The Rockaway Irregular
Recently, my colleague who writes The Progressive in these pages, as a counterpoint to my column, offered a highly critical “take” on the second term Bush agenda, questioning the notion that it might fairly be characterized as “compassionate.” Of course this term has many meanings but the obvious one in this case is that Bush offers conservative policies that reflect concern for the plight of those who are not as well off as the more prosperous members of society. According to the view advanced by my colleague, “compassion” in this sense is a misnomer for the Bush agenda.
It seems to be the left’s conceit, these days, that Bush’s program is all about helping the rich and fleecing those of us who aren’t. In his piece, my colleague referenced a litany of complaints including such things as recently proposed cuts in student aid. Current levels aren’t even “adequate considering current college costs” he opines. After noting that “Congress is unwilling to expand the grants because of budgetary considerations” he goes on to juxtapose the high costs involved in nation-building in Iraq (ah, if only we could spend that money here instead of there!) and complains that the proposed cuts in student aid will prevent the less-well-off from sending their kids to college and getting good jobs.
Many, he avers, will just have to “engage in illegal activity” to make ends meet or “join the military or work in industries that pay inadequate wages and do not supply health insurance.”
My colleague has other complaints, too. We’re not spending enough to defend our borders, he suggests (never mind that we’re spending more than we ever did). And the Administration wants to change the laws that previously mandated that private employers pay workers cash for overtime, commencing when they work more than 40 hours in a single week. The AFL-CIO, he tells us, opposes this so we should too. Never mind that the idea of mandating what employers must pay workers represents an intrusion into a private relationship and makes businesses more costly to operate, thereby imposing a drag on the economic activity that creates jobs. He finishes up by lashing out at the President’s initiative to change the Social Security system, claiming it “would subject future retirees to the uncertainty of investment in the stock market while giving windfall profits to stockbrokers on Wall Street.” (Never mind that all the plans on the table impose rigorous strictures on investments to prevent individuals from blowing it all on wild speculation, or that the investment community is part of our economy too, not some evil cabal conspiring to take our money as his allusion to “windfall profits” suggests.)
After reading his piece I can only say that it perfectly crystallizes the differences between modern liberals (or “progressives” as many now like to be known) and conservatives today. The liberal view is that we’re all entitled. We’re entitled to have our schooling paid for and to get the jobs we want (rather than what’s available) and to not have to join the military (even if that happens to look attractive to us) because the military does bad things like fighting wars sometimes. His comments on the Social Security system are a perfect example of this kind of thinking.
Everyone pretty much agrees that the system is unsustainable as it’s currently constituted. By about 2018 the surplus of current payments now being generated by contributions from people in the workforce will cease because the number of workers contributing will no longer be able to fully cover the value of pay-outs to retirees. At that point, the government will have to turn to the accumulated surplus from past pay-ins. But those accumulated dollars don’t exist except in the form of I.O.U.’s because the Social Security Administration has long since lent all that money to the federal government by buying U.S. Treasury bonds. The practice of investing social security proceeds in U.S. Treasuries to generate cash for other governmental operations goes back to Lyndon Johnson’s Great Society. Well, it seemed like a good idea at the time.
But in 2018, this accumulated surplus has to start being redeemed to keep Social Security going. The amount to be redeemed to cover benefits ratchets up radically in the years after 2018. By 2042 (or 2052, depending on whom you listen to), even the I.O.U.s will have been exhausted at which point the system will only be able to sustain payments in the amount of 75% of anticipated benefits. And in the meantime, during the period leading up to 2042, the government will have had to do one of three things: borrow more money at unpredictable rates to redeem the outstanding Treasury bonds now held by the Social Security system (thereby driving federal debt and interest rates higher); cut benefits well before we reach 2042; or raise taxes to get enough money to redeem the Treasury bonds and keep benefits at the promised levels.
All of these options are problematic. Borrowing more money in the amounts required will drive up money costs while adding to the deficit, thus imposing a serious drag on the economy and killing jobs along with American prosperity. The result could well be a substantial economic downturn that would make the stagflation of the seventies, or even the Great Depression, seem tame by comparison. On the other hand, cutting benefits won’t make benefits recipients very happy since they paid their Social Security tax on their earnings in good faith all these years, expecting to get the benefits they were promised. Raising taxes looks like the easiest way to go to some (especially if they figure they can stick “the rich” with the tab) until you realize that it was high taxation that got us into the stagflation of the seventies in the first place and it was cutting taxes that pulled us out. High tax rates are a drag on the economy no less than high debt.
So what to do? Admittedly, Bush let spending get out of hand in his first term, apparently hoping to convince voters that conservatives cared, too, and were just as “compassionate” as progressives. Although his tax cuts helped revive and sustain the dangerously listing economy that the dot. com bubble collapse and the attacks of 9/11 initiated, he did not hold spending in check in line with those cuts. Now, of course, he’s aiming to correct that. And that’s what the self-styled progressives are up in arms about. They don’t want cuts in any kinds of benefits, only increases . . . and taxes raised to sustain such increases.
The Bush proposal to restructure the Social Security system includes a suggestion to voluntarily privatize part of it, though no workers would apparently be forced to give up participation in the fixed system. The hope is that they’ll choose to do so because personalized accounts offer them a better deal, i.e. a system that’s more in line with individual retirement accounts which allow workers to save their own money in designated investments (pre-selected to minimize risk). The improved return would plug the gap that will occur when the system reaches the point in 2042 when benefits would need to be cut or new revenues found.
The upside here is that the historic returns for personal retirement accounts exceed the returns on monies paid into the Social Security system. Workers will also have a degree of control over that portion of the funds they place into such investments and will be able to pass these on to their children (the current system does not allow that). The downside? Market risk, of course.
But given the carefully screened investment options likely to be offered, nothing short of a major collapse of the system, as we saw in the 1930’s, would be likely to devastate the proposed private retirement nest eggs. And if we did get such a massive downturn, the Social Security system itself would be in big trouble anyway as the government would find itself hard-pressed to make its own ends meet, let alone support the current unsustainable system.
So even if we leave things as they are (as the Democrats demand) and just go with the flow, the impending fiscal imbalances in the Social Security system could very well tip us into a 1930’s style crisis, no matter what.
So how compassionate is the Bush agenda? If compassion is measured by a willingness to deal with the problems that lie down the road and threaten our kids, long after we’ve passed the torch to them, then it fits that bill.
Indeed, what could be more compassionate than leaving them a system that works instead of one that doesn’t? email@example.com.