Thursday, February 03, 2005

Simple analysis from a simple man

I've heard some say that if you want to be relevant, you need to address big things and add your own voice to the discussion of said big things. Well, this is attempt #1...

While I am not a policy wonk, I have opinions; and while I'm also not an economist, I have opinions; and while I likewise am not an expert in politics, I have opinions. What follows then is my 'analysis' of the President's State of the Union address; essentially comments and opinion.

I welcome the bipartisan enthusiasm for spending discipline. I will send you
a budget that holds the growth of discretionary spending below inflation,makes
tax relief permanent, and stays on track to cut the deficit in half by 2009.
(Applause.) My budget substantially reduces or eliminates more than 150
government programs that are not getting results, or duplicate current efforts,
or do not fulfill essential priorities. The principle here is clear: Taxpayer
dollars must be spent wisely, or not at all.

Bravo! Bravo! This is the point, is it not when it comes to questions like deficits and debt? For too long we've granted that everything we can and/or do spend money on should be done. And we have the debt to show for it.

I applaud the effort, assuming of course it's serious and substantive. Not just because I want him to get credit for it, but because I think changing the thinking behind the process important.
Of course the devil is in the details; what programs fit in this category? Whose pet-programs risk the ax? Already, no doubt, the cries have started about how the President is targeting 'social spending' and the less-fortunate who generally are recipients of aid from programs under this umbrella. Never mind of course that the bulk of such spending (Social Security, Medicare as the obvious examples) does not fall in the category of discretionary spending and thus not subjected to such cuts. But anyway...

From here, a quick hop-skip-and-a-jump to the question of taxes:

I've appointed a bipartisan panel to examine the tax code from top
to bottom. And when their recommendations are delivered, you and I will
work together to give this nation a tax code that is pro-growth, easy to
understand, and fair to all.

The hints have been coming for months. Recall the talk during the campaign last year about House Republican's pushing for tax reform--even before and above tackling the Social Security issue. Also, big and important!

I've been a fan of a simplified tax code for a decade, since the days of Dick Armey's one-page flat-tax proposal! Something I really love about the quote from the President here is the reference to a 'pro-growth' stance. If we can find a way to reduce regulation, promote growth and risk-taking while avoiding the unintended consequences of things like corporate scandals, corporate malfeasance and corruption, imagine what a major step this could be!

From here the President jumped right into Point #1 of the evening's Double Whammy: Social Security Reform.

One of America's most important institutions -- a symbol of the trust
between generations -- is also in need of wise and effective reform. Social
Security was a great moral success of the 20th century, and we must honor its
great purposes in this new century. (Applause.) The system, however, on its
current path, is headed toward bankruptcy.

This is the crux of the whole point; without change, minor, major or in-between, the system will outstrip it's ability to pay it's obligations. We'll get to argue about the 'how,' but to argue the 'why,' seems absurd. After all, the train is coming. Whether it arrives in 2042 or 2053 is irrelevant. It will arrive, and if we're caught sitting on the tracks we're gonna get run over.

This is obviously his highest domestic priority, and I thought he did a masterful job of walking through it in what is obviously not designed as a policy speech. First, this:

I have a message for every American who is 55 or older: Do not let anyone mislead
you; for you, the Social Security system will not change in any way.

This does two things. First, it directly reinforces to seniors that they are not a target of anything as some will say. Second, it says to those who would make such claims "I see you!"


And instead of sixteen workers paying in for every beneficiary, right now
it's only about three workers. And over the next few decades that number will
fall to just two workers per beneficiary. With each passing year, fewer workers
are paying ever-higher benefits to an ever-larger number of retirees.

Addresses one of the major legs of the Social Security stool that is subject to failure. Fewer employees paying more benefits to more beneficiaries. Without changes, this is unsustainable. Period.

Then to this:

So here is the result:

Thirteen years from now, in 2018, Social Security will be paying out more than it
takes in. And every year afterward will bring a new shortfall, bigger than the
year before. For example, in the year 2027, the government will somehow have to
come up with an extra $200 billion to keep the system afloat -- and by 2033, the
annual shortfall would be more than $300 billion. By the year 2042, the entire
system would be exhausted and bankrupt.[...]the only solutions would be
dramatically higher taxes, massive new borrowing, or sudden and severe cuts in
Social Security benefits or other government programs.
This summarizes the entire concept of unfunded liabilities. While it is a simple explanation of what is going on, it is also the most direct and easy to understand: the system's obligations to pay benefits will outstrip it's ability to pay and is thus unsustainable.

Finally, he gets specific and begins pointing out previously offered fixes for this mess:

Fixing Social Security permanently will require an open, candid review of the
options. Some have suggested limiting benefits for wealthy retirees. Former
Congressman Tim Penny has raised the possibility of indexing benefits to prices
rather than wages. During the 1990s, my predecessor, President Clinton, spoke of
increasing the retirement age. Former Senator John Breaux suggested discouraging
early collection of Social Security benefits. The late Senator Daniel Patrick
Moynihan recommended changing the way benefits are calculated. All these ideas
are on the table.

From a political standpoint, its a master-stroke pointing to numerous options offered by Democrats. In light of the turn many have taken recently in insisting that Social Security is solvent and strong as ever, it is even more masterful!

Finally, here the President pushes the issue of bi-partisanship:
I know that none of these reforms would be easy. But we have to move ahead with
courage and honesty, because our children's retirement security is more
important than partisan politics.

Essentially, the question is bigger than who is precisely right and who is wrong on how and when solving the problem is appropriate and he urges them to act appropriately! Last on this subject is his making the case for- and defense of private accounts:
Here's why the personal accounts are a better deal. Your money will grow, over
time, at a greater rate than anything the current system can deliver -- and your
account will provide money for retirement over and above the check you will
receive from Social Security. In addition, you'll be able to pass along the
money that accumulates in your personal account, if you wish, to your children
and -- or grandchildren. And best of all, the money in the account is yours, and
the government can never take it away. (Applause.)
The goal here is greater security in retirement, so we will set careful guidelines for personal accounts. We'll make sure the money can only go into a conservative mix of bonds and stock funds. We'll make sure that your earnings are not eaten up by hidden Wall Street fees. We'll make sure there are good options to protect your investments from sudden market swings on the eve of your retirement. We'll make sure a personal account cannot be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits.[...]Personal retirement
accounts should be familiar to federal employees, because you already have
something similar, called the Thrift Savings Plan, which lets workers deposit a
portion of their paychecks into any of five different broadly-based investment
funds. It's time to extend the same security, and choice, and ownership to young

For my money, this addresses all questions about personal accounts or so-called privatization with the exclusion of one, transition. Setting that aside as he did (it's a big question all by itself and falls in the 'how' category and will get it's own debate), it answers the question of how much money goes to these accounts, how it is invested, and how it gets protected. All important questions that needed addressing.

The last point about the Federal Thrift Savings Plan is just good clean political fun! "If it's good enough for you Mr. Federal Employee, why is it not good enough for the people you represent!?"

Point #2 of the Double Whammy, Foreign policy was an effective reminder of why we consider Iraq a part of the WOT, regardless of how we concluded that moving on Iraq was the right move. Likewise, the spotlight re-focused on Syria and Iran served as a not-so-subtle-reminder that we're watching with expectations, these nations responses to our actions in the region. The reference to Egypt and Saudi Arabia also serve a similar function. The heat is being turned up, and rightly so!

My last thought on any one particular point is this:

Recently an Iraqi interpreter said to a reporter, "Tell America not to abandon
us." He and all Iraqis can be certain: While our military strategy is adapting
to circumstances, our commitment remains firm and unchanging. We are standing
for the freedom of our Iraqi friends, and freedom in Iraq will make America
safer for generations to come. (Applause.) We will not set an artificial
timetable for leaving Iraq, because that would embolden the terrorists and make
them believe they can wait us out. We are in Iraq to achieve a result: A country that is democratic, representative of all its people, at peace with its neighbors, and able to defend itself. And when that result is achieved, our men and women serving in Iraq will return home with the honor they have earned.(Applause.)

This ought to be copied and delivered by name as a separate memorandum to each Congressional Democrat who insists on finding a camera and braying on about an "Exit Strategy." This is a clear enunciation of what I would call the ultimate Exit Strategy; Victory.

All in all, a fine speech. Full of bold ideas across a spectrum of issues, it called Americans to stand up and address things head-on. For that I call it inspirational. For the issues addressed specifically, Social Security and foreign policy, I call it important.

"Thank you and may God bless America," indeed!

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