McArdle redefines centrism

  I am on record as liking Ms. McArdle's writing.  But this post is really stupid.  President Bush proposed a carve-out in social security with no way to pay for transition costs except via benefit cuts.  That is not a compromise.  It is also not true that the returns from a portfolio linked to the profits of publicly-traded companies is better than the returns from a portfolio linked to the general level of wages unless you believe that markets are irrational.  Had the GOP put forward an “add-on” proposal, which would have in essence raised payroll taxes to fund a tax-free system of private retirement accounts, it would have attracted a lot of Democratic support.  Even a voluntary add-on, in effect a giant investment tax-break, would have attracted such support.  But Bush drew strong redlines and held on to them for a very long time.  Democratic politicians were given no incentives to compromise, even though many (like Joe Lieberman) would have liked to.

It is entirely legitimate to favor a privatized pension system.  If the Bush proposal had materialized, the Republic would not have fallen.  But here McArdle confuses her own policy preference with the facts about a policy debate.  The truth is that President Bush put forward a near-maximalist proposal, the equivalent of Medicare-for-all, and refused to put forward a way to pay for it without cutting the system's payout formulas.  The fact that McArdle would prefer an even more maximalist proposal does not change that.  Nor does it change the fact that Social Security reform never even made it out of committee, let alone face a filibuster. 

I am, therefore, a bit puzzled by the post.  She seems to be looking for equivalence where there is none.  Strange, for a generally nonpartisan writer.

Comments

[Megan McArdle]

Let me respectfully suggest that each side defines centrism considerably to one side of the actual center . . .

Bush did, according to Andrew Biggs (who was there) make repeated declarations that he was willing to compromise on the payroll tax. But it is not in question, because they issued many press releases saying so, that the Democrats outright refused to talk about any plan that included carve outs. It would be as if the Republicans said that they refused to talk about any plan that included subsidies for lower income people--that's 95% of the point of the thing, for the other side.

[Noel Maurer]

Bad time, right before I gotta run to class ... if President Bush did in fact offer to allow payroll taxes to be raised, then I am wrong and you are right. Or at least more right. Where'd Biggs say that, and is it corroborated?

And about the definition of the center, yes, absolutely.

Be back in a couple hours.

[Noel Maurer]

Hi, Megan! Back in the office.

I found this piece by Biggs, which implies that Dubya was sticking to his guns on the payroll tax issue. But that doesn't mean that Dubya wouldn't've compromised. I'd very much appreciate the cite.

I honestly don't understand why add-ons would have ruined the point of the reform. That's an honest question --- once upon a time I was a registered Republican and pretty conservative to boot, and I don't see why I would have considered carve-outs to be 95% of the reform. In fact, back when I favored that sort of thing, I wouldn't have considered carve outs to be any part of a pension privatization scheme, because of the transition cost problem. Unless you want introduce some sort of strange supply-side argument into pension reform, the sensible proposal is to have add-ons, with later reductions in the payroll taxes destined for the paygo system as the transition generation passes away.

I'm all for analogies, but I'm missing something with this one. What am I not understanding?

As you know, I'm pretty skeptical of the benefits of pension privatization for reasons laid out in Chapter Six of this book. Unless they raise net national savings, I don't see the benefit. But skeptical does not mean rabidly opposed, it means skeptical.

Readers, (whomever you may be) would it be worth distilling the argument into a blog post? I get the feeling this debate was hashed out ad nauseam a few years ago, but what do I know?

[Bernard Guerrero]

Please do. Nearly everything's been hashed out ad nauseum, but that actually tends to cloud the main issues with secondary details & arguments.