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July 07, 2008

Comments

awww... McCain tells the sweetest little lies!

what a charmer.

But I don't think that even he can actually believe that he can make up $695 billion by cutting earmarks and "reforming" Social Security.

I don't think so, either, but there's about 120 million other voters who may not be as good as arithmetic, or like ponies, or both.

Well, McCain's as serious about it as Reagan ever was. Question is, has the American public grown up at all since the 80s?

Thanks for the numbers; that's a sobering look into the level of BS involved in a presidential campaigning!

I know almost nothing about social security as an institution beyond "pay into it as you work, draw from it after you retire."

I'd be curious to read a piece about it (or any of the large chunks of the federal budget, really) that laid out the big picture view. On social security, for instance, how do the mean values for what people pay in versus what they draw out over their lifetime compare? What about if you assume that what they pay in was going into an indexed fund, and staying there till they start taking payments? What are the credible proposals various people mean when they talk about social security "reform?" (Does anyone mean anything other than "don't take so much from working people, and let them invest it themselves?")

Pointers to where I should educate myself on my own time welcome too, of course ;) I suppose this sort of thing might be too basic for the ObWi readership.

emile: I don't have time to find a big-picture thingo now, though the Center for Budget and Policy Priorities would be a good place to start.

But one crucial point is this: letting people invest their SS money for themselves, when it's not just a add-on (i.e., you pay the same amount in SS taxes, but also get to invest your own money if you want), involves a big, big hit to SS solvency. It's not just not a way to make the finances work out better; it's a way to make them drastically worse. Here's my latest explanation of this point, complete with both links and silly pictures, depending on your level of interest.

Can we please stop describing Social Security payments as 'government spending'? Social Security is a mechanism by which workers directly support retirees without actually having to take the old folks in to live with them. It is a retirement fund operated by the government, not funded by the government.

-- TP

Though a comment on Joyner, not McCain:

What does it mean to say that we could make, say, HUD, "totally self-sustaining"? I assume this means "Pay all expenses out of user fees"
I can see how this thought might apply to Interior, or at least some of it (pay a lot to visit the National Parks, larger fees for oil and gas), though in practice it would never happen. But exactly what is HUD's income stream?

Though a comment on Joyner, not McCain:

What does it mean to say that we could make, say, HUD, "totally self-sustaining"? I assume this means "Pay all expenses out of user fees"
I can see how this thought might apply to Interior, or at least some of it (pay a lot to visit the National Parks, larger fees for oil and gas), though in practice it would never happen. But exactly what is HUD's income stream?

It's hard to know what, if anything, to make of this post -- other than a (candid) WTF?

1. WTF is up with attacking McCain based on a statement that he hasn't yet made? I wouldn't assume that the Politico's prognostications are a 100% reliable guide to Obama's positions. It's equally senseless to assume the same for McCain.

Before you accuse someone of lying, at least have a lie in hand. Even if McCain's statement on this issue is simply "What the Politico said," bad form.

2. WTF up with relying on Joyner when his numbers are so deeply flawed so as to be useless?

3. WTF is up with the Obama campaign treating the CBO's projections for 2013 as gospel?

4. WTF with presenting the issue of deficit spending completely out of context? (Deficits are not, by themselves, bad - a lot more context is required.)

Presumably, you want to avoid talking about the three hundred economists (including some big names, e.g., Gary Becker) who endorsed McCain's economic plan today. I suppose that this post does that -- so it's got that going for it.

Can we please stop describing Social Security payments as 'government spending'? Social Security is a mechanism by which workers directly support retirees without actually having to take the old folks in to live with them. It is a retirement fund operated by the government, not funded by the government.

Social Security is a generational tranfer, not a "retirement fund."

Last week in my tax accounting class, the professor asked how many of us thought that we'd ever get any money from Social Security (refined to Social Security retirement benefits, as someone was collecting SS disability). I was the only one who raised my hand. He proceeded to go on and essentially mock me, and talking about how SS was doomed. I tried to explain various points, but he was determined to go on.

It was disheartening.

"three hundred economists"

I've got 400 economists on the line who were foursquare behind subprime lending and then hiding the paper in portfolios around the world.

Another 700 economists have sworn up and down to me personally that inflation is not a problem at the moment, and when deflation raises its ugly head one day again, they're getting ready to tell me that won't be a problem either.

Economists at the major brokerage houses? I have a concensus report in my hand at this moment telling me that the Earth is about to fall into the Sun. They recommend purchasing sunglasses makers, sunscreen manufacturers, and a little-known Indian company which makes brass prayer wheels. They bought yesterday, but there is still time to get in.

Try to think long-term, because my friends, that's how long it's going to take to pay off your credit cards, your mortgage, and as George Carlin used to call it, the effing budget deficit, "effing" being word #8.

I'm beginning to understand Obama's endorsement of faith-based initiatives. He's praying the country is not going to buy this utter crap from the Republican Party one more time.

Changing my kid's diapers in the middle of the night was a "generational transfer", too.

I was happy to do it. ;)

von: for all the details, I was working off this, which the McCain campaign released today. I link to it whenever I cite specifics, but you're right, I should make it clearer.

I hadn't seen the economists thingo when I wrote this.

I don't mean to treat deficit spending as bad, with or without context. I do, however, mean to take McCain at his word when he says (pdf, linked above, p. 4) that "John McCain will balance the budget by the end of his first term." The point of the post is to ask: how, exactly?

Another 700 economists have sworn up and down to me personally that inflation is not a problem at the moment, and when deflation raises its ugly head one day again, they're getting ready to tell me that won't be a problem either.

I don't know of any economists who say that deflation wouldn't be a problem. Most of them think it's catastrophic, and they're close to right. A large part of the question is: how do you define "inflation?" Most of us think of it in terms of prices, but economists generally think of it in terms of the money supply.

Usually, the two go hand in hand. If you have inflation by one measure, you get it in the other, too. There is a strong possibility that that's not what's happening right now. With a huge run up in commodity prices at the same time we're having a credit crunch, we be experiencing price inflation with money supply deflation. That really is a catastrophic situation, as almost every policy prescription you can come up with to help one is going to exacerbate the other. That's why, though I think Ben Bernanke has made some significant mistakes, I'm prepared to cut him some slack, and I sure as hell wouldn't want his job, as desperate as I am to have a job.

1. WTF is up with attacking McCain based on a statement that he hasn't yet made? I wouldn't assume that the Politico's prognostications are a 100% reliable guide to Obama's positions. It's equally senseless to assume the same for McCain.

from the McCain campaign, today, to TPM:

    It's pretty straightforward, as we win, costs will go down with a smaller footprint over time, and those savings will go to deficit reduction. It's really the logical extension of Senator McCain's position as articulated in the 2013 speech. Achieving success in Iraq would obviously lead to reduced expenditures on the effort.

WTF, indeed.

we save money by not spending the money on Iraq. and all that money we saved, we'll put towards reducing the deficit.

it's magic money, you see.

Also: in my own arguments, I did not rely on Joyner. As I said.

Can someone explain the mechanism by which victory in Iraq and Afghanistan would create "savings"?

Does not compute.

And: the McCain pdf is linked from the Politico piece. They make it pretty plain that that's what they're relying on. So clicking through helps.

WTF with presenting the issue of deficit spending completely out of context? (Deficits are not, by themselves, bad - a lot more context is required.)

Assuming McCain is going to promise to balance the budget, isn't it McCain, not hilzoy, who thinks deficits are automatically bad?

If McCain thinks the deficit is not a big deal then let him say so, and put forth his program in that light.

Social Security is a generational tranfer, not a "retirement fund."

A little of both, really, since the 1983 reform. Since then workers have paid in much more than has been needed for the generational transfer part, with the idea that they were, in the aggregate, accumulating a surplus to partly cover their own benefits.

Please let's not sidetrack the thread with yet another round of "worthless IOU's."

Is today "National Explain Everything to Thullen Day"?

Thanks, Michael. ;)

I agree with you on the seriousness of the situation, by the way.

We could job-share Bernanke's job. Heck, let's split it three ways and keep him in the loop.

That of course would remove unemployment as an economic policy.

Social Security is a generational tranfer, not a "retirement fund."

True, but specious. Every retirement scheme is a 'generational transfer'. The food you eat, the health care you get, the electricity you consume in your retirement in 2038 will have to be provided to you in 2038 by the generation of people who are working that year. Whether they provide for you based on family ties, or a social compact, or contractual obligations like your ownership of stocks and bonds, you (the no-longer-productive retiree) will have to rely on 'the next generation' for the real goods and services you need.

-- TP

Can someone explain the mechanism by which victory in Iraq and Afghanistan would create "savings"?

say you're a hard-working reporter who likes to buy donuts for your favorite politician; every month, you buy $100 worth of donuts for him - put it on a credit ard which you don't bother paying off because the access is worth the price. but one month, you realize he doesn't need that many donuts: he only needs $50 worth. so, you've saved $50! and you can use that $50 to pay off the credit card which you've been using to buy all those donuts.

"but wait!" you'll say. "where does that second $50 come from?" well, you'll get that from your other credit card.

McCain's reportedly carries $100k in credit card debt.

(this is my un-surprised face)

I've got 400 economists on the line who were foursquare behind subprime lending and then hiding the paper in portfolios around the world.

Another 700 economists have sworn up and down to me personally that inflation is not a problem at the moment, and when deflation raises its ugly head one day again, they're getting ready to tell me that won't be a problem either.

And these would be meaningful retorts, if they were based in fact.

von: for all the details, I was working off this, which the McCain campaign released today. I link to it whenever I cite specifics, but you're right, I should make it clearer.

This, too, would be a meaningful report if the PDF actually contained a specific. But the PDF simply states that McCain will "balance the budget" but then specifically indicates that the budget does not include certain non-discretionary spending (e.g. social security and medicare). I realize that you and the Politico have made some assumptions regarding the specifics. You've also uncritically accepted the CBO projections offered by Obama as relevant to your assumptions. Your assumptions lead to your conclusion that McCain is lying. That you've assumed a lie by McCain, however, does not make it so.

Also: in my own arguments, I did not rely on Joyner. As I said.

Then why cite him in the first place?

And: the McCain pdf is linked from the Politico piece. They make it pretty plain that that's what they're relying on. So clicking through helps.

Yes, it does. (And, yes, I did click through the first time -- which is what prompted my WTF?).

BY, it's de jure a mixture of generational transfer/retirement fund, but de facto all generational transfer.


But the PDF simply states that McCain will "balance the budget" but then specifically indicates that the budget does not include certain non-discretionary spending (e.g. social security and medicare).

Another way of phrasing the complaint: One needs to know what is part of the "Budget" in order to determine what promise this document purports to make on McCain's behalf.

By the way, I haven't seen McCain make this announcement today or release this document. It wasn't on McCain's website the last time I checked.

This, too, would be a meaningful report if the PDF actually contained a specific. But the PDF simply states that McCain will "balance the budget" but then specifically indicates that the budget does not include certain non-discretionary spending (e.g. social security and medicare).

This makes the budget harder to balance, not easier. In 2013, the payroll tax will still be taking more in than the programs pay out. Unless McCain's argument is that he's not going to count Social Security payments as expenditures, but he is going to count the FICA taxes as revenues, this is irrelevant to hilzoy's point. If he does that, then balancing the budget becomes simple, but also meaningless.

WTF is up with attacking McCain based on a statement that he hasn't yet made? I wouldn't assume that the Politico's prognostications are a 100% reliable guide to Obama's positions.

and yet

And, yes, I did click through the first time

So you know where it came from. And it's been floating around for a while now without any counter from the McCain camp, so I tentatively assume it's a legitimate release (but who knows?).
Still have no idea how you can call it "Politico's prognostications" while admitting that you clicked through to the pdf, unless you think that the Politico made up some predictions and then put them into pdf form with the McCain campaign's imprint. Do you think that? Or is there something in the Politico that you think isn't on firm ground vis a vis the pdf?

WTF is up with the Obama campaign treating the CBO's projections for 2013 as gospel

Let's call the CBO's projections 'useful'. 'gospel' tastes kinda straw-flavored. Saying that the CBO is a useful data point- is that outrageous now? Do you have actual issues with the CBO numbers that you'd like to share?

WTF with presenting the issue of deficit spending completely out of context?

Context- McCain is promising to get rid of them. Are they bad? Maybe sometimes. Is promising to get rid of them while cutting taxes and prosecuting two wars a good idea?

Presumably, you want to avoid talking about the three hundred economists (including some big names, e.g., Gary Becker) who endorsed McCain's economic plan today.

Mind-reading foul.

This, too, would be a meaningful report if the PDF actually contained a specific.

Lacking specific numbers is a pretty serious knock on this. If they have real numbers, why not include them? If they don't have real numbers, how can they make the promise?
Lacking real numbers, it's just puffery hoping for mindless repetition by the SCLM for a day or two.

it's de jure a mixture of generational transfer/retirement fund, but de facto all generational transfer.

I'm not sure what you mean by this. Are you saying that the bonds held by the Trust Fund must be paid off by taxes imposed on future generations? True, but that applies to all government debt. The Treasury bonds I have in my IRA have to paid off by taxes on future generations as well, as do the bonds held by the Chinese Central Bank and anyone else. There is nothing special about SS in this regard.

The fiscal irresponsibility of the past seven years is indeed a generational transfer, but to claim SS is the culprit is inaccurate.

The fiscal irresponsibility of the past seven years is indeed a generational transfer, but to claim SS is the culprit is inaccurate.

I'd agree, but I think that nearly doubling the federal debt in less than 8 years needs a more descriptive name than "fiscal irresponsibility".

Perhaps treason should apply.

As long as a significant portion of the electorate continues to buy the fairy tale that you can simultaneously cut taxes, increase spending and pay down the deficit we will never get our fiscal deficit under control.

And one more thing. Before we begin touting those 300 conservative economists who support McCain's plan.

Since as Von has pointed out, there really isn't a plan yet, how the heck could a professional economist endorse the non plan?

They sound a lot like all those scientists that support creationism to me.

"I fully support it, and I will support it even more once I know what it is"

SS, like all pensions, is a claim on the income-generating capacity of future workers. The only difference between it and my 401(k) is that I have a better chance of screwing up my own investment decisions.

von: "This, too, would be a meaningful report if the PDF actually contained a specific. But the PDF simply states that McCain will "balance the budget" but then specifically indicates that the budget does not include certain non-discretionary spending (e.g. social security and medicare). I realize that you and the Politico have made some assumptions regarding the specifics."

Um: no. I have considered every single proposal for decreasing spending and increasing revenue in the McCain pdf. I have also considered certain further promises he has made (e.g., to increase the size of the army), which are understandably not included in his economic plan, but which involve further spending. I have then added them up, and tried to come up with an idea of how much money McCain needs to come up with. What, exactly, do you think is wrong with this way of proceeding?

"You've also uncritically accepted the CBO projections offered by Obama as relevant to your assumptions."

Is there supposed to be something wrong with the CBO? In any case, when I start doing the math, I use the $410 billion deficit figure, which is the actual budget deficit for 2008.

Von: "WTF is up with attacking McCain based on a statement that he hasn't yet made?"

Von: "Presumably, you want to avoid talking about the three hundred economists (including some big names, e.g., Gary Becker) who endorsed McCain's economic plan today."

Let me try to get this straight, Von: we allegedly don't know enough about the McCain plan to be allowed to criticise it, but we know enough that we should take note of people who have "endorsed" this plan that we don't yet know enough about to be allowed to discuss: do I have that right? We should talk about the praise, but we can't criticize? Am I missing something in your position?

How does that work?

Watch your wallets, folks. McCain wants to pull a Reagan. He'll "save" Social Security by changing the cost/benefit ratio. Reagan increased the cost. McCain said he won't raise taxes, so he'll have to cut benefits.

Since Social Security is in the black, it's yet another shift of the tax burden from the upper class to the middle class. Let's cut those benefits so we can cut somebody else's taxes!

I want to see a proposal from either candidate that Social Security and Medicare will be pulled out of the general fund, so when we borrow $300 billion in surpluses, it counts. That's why today's deficit isn't $400 billion or so, it's actually closer to $700 billion.

It is merely one more indication that there is no substance to McCain. He has up to now displayed policy incoherence that exceeds what I have seen in any major party candidate.

It is all made up. It sounds good. McCain should know by now how very difficult this task is. But he either he doesn't, or he thinks the American people are this stupid. But not all of us are, and in the age of the internet, we can make this known.

BTW, this reminds me of the 1994 Contract With America arguments. It is recycled. But McCain has even less substance than Gingrich et al.

The idea of this person serving as president is insane. Especially when compared with the striking talents of Obama.

The idea of this person serving as president is insane.

The GOP and the Right seem to have a radically different take on what Presidents are for than the rest of us. I think they're genuinely contemptuous of the concept of "good governance."

A candidate who is incoherent, self-contradictory, and issues policy ideas that make no sense whatsoever doesn't bother them, because - SFAICT - the only thing a President is 'supposed' to do, according to the GOP, is cut taxes, gut business regulation, and make sure money and power stay with the "right people."

Everything that maleficent, corrupt, incompetent governance causes - rotting infrastructure, pointless wars, bankrupt agencies, politicized DOJ, etc. - are actually good things to these people. I don't know why; it seems madness, even from a self-interest point of view, to want the country to decline into a banana republic.

But I can't explain how McCain can be considered a reasonable candidate for "the most important job on Earth" (for however much longer that's true) any way other than a deep, deep indifference to the actual effect of that job's performance on actual fellow citizens.

Every retirement scheme is a 'generational transfer'. The food you eat, the health care you get, the electricity you consume in your retirement in 2038 will have to be provided to you in 2038 by the generation of people who are working that year. Whether they provide for you based on family ties, or a social compact, or contractual obligations like your ownership of stocks and bonds, you (the no-longer-productive retiree) will have to rely on 'the next generation' for the real goods and services you need.

And interestingly, the forecasts for SS say that in the long term, the fraction of GDP needed to cover SS costs is quite constant: see http://www.ssa.gov/OACT/TR/TR08/II_project.html#112699l>Figure II.D5, which shows that's about 6%. The same figure shows revenue from a constant tax rate falling from 5% to barely more than 4%. Implicit in that is the prediction that the portion of GDP showing up in wages under the SS cap will decline by almost one-fifth over the next 75 years. Personally, I think a decline of that magnitude will lead to other problems sooner than the SS trust fund gets to zero.

So you know where it came from. And it's been floating around for a while now without any counter from the McCain camp, so I tentatively assume it's a legitimate release (but who knows?). Still have no idea how you can call it "Politico's prognostications" while admitting that you clicked through to the pdf, unless you think that the Politico made up some predictions and then put them into pdf form with the McCain campaign's imprint. Do you think that? Or is there something in the Politico that you think isn't on firm ground vis a vis the pdf?

I know that McCain has made a number of statements regarding the deficit, none final. In some he states that he'll seek to balance the budget in four, in some eight, and in some there are no promises. I don't know whether this document is a final draft, an interim draft, or something else. So, yes, calling it Politico's prognostications is correct.

I'm not sure what you mean by this. Are you saying that the bonds held by the Trust Fund must be paid off by taxes imposed on future generations? True, but that applies to all government debt

That's my point (well, actually, Ricardo's point.)

Let me try to get this straight, Von: we allegedly don't know enough about the McCain plan to be allowed to criticise it, but we know enough that we should take note of people who have "endorsed" this plan that we don't yet know enough about to be allowed to discuss: do I have that right? We should talk about the praise, but we can't criticize? Am I missing something in your position?

How does that work?

My position becomes clearer on the issue at hand when you focus yourself on the issue at hand.

Um: no. I have considered every single proposal for decreasing spending and increasing revenue in the McCain pdf. I have also considered certain further promises he has made (e.g., to increase the size of the army), which are understandably not included in his economic plan, but which involve further spending. I have then added them up, and tried to come up with an idea of how much money McCain needs to come up with. What, exactly, do you think is wrong with this way of proceeding?

Among many other things, it fails to take into account the (noncontroversial) stimulus effect of reduced taxes. In addition, several of your assumptions are incorrect: McCain's proposals include reductions in military expenditures (size does not equal expenditure).

Is there supposed to be something wrong with the CBO? In any case, when I start doing the math, I use the $410 billion deficit figure, which is the actual budget deficit for 2008.

410 is the projected deficit figure for 2008, not the actual figure. But I had thought that you were using the 2013 projection; why are you using the 2008 projection?

That's my point (well, actually, Ricardo's point.)

But then what does any of this have to do with Social Security?

It is not Social Security that causes the government to run at a deficit. Social Security runs a surplus.

What causes the problem is that govt spending exceeds tax revenues. The Bush tax cuts are a generational transfer. The Iraq War is a generational transfer. If you think deficits are bad then address the real reasons for them - not the phony ones.

As I've posted here many times, by far the largest deficits, as percentage of GDP, since post-WWII have come during the Reagan and Bush II administrations. What these had in common, obviously, is manic tax-cutting fueled by supply-side idiocy. Let's hear about that, not Social Security, from McCain, if he's serious about deficit reduction.

von: I cannot now remember why I used the 2008 figure, other than that it had something to do with the assumptions behind the forecasts for the out years. (I mean: what one assumes about, say, the AMT is different for FY 2008, when a patch has already been adopted, than it is for 2012, and something about those issues was behind what I did.

About Politico's document: it did, in fact, go up on the McCain website yesterday. (See also here.) Like most things on McCain's website, it's not easy to find, though I think I'm getting the hang of it. I was prepared t assume that when Politico posted a document purporting to be from the McCain campaign, with the McCain campaign's graphics, etc., it was in fact a McCain campaign document, and not in the same category as Politico reporters speculating about what McCain might do. However, I'm happy to help put doubts on that score to rest.

But then what does any of this have to do with Social Security?

....

What causes the problem is that govt spending exceeds tax revenues. The Bush tax cuts are a generational transfer. The Iraq War is a generational transfer. If you think deficits are bad then address the real reasons for them - not the phony ones.

Yes, all are, in a sense. The difference is in the words "direct" and "indirect." SS is a direct generational transfer. Your other examples are indirect generational transfers.

Incidentally, I don't think that "deficits are bad". All I point out (on this subject) is that it's wrong to call SS a "retirement account." It may (or may not) be a social contract, but it's not an "account".

About Politico's document: it did, in fact, go up on the McCain website yesterday. (See also here.) Like most things on McCain's website, it's not easy to find, though I think I'm getting the hang of it. I was prepared t assume that when Politico posted a document purporting to be from the McCain campaign, with the McCain campaign's graphics, etc., it was in fact a McCain campaign document, and not in the same category as Politico reporters speculating about what McCain might do. However, I'm happy to help put doubts on that score to rest.

Fair enough. I get suspicious when I see a 7/6 story promising a 7/9 document and then, on 7/9, I can't find the document in question -- particularly where McCain hasn't had a consistent or clear position on the issue in question.

I know that McCain has made a number of statements regarding the deficit, none final. In some he states that he'll seek to balance the budget in four, in some eight, and in some there are no promises. I don't know whether this document is a final draft, an interim draft, or something else. So, yes, calling it Politico's prognostications is correct.

That seems to justify ambiguity and flip-flopping as a positive good- as long as he doesn't come up with solid numbers, or even a solid date when he plans to balance the budget, we cannot criticize his positions?
And calling it Politico's prognostications wasn't correct- even if they're repeating stuff from the McCain campaign that turns out to change next month, it's still coming from the campaign. It is neither "Politico's", nor "prognostications".
It'd be a prognostication to say that the McCain campaign will necessarily follow through on these various promises, but I take the piece as a thought experiment (ie what would be the result of following this policy & his other promises), not a prediction.

Among many other things, it fails to take into account the (noncontroversial) stimulus effect of reduced taxes.

How much of an effect do you think this will have? It is noncontroversial, but not much more than a rounding error- unless one embraces the unrealistic assumptions that predicted a boom following the Bush tax cuts & a slowdown following Clinton's tax hikes.

In addition, several of your assumptions are incorrect: McCain's proposals include reductions in military expenditures (size does not equal expenditure).

I hadn't heard that. Do you know of specific proposals to save money in this area (other than 'eliminate waste and fraud')?

"I hadn't heard that. Do you know of specific proposals to save money in this area (other than 'eliminate waste and fraud'"

Win Iraq & Afghanistan. I kid you not.

Katherine,
I admit, I wasn't even thinking about that. And it is sort of confusing- do we get more money if we say "we win!" and leave than if we say "this sucks" and leave?
Also, Im not sure if the forecast 2013 budget contains war spending at all. Id check, but I am so supposed to be working right now...

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