Monday, May 02, 2005

Best wishes to Josh Marshall

Josh Marshall is going on honeymoon. Really, not a figure of speech.
While he is away, Matthew Yglesias is helping mind the store and he's off to a good start:

Warren Buffett, who knows a thing or two about investing, comes out against the phase-out (see last item) along with Berkshire Hathaway Vice Chairman Charles Munger, "a self-described right-wing Republican" who thinks "Republicans are out of their cotton-picking minds on this issue." It's not entirely clear if he thinks Republicans are insan[n]e because their plan is so bad on the merits, insane because their plan is so politically self-destructive, or insane because it's simply absurd to be having a national conversation about restoring "solvency" to the federal government's best-financed element. Perhaps it's all three! LINK

He warns of a red herring tossed into the Individual Security debate (I can't call it "Social" security as long as the aim of the administration is to torpedo the social aspect of the program) in a Nicholas Kristof column which refers to the work of Laurence Kotlikoff, whom he calls "the chief useful idiot of the privatization drive."
Please, Matthew, tell us how you really feel.

Kotlikoff, as you can tell from Kristof's column, is very concerned that the government spends too much money on the people who are old right now, and the people who will be retired soon, and not enough on younger people. The phase-out crowd is a great fan of his book and mentions it constantly. I spent the day a couple of weeks ago at a Heritage Foundation event on Social Security where, naturally enough, you had a lot of privatization advocates, and several of them mentioned Kotlikoff and the analysis presented in his book as an important reason to support the phase-out. Funny thing, though, was that none of them said anything about Kotlikoff's views as to what we should do about it.

Kotlikoff favors replacing Social Security with something that's been given a name that sounds like "private accounts" or "personal accounts" or whatever it is we're supposed to call them nowadays. But his accounts are nothing like the ones Bush is pushing for. Individuals have no control over them -- each and every citizen's money is going to be invested the exact same way according to a formula devised by a government computer somewhere. In essence what he's proposing is simply that the Social Security administration invest the Trust Fund partially in stocks and other private assets. In order to overcome a couple technical problems with that plan, he splits the money up into a whole bunch of pseudo-personal accounts as a kind of accounting device.


What Bush is pushing -- and what's being pushed with many a reference to Kotlikoff's book -- does the reverse. If you're 55 or older when the plan passes, nothing changes for you. If you're 50 or 45, you do face some benefit cuts, but they're not all that big. That's because the way switching from price indexing to wage indexing (whether fully or, as we're now being asked to swallow, partially) works is that there's a little cut the first year, then a little cut the next year, then another cut, then another cut, then another, and so on down the road until quite literally the end of time. Once you get to somebody Josh's age, the cuts are looking pretty steep. If, like me, you were born in 1981, they get even steeper. My younger brother's benefits will be cut even more, and our little cousin Rebecca gets the biggest cuts of all. LINK

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