Bell Curve The Law Talking Guy Raised by Republicans U.S. West

Wednesday, January 19, 2005

Cui Bono?

I've been trying to make sense of Bush's desire to siphon off "personal retirement accounts" from the existing Social Security trust fund, and I keep coming back to one question: why? We can, of course, rule out the stated reason--that he's trying to avert a crisis--because there is no crisis. Even Republican projections admit Social Security will be solvent for at least 40 more years, and even then, modest tweaks are all that is required to make it solvent as far as anyone can see. So what's the real reason behind it?

1. Will this be a windfall for Wall Street, with a hundred million new "personal retirement accounts" to invest?
2. Will this result in more income for the richer retirees, and less income for the poorer ones?
3. Is this a first step toward geting rid of Supplemental Security Income, Medicare, disability benefits?
4. Is this the first step toward getting rid of the payroll tax?
5. Is this some devious attempt to use the hidden $3 trillion in transitional costs that the Federal Government will have to pay as part of a "starve the beast" strategy?

The trouble is, I have not been able to find any good data to back up any of them. Going through these one-by-one...

1. I haven't found good evidence that this would be a windfall for stock brokers, and even the issue of "administrative fees" (which you'd think would be a slam dunk) isn't clear since most accounts wouldn't have much money and fees might be highly regulated.
2. I haven't been able to figure out what effects this program would have on the incomes of people of disparate income (and the only relevant studies I have found were done by the Heritage Foundation, with dubious methodology). Because Social Security is not a needs-based program, it is not obvious to me that getting rid of it would benefit the wealthy.
3. While this might be part of the first wave of assaults on needs-based programs, wouldn't Bush do better to spend his political capital (such as it is) attacking such programs directly (e.g., pushing forward the stalled "Medical Savings Accounts" stuff) rather than touching the "third rail" for what would be essentially purely ideological reasons?
4. I don't see any compelling evidence that this is an assault on the payroll tax. I'm sure that's a long-range goal, but there's a medicare tax too (see previous point).
5. It's not clear to me where the $3 trillion would come from, so it's not clear that this would "starve the beast." And hasn't Bush been fattening the government up, rather than starving it?

Ultimately, I believe the answer must be that this assault on Social Security will financially benefit some Republican constituencies. It's the age-old question: cui bono? Perhaps some of The Citizens can shed some light on this?


The Law Talking Guy said...

According to the Social Security Administration, $455 billion was taken in as revenue from taxpayers in 2003. Imagine what will happen to the value of existing shares of stock if half of that ($225 billion) is pumped into buying stock next year. That's the windfall - trust funds go up.

Raised By Republicans said...

LTG points out the evidence in support of the "windfall" explanation. Although what percentage of overall stock trading would $200 odd Billion amount to? I have no idea. Anyone out there know "the market" better than a starving academic?

To this I would add that the Republicans have been gunning for Social Security from the get go. It was held up by both supporters and critics as the keystone of the New Deal. And it was one of the the New Deal's most hated elements. Among Republicans still fuming about FDR, getting rid of Social Security would be sweet vindication. "Reforming" Social Security would have major symbolic value...the era of the New Deal is dead and will not rise again.

Abolishing or "reforming" Social Security would declare to all the World that America has completely returned to the policies of the Gilded Age of the late 19th century when big business trusts ran amok and working people were left exposed to the deveasting effects of capitalism replaced by monopolism.

US West said...

I don't get the motivation either. Actually, the government raids social security all the time. It is sort of like a little piggy bank for them.

Aside from account managers getting big fees for managing a huge private accounts system, business would benefit.

On the other hand, think about it. How do businesses use stock-holder money? They expand business and pay employees (i.e. executives). I am sure that Bush sees this as a way of making more cash available for business investment, a hidden subsidity. And I when I say "business investment", I am talking about paying high salaries and benefits to his Republican buddies. I don't know about all you guys, but I don't want my retirement accoun feeding Haliburton babies or Enron-like schemes. And may I point out that former Presidents go work for these corporations after they leave office.

Most Americans have private accounts in the forms of 401K and IRAs. And those are now meant to replace pensions. Pensions funds are often bankrupt, owing way more than they can pay out. In fact, coroporate America should be striving to beef up Social Security rather than tear it down since doing so would ease pull on their pension systems.

One thing, though, the 401K system is yet unproven. No one has retired yet with a 401K. That is what is up and coming. So I would be very careful depending on that as a social safety net.

And I haven't heard any details coming out about these supposed "private accounts". I wonder if this is a red herring meant to cover up something deeper. The idea that they raid Social Security all the time. I hate that because it is like paying taxes twice. Payroll taxes need to be in the famous lock box!

The Law Talking Guy said...

To answer RBR in part:
Total US GDP in 2003 was approx. $10 trillion.
$255 billion in tax revenue = approx. 2.5% of the GDP.
That's quite a big share of the US market. It will drive up prices of stock considerably.

Raised By Republicans said...

Thanks LTG that is a big boost.

US West makes a good point, the social security "reforms" shouldn't be seen in isolation. The private sector has already been hard at work dismantling traditional private pensions.

I'd also add the following observation of Republican strategy with regard to regulatory policy. First, they opposed direct government regulation, shifting emphasis to litigation instead of direct government enforcement. The result is our regulatory system is highly dependent on law suits. Second, the Republicans point to the law suits as some sort of bugbear and argue for their removal. But in the absence of direct government enforcement, tort reform would effectively deregulate large areas of business practice, shielding companies from taking responsibility for wrong doing.

Imagine this strategy with the 401K/Social Security situation. Step one, privatise the system. Step two, erode the newly privatised system.

US West said...

I suggest you all take a look at the current New Yorker article:

He also examines the motives behind the social security debate. And he comes up with the same motivation that RBR does: ideology.

This causes me to wax philosophical. This blog, after all, is supposed to lend itself to just this type of thing. So bear with me.

The tricky part about this administration is that us cynics can't accept that the motivation is purely ideology. We think in terms of logic. We say that if you can show some logical reasoning why something is a credible idea or policy, we are interested in hearing about it and evaluating it. But we live a world of "feelers" where logic is not the starting point for anything. Feelings, desires, etc. are the starting point. So for us, everything is turned upside down.

But consider that ideology is merely idealism by another name and there is a great deal of self-interested narcissism (is that redundant?) involved. There is a great big power trip that comes from molding the world to fit your own personal vision. And what you get is policy for policy's sake. I am reminded of watching vandals rip something apart just to show they can. It is the ultimate joke of post-modernism. In an attempt to deconstruct everything, you've destroyed the logic glue that held everything together. So now we live in this sort of nether world where everything potentially means everything thing and ultimately nothing at the same time.

So the President, in the face of all quantifiable, logical evidence, such as a $3.5 trillion Social security trust find and forecasts from everywhere saying that Social Security is fine, can stand up and insist with a straight face that he will fix something that isn't broken. And like most lies, if you tell them long enough, you and everyone else will believe them. And it isn't hard because people are like sheep.

This administration isn't about a larger call to "serve" of the country and uphold its ideals of equality or justice. Those words serve merely as empty marketing rhetoric. To do anything different would require a selfless integrity that the people in charge do not have.

Raised By Republicans said...

US West's comment makes me think of the following:

There is a political scientist at the U. of Michigan named Ronald Ingelhart. He proposed that when voters' are in their politically formative years (young adulthood), they react to their economic surroundings by prioritizing political issues. When people are poor and economically insecure early in life they spend their entire lives mainly concerned with economic - or "materialist" - issues. When people are relatively well off, they have the time to worry about "post-materialist" issues like religion, content of school books, the environment, etc. Post-materialism is very much akin to post-modernism.

I've long thought that Clinton and G.W. Bush have similar personalities. Both have a situational approach to morality that tends toward being self-serving. But increasingly I'm seeing the monumental difference between the two: Clinton is a materialist and Bush is a post-materialist.

Clinton was the ultimate materialist/mondernist President ("Its the economy stupid"). He picked his public positions on policy based on polls and focus groups of constituents. Clinton, more than any politician I can think of, had a nack for finding the position of the median American on any given issue and sticking to them like glue. In a fundamental way, he saw himself as dependent on the electorate. The logical (US West half-jokingly calls them "cynical") among us can understand Clinton even if we don't agree with him. If Clinton changed positions it was usually in response to some pragmatic constraint (he lost support in Congress, the poll numbers said he'd lose popularity etc). What's more he made little attempt to conceal his strong pragmatic streak. Policies were justified in terms of reason and logic.

Bush is the ultimate post-materialist/post-modern President. His policies on the economy are simplistic and never really form the center of his projected image as a leader. Instead he makes strong appeals to America's and Americans' destiny to spread "freedom" throughout the world (whether they want it or not). He rejects the logic and reason of the Englightment. He conceals the details of key policies, engages in apparently reckless adventures, and resists any constraints on his own behavior. All the while justifying his actions by claiming priviledged access to the Will of God. Logic and reason are rejected as justifications for policy. Instead all policy must be justified by what is "right" or "just." And right is defined in terms of personal belief which is asserted as universal. His biggest political influence is "Jesus Christ because he changed MY life" (emphasis added). We normally think of post-modernism and post-materialism as being leftist phenomena but Bush is an example of right wing post-modernism.

At the risk of seeming hyperbolic...What is alarming to me is that Bush's ideology has as its major component a world view that rejects the ideas upon which democracy itself was founded.

US West said...

RBR makes a good point with post-materialism. This post may lack a bit of coherence, but there are numerous ideas floating in my head.

I hadn't considered materialism’s play in all of this. But RBR is right. Poverty today is very different that what we associate it with from the past. We talk about the “working poor”. Because "elite" consumer goods can be produced and purchased so easily, even the very poor can have DVD, MP3 players, and decent automobiles. I remember reading an interview with the founder of Crate and Barrel (I think) who pointed out that it is harder today to appeal to the upper crust since everything that starts out unique quickly has a knock off. And everything that starts out street gets gentrified. So it is odd to me when I hear about retirees having to choose between food and drugs. Somehow, I don't buy it. But that is another story. My point is that it is harder to distinguish the haves from the have nots just by glancing. This forces the haves into even more extravagance in order to set themselves apart. It becomes, then a vicious cycle. But I wonder if we aren’t nearing the tipping point.

This has ramifications for our values. The Enlightenment, to which RBR refers, was about independence within a set of boundaries. Locke, for instance, was in favor of private property but there were conditions, one of which was that no one should take more than he needed or could use. Government had a duty to insure domestic tranquility and the common good. And when things got out of control, government came and regulated- remember the Trust Busters and the New Deal. Government was checked by its own internal system to insure that centralized decisions would get made with a great deal of debate and discussion so that you would get a fair policy even if it wasn’t the BEST policy. Those notions have long since disappeared.

But let us not forget that the Enlightenment, while empowering, was an elitist concept that was meant to let the 2nd rung of society have more control over the 1st rung. Allowing the 3rd rung anything in the deal was a necessary evil. But that might be me being cynical. On the other hand, it was a powerful ideology that changed how everyone thought. It made government responsible to more than itself, and it saw a certain dignity in humanity. It was a theory that was put into practice in the form of republicanism. And what the Enlightenment became is perhaps more important than that what it was intended to be.

I don't think, RBR, that it is an exaggeration to say that our current group of leaders (if you can even call them that) on both sides of the isle are acting counter to our "values" as a nation. I’ve made that point several times in varying discussions on this blog. But then, many of the things that we say we value we really don't. Manifest Destiny was a really a nice justification for crooks, criminals, and land speculators to grab all they could from the Indians. But we called it independence and ingenuity, just like we call our Iraq war a move to bring “freedom” and “democracy” to the region and out social security reforms “ownership society”. We are good at marketing our baser notions as high morality; we have created cultural myths for ourselves as Americans. Like most myths, there is some truth behind our high notions of equality and justice, but mostly it is a form of empty self-delusion. And we have more time to engage in delusions thanks to all the high standard of living we have managed to acquire. But we aren’t happy. That is why there is the 50/50 nation (which may be a new myth) and a move to “God”.

Bush is a reflection of the average American. He is an empty man. He tried to fill it with his addictions, he was the Gatsby who tried to party it away. But nothing worked. So now he tries to appear full by relying on God. That’s how people fill “empty”. And the nice thing about relying on God and “God’s will” is that you can not disprove it. It is whatever you want it to be. So, you are correct RBR, that there is no other need for reason. You can’t reason with someone who insists that God is the ultimate force and He is acting through me. It is self-delusion and narcissism to the max. So you are right, he is the perfect reflection of a rightist post-materialist.

US West said...
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US West said...
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