Ezra Klein responds to my post on Peter Orszag, addressing a quote from Ben Stein’s Politico interview with Orszag this morning:
Orszag’s long-running project – something that has made him the Left’s favorite Cabinet member – has been replacing talk of an “entitlement crisis” with his argument that Social Security requires only modest tax hikes and benefit cuts, while Medicare and Medicaid have much more dramatic fiscal woes.
Ezra says I’m wrong to interpret this to mean that Orszag thinks "Social Security requires only modest tax hikes and benefit cuts":
Hamsher focuses on the bolded portion. But that gets the importance of the quote backwards. The point of Orszag’s argument is not how you fix Social Security. It’s to stop talking about an entitlement crisis. To read a clearer exposition of this argument, see this old Paul Krugman post. "Social Security fades to insignificance in any realistic discussion of entitlements problems," he says.
[]
If there’s an "entitlements problem" that requires an "entitlements commission" then that will cut Social Security and Medicare and Medicaid. If there’s no "entitlements problem" and instead a health reform problem and some small questions about a politically electric program, then what you get is health reform — which is also a way to slow Medicaid and Medicare growth without resorting to cuts — and an end to the fear-mongering on Social Security. Orszag is one of the good guys here.
Orszag’s not running for prom king here so whether he’s "one of the good guys" is not really relevant. He has been presenting his plan to cut Social Security benefits as part of the White House’s efforts on "fiscal responsibility," according to people who have directly participated in those presentations. I granted anonymity in this instance in accordance with the rules followed by the New York Times, because I trusted where the information was coming from, I thought it was important to get out, and there was a valid reason (not wanting to jeopardize relationships with the administration) for requesting it.
Now Orszag confirms that reporting by doing an interview where he says he thinks Social Security requires benefit cuts. Ezra says my conclusion is "an effort to read the tea leaves to suggest that the Obama administration has a secret plan to cut Social Security benefits." I don’t know what the "secret" part is.
He then goes on to tell us that what Orszag really means is that he has no intention to cut Social Security, what he really wants to do is deal with the broad question of Medicare and Medicaid as part of healthcare reform. Fair enough. But Ezra wrote a post this morning quoting anonymous administration officials on the subject wherein he granted them anonymity for no legitimate journalistic reason I can tell, because they did nothing other than give administration spin. Nobody legitimately speaking on behalf of the administration should fear retribution for doing so. Ezra transcribed this exchange with no pushback or critical scrutiny, something Glenn Greenwald has been taking Mark Ambinder to task for. If Ezra’s got great sources in the administration, why is he venturing guesses about what Orszag intends? Why doesn’t he go and ask them, point blank — is cutting Social Security benefits off the table?
There’s a big summit on "fiscal responsibility" happening on Tuesday that nobody knows almost anything about. Yesterday numerous sources in the health care policy world confirmed that the administration told them (again off the record) that Pete Peterson and Laura Tyson would be keynote speakers, and now both are saying they won’t be speaking. According to the WSJ Obama told the Blue Dogs they had his permission to pursue legislation to create a panel whose recommendations on "long term deficit strains" would be subject to an up-or-down vote of Congress, and after Congressional leadership pitched a fit, that seems to be off the table too. But what are they going to talk about at this summit, and who is invited?
On a conference call today arranged by Campaign for America’s Future that included Roger Hickey, Jamie Galbraith, Nancy Altman and Dean Baker, Roger said that several of them had been told they might be invited to the summit, but no formal invitation had been issued yet (though Pete Peterson has his invitation). And while they had initially been told that the summit would address Social Security, Medicare and Medicaid (which Ezra claims Orszag is desperately trying to separate), now they’re hearing from administration sources that nobody is sure.
"It may well be that the plan has been modified" said Galbraith, who was up on the Hill several weeks ago and says the assumption was that the underlying economic problems would be over quite quickly so by the time the summit occurred they could move on to other questions (which is pretty much what Digby says).
"But the administration is getting a reality check, it’s got bigger fish to fry" said Jamie. "These problems are simply not the result of the Bush treasury bobbling the ball. We’re seeing a true meltdown."
Last week people spent days trying to project meaning into Timothy Geithner’s vague testimony before Congress, and anonymous administration sources used Mark Ambinder to tell us what the plan really was. This week we find out Geithner had no plan. It seems to be a pattern, and it’s sad to see Ezra participating. It may be that in the wake of the horrified response Orszag got from Congressional leadership that any ideas about "fixing" Social Security have been abandoned — these things seem to be changing by the minute. But if Ezra has valuable sources within the administration willing to speak to him about what the White House intends, there are a lot of people right now who would like to know. He should be using them to find out solid information on that front rather than float anonymous spin and then speculate about the meaning.
Update: Isaiah Poole has a recording of the call with Hickey, Galbraith, Altman and Baker up at Campaign for America’s Future.



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Great post – I sure as hell don’t want anyone retired, hoping to retire some day, after years of contributing into the fund to have to settle for cat food because, well it seems that the cookie jar was raided one too many times for the benefit of the few. Geez, a lock box seems like a good idea. Then and now.
Oh, and ZED!
I have this really bad feeling that no one really knows what to do about the economy because we are so fucked that there is nothing to do.
FD – I am always inclined towards fiscal pessimism. This year it’s called realism.
But but but Orszag probably TOLD Ezra he didn’t mean what he said and Ezra really really really wants to believe that Orszag wouldn’t LIE to him or anything like that. Would he?
I don’t think that any politician would vote to CUT social secuirity benefits. What they MAY vote to do is to reduce the rate of growth by changing the index used to calculate benefit increases.
At least all of this spin is transparent as such. Such transparency is a point in this administration’s favour, right?
The double-secret probation password to gain entrance to the Village is tapping your steno shoes together twice.
As Toto puts it, who knew?
Nothing can be fixed until health care is fixed.
Optimist.
They leak what they intend to do, everyone goes off saying ‘they don’t really intend that, they’re going to do something else’ – and then the administration does exactly what they said they’d do.
Also, remember that half of this administration is really Blue Dogs. They’re going to do a lot of stuff we don’t like, and we don’t have the access and influence that we should have as Democrats.
In the words of Chris Bowers (just a snippet out of time!)
“I reserve the right to remain unnerved……..”
Jane you are on fire, and we don’t need any benefit cuts. We do not need 67 year old truck drivers. We don’t need 67 year old retail clerks.
yeah! They are either faking her out or she’s driving them back under the rock they crawled out from.
If this discussion were really about fiscal responsibility, and not about embezzling our retirement, they would be pushing single payer health care.
Jane: Has Ezra called you yet to thank you for helping him to not become another victim of the dreaded ‘access itself is the endgame’ disease that seems to afflict so many legacy journalists?
true!
I actually like Ezra and think he’s smart, but the rules are being written for covering a new administration by those who are willing to talk within it, and it’s up to everyone to determine what that access is worth to them.
jane,
if you read the Diamond-Orszag plan you see that it says increase benefits for low income earners to the poverty level by 2012, and above the poverty level thereafter. To pay for this increase cut benefits on the highest earning workers in the future, and increase taxes two ways – rate increase phased in over the time between now and actuarial insolvency in 2041, and move the earnings cap upwards at an accelerated pace.
We need to beware of a bait and switch, but we should be applauding Orszag’s plan as helping get more money to the poor now, and dealing with the long term (30 year) actuarial problems in a progressive manner – let the high earners subsidize the low earners.
i’ve got a series of comments about this on your earlier thread.
Ah, three-dimensional chess.
If only the rest of America had Team Obama’s brilliance and cleverness, we could see what was around the next five or six corners.
Not.
One of the sadder things I’ve watched in the blogosphere over the past five years or so has been watching smart young people like Erza Klein and Matt Yglesias get turned into DC zombies. How am I going to explain to my kids that Erza isn’t really Joe Klein with botox?
“Access Journalism” is the new political porn.
Insiders have their way with journos, and journos let them.
Another instance of pay-to-play.
Or shorter: “Hum along with me.”
I do appreciate the progressive considerations and you rightly point them out. But our financial industry is insolvent, we’re in two wars we can’t seem to get out of, there’s a housing crisis — tell me again why we’re dealing with a potential problem in 2041?
A first-class piece of reporting, Jane. Impressive referencing throughout the piece. (I’m sure those at the controls count on most people not digging for the meat.) One thing was missing, however.
What brand of cat food is recommended for the long haul? Personally, I’m partial to Trader Joe’s tuna. It’s really cheap and my two cats, Diva and Maestro, seem to like it. Just sayin’…
Kobe is partial to Organix brand dog food. Katie likes cat food cos it’s stinky but she’s not particular.
and a healthcare crisis
Fixed it for you
Just go heavy on the mayo.
There is a lock box. Read the Social Security Administration’s projections – insolvency for Medicare in 2020, Old Age and Survivors Insurance insolvency in 2041. (See table 1, about midway though the linked page).
Neither of those dates makes it a crisis that has to be solved with urgency. However modest changes now can have a greater effect than more substantial changes in 15 years. This is just actuarial fact.
What is pressing is increasing benefits for low income earners. Get more money in the hands of poor people, they will buy hamburger instead of catfood and we see multiplier effects throughout the economy.
Orszag gets all low income retirees to the poverty level in 3 years, paying for this by increasing the income cap. It also addresses the long term problems with OASI with modest changes to high income earner’s benefits and a phased tax increase FICA taxes rise from 12.4% (combined employee and employer tax) to 14.2% over 15 years. This delays insolvency from 2041 until 2078 or later. if we can get all SS recipients to at least the poverty level sooner that’s even better.
Medicare is a much more pressing issue. 2020 insolvency, 2012 lock box funds begin to be used for current benefits. Fixing health care will go a long way towards fixing Medicare and we should be pushing very hard for health care reform.
If there were jobs, not just service industry jobs, jobs for all able employee’s, then we wouldn’t HAVE an entitlements issue, methinks.
Bravo Mz. Hamsher for calling out distorted realities, where EVER they may lie.
WMD, you comment is interesting, but I don’t fully get it (I’m not that informed on these types of details) . . . got time to extrapolate a bit more? I mean, does it provide for INPUT to Soc Sec to keep the pot full, or does it lean to implementing cuts to DIMINISH the pot?
I’d also like to ask, why cut benefits for ANYONE? Why not tax the higher end CEO level folks more, and tax corporatins, more, to maintain or increase the pot for us all, now, tomorrow, and the next gen’s to come? Thanks, hope you have time and inclination to comment more, I look forward to learning more . . .
Brilliant comeback. Why indeed? Social Security tinkering (or even discussion) at this point is horribly wrongheaded policy.
We just got mugged by Bushco on every front imaginable. Really? Good time to screw with Social Security?
Stellar, Jane – thx
“…However modest changes now can have a greater effect than more substantial changes in 15 years. This is just actuarial fact.”
Hey…being proactive just makes way too much sense. Why would we ever want to consider doing that? We always want to wait until things are in blinking red light EMERGENCY status. You know…sorta like now.
What the F are we going to do in Afghanistan aside from funneling billions of dollars to the Military Industrial Complex? Say no to expanded war in Afghanistan.
I never get these arguments. If Orszag wants to say there is no entitlement crisis, why didn’t he just say there is no entitlement crisis?
fixing the longer term problem is cheaper the sooner it is addressed.
It’s basically compounding working in favor of solvency.
Right now increase benefits for the lowest income retirees and disabled beneficiaries. Over the coming 2 years fix health care. If it takes minor tweaks to the tax structure to sell that then do so. And realistically taxing income above 107k at 6.2% – the same as income below 107k is an easy sell and is progressive. Cutting higher income earner benefit growth is a bit tougher, but I feel SS should be a safety net and it’s important that it truly serves that function. In the previous thread I gave figures for myself and a hypothetical 48 year old earning $14k a year.
i get $2351 per month at age 67. The low income person gets $781 per month. Now neither one is a great income, but $781 per month is obscenely low and is a crisis. If My benefits have to be cut to help the low income earner then do so; I want them to have a safety net.
Long term there are a lot of structural problems with the federal government. Military spending has to be cut (this will be a hard fight because “democrats are weak on national security” is accepted as true by the village and also by a lot of the hinterland inhabitants to boot (not just wingnuts unfortunately).
But but but, there’s all that missing heroin we need to grab and hoard (can you say that,Contra Stan? I though you could) so the bad guys don’t get it!!!! /OT
Let’s see, at a time when we should be talking about increases, these clowns want to cut payments and increase retirement age?
Is the government going to nationalize WalMart so that eveyone who is over 60 and can’t get hired (they anyone, any age right now) can work as a greeter?
I just can’t believe Obama is behind this, or will let this happen. And if he is, I feel like I wasted amost two years of my life working like a dog to get him elected.
Just how supid IS EVERYONE in DC?
I am, again, left speachless…
wmd, do you have an answer to this question? Larue makes a critical point.
If it is as “minor” (and possibly beneficial) as you say, how was this ever justification for the idea of an “up or down” vote in Congress?
I’ve never known that type of Congressional action to be used for anything but an extremely divisive issue.
Could it be that there are more divisive things behind Orszag’s entitlements curtain than we know?
Seems to me that one of the major points that Jane raises is that (along with the insidiousness of “Access Journalism”) is that the Obama Administration’s “veil of transparency” seems pretty opaque, and deliberately so.
Three dates to consider according to the SSA’s actuaries:
2012 – Medicare is using “lock box funds”
2020 – Medicare is insolvent – more money has to come from some where to pay benefits.
2041 – OASI is insolvent.
The Medicare problem is much more relevant today than the OASI problem (albeit the obscenely low benefits OASI pays to low income workers is a problem now).
A big portion of the Medicare problem is due to the assumption that health car costs will increase faster than inflation, my (imperfect) recollection is it assumes costs increase at CPI + 10+%. Fixing the US health care system could change that to CPI + 1%.
Fixing health care policy is critical.
Yes, unfortunately there is nothing in it.
I don’t have an answer for that – up or down vote seems pretty stupid to me.
There are treasury bills in the lock box. Please read this.
The Republican Party is not shy in some states (like Texas) in espousing the opinion that the party would like to take over the Panama Canal by force and destroy the Social Security program.
Do these Republican extremists have Obama’s ear?
It’s really worth reading the proposal Jane linked to in her earlier post. The tax changes are:
raise the cap on income subject to FICA
raise the tax rate from 12.4% (combined employee/employer) to 14.2% over the course of 15 years (I’m going on memory it could be 10 years or 20… read the proposal and correct me).
High income earners would not see the same growth in benefits as is currently promised. This is a progressive thing as low income earners would see major growth in benefits.
Orszag-Diamond is a progressive policy change. Tax the rich, give more benefits to the poor. My concern is that it could be subject to bait and switch by Blue Dogs and Republicans.
Fair enough!
And I’m of the opinion that folks, even Bluedog politicians, don’t generally do something stupid like that suggestion without a darn good reason. *g*
exactly right.
or our military budget. or any number of other things.
It says insolvency would move from 2041 to at least 2078.
Here’s the Diamond-Orszag proposal. It doesn’t take long to read it, and there’s no real math to understand, it’s a qualitative analysis that I hope is actuarially sound, but given it was reviewed extensively I will accept it is so.
OOps, that’s an update to this proposal Jane linked to. the link in #46 is just an abstract, although the full paper is available as a pdf there.
great post jane. thank you.
I take Jane’s point (at 21). We are dealing with an insolvent financial system and (at least) two wars. However,
I agree with that whole “time value of money” consideration. Basically, it’s nickel and dime stuff if we deal with it (in a progressive way) relatively soon. If we wait, then we’re talking about another iceberg just floating around out there.
If it were me, there would be no cap on FICA, period. No exceptions.
From the 2008 Trustees report. The following refers to OASDI (what we usually call Social Security):
http://www.ssa.gov/OACT/TR/TR08/II_highlights.html
These are the dates SS is using and again “special obligations” are not T bills. They are rather instruments that the government has given its backing to.
I agree – no income cap on FICA (just like Medicare). Make the Medicare tax progressive – increase from 1.65% to as high as 4% on incomes above median (tweak as necessary) to pay for universal (single payer) health care.
Special obligations does sound ominous. A rose by any other name? These special instruments are obligations of the Treasury regardless of whether they are T-Bills or not… and treasury is paying interest to SSA on these instruments.
It appears that the plan aspires mostly to avoid taxing the rich while its focus is to cut benefits and raise the retirement age to 69 for worker drones.
And habaneros…
Whether I ultimately agree or disagree on some points, I have to hand it to you for the courteousness and excellence of your commentary.
Sweeps chapeau off head and bows with admiration!
The difference between a T bill and the SS obligations is that a T bill is sold to someone else. The obligations are a case of the government borrowing and lending money to itself. This means that money that the American people paid into the system (and which the government spent) will have to be paid back by, you guessed it, themselves.
Hey Jane,
Thanks for the post. I appreciate the comments taking on the “policy development” process.
This kind of dialogue needs to happen here often.
Hopefully, Ezra K, pays attention…
More often.
thank you.
I’m very much willing to personally pay more and receive less in order that low income retirees can have a dignified retirement. I’m also willing to pay more in order to have universal health care.
The latter has some personal cogency – my COBRA benefits ended Dec 1, 2008, I can’t get an underwritten policy due to health issues (I’m overweight, have osteo arthritis and am allergic to hornet stings)… Will be buying a “guaranteed issue” policy for $719 per month until I get a new employer… at which point I’d happily pay higher Medicare taxes so I’m never in this situation again.
The Fed is going to be buying T-Bills soon (monetizing the debt), mark my words. I do take your point though; even so a rose by any other name seems apropos here.
That’s just false – at least “avoid taxing the rich” is false. Diamond Orszag taxes the rich more, and cuts their future benefits as well, while increasing benefits for lower income workers.
I may have missed it, but I did not see any changes to the $90,000 cap threshold. That’s where the meat is. Raising the rate from 13.5 to 15 percent and not touching the cap is a gift to the wealthy.
Starting about 1/4 of the way down in my browser:
This is less than I’d call for – it says set the cap so that income not subject to FICA is 13% of all earnings. I’d say no cap whatsoever and I have no idea why they keep an earnings cap/
however a bit later they say:
This reads to me as a surtax on very high earners, and in particular it is a surtax on income above the FICA cap.
Jane, you are FIERCE!
Keep the pressure on ‘em!
I believe either Nate Silver or Mark Kleiman pointed out that about $2T was pissed away in tax cuts to rich folks, money that presumably went into hedge funds seeking high ROI. In a sense the Bush tax cuts created the money pool for Ponzi finance.
The two wars were another $2T down the toilet.
Another worthwhile observation:
Wingnuts are denying that FDR’s New Deal spending helped the economy, but they claim WWII did help the economy.
WWII was debt financed consumption on steroids – borrow money to pay for destroying things. Borrowing money to pay for infrastructure seems eminently more suitable for creating wealth in the long term, although the War related capital in factories does have create some long term wealth, every bullet and bomb used is just money set on fire.
So why are higher earners and let’s include all forms of compensation and income not taxed at 13% or whatever the rate is for everyone else?
Why indeed.
I don’t think there should be a cap on income subject to FICA. I think the surtax proposed is fair and reasonable.
I think benefit reductions for high income earners used to pay for substantial increases to the poor $781/month beneficiaries is also worthwhile. $781 per month in 2028 is obscenely low and does not provide for a dignified retirement, but that’s what a life long minimum wage earner can look forward to.
Yeah, well, I get less than that. I’d feel like I was floating on that and might even be able to handle emergencies if/when they arise.
This whole secrecy thing is making me crazy. I want something somewhere I can sign to protest; somebody to call.
This is not a case of “no news is good news”, this site is practically the only one reporting on this.
Maybe this, maybe that….meanwhile everything’s under the table and Pete Peterson is invited to ruin the rest of my life, such as it is.GaaaaaaHHHHHHH!!!!!!!
My thoughts exactly. Unless there is a stalking horse in this race……..again, and O feels he has the political capital to (1) raise the cap and tax the rich for what they scam out of working people’s meager salaries. (2) O feels he has the political capital to start getting rid of this program because everyone loves and trusts him so much and he has a new brand of Koolaid that tastes better.
Obama DOES seem to be ignoring everyone but the Republicans and the economists who got US here in the first place.
I hear he waffled big time up in Canada with Harper over NAFTA modifications.
Obama raises Nafta renegotiation during first official visit to Canada
The $781 per month figure is for someone my age (48) retiring at age 67. I’ve been trying to relate the benefits currently promised to low and high wage earners using my own situation as a baseline (I hit the cap 3 out of last 5 years).
INstead of raising the rates that much – that’s a pretty hefty tax rate for most people – why not raise the ceiling so everyone pays on their entire paycheck? It’s at least as fair.
Hey Ezra. Hardball producer is on Line 2. Mission accomplished.