BUDGET BABEL: Where does all the confusion come from?


Interlude—Krugman and Mann explain: Before we were called away from our desks, we were exploring the constant confusion surrounding our budget discussions.

More specifically, we were discussing the difficulty journalists have explaining how Social Security works. See THE DAILY HOWLER, 12/6/12.

Tomorrow, we'll return to Glenn Kessler’s recent attempt to explain the workings of the venerable program. For today, let’s ask an obvious question:

Why in the world is it hard to explain the way this program works? Social Security has been around since the 1930s—and the famous reform by President Reagan and Speaker O’Neill occurred in 1983!

But even after all these years, major journalists find it hard to explain the workings of this seminal program. At the Post, Kessler had a terrible time trying to say if Social Security does or doesn’t add to the deficit. For our money, Kevin Drum struggled with this question too.

How is it possible that major journalists can’t explain such basic topics? In our view, Paul Krugman and Thomas Mann recently gave us a partial answer.

Krugman’s answer came in last Friday’s column. First, he noted that many voters are confused about the way the “fiscal cliff” works. They think the federal deficit will increase if we go over the cliff.

The opposite is true, of course. if we go over the fiscal cliff, the deficit will be greatly reduced. As he continued, Krugman cited one possible source for the public’s constant state of confusion concerning budget matters of this type:
KRUGMAN (12/7/12): [T]here is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now—except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.

Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now—namely, mass unemployment.
For Krugman’s full argument, read his whole column. But according to Krugman, a powerful industry exists to promote (unwarranted) fear about federal deficits—and there is virtually no organized effort to push back against its claims.

Voters are constantly told to fear the problems of deficit spending. They rarely hear contrary arguments.

Krugman is describing a state of “manufactured consent”—a situation in which the public gets brainwashed and disinformed by our budget debates. And sure enough! In a separate piece last week, a highly-regarded old Washington hand made a similar presentation.

This second observer was Thomas Mann, who joined with Norman Ornstein this year to write a widely-disappeared book. Mann has been a congressional scholar at the Brookings Institution for the past thirty years. For decades, he has been one of the nation’s most respected policy analysts.

Last week, Dan Froomkin interviewed Ornstein and Mann for the Huffington Post. At one point, Mann complained about the way the press corps overstates the need for deficit reduction. His explanation for this state of affairs sounded a great deal like Krugman’s:
FROOMKIN (12/7/12): Mann said he was struck in conversations with journalists by how influenced they were by the heavily funded movement to promote a bipartisan consensus around deficit reduction and austerity. Such a bipartisan consensus doesn't actually exist, Mann pointed out. But if you believe it does, than you can blame both parties for failing to reach it.

"The Peterson world, I think, has given journalists the material to keep doing what they're doing," Mann said of the vast network of think tanks and other influential Washington groups underwritten at least in part by Wall Street billionaire Peter Peterson.

Peterson's vast spending has given rise to an environment of contempt among the Washington elites for anyone who doesn't believe the government is dangerously overextended.
That's what Krugman said! Like Krugman, Mann described a badly unbalanced public discourse, in which certain heavily-funded groups tilt the budget discussion toward the need for deficit reduction.

According to Mann, the activities of these heavily-funded groups have created myopia among the establishment press. According to Krugman, these same activities have left the public in a state of high confusion.

In essence, Krugman and Mann are describing the state of play surrounding Social Security. For decades, the groups Mann describes as “Peterson world” have been arguing very aggressively about the allegedly perilous state of this venerable program.

Is Social Security headed toward “bankruptcy?” A familiar array of talking points have been used to convince the public, and the press corps, that this disaster is looming.

Everyone has heard these frightening claims, which have been widely churned by mainstream journalists. Among the public, these familiar claims have created a sense that Social Security won't be long for the world unless we start cutting it back:
Familiar claims about the Social Security trust fund:
The money isn’t there—we’ve already spent it.
It’s just a pile of worthless IOUs.
The Social Security trust fund is just a book-keeping fiction.
For these reasons, Social Security will go bankrupt in the year 20xx.
Powerful groups have broadcast these claims (and others) for decades—and these repetitive gloomy claims have had a powerful effect. As far back as 1994, the Associated Press reported a now-iconic survey of voters aged 18 to 34.

“Young Americans find it easier to believe in UFOs than the likelihood Social Security will be around when they retire,” the AP reported. Among respondents, only 34 percent said they believed Social Security would still exist by the time they retired.

In fact, Social Security can never go “bankrupt” in the familiar sense of that term. Social Security will always exist, though it may not be able to pay the full level of benefits currently promised for future retirees absent increases in funding.

But so what! As far back as 1994, a large number of voters had been tricked into thinking the program was destined to disappear. Those voters believed that bogus notion because of the state of affairs Krugman described last Friday:
KRUGMAN ONLY SLIGHTLY REWRITTEN: There is a whole industry built around the promotion of panic about Social Security. Lavishly funded corporate groups keep hyping the danger that the system will go “bankrupt.”

Meanwhile, there is almost no organized attempt to explain the actual facts.
For decades, voters have been aggressively conned about the workings of Social Security. And there has been almost no attempt from “the left” to straighten out the confusion—to challenge the disinformation.

In how many ways has the public been failed? Let us count the ways:

The nation’s (thoroughly useless) professors haven’t tried to address the confusion. The nation’s liberal journals have made no real attempt. The people who pose as liberal columnists have never bothered with this task.

Has the Democratic Party tried? Please! You have to be joking!

In separate publications last week, Krugman and Mann described the state of our budget discourse over the past many decades. Here it is:

From the right, we’ve been subjected to lavishly-funded disinformation campaigns, leading to massive confusion. From the left, we have seen indifference, slumber and bullroar.

By now, a liberal world worth the name would have created an easy-to-follow account of the way Social Security actually works. But no such source of coherence exists. Go ahead! Tell us where we can find it!

In fact, our public discourse features very few actively functioning, competent liberal voices. In their place, we have an array of liberal Potemkins—and massive confusion reigns.

Does Social Security add to the deficit? That’s the question Kessler tried to discuss at the Washington Post. In our view, he authored one of the most confusing discussions we’ve ever seen, on this or any topic.

But why does all this confusion exist? Why is it still so hard for journalists, even liberal journalists, to explain these highly seminal topics?

The fault, dear liberals, doesn’t lie in the stars. For decades, the fault has lay with us. We liberals love to tell the world that the other tribe has all the dummies—that we are the very smart, moral people.

But as we have pleasured ourselves in this way, the other side has spread massive confusion through the land. We liberals, the alleged intellectual giants, have slumbered, snored, burbled, clowned. Slept.

Alas! Thanks to our tribe's failure to function, mass confusion exists to this day.

Tomorrow: Does Social Security add to the deficit? Back to what Kessler said.


  1. I agree with Bob that SS isn'y made clear by the organs he mentions, neither by the conservative one nor by the liberal ones. In addition to the dumb statements trying to create panic, there are the dumb statements trying to avert panic.

    E.g., it is said that at the point where the SS Trust Fund goes to zero, SS income would still be 75% of SS outgo. This is supposed to be a defense of current policy. But, this scenario could only be dealt with by a combination of three methods:

    1. Immediately cut SS benefits 25% for all existing and future retirees.
    2. Increase all SS assessments by 33%
    3. Fund the SS deficit from the General Fund.

    From a political POV, #1 is a non-starter. No politician would dare cut benefits to existing retirees -- not even Paul Ryan.

    I'd say #2 is a non-starter as well. I could imagine a small increase in assessments, but 33% would be crazy, not fiscally crazy, but politically crazy.

    So, by default, SS will be more and more [paid for from the General Fund. It will formally add hundreds of billions of dollars to the federal budget deficit.

    1. ...under your bullshit scenario, assuming *nothing* is done for a few decades.

      Yeah, it smells. Like everything you write on this topic.

      Instead, of course, anyone who is seriously concerned with what will happen to seniors' benefits in a few decades will put forth an entirely different set of proposals.

      For example, raising the SS tax income cap, now, would provide sufficient funds for full benefits long into the future. That pretend demon, the federal budget deficit, would not increase.

    2. You're kind of vague, Anon. How much would you propose raising the cap? How much would that add to SS's income? And, what's the level of political support for raising the income cap by various amounts? Given that we need to raise SS income 33% over time, how much of that amount could reasonably be realized by raising the income cap? In other words, do you think Congress will actually raise or even eliminate the income cap?

      If Congress does do this, then SS becomes a bait-and-switch program. For 3/4 of a century SS has been presented to the public as an insurance program. If high wage earners get a big jump in their assessments with no increase in benfits, it will be obvious that SS is no longer an insurance program.

    3. You're right:

      We ought to raise the cap AND raise benefits.

      Extra credit:

      Why is it a "bait-and-switch" if we tax the rich at the same rate as everyone else, but not a "bait-and-switch" if we cut benefits?

      Extra extra credit:

      Go the f*ck away.

    4. D in C:

      Here's a specific proposal from the Economic Policy Institute (http://www.epi.org/publication/raising_cap_on_social_security_tax_best_way_to_fix_shortfall/)I'd be interested in your thoughts on this:

      "As you know, Social Security taxes are levied on earnings up to a maximum level that is adjusted each year to keep pace with average wages. In 2009, this payroll tax cap is set at $106,800 dollars, and roughly 6 percent of the population has earnings above the cap.

      Due to growing income inequality, the share of earnings above the cap has risen from 10 percent in 1982 to over 16 percent in 2006. This is because incomes have grown strongly at the top while middle incomes have stagnated.

      This trend is expected to continue, meaning that a growing share of earnings will remain outside the tax base.

      The cap also means that higher-income individuals pay a smaller share of their income in Social Security taxes than middle-class employees. Including the employee and employer shares of Social Security and Medicare taxes, earners in the middle fifth of the income distribution pay an average effective payroll tax of about 11 percent. In contrast, the top 1 percent of earners pay just 1.5 percent on average.
      Let me turn now to different options for making adjustments to the cap.

      According to the Social Security Administration, fully eliminating the cap on taxable earnings would be sufficient to fully close the projected shortfall. If newly-taxed earnings above the taxable maximum were credited toward benefits, eliminating the cap would close most, but not all, of the gap.

      Short of that, raising and indexing the cap to capture 90 percent of earnings, as it did when the system was last in long-term balance, would reduce the shortfall by slightly less than half, assuming benefit adjustments.

      A third option would be to split the difference: eliminate the cap on earnings for employer contributions, and raise the cap to cover 90 percent of earnings for employee contributions. With earnings up to the employee cap credited for benefit purposes, this change would reduce the long-term shortfall by about three-fourths."

    5. Quaker in a BasementDecember 11, 2012 at 2:51 PM

      But, this scenario could only be dealt with by a combination of three methods:

      1. Immediately cut SS benefits 25% for all existing and future retirees.

      Immediate? Existing retirees?

      Why, in your imaginary scenario, is it necessary for immediate cuts? If SS revenue is sufficient to pay 75 percent of promised benefits years from now when the trust fund is depleted, wouldn't the 25 percent benefit cut have to happen then instead of now?

    6. It's not my "imaginary scenario." It's a proposal by the Economic Policy Institute and it suggests raising taxes, not cutting benefits. I posted it to counter D in C's complaint about a lack of specifics.

    7. ...and Quaker wasn't talking about your EPI scenario.

      He was talking about that assh*le David's fantasies -- that's why he quoted David directly before saying "imaginary scenario."

      Let's don't fight amongst ourselves unnecessarily!

  2. You should use lain, not lay, in the following sentance:

    For decades, the fault has lay with us.