Kevin Drum - November 2012

Everyone Hates the Idea of Raising the Medicare Age

| Wed Nov. 28, 2012 11:27 AM EST

One of the favorite entitlement-reforming proposals among both Republicans and Beltway centrists is raising the Social Security retirement age. It's a bad idea. Another favorite proposal is raising the Medicare eligibility age. This is also a bad idea, though for different reasons.

But it's more than a bad idea. It's also massively unpopular, as a recent ABC/Washington Post poll shows. It's not just unpopular among Democrats, it's also wildly unpopular among independents and even among Republicans. This has the potential of becoming a zombie idea every bit as bad as raising the Social Security age, and it really needs to be stopped in its tracks. It's unfair to the poor, it wouldn't save much money, and everyone hates the idea. It should be deep-sixed before it ever has a chance to catch on.

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Dick Durbin Wants to Make a Deal on Social Security

| Tue Nov. 27, 2012 9:29 PM EST

I'm a big fat granny-hating sellout, which probably explains why I think a deal to make Social Security solvent would be a good idea. But Dick Durbin is a liberal hero, and guess what? He wants to make a deal too:

I believe we need a new bipartisan commission to recommend a plan to keep Social Security solvent for the next 75 years. The commission should have a reasonable amount of time — eight months to a year — to present a plan to Congress. Congress should vote on the commission’s plan and any other bipartisan plan that makes Social Security solvent for 75 years. Whatever plans wins the most votes — beyond the 60 votes you need to pass anything of significance in the Senate — is the plan that ought to move forward.

Fine. But it's worth answering a few questions I've gotten about this. First question: I've suggested that a successful deal would take Social Security off the table for decades. But didn't the Greenspan Commission think they'd taken Social Security off the table forever back in 1983? Now it's popped back up. What's the deal?

Answer: That was never their intent. The commission's plan was to make Social Security solvent over 75 years by building up a surplus through 2020 and then using the surplus to pay off the retiring baby boomers through 2060. After the surplus had been used up, however, they knew perfectly well that Social Security would be insolvent again. In fact, on an ongoing basis, their estimate of Social Security's shortfall is pretty similar to our current estimate, as the charts below show:

Thirty years have passed since the Greenspan Commission's report, and our job now is to finish their unfinished business by figuring out how to make Social Security solvent after the surplus is exhausted. If we do this without trust fund gimmickry, it really will make the system fully funded more or less permanently.

Second question: Why bother with this now? At worst, the trust fund surplus will run out around 2040 or so. Why not wait and see how things work out?

Actually, I'm fine with that. Another ten years won't do any harm, and we'll have a better picture of where the economy is headed by then. Still, if we start earlier, it allows us to phase in changes more slowly, and I think there really is a benefit to this. It makes the impact on both current workers and current retirees smaller, and it allows everyone to plan better.

Third question: Why are people like me talking about a compromise approach that includes both tax increases and benefit cuts? Social Security isn't a very generous program to begin with. If it needs fixing, it should be done solely through tax increases.

That's a reasonable view, but I don't think it's a realistic one. I believe Social Security should be broadly financed, so I don't favor closing its shortfall with a whopping big tax increase on the rich. And benefits are scheduled to increase over the years, so what we're talking about here is a smaller increase, not a cut in absolute terms. A blended approach—say, two dollars of revenue increases for each dollar of benefit cuts—that gradually increased payments to low earners, reduced payments to higher earners, and increased taxes broadly, would be pretty tolerable if it were phased in over 20 or 30 years.

Fourth question: Isn't this just pie in the sky? Yes, it absolutely is. Even squishy sellouts like me are only in favor of a deal that includes both small revenue increases as well as small cuts in future benefit growth. However, there's approximately zero chance of Republicans agreeing to any revenue increases, which means no deal is really on the horizon.

And let's make this more specific. Right now, there's a proposal on the table to change Social Security's inflation indexing formula in a way that would slow the growth of future benefits. This is a defensible idea (though see Dean Baker for a dissenting view), but under no circumstances should it ever be passed on a standalone basis. It should only be passed, if at all, if it's accompanied by a revenue increase that's at least as large.

That said, a compromise deal would shore up a key program of the liberal project and put an end to scary stories about how Social Security won't be around for today's younger workers. I'm in favor of young people having confidence in liberal programs, and that's why I think a deal would be good for us lefties. The only problem is finding enough Republicans who agree.

The Bill and Hillary Show

| Tue Nov. 27, 2012 4:46 PM EST

You know who should have a radio talk show? Bill Clinton. Or, better yet, Bill and Hillary. They could trade off weeks so they both have time for whatever other good works they want to engage in. I'll bet they could attract a bigger audience than Rush. And who wouldn't want to be a guest on their show? They'd attract an all-star roster without even trying.

Given their popularity and ability to explain things in language that ordinary people can relate to, this could be a bigger contribution to selling the liberal project than anything currently in existence. They should do it.

Yet More Shameless Attacks on Susan Rice

| Tue Nov. 27, 2012 4:25 PM EST

Here's a shocker. Susan Rice, in a meeting with John McCain and the rest of the Senate's Benghazi brigade today, acknowledged that her initial description of the attacks had been mistaken. This netted her....exactly nothing:

Ms. Rice’s acknowledgment, in a meeting on Capitol Hill with three Republican senators who had sharply criticized her earlier statements in a series of televsion interviews after the attack, seemed to do little to quell their anger. The senators emerged from the meeting voicing even deeper reservations about Ms. Rice’s role in the messy aftermath of the Benghazi attack, which resulted in the deaths of four Americans.

“We are significantly troubled by many of the answers that we got, and some that we didn’t get,” Senator John McCain of Arizona said to reporters. Senator Lindsey Graham of South Carolina said, “Bottom line: I’m more concerned than I was before” — a sentiment echoed by Senator Kelly Ayotte of New Hampshire.

These people are just shameless. By this point, they know perfectly well that Rice never said anything deliberately misleading. On September 15 she passed along the unclassified assessment of the intelligence community as of September 15, and that's it. But they just can't stand to admit that they were wrong. It's like watching a bunch of preening teenagers facing off in the schoolyard. It's all just a big game to them.

Chart of the Day: The GOP's Generation Gap Problem

| Tue Nov. 27, 2012 2:51 PM EST

Jon Chait points to a Pew study today that doesn't really say anything new, but definitely says something worth repeating: the Republican Party may have problems with blacks and Hispanics, but their biggest problem is probably with the young. During the Bush era, the combination of the Iraq War and the resurgence of the Christian right turned off younger voters in increasing numbers, and these young voters began voting in increasing numbers for Democrats. The chart below tells the story:

In fact, things are probably even worse than this. The Pew study reminds me of a great chart that the New York Times produced back in 2006 showing the effect that presidents have on brand loyalty to their party. Basically, a popular president gains the votes of 20-year-olds, and those voters retain much of their loyalty to the president's party for the rest of their lives. The opposite happens with an unpopular president. So Democrats spent eight years with a president that 20-somethings liked (Clinton), then Republicans suffered through eight years with a president they hated (Bush), and now Democrats have eight years of a president that 20-somethings like again (Obama). That's 24 years worth of 20-year-olds who are likely to retain a fairly strong loyalty to the Democratic Party.

Obviously this could change. This is a tendency, not an iron law. But as these 20-somethings age, they're going to vote at higher rates and they're going to become more influential. And the likelihood is that most of them are going to stay Democrats. It's hard to overstate how big a headache this is for the GOP. These are voters who, generally speaking, don't hate gay people, don't hate abortion, and aren't scared by a nonwhite future. This is a problem because, as Charles Murray put it, Republicans are viewed today as "the party of Bible-thumping, anti-gay, anti-abortion creationists." Murray seems to think this is unfair, but I don't see why. Until and unless this changes, this huge cohort of voters is likely to remain largely in the Democratic camp.

Single Mothers Now Off the Hook for 70s Crime Wave

| Tue Nov. 27, 2012 12:26 PM EST

Philip Cohen notes today that homicide rates in Washington DC have plummeted over the past couple of decades. The city that used to be the murder capital of the world has seen murder rates fall by three-quarters. At the same time, the rate of single-motherhood has remained steady.

That's surprising, because it was a big part of the story 20 years ago, when D.C. was the murder capital of the country during a national crime wave. I think single mothers—especially those who were raising their kids back in the 1990s—deserve an apology from the conventional-wisdom purveyors of that time.

....Violent crime has fallen through the floor (or at least back to the rates of the 1970s) relative to the bad old days. And this is true not just for homicide but also for rape and other assaults. At the same time, the decline of marriage has continued apace. Looking at two aggregate trends is never enough to tell a whole story of social change, of course. However, if two trends going together doesn't prove a causal relationship, the opposite is not quite as true. If two trends do not go together, the theory that one causes the other has a steeper hill to climb. In the case of family breakdown driving crime rates, I don't think the story will make it anymore.

And I'm open to explanations for why crime has really fallen, even including some minor role for the incarceration craze. But there were a lot of people who were not nearly so circumspect about the soundness of their causal stories when the family-breakdown-crime assumption served their ends. And it would be big of them to own up to it now.

Fascinating! As you can see in the chart above, the violent crime rate (which includes murder, rape, robbery, and assault) has an inverted U shape, so if we're looking for something to explain both the rise and fall of crime, I suppose our first task would be to find something else with an inverted U shape. That wouldn't prove all by itself that this was the cause of the change in crime rates, but it would certainly give us a starting point.

But what could it be? Cohen notes that since the Washington Post is no longer able to blame violent crime on family breakdown, it now attributes declining murder rates to "rising incomes, improved law enforcement technology and community relations, and better trauma care." Maybe so. But just like single motherhood, those are all sociological explanations. I wonder if we should go further afield?

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No, Business Is Not Slowing Down Because of the Fiscal Cliff

| Tue Nov. 27, 2012 11:52 AM EST

In his column today, Neil Irwin quotes the CEO of AT&T claiming that "uncertainty" over the fiscal cliff is restraining business growth. This is a common claim, but Irwin correctly points out that "a slowing in business spending took effect long before the term 'fiscal cliff' had even been coined." He's right. But just saying this doesn't make it clear just how dramatic the slowdown has been. As you can see in the chart on the right, business investment growth has been on a clear downward slope for the past three years. This obviously has nothing whatsoever to do with fear of the fiscal cliff.

I'm a cynic, so I suppose you should take my views on the business community with a shaker of salt. Nonetheless, here's what I think we should conclude from this: Fortune 500 CEOs should never be taken seriously on macroeconomic issues. Their job is to dole out high-grade BS in public, and politics and macroeconomics are just grist for their mill. Every word out of their mouths is special pleading, and that's how the business press ought to treat it. I really have no idea why anyone ever takes them seriously on this stuff.

Financial Catastrophe Apparently No Longer a Republican Concern

| Tue Nov. 27, 2012 11:04 AM EST

From House Speaker John Boehner, on President Obama's request to raise the debt ceiling:

There is a price for everything.

I know this seems unexceptional, but really, it's not. It's gobsmacking. Ever since the election, Republicans have been acting as if financial catastrophe is purely a problem for the president. To listen to Boehner, you'd think that avoiding the austerity crisis (nee fiscal cliff) is a partisan goal, not something that Republicans are supposed to care about for its own sake. Likewise, default on the national debt is the president's problem, full stop. If he doesn't want markets to panic, then he needs to cough up some goodies.

What's even more gobsmacking is that nobody in the press seems to find this at all out of the ordinary. The leader of the opposition basically shrugs his shoulders in public and says that if the president doesn't want the national economy to collapse, he'll have to pay a price. The response is another collective shrug. That's Republicans for you, it says.

Remarkable.

Why a Canadian Central Banker Probably Wouldn't Help American Monetary Policy

| Mon Nov. 26, 2012 8:53 PM EST

Mark Carney, a Canadian, was appointed today to head up the Bank of England. This is, needless to say, a surprise, since the the job of UK central banker would normally go to a UK citizen. But Carney is very highly regarded, and Felix Salmon wonders why this kind of cross-border appointment doesn't happen more often:

In general, high-profile public-sector jobs tend to be done better when they’re done by foreign nationals. The logic is simple: if you’re choosing from a global pool of candidates rather than simply a national pool of candidates, you’ll end up with a better person at the end.

Which raises the obvious question: why is such a move still unthinkable in the US? There are lots of big jobs coming up here: Treasury secretary, SEC chairman, Fed chairman — and all of them are going to go, automatically, to US nationals. Think about it this way: Mark Carney is the best central banker in the world, and he would be an amazing replacement for Ben Bernanke. What’s more, given the choice, he would surely plump for the Fed over the Bank of England. So it’s reasonable to assume that if the US wanted him, they could have had him.

Felix is, I think, more or less a proponent of a borderless world, which makes him a bit of an outlier on things like this. Still, it's a good question. Why not hire a foreigner to run the Fed?

First things first: would it even be legal? As it happens, many federal government agencies aren't open to noncitizens, and the annual appropriations act generally prohibits the use of appropriated funds to pay noncitizens. If we were talking about, say, HUD or the Department of Education, a foreigner would probably be out of luck. Luckily for us, the Fed allows employment of foreign nationals with the appropriate work authorization, and presumably that wouldn't be too hard to get. So yes: it would be legal.

But would it be a good idea? I'm more of a nationalist than Felix, and I'm not sure it would be. This is not, after all, just another cog in the civil service bureaucracy. I'd want my president to be a U.S. citizen, for example, because I'd want to be damn sure that the president has the best interests of the United States firmly at heart. Ditto for members of Congress. And ditto again for the most senior, policymaking positions in the federal government. That decidedly includes the Fed chairman.

Beyond that, I'm not really convinced there's any such thing as "the best central banker in the world" anyway. If your problem is that you don't like Ben Bernanke's policy preferences, then you've got a problem with Barack Obama, not Bernanke. There are probably plenty of qualified Americans who share your taste in monetary policy, whatever it happens to be, but apparently Obama didn't want to appoint any of them. Likewise, if your problem is that you think America's regulatory apparatus is too friendly to Wall Street, then you should blame Congress and the past few presidents. They're the ones who deregulated the financial industry and continually reappointed as Fed chairman a guy who was eager to implement this deregulation. Finally, if your problem is that Bernanke hasn't been able to persuade the FOMC to adopt looser monetary policy, what are the odds that a Canadian technocrat would have been any better at it? Slim and none, I'd guess.

I don't doubt that Mark Carney is a terrific central banker. But technical competence isn't that hard to find, and Carney had the advantage of working in a country with a long history of conservative financial regulation. That probably had more to do with Canada's strong performance during the financial crisis than Carney's response to the crisis did. After all, Ben Bernanke provided mountains of liquidity to the financial system, just like Carney, and dropped interest rates to near zero before Carney did. Long story short, the main difference between the U.S. and Canada seems to lie in their respective regulatory regimes before the crisis hit, not the response of their central bankers after the crisis hit.

So there's probably not much point in looking overseas for a Fed chairman. We have plenty of good candidates on offer right here at home. What we really need is a better regulatory regime and a different national attitude toward monetary policy. This is a political problem, not really a central banking problem per se, and the solution isn't a better Fed chairman, it's a political class that wants a better Fed chairman in the first place. Horse, meet cart.

Why Social Security Reform Would Be Good For Liberals

| Mon Nov. 26, 2012 3:00 PM EST

As Atrios notes, he and I have disagreed about the merits of Social Security reform for many years. Today he explains why he doesn't think that fixing Social Security's finances would do any good:

Nothing will take Social Security off the table for decades. They could cut benefits in half and extend the expected solvency of the program for 12 trillion years, and the Washington Post would be back the next day informing us that this was a good down payment, but much more "reform" needs to happen blah blah blah.

They really do want to starve your granny.

This really is the heart of our disagreement. So here's my argument in super-condensed form.

If we extended the solvency of Social Security for the next century, it's true that the Cato Institute would be back the next day complaining that this wasn't enough. After all, they're ideologically opposed to the whole idea of Social Security. It might take the Heritage Foundation a little longer, but they'd get right back into the fight pretty quickly too.

But the Washington Post wouldn't. The Pete Peterson folks wouldn't. The truth is that all the earnest, centrist, Very Serious People who want to reform Social Security don't want to starve your granny. They don't have a problem with the concept of a guaranteed retirement program. They just want it to be properly funded.

So a deal would shut them up. The Post editorial board would be happy. The Pete Peterson fans would be happy. Everyone outside the hard right would be happy. And without the megaphone provided by the VSPs, the hard right simply has no traction on this issue. They could keep griping forever, but it would just be one of their many fringe issues that no one else cares about. Effectively, Social Security would be off the table for decades.

What I mean by this, of course, is that it would be as far off the table as anything ever is in real life. Nothing will make everyone happy. Nothing will fix Social Security forever. Nothing will shut up the Glenn Becks and the Birchers and the libertarian hard cases. But if the VSPs are on board, Social Security would, for all practical purposes, cease to be a subject of controversy for many, many years. I think that would be good for the country, good for seniors, good for the liberal project, and well worth doing. The problem is finding any negotiating partners on the other side who are serious about making a deal.