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Listening to arsonists

Brad DeLong, Brad DeLong | June 29, 2010

I had always thought that Barack Obama made a significant mistake in naming the Republican ex-senator Alan Simpson to co-chair the president’s deficit-reduction commission. Simpson was a noted budget arsonist when he was in the Senate. Indeed, he never met a budget-busting, deficit-increasing initiative from a Republican president that he would not lead the charge to pass. Nor did he ever meet a sober deficit-reducing initiative from a Democratic president that he did not oppose with every fiber of his being.

You don’t pick an arsonist to head the fire department, I thought when Obama named him co-chair of the National Commission on Fiscal Responsibility and Reform.

But perhaps I am ungenerous. Perhaps Simpson has had a change of heart. Perhaps he has traveled his own road to Damascus, come face-to-face with what he had done and who he was, repented, and wanted to repair some of the damage to America and its long-run economic growth prospects that he had caused.

Even in that case, however, naming those who misbehave to important positions of high trust and acclaiming them as bipartisan statesmen gives the next generation really lousy incentives. And it’s not as though Congressional Republicans think they owe enough to Simpson for him to swing a single vote in either chamber of the legislature.

Obama officials assured me that Simpson had, indeed, had a change of heart; that he was a smart man with a sophisticated understanding of the issues; that he could sway reporters and get them to describe the commission’s advice as “bipartisan” (even though he could not sway actual legislators); and that he would be a genuine asset to the substantive work of the commission.

John Berry recently wrote in the online journal The Fiscal Times that not even that is true. Simpson is “condescending and derisive – and wildly wrong about important parts of the Social Security system’s past.” Moreover, Simpson apparently does not understand that, as commission co-chair, his job is to build a broad coalition for necessary and mutually beneficial policy changes.

Indeed, Berry reports that Simpson now believes that it would be unfair to use general revenues to pay for any portion of Social Security benefits. In other words, the large surplus in the Social Security trust fund, which is made up of government bonds that general revenues are earmarked to pay for, does not really exist and cannot be drawn upon. “Simpson maintained,” according to Berry, that “Social Security is already insolvent because it is paying out more than it is getting in tax revenue.” Never mind that the plan since 1983 has been for Social Security to tax more than it spends for a full generation and then use the built-up surpluses to spend more than it taxes.

“There is no surplus in there. It’s a bunch of IOUs,” Berry reports Simpson as having said. “Listen. It’s two-and-a-half trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been set up.”

Simpson is not making sense. All investments are IOUs. A General Electric bond is just that – a promise by the General Electric Company to pay its creditors. A dollar bill is an IOU from the government, just like a Social Security Trust Fund bond is.

Perhaps the most bizarre of Simpson’s claims that are quoted by Berry is that the Social Security Commission of 1983 “never knew there was a baby boom….” The baby boom, of course, started immediately after World War II and peaked in 1960. As Berry writes: “Alan Greenspan, who headed…[that] commission…would tell Simpson something different. The big demographic shift that began right after World War II was precisely why…taxes were raised and benefits were cut [in 1983] – to build up a trust fund surplus so benefits could be paid.”

Four centuries ago, the consensus, in Western Europe at least, was that good and even adequate government in this fallen world was inevitably a rarity. Democracy always degenerated into mob rule, monarchy into tyranny, and aristocracy into oligarchy. Even when well run, democracy took little interest in the distant future, aristocracy took little interest in the well-being of those whom Simpson calls the “little people,” and monarchy took little interest in anything other than legitimate succession.

Then, at the end of the eighteenth century, the founders of the United States of America and their intellectual successors claimed that this pessimism about government was unwarranted. “The science of politics…like most other sciences,” claimed Alexander Hamilton, “has received great improvement….The regular distribution of power into distinct departments…legislative balances and checks…judges holding their offices during good behavior; the representation of the people in the legislature by deputies of their own election…are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided…”

Perhaps Hamilton was too much the optimist. When I look at Barack Obama’s deficit commission – indeed, look at governance worldwide – I see many imperfections, but few or no examples of excellence.

Cross-posted from Project Syndicate.   A podcast of this article is online.

Comments to “Listening to arsonists

  1. Brad DeLong brings question of Obama choosing Alan Simpson to suggest changes to Social Security. Speaking of the coyote in the hen house: It seems like we have the richest Americans both complaining about Social Security, and the ones picked to save it. Simpson’s grand idea is change the age at which one can collect Social Security to 70 instead of 65 or 66 (depending on your birth year). Fine, but what about all the upper income earners that pay a much smaller proportion of their salaries into Social Security? No one talks about the $103,000 per year limit on paying that 6.2% Social Security tax. That means that all those making over that limit get a 6.2% raise (or tax cut) each year when the rest of us pay that 6.2% all year! So, if you make $206,000 per year, like many in the Bay Area including most UC administrators, you get a 6.2% raise for a large portion of the year. Why won’t this be part of any Social Security fix? Because corporations control Congress, particularly after this next election, and will simply tell our “representatives” that it won’t happen, because they have to match that 6.2% and they’ll see that as an unfair tax on them. Fairness would have everyone pay the Social Security tax for the entire year they make a salary, not extend the age at which one can collect so many more will die before they collect.

  2. However, once again we merely prove that it is far easier to castigate others than to protect and preserve quality of life for far future generations of the human race.

    It would be nice if UC would dedicate our resources to saving the human race as our highest priority and paramount obligation to humanity, but not nearly enough intellectuals, and politicians in both parties, really care enough to dedicate resources to achieving that goal yet.

  3. Re: “Democracy always degenerated into mob rule, monarchy into tyranny, and aristocracy into oligarchy.” Actually, all six and more describe various factions of the Republican party just in the 21st century so far, including in the same order, the GOP into various republican majorities and minorities in Congress, GW Bush into Cheney, the Bush Autocracy into Neocons, etc.

    Yes, Simpson has proven to be as most suspected, a doomed attempt by Obama to restore Democracy in Washington to keep the republicans from completing their overthrow of American Democracy.

    But then he also blew it with Chu in spite of Chu’s leadership in perpetuating our Holocaust bomb stockpiles that can destroy humanity for profit, and his “alliance” with BP that has gone on to destroy as much life in the Gulf as possible.

    However, once again we merely prove that it is far easier to castigate others than to protect and preserve quality of life for far future generations of the human race.

    It would be nice if UC would dedicate our resources to saving the human race as our highest priority and paramount obligation to humanity, but not nearly enough intellectuals, and politicians in both parties, really care enough to dedicate resources to achieving that goal yet.

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