Deficit Fever

John Dickerson wants someone to explain a little better why deficit reduction is suddenly so important:

Politicians haven't gotten better at delivering this message to people. Why do we have to reduce the deficit? And do we have to do it quickly? How will a smaller deficit improve the life of the average citizen?

It's an assumption of the current debate that these questions have already been answered. Politicians have jumped ahead to stage two of the debate: the competition over who can do more deficit-reducing. But both parties should go back to square one: Here's why we need to do it in the first place. The party that wins the political battle will be the one that makes this case most clearly to the public, because if people buy the diagnosis they'll be more likely to buy the prescription.

Dickerson has been a reliable deficit scold recently, and a friend of mine is annoyed. "It's almost as if he's saying 'Will somebody please explain to me what these parroted lines of mine mean?' " he says.

I guess I'd be a wee bit more charitable. Presumably Dickerson himself thinks he knows why the deficit is so important, but also thinks that the good word hasn't soaked through to the common man yet. And without that, our all-important budget cutting will never have enough public support to happen.

But if that's what he thinks, I'll bet he's wrong. So here's a challenge to Dickerson: without making any phone calls or doing any Google searches, write 500 words on why deficit reduction is so important. Write that speech you think the president should give! But lock yourself in your office and do it off the top of your head. Demonstrate to us that you really do understand why deficit reduction is so critical. Ten bucks says you don't get it right.

(Hint: your answer should not contain the words hyperinflation or Greece. It should contain the word healthcare.)

Atrios says there's not much point in trying to save money by cutting Social Security benefits for rich people:

There's No Money In Means Testing

You just can't save any money worth the additional administrative burden by depriving a few rich people of their Social Security and Medicare benefits. There aren't that many rich people! Now, those not many rich people make a hell of a lot of money so you can raise revenue by increasing tax rates on them, but it isn't worth bothering going after their Social Security checks.

This is probably true. If you make the means testing stringent enough so it applies only to the genuinely well off, it wouldn't hit enough people to matter much. Conversely, if you make the means testing loose enough to matter, it would bite into a lot of ordinary middle class earners, and that's neither fair nor politically feasible.

Want some evidence? Well, it turns out that Social Security is already means tested: your benefit level is calculated as 90% of your first $749 in monthly pre-retirement earnings, 32% of earnings up to $4,517, and 15% of your earnings above that. This means that high-income earners get a smaller benefit as a percentage of their income than low earners do.

One way to means test even more would be to reduce the third "bend point" to, say, 10% of earnings above $4,517. This would decrease benefits for the well off without touching benefits for anyone else, and it's easy to do since the system is already built with this structure in place. In fact, this is exactly the recommendation of the Rivlin-Domenici deficit reduction report.

So how much does it save? Answer: $59 billion in 2040, which is a grand total of 1.6% of the savings in their entire Social Security plan. You could reduce the third bend point to 0% and it still wouldn't be more than a nit. And note that this starts to bite at an income of $54,000 per year, which is hardly anyone's idea of rich. Raise that limit even to upper middle class territory and you'll save even less.

So why bother? To save real money, you'd have to get way more drastic, which means not just a lower cap on benefits, but actually reducing benefits for anyone with even modest retirement savings, and that would have the unhealthy side effect of reducing incentives to save for retirement as a supplement to Social Security. I don't think anyone is up for that.

Over at the Economist, Erica Grieder has given up on Social Security:

Every so often I get a document from the Social Security Administration in a green-edged envelope, and I open it straight away, thinking it might be important. Instead, I find that it's just a statement of my Social Security earnings and future benefits, a concept so absurd that I immediately recognise it for fiction....If I stopped working now, this document says, I would receive a couple thousand dollars a month in benefits at whatever age it is they suggest I retire, something I obviously do not expect to ever be able to do.

I just don't get it. Why do smart people keep saying stuff like this? Medicare is a problem. But unless you believe that the United States is literally going to collapse in the near future, Social Security isn't. Period.

The weird thing about this is that Social Security isn't even hard to understand. Taxes go in, benefits go out. Unlike healthcare, which involves extremely difficult questions of technological advancement and the specter of rationing, Social Security is just arithmetic. The chart on the right tells you everything you need to know: Right now, Social Security costs about 4.5% of GDP. That's going to increase as the baby boomer generation retires, and then in 2030 it steadies out forever at around 6% of GDP.

That's it. That's the story. Our choices are equally simple. If, about ten years from now, we slowly increase payroll taxes by 1.5% of GDP, Social Security will be able to pay out its current promised benefits for the rest of the century. Conversely, if we keep payroll taxes where they are today, benefits will have to be cut to 75% of their promised level by around 2040 or so. And if we do something in the middle, then taxes will go up, say, 1% of GDP and benefits will drop to about 92% of their promised level. But one way or another, at some level between 75% and 100% of what we've promised, Social Security benefits will always be there.

This is not a Ponzi scheme. It's not unsustainable. The percentage of old people in America isn't projected to grow forever. Lifespans will not increase to infinity.1 Taxes go in, benefits go out. It's simple.

Now, Social Security is not a very generous program, so it's possible that you won't want to retire on its modest benefits. But short of some kind of financial apocalypse — in which case we've got way bigger things to worry about anyway — Social Security benefits will be there for everyone alive today. Why is it that so few people seem to get this?

1Well, sure, they might. Who knows what medical breakthroughs we'll come up with? But lifespans have been increasing at a very slow rate for many decades now, and there's nothing on the horizon that suggests this will change suddenly. If it does, we'll have to deal with it when it happens, but there's no reason to think we should plan for it now.

Jamelle Bouie is puzzled:

By disposition, I'm not that worried about the debt. But even if I were, I have yet to hear a compelling reason for why now is the time to be hyper-concerned about the debt.

Because a Democrat is president, that's why. Any other questions?

Last year, as I'm sure you'll recall, Andrew Breitbart posted an edited videotape of a speech by Shirley Sherrod. He presented this video as proof positive that Sherrod, the USDA's Georgia Director of Rural Development, was herself a racist and, furthermore, executed her job in an overtly racist way. Needless to say, it showed nothing of the kind. In fact, it showed just the opposite.

So should Sherrod sue Breitbart for defamation? At the time, Mark Thompson thought such a suit was ill-advised, but now that Sherrod has indeed sued Breitbart and Thompson has seen the actual complaint, he's done a U-turn: "Having now reviewed some of the concrete allegations in her complaint and some other important factors, I’d like to walk that original assessment back a few miles. I have no idea how this case is ultimately going to play out, but Breitbart’s going to have a far tougher road to hoe on this than I anticipated."

bmaz has more, including the fact that Sherrod is being represented by a very big gun indeed:

Lastly, the complaint is telling for just who Shirley Sherrod’s attorneys are, and it is a very significant point. There are a team of four attorneys at the DC office of Kirkland & Ellis, Thomas Clare, Michael Jones and Beth Williams with the lead being one Thomas D. Yannucci. And who is Tom Yannucci? Glad you asked. He is, if not the preeminent, one of the most preeminent plaintiffs defamation attorneys in the United States....Yannucci is the attorney who embarrassed and gutted NBC’s Dateline on the fraudulent GM exploding gas tank story and who obtained a page one above the fold retraction from Gannett Newspapers and the Cincinnati Enquirer, and reportedly $18 million, in the Chiquita Brands story.

....Shirley Sherrod is quite a woman, and she has come to the dance locked and loaded and with a very compelling story. Andrew Breitbart better strap in, it could be a bumpy ride.

I can't think of a more deserving recipient of a bumpy ride.

I was channel surfing last night when Inkblot jumped into my lap and trapped me on the couch. As a result I ended up watching most of Bill O'Reilly's show,1 one segment of which was dedicated to Bill flipping out over the nerve of NBC's David Gregory asking John Boehner to unequivocally denounce birtherism. To my surprise, Juan Williams disagreed (mildly) with O'Reilly, while Mary Katherine Ham, of course, egged him on. Only pinheads believe in the whole birther thing, Bill said. It was ridiculous to even bring up the subject.

I was reminded of O'Reilly this morning by the results of the latest PPP poll:

Birtherism is alive and well within the GOP ranks....Birthers make a majority among those voters who say they're likely to participate in a Republican primary next year. 51% say they don't think Barack Obama was born in the United States to just 28% who firmly believe that he was and 21% who are unsure.

And of course, that's not all. There's also this:

As state legislatures across the country begin their 2011 sessions, there is one lingering issue that simply won’t die. Conservative legislators in several states have already proposed more “birther bills” that allude to the conspiracy theory alleging that President Obama is foreign-born....In the last month, bills have appeared in Connecticut, Tennessee, Arizona, Indiana, Nebraska, Missouri and Montana that would all require anyone running for elected office to furnish a long-form birth certificate before being declared eligible as a candidate. Oklahoma, home to several attempts at pushing birther bills through the legislature, has no fewer than three birther bills currently under review....and still other states, including Texas, are carrying on discussions of birther bills from earlier legislative sessions.

To summarize: a majority of likely Republican voters think Barack Obama wasn't born in the United States and upwards of a dozen state legislatures are considering birther-inspired bills. But Bill O'Reilly thinks this is just a nothingburger that the liberal press is blowing all out of proportion. I wonder how big it has to get before he thinks it's legitimate news that the leaders of the Republican Party steadfastly refuse to denounce a lunatic theory that's literally sweeping through their own party?

1I know, I shouldn't blame this on poor Inkblot. But if it weren't for him, I wouldn't have watched.

Ezra Klein:

Perhaps it's the mark of a good book that after you read it, you begin seeing evidence for its thesis in lots of different areas. Since reading Tyler Cowen's "The Great Stagnation," I've been seeing a lot of support for a claim that I'd initially resisted: the idea that the technological advances of the 19th and early 20th centuries were far more important to both the economy and quality of life than what's come since.

I myself never found this thesis hard to accept in the first place, but I'd toss in an additional aspect to ponder. Roughly speaking, I'd say there have only been three big GDP-busting inventions over the past few centuries: the steam engine, electrification, and the digital computer. There have been plenty of related spinoffs (internal combustion engines, the internet) and plenty of important but smaller inventions (penicillin, radio). But the big three are the big three.

So in some sense, the problem here is with our expectations. World-changing inventions just don't come around all that often, and when they do it takes a long and variable time for them to become integrated enough and advanced enough to have an explosive economic effect. Steam took the better part of a century, electrification took about half that, and computers — well, we don't really know yet. So far it's been about 60 years and obviously computers have had a huge impact on the world. But I suspect that even if you put the potential of AI to one side, we're barely halfway into the computer revolution yet. To a surprisingly large extent, we're still using computers to automate stuff we've always done instead of actually building the world around what computers can do.

In any case, regardless of how computerization unfolds in the future, it's hardly surprising that we haven't yet had a fourth great invention. They only come around once a century or so, after all. Give it time.

This is lovely, isn't it?

A law under consideration in South Dakota would expand the definition of "justifiable homicide" to include killings that are intended to prevent harm to a fetus—a move that could make it legal to kill doctors who perform abortions. The Republican-backed legislation, House Bill 1171, has passed out of committee on a nine-to-three party-line vote, and is expected to face a floor vote in the state's GOP-dominated House of Representatives soon....If the bill passes, it could in theory allow a woman's father, mother, son, daughter, or husband to kill anyone who tried to provide that woman an abortion—even if she wanted one.

This is from Kate Sheppard, who reports that South Dakota already has no abortion providers and relies on a Planned Parenthood doctor who flies into a clinic once a week. Presumably that doctor is pretty well guarded, but still: if this law passes would you want to fly into South Dakota once a week knowing that every wannabe 007 in the state now feels like he has a license to kill? Nope. Which, of course, is the whole point.

UPDATE: The sponsor of the legislation says this is all a bunch of hooey. Greg Sargent:

I just had a spirited conversation with the bill's chief sponsor, State Representative Phil Jensen, and he defended the bill, arguing that it would not legalize the killing of abortion doctors. "It would if abortion was illegal," he told me. "This code only deals with illegal acts. Abortion is legal in this country. This has nothing to do with abortion." In other words, since abortion is not "homicide," the law could not apply.

....When I asked Jensen what the purpose of the law was, if its target isn't abortion providers, he provided the following example: "Say an ex-boyfriend who happens to be father of a baby doesn't want to pay child support for the next 18 years, and he beats on his ex-girfriend's abdomen in trying to abort her baby. If she did kill him, it would be justified. She is resisting an effort to murder her unborn child."

I report, you decide.

Andrew Sullivan is apoplectic about the cowardice of Obama's budget presentation yesterday:

I didn't spend eight years excoriating George "Deficits Don't Matter" Bush to provide excuses for Barack "Default Doesn't Matter" Obama. Like other fiscal conservatives, I'm just deeply disappointed by Obama's reprise of politics as usual - even as the fiscal crisis has worsened beyond measure in the last three years. My point is that actually being honest about the budget and what it will take to resolve its long-term crisis is not political suicide, as Chait says. It's statesmanship. It's what a president is for.

I'm just mystified here. Has any president, ever, used the annual budget as a springboard for a massive change to entitlement programs? Even if Obama wants such changes, this isn't the time or place he'd propose it. He'd propose it separately, as a major initiative completely divorced from the annual budgeting process.

Our budget deficit has skyrocketed over the past three years because of an unprecedented economic crisis. It will shrink as the economy starts to grow again, and it can be brought down to a nearly reasonable level merely by letting the Bush tax cuts expire. The rest will require changes to Medicare, since that's the source of nearly all our long-term problems. But last year's election campaign made it crystal clear that swinging changes to Medicare would be dead on arrival if Obama proposed them now, and deliberately setting forth a proposal doomed to failure would make future action less likely, not more.

I have no crystal ball. I don't know if Obama is truly interested in making historical changes to Medicare and/or Social Security later in his term. But if he is, he'd be a fool to propose them now. The annual budget is just an annual budget, and the process for getting it through the congressional committee process is laborious and well trod — and that laborious and well-trod path most definitely doesn't include the kind of big-time dealmaking necessary for some kind of grand bargain over taxes and entitlements. If you want entitlement reform to disappear without a trace, yesterday would have been a great time to propose it. If you want it for real, you'll wait.

Via Jon Chait, who's dubious about this since no one else breathed a word of it, here is Elizabeth Drew in the New York Review of Books claiming that underneath all the trash talk, Obama and the Republican leadership have already agreed to hammer out a bipartisan budget deal:

But despite all the confrontational rhetoric between the two parties about budget priorities, the White House and Republican congressional leaders, in private talks, have agreed on the need to try to reach a bipartisan “grand bargain” over the budget—a sweeping deal that could include entitlements and tax reforms as well as budget reduction. A Senate Republican leadership aide confirmed this, saying, “In fact, for anything to happen, it will require such a White House/congressional leadership bargain.” The preferred idea is that, just as they did late last year on the tax bill, they would reach an agreement and then unveil it to the public.

At the same time, a bipartisan group of leading senators have met in an effort to cut the deficit—which could become a part of the debt-reduction puzzle. The thinking is that the Tea Party allies might be brought along in the end, because their primary goal is to reduce the deficit. The details will be difficult, but a surprising sort of deficit-cutting fever has broken out on Capitol Hill, fueled in part by a fear that at some point the bond markets and foreign lenders will call in their loans, setting off a disastrous financial crisis. Right now, there’s a game of chicken going on over who will offer their proposals first, but this should be resolvable.

Another reason this is happening is that despite their occasional deference to Tea party demands, the Republican congressional leaders, Mitch McConnell, John Boehner, and Eric Cantor, are also realists. They may try to drive a hard bargain on the budget but they know that the issue must be resolved. Despite the baying of some Tea Party allies that the government should be shut down if the administration doesn’t offer enough concessions, these leaders understand that that would be a disastrous course for the Republicans—as it was when Newt Gingrich tried it in 1995.

Well, maybe. There's no telling who Drew's original source is for this, and her confirming source (a "Senate Republican leadership aide") isn't all that impressive. What's more, it ain't the case that the tea party movement's "primary goal" is reducing the deficit. Its primary goal is to reduce taxes and its secondary goal is to lift the intolerable burden of tyranny that Barack Obama has imposed on us. (Its tertiary goal is whatever bee happens to be up Glenn Beck's bonnet the week you ask them.) As for foreign lenders "calling in their loans," it's hard to parse what that's even supposed to mean.

So....I'm not sure about this. A "grand bargain" would, almost by definition, include tax increases, and my guess is that the GOP leadership's realism extends about as far as understanding that supporting a tax increase would pretty much spell the end of their political careers. Drew's report is interesting, but like Jon, I'll believe it when there's more than one reporter in all of Washington DC who's heard about this.