Marginal Utility

by Tom Bozzo

As I told Oscar and his comments section last night, during last night's press conference, George W. Bush channeled George Oscar Bluth II (*) and performed some privatization magic (oops, illusions) on Treasury securities.

I just heard this on the radio this morning:

I've traveled the country to talk with the [i.e., to a carefully screened segment of the] American people. They understand that Social Security is headed for serious financial trouble and they expect their leaders in Washington to address the problem.

I admit to chuckling at GWB's delivery of "serious financial trouble," like he wished he still had Saddam Hussein to kick around. He subsequently described the Treasury securities in the Social Security trust fund as "empty promises," while offering that private account holders could hold nice safe Treasury securities in their private accounts as "real assets, real money." I leave it as an exercise as to whether a private account invested in Treasury securities can overcome the guaranteed benefit offset after fund management expenses.

Or, as Josh Marshall ably put it:

There was so much bamboozling going on tonight in that press conference that it was easy to miss one essential contradiction in the president's argument. You don't have to worry about private accounts, he said, because if you want you can fill your account with US Treasury bonds which have no risk at all. They're backed by the full faith and credit of the US government. But he says that the very same Treasury notes, when they're in the Trust Fund, are just worthless IOUs.

It's amazing, with this bunch, how in the span of just three months something I used to impugn the intellectual integrity of a right-wing think tank ends up issuing from the mouth of the president.

Brad DeLong, meanwhile, tries to figure out whether "[t]he plan... preserves the defined-benefit component of Social Security in the long run," and answers a tentative maybe.

That's a tough one. The relevant quote appears to be:

As a matter of fairness, I propose that future generations receive benefits equal to or greater than the benefits today's seniors get.

At the first reading, I read "benefits today's seniors get" as "current-law benefits," in which case this would effectively constitute an endorsement of the Ryan-Sununu flavor of the plan, i.e., the fiscal armageddon version of privatization.

At second reading, however, I'm inclined to see it as an indication that guaranteed benefits will be frozen at current (real) levels, presumably by benefit indexing changes. So, what Bush is saying is that there will be big guaranteed benefit cuts relative to current law. Since it's possible to get a total offset of the guaranteed benefit — which at least in some cases will not be made up with the private account proceeds — I conclude that the administration has made no progress on the defined benefit issue, and if anything is cementing the rollback of Social Security's retirement safety net. (Update: this is also Kevin Drum's conclusion; he also notes Bush's mention of "enhanced" low-earner benefits. "Enhancement," in this case, seems to mean "no worse than current law," unless you're a low earner who becomes a medium-low earner, in which case benefits won't be enhanced.)

I also conclude that the latest apology owed is from factcheck.org to John F. Kerry.


(*) "Arrested Development's" allegory of the Bush years alone should install it in the Pantheon of underappreciated television comedy.