Republicans have been more frustrated than usual with their Presidential candidates, and last Tuesday’s debate exchange on Social Security between Rick Perry and Mitt Romney shows why. One candidate seemed to taunt his critics by showing disdain for anyone who supports the entitlement for seniors, while the other candidate sounded like a Democrat defending it.
Mr. Perry was asked about a passage from his recent book in which he called Social Security a Ponzi scheme. The question was inevitable, yet the Texas Governor gave the impression he hadn’t given it more than a few moments of thought.
“Anybody that’s for the status quo with Social Security today,” he said, “is involved with a monstrous lie to our kids, and it’s not right.” Young people who “expect that program to be sound, and for them to receive benefits when they research retirement age” should be disabused of that notion, Mr. Perry added, repeating the “lie” bit as if he had little more to say.
Give Mr. Perry credit for addressing one of the third rails of American politics, but that doesn’t mean he has to invite electrocution. The problem with his hot rhetoric is that it can turn off many voters before they even get a chance to listen to his reform proposals, assuming he eventually offers some.
He’s even technically right that Social Security is a species of Ponzi scheme (if not a criminal enterprise) in the sense that young people today are putting more into the system than they can possibly get out in retirement.
As the economy continues to struggle, we are reminded of a course offered at Yale University titled “Grand Strategy.” Drawing on a weighty curriculum of history and philosophy, the course seeks to train future policy makers to tackle the complex challenges of statecraft in a comprehensive, systematic way. Clearly, U.S. economic policy is sorely lacking an effective grand strategy, and we are likely to endure high unemployment, weak economic performance and trying financial markets until such a strategy is articulated and pursued.
Policy makers should cease the barrage of ad hoc, short-term policy initiatives. Is increased federal spending across government agencies a grand strategy? How about checks in the mail to spur spending? Cash for clunkers to move auto inventories? Fast trains and faster Internet? Mortgage modification programs and fleeting tax credits to re-stoke home ownership?
Inducing consumers to do today what they would otherwise do tomorrow is hardly a grand strategy. Hundreds of billions in “stimulus” spending has stimulated little but more debt. Forty-eight months have passed since the onset of the financial crisis, 26 months since the recession technically ended. Yet job creation remains remarkably weak, and markets deeply uneasy.
We can’t go on like this.
The debt-limit debate caused policy makers to recognize what citizens already knew: We must put our fiscal house in order. Cutting spending is essential. But we will never cut our way to prosperity. (more…)
By Charles Krauthammer – Washington Post Writers Group
Published in: Other Views
August 6, 2011
WASHINGTON Conventional wisdom holds that the congressional super-committee established by the debt-ceiling deal to propose further deficit reduction will go nowhere. I’m not so sure. There is a grand compromise to be had. It does, however, require precise sequencing. To succeed it must proceed in three stages:
1 Tax Reform. True tax reform that removes loopholes while lowering tax rates is the Holy Grail of social policy. It appeals equally to left and right because, almost uniquely, it promotes both economic efficiency and fairness. Economic efficiency – because it removes tax dodges that distort capital flows (and thereby diminish productivity) while cutting marginal tax rates (thereby spurring growth). Fairness – because a corrupted tax code with myriad breaks grants deeply unfair advantage to the rich who buy the lobbyists who create the loopholes and buy the lawyers who exploit them.
Which is why the 1986 Reagan-Bradley tax reform was such a historic success. It satisfied left and right, promoted efficiency and fairness, and helped launch two decades of almost uninterrupted economic expansion.
But didn’t that agreement take years to hammer out? Yes. Today, however, the elements are already laid out by the Simpson-Bowles commission. The super-committee doesn’t have to reinvent the wheel. It simply has to make choices.
President Obama famously played to grandma’s Social Security fears this week, saying in an interview about the debt-ceiling talks that “I cannot guarantee that those checks go out on August 3 if we haven’t resolved this issue because there may simply not be the money in the coffers to do it.”
To which a friend of ours replied, whatever happened to the trust fund?
That’s the fund that, according to our politicians, is holding all those Social Security taxes that workers pay. Why can’t Congress or Mr. Obama dip into that $2.6 trillion cash hoard to pay benefits until this debt-limit business gets sorted out? After all, as White House budget director Jack Lew put it in a February USA Today op-ed, “Social Security benefits are entirely self-financing.”
Not quite. As everyone in Washington knows, the trust fund contains not cash but IOUs. Payroll taxes don’t go to some vault in Fort Knox, and they certainly aren’t invested. When Social Security runs a surplus, Congress spends the money immediately on something else and then the government claims its owes a debt to itself. Where the money will come from to pay these IOUs is anybody’s guess—though Mr. Obama is hoping it will be higher taxes. (more…)
By Charles Krauthammer – Washington Post Writers Group
WASHINGTON Here we go again. An approaching crisis. A looming deadline. Nervous markets. And then, from the miasma of gridlock, rises our president, calling upon those unruly congressional children to quit squabbling, stop kicking the can down the road and get serious about debt.
This from the man who:
Ignored the debt problem for two years by kicking the can to a commission.
Promptly ignored the commission’s December 2010 report.
Delivered a State of the Union address in January that didn’t even mention the word “debt” until 35 minutes in.
Delivered in February a budget so embarrassing – it actually increased the deficit – that the Democratic-controlled Senate rejected it 97-0.
Took a budget mulligan with his April 13 debt-plan speech. Asked in Congress how this new “budget framework” would affect the actual federal budget, Congressional Budget Office Director Doug Elmendorf replied with a devastating “We don’t estimate speeches.” You can’t assign numbers to air. (more…)
We’ve had strong presidents and weak presidents, skillful presidents and incompetent presidents, mediocre presidents and just plain poor presidents. Barack Obama stands alone as the first president who simply declines to lead.
On almost every major issue since he took office in January 2009, Obama has dumped responsibility on someone else, merely paid lip service, or let the issue quietly fade away. Just this year, the issues that have gotten the no-leadership treatment from Obama include: the deficit, the debt, Medicare, Social Security, Medi-caid, energy, corporate taxes, medical liability, immigration, and Libya.
The president set his pattern of negligible leadership early on in his administration. Rather than draft his own proposals on economic stimulus, health care, cap and trade, and Wall Street reform—his top priorities—he delegated the job to Democrats in Congress.
Even Jimmy Carter, one of our weakest presidents, didn’t do this. And strong presidents, like Lyndon Johnson and Ronald Reagan, never considered deferring to Congress in that way. They followed the traditional practice of drafting specific legislation—two major tax bills and a military buildup in Reagan’s case, civil rights and Medicare in LBJ’s—and pressing Congress to ratify their recommendations.
Why is Obama so leadership averse? For one thing, it gives him flexibility since he’s not tied irrevocably to what congressional Democrats come up with. And it limits his accountability. He’s free to attack Republican proposals without attaching himself to an alternative that Republicans could attack. (more…)
Typical retired couples will collect $1 million or more in Social Security and Medicare. This is more than they paid in, and the cost will fall on today’s workers.
Readers may recall the 1950s TV show, “The Millionaire,” which portrayed stories of individuals who were given a “no strings attached” gift of money by an anonymous benefactor. Each week in one of the show’s opening scenes, a man representing the wealthy benefactor, John Beresford Tipton Jr., knocked on an unsuspecting recipient’s door and announced: “My name is Michael Anthony and I have a cashier’s check for you for one million dollars.”
That TV program is scheduled to return next year as a reality show, and the new recipients will be the typical husband and wife who reach age 66 and qualify for Social Security. Starting next year, this typical couple, receiving the average benefit, will begin collecting a combination of cash and health-care entitlement benefits that will total $1 million over their remaining expected lifetime.
According to my calculations based on government data, such married couples will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.
We cannot even remotely afford to make good on these promised benefits. Although our system of personal liberty, free enterprise and limited government has made us an affluent and upwardly mobile people, we are not yet a nation of John Beresford Tiptons.
A fundamental misconception about America’s welfare state misleads millions of voters to reflexively support ever bigger and more generous government. William Voegeli fingers the attitude in his book, Never Enough: America’s Limitless Welfare State: “no matter how large the welfare state, liberal politicians and writers have accused it of being shamefully small” and “contemptibly austere.”
Barbara Ehrenreich expresses the attitude in her book, Nickled and Dimed: “guilt doesn’t go anywhere near far enough; the appropriate emotion is shame” regarding the stingy miserliness of America’s welfare state. In light of the current budget debate, with House Budget Committee Chairman Paul Ryan putting fundamental entitlement reform on the table, this misconception especially needs to be corrected.
America’s welfare state is not a principality. It is a vast empire bigger than the entire budgets of almost every other country in the world. Just one program, Medicaid, cost the federal government $275 billion in 2010, which is slated to rise to $451 billion by 2018. Counting state Medicaid expenditures, this one program cost taxpayers $425 billion in 2010, soaring to $800 billion by 2018. Under Obamacare, 85 million Americans will soon be on Medicaid, growing to nearly 100 million by 2021, according to the CBO. (more…)
