cannot, and probably has no intention to keep. This debt will have to be paid for sooner or later, and will necessitate significant tax increases in the future.
He has also shown a marked tendency to try to directly control the economy. He is using federal bailout money to strongarm banks and financial services companies, and is on his way to all but nationalizing the automobile industry.
I don't know if this was what the American people had in mind when they elected President Obama. But it is what they got. The question is, is it what they want?
I believe that ours is a nation that is an example to the world. We have achieved prosperity, success, and power that is unprecedented in the history of the world. Our nation was founded on the promise of life, liberty, and the pursuit of happiness. We sought, to paraphrase John Adams, to build a nation of laws, and not merely of men. We fostered free enterprise, and honored the self-made man. We gave hope to the immigrant, and lit a beacon for the rest of the world to see; one to which all could aspire. We used to call all of this "American Exceptionalism." This was the idea that America was unique, and offered a singular example to the world. But just lately, we seem to be suffering a crisis of confidence.
President Obama does not seem to regard America as exceptional. Responding to a question from the press during a recent trip to Europe, Obama said, “I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.” That is to say, he does not believe in any such thing. In fact, he has had very little good to say about the nation he was elected to govern. Instead, he seems interested in actually diminishing the prestige of the United States. America is, at least to his way of thinking, a negative force in the world.
At home, he has set a very ambitious agenda. I think he has made clear that he intends to transform the United States. The notions of free enterprise and limited government seem not to his liking. Instead, he is setting out to drastically expand the role of government in the lives of his fellow Americans. I think that this is a very dangerous direction for this country. He has already dramatically increased the federal budget. And this increase will almost certainly be permanent. Though the "stimulus" spending has been characterized as necessary to deal with the current economic situation, the spending will far outlive the current recession. It has been decades since federal spending has actually decreased from one year to the next. The increase in spending, therefore, and the accompanying ballooning of the federal debt must, therefore, be regarded as permanent. Even if he did nothing more, he will have dramatically inflated the federal budget and federal power. And though he has made promised to lower taxes for most Americans, this is a promise that he will not, cannot, and probably has no intention to keep. This debt will have to be paid for sooner or later, and will necessitate significant tax increases in the future.
He has also shown a marked tendency to try to directly control the economy. He is using federal bailout money to strongarm banks and financial services companies, and is on his way to all but nationalizing the automobile industry.
I don't know if this was what the American people had in mind when they elected President Obama. But it is what they got. The question is, is it what they want?
Monday, April 27, 2009
Why bother?
The Internet is a beautiful thing. I have been amazed to watch the explosion of writing and discussion that has sprung up on websites and blogs and now takes place every hour of every day. While the established newspapers seem to be going the way of the passenger pigeon, people from all walks of life have begun publishing their thoughts, and the news that matters to them. It's remarkable.
As for myself, my primary focus on this blog will likely be law, politics, history, and economics. I have always had a fascination for how societies and economies function. It's not just a hobby. I've been in the business, so to speak, as a lawyer and a policy wonk. Now, there are lots of political writers and bloggers. Many of them are, no doubt, smarter and more insightful than I am. So why do it? Because I think that I have something to add to the discussion. Everybody in the pool.
As for myself, my primary focus on this blog will likely be law, politics, history, and economics. I have always had a fascination for how societies and economies function. It's not just a hobby. I've been in the business, so to speak, as a lawyer and a policy wonk. Now, there are lots of political writers and bloggers. Many of them are, no doubt, smarter and more insightful than I am. So why do it? Because I think that I have something to add to the discussion. Everybody in the pool.
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