Peter Orszag's "Good Cop, Bad Cop" Social Security Routine
Monday 15 November 2010
Former White House budget director Peter Orszag is taking a new approach in his quest to cut Social Security. He's playing progressive "good cop" to to the ultra-right bad cops of the White House deficit commission, Erskine Bowles and Alan Simpson. Now that Bowles and Simpson (Blimpson?) are done threatening the elderly with their roundhouse benefit cuts, Orszag has entered the interrogation room to offer them a deal. I know my partners can be rough, he says, but I think I can talk them into something a little more reasonable. Just play along, pal, give me something I can work with here.
I suppose that would make progressives the jittery John Garfield character sweating under the lights. And this is the moment in our movie when the audience yells at the screen: Don't do it, Johnny! It's a set-up!
Funny thing is, I was feeling bad about Orszag. I felt I'd been too harsh, too personal in my criticisms of him, even after his recent hit piece on Social Security and "the left." And I think I was. But that doesn't change the fact that he's become a relentless advocate for unneeded Social Security cuts, and his latest blog post on the topic is just another way to pursue the same goal. Sure, says Orszag, Simpson and Bowles are a little harsh.. Their plan would restore long-term balance by using 70% benefit cuts and 30% tax increases. But Orszag says they and the Republicans will accept a 50/50 split and progressives should be thrilled.
Like I said, a set-up.
It's sad to see Orszag, an undeniably brilliant numbers guy, continue to stack the deck in this discussion. Raising the payroll tax cap altogether, so that it covers 100% of income, would solve all of Social Security's future actuarial imbalances - and even permit a benefit increase. And as we found in a survey co-funded by the Campaign for America's Future, that's the approach the public prefers. Even Tea Party supporters are on the "progressive" train when it comes to Social Security. Yet once again Orszag refuses to address the public's preferred option. As before, he pretends it doesn't exist.
Be thankful for small favors. Orszag's backed off his personal attacks on those who don't share his point of view. On November 3, anyone who favored a different approach than Orszag's was "strident." (Is the former Chief Actuary of the Social Security Administration under Ronald Reagan really "strident'?) They were also dismissed as members of that now-marginalized species known as "the left" (remember, this is what most Tea Party members want.)
Orszag fails to mention why Social Security is projected to have a mild, long-term deficit. The intent of the 1983 Social Security overhaul was to ensure that 90% of all income was subject to the payroll tax. And it was, until wage growth slowed dramatically and income inequality rose sharply in the 1990's and 2000's. Orszag says it's "progressive" to propose that we return to this 1980's-era level of taxation ... in 2050. And he does so without telling his readers that it was already at that level twenty-five years ago.
The marginal income tax rate for the highest-earning Americans fell from 70% to 33% under Ronald Reagan. At the same time, the relatively minor payroll tax was applied to 90% of all income. Now Orszag wants progressives to celebrate a proposal that would result in even lower marginal tax rates and stall that 90% target for another forty years. The net effect is a tax bonanza for the wealthiest Americans that's subsidized by benefit cuts for nearly everybody else. That's hardly "progressive" stuff.
Orszag's clearly paid attention to critics of the Bowles/Simpson proposal. But rather than rebut them, he appropriates their arguments and attempts to make them his own. He acknowledges that "Social Security is not the key fiscal problem facing the nation," while "federal health care costs will increase six times as much." And he notes (without attribution) the critics' observation that future imbalances in Social Security are "expected to amount to 0.7 percent of the economy."
His response? The increase in Social Security costs is "not a huge amount, but a deficit nonetheless." What he doesn't say is that Social Security is forbidden by law to contribute to the overall deficit, or that lifting the payroll tax cap would eliminate any future imbalances while leaving enough money left over to raise benefits. (That would be an excellent idea, given the reduction in personal wealth caused by the recent economic crisis.)
There's more: Simpson and Bowles' punitive reduction in cost-of-living adjustments is lauded as "more accurate," even though it less accurately reflects out-of-pocket medical costs and other prices that most directly affect older Americans. He says that "benefits for the poorest 20 percent of recipients would increase by about 5 percent, while those for the wealthiest retirees would fall by almost 20 percent." But those (unverified) figures warrant extreme skepticism. The "wealthiest retirees" would almost all be middle-class earners. And consider the loophole-ridden language Bowles and Simpson use for that lower-income benefit: it would "keep full-career minimum wage workers above the poverty threshold," they say. What is a "full-career minimum wage worker"? Would anyone who has ever worked for more than minimum wage be disqualified? Is 5% enough to keep this population out of poverty? They don't say, and neither does Orszag.
Orszag would have us believe that this plan, adjusted for a 50/50 mix of revenue and benefit cuts, would be an effective and highly "progressive" compromise. It's not. He also says Republicans would probably support it. But that's a political, tactical argument, and the Democratic record on that front has been - shall we say - unimpressive lately? The "compromise before you debate" approach is exactly what led to this month's "shellackin'." Besides, if everybody listened to Orszag, who would argue for the approach that most people (including most Tea Partiers) want?
It's not Peter Orszag's fault that the Republican leadership has been so intransigent and destructive, so unwilling to compromise. But in this political climate it undermines his credibility to say that this is "a highly progressive reform plan for Social Security that could attract Republican support as well." That sentence doesn't parse.
There was a time when each party proposed its policies, they debated in public, and compromises were made when agreement was possible. Legislation got passed - but voters also got to see what each party stood for. That way it could make an informed choice in the next election. It's impossible to understand why this time-tested principle of democratic governance has been abandoned by so many influential Democratic advisors.
Peter Orszag would serve his readers better by giving them the full range of options instead than presenting them with a slanted set of options. And he should explain, directly and candidly, why he doesn't support the approach that most Americans (including most Republicans) want. Instead he does his readership the disservice of pretending that approach doesn't exist. Progressives should reject his argument, and so should Democrats. (Those two groups overlap, of course - but it should be obviously to everyone by now that they're not contiguous.)
Bowles and Simpson? Orszag says he's sorry if they roughed you up a little. But they're really good guys, he says, and they've offered "a highly progressive plan." I think we can work out a deal. Warm up that coffee for ya?
It's a set-up, Johnny!
 See Blivens, L. Josh
 Bowles and Simpson propose eliminating a number of tax deductions and other tax breaks, so the net effect of their proposal on the wealthiest Americans is difficult to calculate precisely. But it's likely that the net result will be less than 33%, and it certainly will be far less than 70%.
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