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January 25, 2011

No Suprise: Captain Hope Won't Be Suggesting Any Reforms To Entitlement in the SOTU

This is tricky politics, because there's probably not a majority in favor of this, nor a majority in either party. Conservatives like to talk a good game about cutting spending, but they get mealy-mouthed and start talking vaguely when this subject comes up. The most they'll say, usually, is that "all options are on the table" but if you specifically ask about reforming entitlements, they'll start saying "We should definitely be discussing that" or "We should definitely be examining those options."

Well, that's a nod in the right direction, but discussing and/or examining doesn't stop the country from going bankrupt. Only acting does, and few people are willing to say We need to act.

Paul Ryan says that. Sarah Palin, through her endorsement of the Ryan plan, also says that. Almost no one else does. Just that we should discuss and/or examine.

Well, Barack Obama will not even be committing himself to discussing and/or examining reforms to Social Security.

In 2015, the Social Security Trust Funds will run out of cash because the program will permanently start paying out more benefits than it collects in taxes. At that point, the program will start redeeming the IOUs in the trust funds to pay benefits to current seniors. At first, they will cash in the interests supposedly earned over the years, then in 2025 they will redeem the assets themselves until they dry out. But here is the problem. The federal government doesn’t have that money any more because it spent it on stimulus, education, green jobs, and more daily consumption. Then what? Well, it means that in order to repay the program so it can continue to pay out benefits at the promised levels, the federal government will have to borrow more money, increase taxes to get more revenue, or print more dollars. None of these options are good for the American people but it probably beats the alternative of not paying the benefits of current retirees.

By refusing to reform Social Security today, the president is telling the American people that he chooses the road to more taxes, more borrowing, or unanticipated benefit cuts for seniors already in the program.

Paul Ryan won't commit to this in the rebuttal, either -- he's giving the consensus GOP rebuttal, not his personal plan. But I do imagine he will at least mention discussing/examining all options.

Which Obama -- He who is so bold and determined to fix the country that he's willing to do unpopular but necessary things and only serve a single term -- will not.

If Ryan's rebuttal, reflecting the weak GOP consensus, will be tentative, Obama and the Democrats plan on making a virtue of actual cowardice. And then demogoguing on that. Charles Schumer is already doing just that.

Schumer’s strategy is to highlight the link between GOP efforts to cut as much as $50 billion from the federal budget and a “roadmap” to create private accounts for Social Security and Medicare that Ryan created.

“This is an initial volley in a three-day effort — 72-hour window — to try to muddle Paul Ryan’s foray onto the national scene,” said a senior Senate Democratic aide. “We want to make the House Republicans or Republicans at large own his roadmap and what it would entail for Social Security.”

I wish some spokesman would stop just saying these programs are unsustainable and emphasize what the word "unsustainable" means -- they will not be sustained. They will stop. The only options are reform, raising taxes, or flooding the country with inflationary dollars. By not choosing reform we are, by default, choosing some combination of the other two.

So what will Obama talk about, if nothing important? Pap. He';s going to try to sell himself as a fiscal conservative, if you can believe he'd be so brazen, while simultaneously -- get this -- pushing for more spending. Wait, did I say spending? I meant "investments."

He'll posture as a deficit hawk while pushing -- as they always do -- the most trivial steps possible, and earmark ban and a freezing of the federal budget.

The budget does not need to be frozen -- it needs to be cut. It has grown enormously since 1998. And hugely just since 2008. Freezing it at its ridiculously high level is not fiscal conservatism, it is fiscal catastrophism. It is... Cloward-Piven.

The budget this year is $3.8 trillion (with a T), of which more than a third -- $1.4 trillion -- was simply borrowed from our future ten-years-from-now selves, and there is no reason to believe our future ten-years-from-now selves will have extra cash. In fact, they'll have less, given that all the problems we're having now will accelerate and grow even worse to the point that, in 2020, we will look back on 2010 fondly.

But yes, be so daring as to propose freezing spending at current obscene levels.

Fairness: Captain Ed has some good quotes on this. I find the position of the never-cut-Social-Security/Medicare lobby pretty cynical, as they're saying, pretty much, "I don't mind if these systems implode after I die, as long as I get as much as possible before then."

That's always my problem with current retirees (or soon-to-be-retirees) who say "Well I was promised these things."

Well, you know has two thumbs and was also promised these things? (Two thumbs point back at self.) This guy!

The question isn't whether the government is going to honor the promises it's made to people who paid into SS and Medicare. It won't. It can't. The question is only whether some people get nearly every dime and other people get nothing (except a huge bill), or some people get a little less while the generations coming up get a lot less, but still something.

There is no conceivable politics in which current or near-term retirees don't get most of their due, and get far more than anyone else will in the future. But the cynical posturing of Just make sure I gets mine; everyone else can suck it drives me crazy.

Given that no one under forty or near forty is going to see any of these benefits, a question arises: Then why on earth should we pay into the system at all that's supporting current retirees?

Anyway, here's some more along those lines.

The table also shows, however, that those already in Social Security will, in the future, get back $18.7 trillion (in present-value dollars) more than they will contribute henceforth. In short, their past excess contributions, even if they had been saved, are nowhere near the amount needed to pay for their future benefits.

This is where young and future generations come in. Social Security is a pay- as- you- go system: each generation’s benefits are paid primarily by taxing those that follow (this is true even if we adopt the controversial viewpoint that the $2.4 trillion Trust Fund is effective pre- funding). Were we to exclude current program participants from the solution, those just entering Social Security now will effectively be asked to put an additional $16.3 trillion into the system beyond what they will ever receive.

I'm not sure I understand conservatives who say it's time for public unions to take a haircut on their promised pensions but Social Security can't be modified at all, even a small amount (like 5%) to help sustainability.

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posted by Ace at 12:15 PM

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