Editore"s Note
Tilting at Windmills

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November 23, 2004
By: Kevin Drum

SOCIAL SECURITY FANTASYLAND....On Friday I speculated that George Bush might decide to tackle the transition costs of Social Security privatization by simply pretending that that the costs don't really exist. Today, via the Washington Post, it appears that several variations on this idea are already being run up the flagpole:

The strategies include, for example, moving the costs of Social Security reform "off-budget" so they are not counted against the government's yearly shortfall.

...."You cannot look at Social Security in the context of a five-year budget," the window that current White House and congressional spending plans cover, [Senator Judd] Gregg said. "To do so is naive and foolish. . . . If this is simply scored as a five-year exercise, we're never going to solve the problem."

....An analysis of one plan produced by Bush's Social Security Commission concluded that the interim financing would cost as much as $104.5 billion the first year, balloon to $194.4 billion in the 10th year and would peak in roughly 20 years at $258 billion.

....Gregg and other allies of the president argue, in fact, that transition costs of $1.5 trillion or more over the next 10 years should not be considered an increase in the nation's debt. Instead, they say, such borrowing would be a prudent recognition of future obligations.

"The diversion of a portion of payroll taxes to personal accounts is akin to prepaying a mortgage," R. Glenn Hubbard, former chairman of Bush's Council of Economic Advisers, wrote in the current issue of Business Week.

...."The market is rational, and they are already nervous about all these unfunded obligations in Social Security and Medicare," said Kent Smetters, a former Bush Treasury Department economist now at the University of Pennsylvania. "Resolution of that uncertainty is actually going to be a positive."

Wonderful. Just move it off the books. After all, it's not a real deficit anyway because we're promising to make it all up in 30 years or so which means the bond markets won't care about it. In fact, a willingness to blow up our deficit right here and now will actually be a positive!

This is just plain scary. What planet do these guys live on?

Kevin Drum 2:09 AM Permalink | Trackbacks

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