Quote of the Day
Great spirits have always encountered violent opposition from mediocre minds.
Albert Einstein
Sunday Talk Soup
Like last Sunday, I'm primarily focused on Meet the Press. My issue this week isn't so much with host David Gregory (although he continues to do a mediocre job of substantively challenging his progressive guests), as with Dick Durbin (D-IL), whom is part of the Senate Democratic leadership. Although I have never agreed with Durbin (including during the years I was an Illinois resident), I gave him some kudos for being one of the senators on the President's bipartisan deficit reduction commission. Among the issues discussed by the commission: entitlements, especially social security.
So when I heard Sen. Durbin specifically claim that social security doesn't add one dollar to the federal deficit this year (in line with state-of-denial Democrats), we are faced with one of 2 conclusions, which I'll leave to the reader to decide: either Sen. Durbin is incompetent in understanding one of the biggest parts of the federal budget, or he deliberately lied to the American people. Did David Gregory challenge Durbin's false assertion? Of course not.
Let's go to SSA Summary of the 2010 annual reports released LAST AUGUST:
Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly...
A couple of comments here: first, what is significant about the year 1983? This was around the time of the last social security reform measure. The Democrats saw the writing on the wall back then, but we are running a deficit now, and the Democrats are singing 'don't worry, be happy'. Now of and by itself, from a life cycle perspective, an operational deficit in retirement funds isn't surprising, e.g., a retired worker stops contributing to his 401K and starts taking distributions. The issue is whether the distributions are sustainable or whether you are eating into investments throwing off income, in which you face a possible issue of outliving your assets. The point is, the baby boomers are only starting to turn 65, and we are facing a problem because there really isn't much of a nest egg--basically we take the payroll revenues and send them out to beneficiaries, depositing the difference (if applicable) into the reserve. A one or 2-year blip wouldn't be a major problem, except you consider the trend--and the SSA is not expecting a recession for that shortfall after 2014. What the report goes on to say is that the actuaries to expect the principal behind the current reserve to be exhausted by 2024. The remaining years of full funding will be off cumulative interest. During the distribution period, of course, Uncle Sam has to find the money to pay the bonds and interest and can't count on a captive source for funding its own operational deficits--with trillion dollar deficits as far as the eye can say. This is unsustainable.
But even if you disregard this, keep in mind that this year, as part of lame duck session compromise, in an effort to goose the economy, there is a partial payroll tax cut--this actually adds to the EXISTING social security deficit--which, in fact, counter to Durbin's misleading (and outright false) allegations, ADDS TO THE FEDERAL DEFICIT:
This year alone, Social Security is projected to collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits, the nonpartisan Congressional Budget Office said Wednesday. That figure swells to $130 billion when a new one-year cut in payroll taxes is included, though Congress has promised to repay any lost revenue from the tax cut [i.e., adds to the deficit one way or the other].
The CBO, which came up with the revised figures above, also had something to add about their (and the SSA's) prior expectation noted above (i.e., that we would see net contributions would come to a small surplus in the coming couple of years), as economic assumptions involving employment pickups have moderated:
New congressional projections show Social Security running deficits every year until its trust funds are eventually drained in about 2037.
You remember the CBO, right? The same organization that evaluated what I refer to as the kaleidoscope budget of the Democratic Party Health Care Law (you shake and bake numbers by matching 6 years of outflows against 10 years of inflows based on double-counting improbable cost savings in Medicare) and purposefully keeping doc fixes out of the mix to come up with an intellectually dishonest "surplus". The Democrats accused Republicans of being "hypocritical". In fact, Bush spent considerable political capital early in his second term, 6 years ago, trying to reform the social security system.
And this isn't even taking into consideration that the federal government operational budget is having to pay interest on what it owes the social security reserve. If that interest payment is not fully funded by existing general tax revenues, it adds to the deficit. Durbin is demonstrably wrong on multiple levels.
Unethical Doctor(s) at the Madison, WI Protests
The idea of professionals abusing their privileges is not a new one. For example, in the years preceding Roe v Wade, therapeutic abortion for "mental health" reasons was grossly abused by sympathetic providers and/or disingenuous patients, surprising even lawmakers drafting the original legislation. Of course, progressive professors for years have blurred the line between scholarship and ideology, and the recent ClimateGate scandal demonstrated the extent to which the critics of the dominant climate change paradigm were intentionally marginalized. Let's not forget how pages and interns at the national level have been sexually pursued by elected officials. All of these individuals have cast a shadow of the credibility of the institutions they represent or have certified them.
Among the related stories of the collective bargaining kerfuffle I tracked via Drudge Report, is the following item from the MacIver News Service:
I don't think being "sick of Governor Scott Walker" is generally accepted as a medical condition. And, and can you cough a little more convincingly when you go up to an excuse-mill "doctor" complaining you might have caught a little 24-hour cold while on an illegal strike attending a protest rally? These "doctors" should be brought up on professional ethics charges and stripped of all related privileges. Any protesters presenting these forms to a public sector employer should be terminated for cause and prosecuted for fraud by the state of Wisconsin. Furthermore, if any of the "doctors" are public sector employees e.g., affiliated with a University of Wisconsin medical school or facility, they should be terminated--they are hardly independent of the status of fellow employees; professional standards require not only independence in fact, but also in appearance. I don't have an issue with the right of any Wisconsin citizen to their political beliefs, but when they are involved in a conspiracy for fraud, they have crossed the line.
Taking Republicans to the Woodshed
I've tried to be patient with the Republicans, but I think some criticisms are overdue.
First, Lindsey Graham (R-SC) on Meet the Press today suggested means-testing of benefits. (Speaker Boehner has mentioned the same.) I want to point out that the amount of savings from the relatively small number well-to-do people is limited since the maximum payout is under $30K a year. Moreover, for higher-income seniors, social security distributions are already partially taxed, and there are studies showing the rate of returns for higher-income people are less than for lower-income people. I think there is some argument that could be made that wealthier citizens should not expect more than what they/their employers have put into the system and certain benefits (e.g, prescription drug coverage) should have higher-deductibles. Basically, I want Graham and Boehner to hear me: we need to hear shared sacrifice and not get sucked up into class warfare language like means-testing and eliminating the income ceiling. The government made a contract with each of us that if we contributed and met the criteria, we get the income, which is not a gift but repayment for what we contributed. If the federal government wants to supplement lower-income senior citizens, it should do so out of general revenues, consistent with other poverty programs across classes of citizens. You cannot change the rules of the game once the game has been played. If you want to exclude seniors from future distributions after the fact, you need to give them what they paid into the system. Otherwise, what's being proposed is blatantly unconstitutional (at minimum, the Fifth and Fourteenth Amendments).
Second, Governor Scott Walker (R-WI). I think if you're going to take on the unions, you should have thought bigger and communicated better. For meaningful reform to empower decision makers at the school level, we need to discuss substantive reforms empowering school administrators, including streamlining work rules, teacher termination, and market- and performance-based compensation. Walker's nuanced approach to collective bargaining is not obvious, probably the first step towards real reform, which is what the unions really are reacting to; the compensation adjustments on health care and pension contribution certainly help county/district administrators coping with a limited personnel budget. I mentioned in an earlier post what Governor Guillemette would do: in particular, converting a defined-benefit pension into a defined-contribution (403-B) system (even the former Democratic Michigan governor on MTP mentioned that she had done that in a union-happy state). But Governor Walker, even with these concessions, with or without union consent, still has a budget deficit of over $3B to deal with.
Investment blogger Joel Bowman has a good summary of states facing the days of reckoning: (We are now reaping the rewards of years of unsustainable progressive legislation and commitments at all levels of government.)
States from coast to coast are facing budget shortfalls of a magnitude heretofore unseen, unfathomable, even. More than 40 states are in the red for a combined budget shortfall of $125 billion for fiscal year 2012. ...How did it come to this? As it turns out, the state is almost as costly as it is unnecessary. Monopolizing entire sectors of the economy with increasingly expensive, terminally inferior products and services is an expensive hobby, one that drains billions from the productive, private sector in the process... According to figures from the Bureau of Labor Statistics, 22.5 million Americans, comprising 17% of the entire workforce, now work for the government. The average government employee makes $47,000 per year, while private sector workers pull down an average of $45,000. The average public sector employee pays $3,600 for healthcare. Construction workers, for comparison, pay an average of $4,100. Those in the services and retail industry pay $4,200. Only 20% of workers in the private sector have what are known as “traditional” retirement plans, compared with 79% in the public sector. And, while most private employees don’t get health insured benefits in retirement, 87% of public workers do.
Finally, the kerfuffle over the amount of deficit reduction: 4% of the deficit, after a 25% ramp up of discretionary spending? Is that all? But nothing like a 9% haircut, across the board, because you don't trust Obama's choices? Isn't that recycling the argument made by the pro-earmark legislators, that if they couldn't spend it, Obama would make other choices? The House should make it clear that the Obama Administration cannot reuse federal dollars allocated, e.g., from canceled projects, that federal salaries over the median income are subject to a haircut and all step-increases frozen immediate, that agencies need to look at staffing cuts (including civil servants and contractors) and pooling resources, etc. We should look at selling federal buildings and property and privatizing operations when feasible: in other words, look at what states and cities are doing to balance their budget, and put those efforts on steroids. So THUMBS DOWN! on just a 4% cut--we need more than just pent-up, long-time desires to strip public broadcasting, Planned Parenthood, etc. We also need to accelerate disposing of government-owned stock, e.g., any remaining shares of the auto companies, the GSE's, and AIG.
And here's where I'm going to differ from the military conservatives: I particularly disliked Defense Secretary Gates doing the Chicken Little act on reductions of military spending. DoD bureaucrats are no more productive than domestic ones.
Finally, we need to look at raising revenues while cutting or holding spending flat. It has to be across the board and significant enough to start paying down debt. Even during the surpluses just over a decade ago were not operational surpluses--they consisted of payroll tax inflows, net of outflows. If you don't have the will to eliminate or reduce programs, you have to pay for them. I have repeatedly encouraged a national sales tax; since our trade partners already implement the same, it's consistent with international trade agreements.
Political Humor
A few originals:
- The unions are also economizing. For example, noticing a link between George Walker Bush and Scott Walker, they are reusing their old anti-Bush signs...
- When told IBM's Watson with artificial intelligence won the game show "Jeopardy" against two humans, President Obama countered that Central Intelligence's Sherlock Holmes is in constant jeopardy against more foes.
Musical Interlude: My Favorite Groups
The Bee Gees, "(I've Just Got to Get) A Message to You"
