Welcome to MichaelMoore.com!
Condi Lied: Declassified Memo from Clarke
by SusanHu
Thu Feb 10th, 2005 at 18:40:42 PST
(From the diaries -- kos)
Although then national security adviser Condoleezza Rice wrote a March 22, 2004 column in The Washington Post that "No al-Qaeda threat was turned over to the new administration," a newly declassified document [image below the fold] tells the story.
U.S. media haven't got this yet, but Australian papers have:
US al-Qaeda warning revealed
11feb05
EIGHT months before the September 11 attacks the White House's then counterterrorism adviser urged then national security adviser Condoleezza Rice to hold a high-level meeting on the al-Qaeda network, according to a memo made public today.
"We urgently need such a principals-level review on the al-Qaeda network," ... Richard Clarke wrote in the January 25, 2001 memo.
Mr Clarke, who left the White House in 2003, made headlines in the heat of the US presidential campaign ... when he accused the Bush White House of having ignored al-Qaeda's threats before September 11.
Mr Clarke testified before inquiry panels and in a book that Rice ... had been warned of the threat.
CONDI LIED :: CONDI LIED :: CONDI LIED
Saturday, February 12, 2005
George Bush's Moby Dick
Welcome to MichaelMoore.com!
Commentary: George Bush’s Moby Dick
As Captain Ahab obsessively led his crew toward disaster, so George Bush is leading America.
By Gerald Rellick
It is not without good reason that Herman Melville’s classic novel Moby Dick has been used to capture some sense of the madness of George W. Bush and his obsessive war against evil. We see in the legendary White Whale and Captain Ahab the madness that now haunts us all:
The White Whale swam before him as the monomaniac incarnation of all those malicious agencies which some deep men feel eating in them…. All that most maddens and torments; all that stirs up the lees of things; all truth with malice in it...all evil, to crazy Ahab, were visibly personified, and made practically assailable in Moby Dick.
The start of Ahab’s fateful journey is described, fittingly for our time, in an insightful article, “Leviathan,” in the New York Review of Books, written in 2003 just prior to the invasion of Iraq. Author Jason Epstein writes:
Captain Ahab of the Nantucket whaler Pequod called his officers and crew together on the afterdeck to announce a change of plans. Instead of filling his hold with oil and returning safely home, he will subordinate the fiscal point of the voyage to a preemptive first strike against evil, embodied, he claimed, in a particular whale of an unusual color which in a previous encounter had torn his leg away.
To a leery and frightened first mate, Mr. Starbuck, Ahab screams, “Death to Moby-Dick. God hunt us all if we do not hunt Moby-Dick to his death!”
And so, George Bush, compelled at first by the obvious, the need to hunt the 9/11 mastermind, Osama bin Laden, did not rest easy with the progress of this “voyage.” The fighting in Afghanistan, with its mountains and circuitous caves, the sluggish going after the initial air bombardment, was simply bad theatre for a president who was untested, unsure of himself, and now suddenly in over his head. George Bush desperately needed a media-age victory.
The villain fit the script well on the surface of things; but the harsh reality was that bin Laden was so clever, so elusive, so enabled by his environs, that this hunt could go on for years without resolve. What George Bush needed now, in the words of Norman Mailer, was to punch out some “bozo in the boondocks” to prove his manhood. And the “hollowed-out Palooka,” just made to order, was Saddam Hussein and Iraq. This was a chance for America to show its ‘stuff,” not in intelligence, wisdom or craft, but in raw military power, America’s hole card -- or so Bush and his Neocon gang believed.
Now, nearly two years into Mad George’s senseless charge into Iraq, and over 1400 American servicemen killed, and possibly as many as 100,00 Iraqis killed, what are we Americans to make of all this?
As the media lavishes attention on the elections in war-torn Iraq, are we to be misled again? Are we to forget that this war was never about democracy in Iraq? Iraq’s Weapons of Mass Destruction, ready to be used against us in America, an imminent threat to our security, and Saddam Hussein’s ties to bin Laden and al Qaeda -- all this has evaporated and been revealed as lies and deception. Do we now accept lying to the American people at the highest levels of government as acceptable policy? Even when it means our young men and women die for these lies? How much more are we to take?
As Seymour Hersh put it recently:
…the amazing thing is we are being taken over basically by a cult. Eight or nine neo-conservatives have somehow grabbed the government. Just how and why and how they did it so efficiently, will have to wait for much later historians and better documentation than we have now, but they managed to overcome the bureaucracy and the Congress, and the press, with the greatest of ease…. You do have to wonder what a Democracy is when it comes down to a few men in the Pentagon and a few men in the White House having their way.
A big part of it is that an unusually virulent strain of moral cowardice has taken over our nation’s capital and much of the “heartland” of America. Fear is the dominant emotion. Fear of authority, fear of speaking out, fear of just about everything. Enemies are everywhere. Whatever happened to the “home of the brave?”
Just as the mad Ahab deceived his crew into believing their expedition was about hunting whales, so mad George Bush, aided by his chief Neocon thugs -- Dick Cheney and Condoleezza Rice -- lied to the American people about their true mission, until it was too late to turn back. We had to hunt Saddam Hussein or else. And not to worry, said Mr. Cheney, Iraq would be a “cake walk.”
We are now like Ahab’s crew, trapped it seems into doing his insane bidding. Is our fate sealed? Can Ahab be stopped?
Gerald S. Rellick, PhD, worked in the defense sector of the aerospace industry. He now teaches in the California Community College system. To send Jerry your comments, send an email to info@interventionmag.com
Commentary: George Bush’s Moby Dick
As Captain Ahab obsessively led his crew toward disaster, so George Bush is leading America.
By Gerald Rellick
It is not without good reason that Herman Melville’s classic novel Moby Dick has been used to capture some sense of the madness of George W. Bush and his obsessive war against evil. We see in the legendary White Whale and Captain Ahab the madness that now haunts us all:
The White Whale swam before him as the monomaniac incarnation of all those malicious agencies which some deep men feel eating in them…. All that most maddens and torments; all that stirs up the lees of things; all truth with malice in it...all evil, to crazy Ahab, were visibly personified, and made practically assailable in Moby Dick.
The start of Ahab’s fateful journey is described, fittingly for our time, in an insightful article, “Leviathan,” in the New York Review of Books, written in 2003 just prior to the invasion of Iraq. Author Jason Epstein writes:
Captain Ahab of the Nantucket whaler Pequod called his officers and crew together on the afterdeck to announce a change of plans. Instead of filling his hold with oil and returning safely home, he will subordinate the fiscal point of the voyage to a preemptive first strike against evil, embodied, he claimed, in a particular whale of an unusual color which in a previous encounter had torn his leg away.
To a leery and frightened first mate, Mr. Starbuck, Ahab screams, “Death to Moby-Dick. God hunt us all if we do not hunt Moby-Dick to his death!”
And so, George Bush, compelled at first by the obvious, the need to hunt the 9/11 mastermind, Osama bin Laden, did not rest easy with the progress of this “voyage.” The fighting in Afghanistan, with its mountains and circuitous caves, the sluggish going after the initial air bombardment, was simply bad theatre for a president who was untested, unsure of himself, and now suddenly in over his head. George Bush desperately needed a media-age victory.
The villain fit the script well on the surface of things; but the harsh reality was that bin Laden was so clever, so elusive, so enabled by his environs, that this hunt could go on for years without resolve. What George Bush needed now, in the words of Norman Mailer, was to punch out some “bozo in the boondocks” to prove his manhood. And the “hollowed-out Palooka,” just made to order, was Saddam Hussein and Iraq. This was a chance for America to show its ‘stuff,” not in intelligence, wisdom or craft, but in raw military power, America’s hole card -- or so Bush and his Neocon gang believed.
Now, nearly two years into Mad George’s senseless charge into Iraq, and over 1400 American servicemen killed, and possibly as many as 100,00 Iraqis killed, what are we Americans to make of all this?
As the media lavishes attention on the elections in war-torn Iraq, are we to be misled again? Are we to forget that this war was never about democracy in Iraq? Iraq’s Weapons of Mass Destruction, ready to be used against us in America, an imminent threat to our security, and Saddam Hussein’s ties to bin Laden and al Qaeda -- all this has evaporated and been revealed as lies and deception. Do we now accept lying to the American people at the highest levels of government as acceptable policy? Even when it means our young men and women die for these lies? How much more are we to take?
As Seymour Hersh put it recently:
…the amazing thing is we are being taken over basically by a cult. Eight or nine neo-conservatives have somehow grabbed the government. Just how and why and how they did it so efficiently, will have to wait for much later historians and better documentation than we have now, but they managed to overcome the bureaucracy and the Congress, and the press, with the greatest of ease…. You do have to wonder what a Democracy is when it comes down to a few men in the Pentagon and a few men in the White House having their way.
A big part of it is that an unusually virulent strain of moral cowardice has taken over our nation’s capital and much of the “heartland” of America. Fear is the dominant emotion. Fear of authority, fear of speaking out, fear of just about everything. Enemies are everywhere. Whatever happened to the “home of the brave?”
Just as the mad Ahab deceived his crew into believing their expedition was about hunting whales, so mad George Bush, aided by his chief Neocon thugs -- Dick Cheney and Condoleezza Rice -- lied to the American people about their true mission, until it was too late to turn back. We had to hunt Saddam Hussein or else. And not to worry, said Mr. Cheney, Iraq would be a “cake walk.”
We are now like Ahab’s crew, trapped it seems into doing his insane bidding. Is our fate sealed? Can Ahab be stopped?
Gerald S. Rellick, PhD, worked in the defense sector of the aerospace industry. He now teaches in the California Community College system. To send Jerry your comments, send an email to info@interventionmag.com
Monday, February 07, 2005
Bush's Deficit Plan Is All in the Math
Bloglines | My Feeds
Bush's Deficit Plan Is All in the Math
Mon Feb 7, 7:55 AM ET
Add to My Yahoo! Top Stories - Los Angeles Times
By Joel Havemann Times Staff Writer
WASHINGTON — The budget President Bush (news - web sites) will present to Congress today will show the federal deficit cut in half by the time he leaves office in four years.
• Latimes.com home page
• Subscribe to the Los Angeles Times
Reuters Photo
Reuters
Slideshow Slideshow: President Bush
At least technically it will.
Achieving that goal relies on where the budget math starts and stops, how things get counted and what gets left out.
When Bush took office in 2001, the nation had experienced a four-year string of budget surpluses. That changed quickly as the economy slowed, tax rates were cut and spending in the war on terrorism skyrocketed.
By July 2003, the president was urging Congress in his weekly radio address "to make spending discipline a priority, so that we can cut the deficit in half over the next five years."
In his State of the Union address Wednesday, Bush said his fiscal 2006 budget, which he will unveil today, "stays on track to cut the deficit in half by 2009."
But students of the budget say that the president will find it nearly impossible to steer the government along the course that the budget will map out between now and 2009.
"It doesn't quite compute," said Isabel V. Sawhill, director of economic studies at the Brookings Institution think tank, who foresees a shortfall slightly larger in 2009 than now.
It is the 2004 deficit that Bush is promising to cut in half, but he's not starting with the actual 2004 deficit of $412 billion.
Instead, his benchmark is the projected $521-billion deficit that his Office of Management and Budget estimated a year ago, when the fiscal year was four months old. Using half of that figure, Bush's goal is to reach a deficit of $260.5 billion.
If Bush were to start with the actual 2004 figure, his goal would be a deficit of $206 billion — $54.5 billion more.
There are more twists. Bush proposes to cut the deficit in half not in dollars but as a share of the economy. If the economy grows, as is projected, then the deficit will decline as a share of the economy even if it does not shrink by a single dollar.
The 2004 deficit was 4.5% of the economy. So in fiscal 2009 it must be 2.2% or less. That is exactly the average share of the last 43 years, according to the Congressional Budget Office (news - web sites).
Finally, the budget that the president will send to Congress will, like his past budgets, omit some major deficit-raising items.
It will, as Vice President Dick Cheney (news - web sites) said on "Fox News Sunday," be "the tightest budget that has been submitted since we got here." It will hold the growth in domestic programs whose spending levels are set in annual appropriations bills to less than inflation.
But these programs, because they exclude defense and giant benefit programs such as Social Security (news - web sites), account for about $1 of every $5 the government spends.
Most of the cost of the Iraq (news - web sites) and Afghanistan (news - web sites) wars will not be included in the budget. Instead, it will be sent to Congress as a supplemental budget request for 2006, just as the administration recently announced an $80-billion supplemental request for the current fiscal year.
Nor will the cost of introducing private investment accounts to Social Security — $754 billion over the first 10 years alone — be found in the budget, according to administration officials.
That cost will be borrowed, Cheney said, calling the figure a "manageable amount" in terms of dealing with the deficit. He acknowledged that it would also be necessary to borrow "trillions more" after the first decade, but he argued that the private accounts eventually would greatly enhance Social Security recipients' retirement income.
On the tax side, the budget is not expected to show the effect of its proposal to curb the alternative minimum tax, which is likely to win congressional approval.
This tax, designed to hit wealthy individuals who shelter much of their income from taxes, has been snaring a growing number of taxpayers whose income has merely grown with inflation. Preventing the alternative minimum tax's reach from growing would add $44 billion to the deficit that today's budget will project for 2009, the CBO said.
Even if the administration succeeded in getting the actual 2009 deficit to half of its 2004 size, analysts at the Center on Budget and Policy Priorities expect it to rocket back upward shortly thereafter. They point out that the first wave of the baby boom generation would reach the full retirement age of 66 in 2012, sending federal retirement and healthcare costs soaring.
"The 2.2% deficits won't be sustainable for long," predicted Richard Kogan, a senior fellow at the center.
The problem, watchdog groups say, is that the government's spending habits and penchant for cutting taxes do not match the administration's budget-restraint rhetoric.
"This administration has a schizophrenic fiscal policy," said Robert L. Bixby, executive director of the Concord Coalition, which lobbies for smaller deficits. "It has a big-government spending policy and a small-government revenue policy."
Bush's tax cuts, whatever their economic merit, have taken their toll on government income. Tax revenue fell in each of Bush's first three years in office, though this year it is projected to rise to a record level.
But as a share of the nation's economic output, tax payments to the government fell to 16.3% last year, the lowest level since 1959. And in 1959, the government was not paying for Medicare (which cost $297 billion in 2004), Medicaid ($176 billion), food stamps ($29 billion) or the space program ($15 billion).
Spending, meanwhile, was lower than its 25-year average by about 1 percentage point. But at 19.8% of the economy it was $412 billion greater than revenue — a record deficit.
Faced with growing deficits, more conservatives are abandoning the doctrine that the government should run surpluses or hold deficits to a minimum.
"The deficit is merely the uninteresting difference between two very interesting numbers," said Grover Norquist, president of the conservative advocacy group Americans for Tax Reform and an informal advisor to the White House and Republican lawmakers.
Norquist's organization is dedicated to restraining both spending and revenue. Spending is the key, Norquist said. Whether financed by tax revenue or borrowing, it drains money from the private economy.
"The fundamental difference between the two parties," he said, "is how big the government should be."
Norquist's argument has become sufficiently popular that it has spurred formal rebuttal from deficit hawks. Brookings Institution scholars Sawhill and Alice M. Rivlin write in a recent book for the Washington policy research organization that "deficits matter a lot" and "better policies are possible and urgently needed."
Deficits, Sawhill and Rivlin argue, drain money from the economy that could otherwise be used for private investment, thus inhibiting economic growth and forcing interest rates upward. Deficits force the government to set aside a growing share of tax revenue for the payment of interest on the national debt, and "they impose enormous burdens on future generations."
Bush's Deficit Plan Is All in the Math
Mon Feb 7, 7:55 AM ET
Add to My Yahoo! Top Stories - Los Angeles Times
By Joel Havemann Times Staff Writer
WASHINGTON — The budget President Bush (news - web sites) will present to Congress today will show the federal deficit cut in half by the time he leaves office in four years.
• Latimes.com home page
• Subscribe to the Los Angeles Times
Reuters Photo
Reuters
Slideshow Slideshow: President Bush
At least technically it will.
Achieving that goal relies on where the budget math starts and stops, how things get counted and what gets left out.
When Bush took office in 2001, the nation had experienced a four-year string of budget surpluses. That changed quickly as the economy slowed, tax rates were cut and spending in the war on terrorism skyrocketed.
By July 2003, the president was urging Congress in his weekly radio address "to make spending discipline a priority, so that we can cut the deficit in half over the next five years."
In his State of the Union address Wednesday, Bush said his fiscal 2006 budget, which he will unveil today, "stays on track to cut the deficit in half by 2009."
But students of the budget say that the president will find it nearly impossible to steer the government along the course that the budget will map out between now and 2009.
"It doesn't quite compute," said Isabel V. Sawhill, director of economic studies at the Brookings Institution think tank, who foresees a shortfall slightly larger in 2009 than now.
It is the 2004 deficit that Bush is promising to cut in half, but he's not starting with the actual 2004 deficit of $412 billion.
Instead, his benchmark is the projected $521-billion deficit that his Office of Management and Budget estimated a year ago, when the fiscal year was four months old. Using half of that figure, Bush's goal is to reach a deficit of $260.5 billion.
If Bush were to start with the actual 2004 figure, his goal would be a deficit of $206 billion — $54.5 billion more.
There are more twists. Bush proposes to cut the deficit in half not in dollars but as a share of the economy. If the economy grows, as is projected, then the deficit will decline as a share of the economy even if it does not shrink by a single dollar.
The 2004 deficit was 4.5% of the economy. So in fiscal 2009 it must be 2.2% or less. That is exactly the average share of the last 43 years, according to the Congressional Budget Office (news - web sites).
Finally, the budget that the president will send to Congress will, like his past budgets, omit some major deficit-raising items.
It will, as Vice President Dick Cheney (news - web sites) said on "Fox News Sunday," be "the tightest budget that has been submitted since we got here." It will hold the growth in domestic programs whose spending levels are set in annual appropriations bills to less than inflation.
But these programs, because they exclude defense and giant benefit programs such as Social Security (news - web sites), account for about $1 of every $5 the government spends.
Most of the cost of the Iraq (news - web sites) and Afghanistan (news - web sites) wars will not be included in the budget. Instead, it will be sent to Congress as a supplemental budget request for 2006, just as the administration recently announced an $80-billion supplemental request for the current fiscal year.
Nor will the cost of introducing private investment accounts to Social Security — $754 billion over the first 10 years alone — be found in the budget, according to administration officials.
That cost will be borrowed, Cheney said, calling the figure a "manageable amount" in terms of dealing with the deficit. He acknowledged that it would also be necessary to borrow "trillions more" after the first decade, but he argued that the private accounts eventually would greatly enhance Social Security recipients' retirement income.
On the tax side, the budget is not expected to show the effect of its proposal to curb the alternative minimum tax, which is likely to win congressional approval.
This tax, designed to hit wealthy individuals who shelter much of their income from taxes, has been snaring a growing number of taxpayers whose income has merely grown with inflation. Preventing the alternative minimum tax's reach from growing would add $44 billion to the deficit that today's budget will project for 2009, the CBO said.
Even if the administration succeeded in getting the actual 2009 deficit to half of its 2004 size, analysts at the Center on Budget and Policy Priorities expect it to rocket back upward shortly thereafter. They point out that the first wave of the baby boom generation would reach the full retirement age of 66 in 2012, sending federal retirement and healthcare costs soaring.
"The 2.2% deficits won't be sustainable for long," predicted Richard Kogan, a senior fellow at the center.
The problem, watchdog groups say, is that the government's spending habits and penchant for cutting taxes do not match the administration's budget-restraint rhetoric.
"This administration has a schizophrenic fiscal policy," said Robert L. Bixby, executive director of the Concord Coalition, which lobbies for smaller deficits. "It has a big-government spending policy and a small-government revenue policy."
Bush's tax cuts, whatever their economic merit, have taken their toll on government income. Tax revenue fell in each of Bush's first three years in office, though this year it is projected to rise to a record level.
But as a share of the nation's economic output, tax payments to the government fell to 16.3% last year, the lowest level since 1959. And in 1959, the government was not paying for Medicare (which cost $297 billion in 2004), Medicaid ($176 billion), food stamps ($29 billion) or the space program ($15 billion).
Spending, meanwhile, was lower than its 25-year average by about 1 percentage point. But at 19.8% of the economy it was $412 billion greater than revenue — a record deficit.
Faced with growing deficits, more conservatives are abandoning the doctrine that the government should run surpluses or hold deficits to a minimum.
"The deficit is merely the uninteresting difference between two very interesting numbers," said Grover Norquist, president of the conservative advocacy group Americans for Tax Reform and an informal advisor to the White House and Republican lawmakers.
Norquist's organization is dedicated to restraining both spending and revenue. Spending is the key, Norquist said. Whether financed by tax revenue or borrowing, it drains money from the private economy.
"The fundamental difference between the two parties," he said, "is how big the government should be."
Norquist's argument has become sufficiently popular that it has spurred formal rebuttal from deficit hawks. Brookings Institution scholars Sawhill and Alice M. Rivlin write in a recent book for the Washington policy research organization that "deficits matter a lot" and "better policies are possible and urgently needed."
Deficits, Sawhill and Rivlin argue, drain money from the economy that could otherwise be used for private investment, thus inhibiting economic growth and forcing interest rates upward. Deficits force the government to set aside a growing share of tax revenue for the payment of interest on the national debt, and "they impose enormous burdens on future generations."
Saturday, February 05, 2005
The New York Times > Opinion > Op-Ed Columnist: Gambling With Your Retirement
The New York Times > Opinion > Op-Ed Columnist: Gambling With Your Retirement
Gambling With Your Retirement
By PAUL KRUGMAN
Published: February 4, 2005
A few weeks ago I tried to explain the logic of Bush-style Social Security privatization: it is, in effect, as if your financial adviser told you that you wouldn't have enough money when you retire - but you shouldn't save more. Instead, you should borrow a lot of money, buy stocks and hope for capital gains.
Advertisement
Before President Bush's big speech, a background briefing by a "senior administration official" made it clear that the plan calls for exactly the "borrow, speculate and hope" strategy I described - not just for the system as a whole, but for each individual.
Here's the money quote: "In return for the opportunity to get the benefits from the personal account, the person forgoes a certain amount of benefits from the traditional system. Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent rate of return" - after inflation - "which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent rate of return."
Translation: If you put part of your payroll taxes into a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent.
Peter Orszag of the Brookings Institution got it exactly right: "It's not a nest egg. It's a loan."
For years, privatizers - including Mr. Bush - have claimed that people would do better with private accounts than with traditional Social Security even if they played it safe and invested in U.S. government bonds (which yield 3 percent after inflation).
But the official at the briefing made it clear that his boss was fibbing: if you invested your private account in government bonds, you would face benefit cuts equal in value to your investment, so you would be no better off than under the current system.
The only way to get ahead would be to invest in risky assets like stocks, and hope for higher yields. But if the investment went wrong and you earned less than 3 percent after inflation, your benefit cuts would leave you poorer than if you had never opened that private account.
So people are expected to take a loan from the government and use it to buy stocks, and if that turns out to have been a mistake - well, too bad.
Experts usually tell people to plan for their retirement by investing in a mix of stocks and bonds. They disapprove strongly of speculation on margin: borrowing to buy stocks. Yet Mr. Bush wants tens of millions of Americans to do exactly that.
Meanwhile, what does any of this have to do with the ostensible purpose of the whole thing: saving Social Security?
Here's the senior official again: "In a long-term sense, the personal accounts would have a net neutral effect on the fiscal situation of Social Security." The government would have to borrow huge sums up front to create the personal accounts - $4.5 trillion in the first two decades - but it would supposedly make up for all that borrowing with offsetting cuts in account holders' benefits many decades later.
Color me skeptical: will retirees with private accounts that performed badly really be forced to repay their loans in full? Even if they are, private accounts will at best have a "net neutral effect" - that is, they will do nothing to improve Social Security's finances. Mr. Bush says the system faces a crisis; what does he propose to do about it?
The answer, presumably, is that his plan will also involve major benefit cuts over and above those associated with private accounts. And it's true that you can improve Social Security's finances with privatization, as long as you also slash benefits - just as you can kill a flock of sheep with witchcraft, provided you also feed them arsenic. (Thanks, M. Voltaire.)
Do you believe that we should replace America's most successful government program with a system in which workers engage in speculation that no financial adviser would recommend? Do you believe that we should do this even though it will do nothing to improve the program's finances? If so, George Bush has a deal for you.
Gambling With Your Retirement
By PAUL KRUGMAN
Published: February 4, 2005
A few weeks ago I tried to explain the logic of Bush-style Social Security privatization: it is, in effect, as if your financial adviser told you that you wouldn't have enough money when you retire - but you shouldn't save more. Instead, you should borrow a lot of money, buy stocks and hope for capital gains.
Advertisement
Before President Bush's big speech, a background briefing by a "senior administration official" made it clear that the plan calls for exactly the "borrow, speculate and hope" strategy I described - not just for the system as a whole, but for each individual.
Here's the money quote: "In return for the opportunity to get the benefits from the personal account, the person forgoes a certain amount of benefits from the traditional system. Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent rate of return" - after inflation - "which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent rate of return."
Translation: If you put part of your payroll taxes into a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent.
Peter Orszag of the Brookings Institution got it exactly right: "It's not a nest egg. It's a loan."
For years, privatizers - including Mr. Bush - have claimed that people would do better with private accounts than with traditional Social Security even if they played it safe and invested in U.S. government bonds (which yield 3 percent after inflation).
But the official at the briefing made it clear that his boss was fibbing: if you invested your private account in government bonds, you would face benefit cuts equal in value to your investment, so you would be no better off than under the current system.
The only way to get ahead would be to invest in risky assets like stocks, and hope for higher yields. But if the investment went wrong and you earned less than 3 percent after inflation, your benefit cuts would leave you poorer than if you had never opened that private account.
So people are expected to take a loan from the government and use it to buy stocks, and if that turns out to have been a mistake - well, too bad.
Experts usually tell people to plan for their retirement by investing in a mix of stocks and bonds. They disapprove strongly of speculation on margin: borrowing to buy stocks. Yet Mr. Bush wants tens of millions of Americans to do exactly that.
Meanwhile, what does any of this have to do with the ostensible purpose of the whole thing: saving Social Security?
Here's the senior official again: "In a long-term sense, the personal accounts would have a net neutral effect on the fiscal situation of Social Security." The government would have to borrow huge sums up front to create the personal accounts - $4.5 trillion in the first two decades - but it would supposedly make up for all that borrowing with offsetting cuts in account holders' benefits many decades later.
Color me skeptical: will retirees with private accounts that performed badly really be forced to repay their loans in full? Even if they are, private accounts will at best have a "net neutral effect" - that is, they will do nothing to improve Social Security's finances. Mr. Bush says the system faces a crisis; what does he propose to do about it?
The answer, presumably, is that his plan will also involve major benefit cuts over and above those associated with private accounts. And it's true that you can improve Social Security's finances with privatization, as long as you also slash benefits - just as you can kill a flock of sheep with witchcraft, provided you also feed them arsenic. (Thanks, M. Voltaire.)
Do you believe that we should replace America's most successful government program with a system in which workers engage in speculation that no financial adviser would recommend? Do you believe that we should do this even though it will do nothing to improve the program's finances? If so, George Bush has a deal for you.
Thursday, February 03, 2005
Subscribe to:
Posts (Atom)
