Before the Bush administration came out in favor of “progressive price indexing” for Social Security, conservative commentators hailed the wisdom of the White House's vaguely formulated plan and charged liberals with opportunistic obstructionism in their opposition to the plan. Then the president endorsed “progressive” indexing and ... conservative commentators hailed the wisdom of the White House's vaguely formulated plan and charged liberals with opportunistic obstructionism in their opposition to the plan.
Liberals, you see, are hypocrites for not realizing that the switch from benefit cuts for every American to benefit cuts for 70 percent of Americans changes everything in this debate. Conservatives, by contrast, are steadfast and principled for supporting the president's plan -- no matter what the plan is and no matter how many times it changes.
The notion that there's anything here for a liberal is laughable, based on a moronic, straw mannish view of what liberalism is all about. If there must be drastic benefit cuts, it's better, of course, to shelter the poor from those cuts than to subject them to it. And if there must be pain inflicted on someone as a result of changes in Social Security policy, it's appropriate for high-income people to bear their fair share of that pain. But why a plan would be appealing to liberals merely because it's a bad deal for rich people is beyond me. Contrary to whatever myths may be propagated in the bowels of the conservative movement, I have no particular grudge against people who earn around $90,000 a year or more. Indeed, this describes many of my nearest and dearest family members. None of my best friends make this kind of cash, but many of them will be soon when they finish law school, medical school, or whatever else it is they're doing at the moment. I'd rather see them get the ax than worse-off folks, but benefit cuts are still bad no matter what -- their mere existence doesn't make an otherwise unappetizing policy proposal start to look tasty.
And phasing out Social Security and replacing it with a program of private accounts -- the thing that's really at issue here -- is still as unappealing as ever. John Tierney, new columnist for The New York Times argues that the risks involved in forcing people to rely on the stock market for their retirement security are small compared with the risk that Congress and the White House will just decide to cut your benefits one day. Tierney must be kidding. The only people who want to slash my guaranteed benefits are the same people "warning" me against the risk that this will happen. Why, one week before assuring me that privatization was the best way to avoid this risk, Tierney was arguing that my benefits should be cut.
The president has argued that I can -- if I choose -- insulate myself from market risk by investing my private account in ultra-safe treasury bonds. And, indeed, I could do this. The federal government sells, for example, inflation-indexed bonds that guarantee me a 1.85 percent interest rate above inflation. The outcome is, thus, guaranteed. Unfortunately, the guarantee is that I'll lose money. Every dollar I invest in my private account needs to be paid back in the form of further reductions in my Social Security benefit. And not just repaid, but repaid with interest -- 3 percent interest above the rate of inflation. Add on the expected 0.3 percent administrative costs (likely an underestimate) and for every dollar I "safely" invest, I'm guaranteed to earn a negative 1.45 percent rate of return on my cash. The point is neither partisan, nor opportunistic, nor obstructionist. It's a fundamental policy problem. The 3 percent clawback and the administrative costs ensure that otherwise safe investments will become sure losers and that potentially worthwhile risks (stock ownership, for example) become far too risky. But the clawback is necessary to make the math work out -- without it, benefit cuts would need to be much larger than anything the president is currently proposing. Under a scenario like that, private accounts could be a good deal relative to not having them, but the overall package of cuts and accounts would be a terrible burden on families already coping with an economy that's riskier than ever. This is a real argument, and, so far as I can tell, no conservatives have tried to answer it on the merits, choosing instead to mount attacks on liberal motives and dwell in the right's habitual cesspool of policy ignorance.
This is why there can be no compromise on Social Security until the Republicans drop the idea of privatizing the program. It's not a political position or, even, a bargaining stance. Privatization is a bad idea, and half-privatizing or quarter-privatizing or whatever-fraction-you-like-privatizing doesn't make it any better. And since Social Security is the federal government's largest program, there's nothing else conservatives could conceivably dangle that would make a logrolling deal -- in which we accept a bad idea in exchange for a good one in some other area -- worthwhile. The only thing worth considering would be agreeing to privatization in exchange for replacing America's tragically stupid health care system with a universal single-payer one, and I'm not going to be waiting by the phone for the president to ring me up with that offer -- and I wouldn't advise Harry Reid to do so, either.
Matthew Yglesias is a Prospect staff writer.
