Dean Baker at The Nation and Fred Barnes of The Weekly Standard take on the topic of Social Security this week -- from decidedly disparate perspectives.
Barnes warns (subscription required) that Democratic opposition isn't the most serious hurdle for the president's plans to overhaul the system. At the moment, he writes, "Republicans are an even bigger problem for the White House."
They're divided on the two biggest reform issues: how big a chunk should be carved out of payroll taxes for individual investment accounts and whether the growth of Social Security benefits should be curtailed.
Most Republicans will insist on private investment accounts funded by as much as four percent of a worker's income (taken from the total 12.4 percent Social Security payroll tax) instead of the two percent previously proposed by the Bush administration, writes Barnes. Some are even discussing a six percent set-aside for private investment accounts, phased in over 10 years. That would create such a drain on income into the Social Security system that it would almost certainly require a reduction in benefits to ensure solvency. But without such cuts, Wall Street seems likely to balk rather than endorse the proposal. "Wall Street wants to see some spinach with the dessert," Bush aides told Barnes.
The Republicans are far from united on how to proceed, and an intra-party fight is likely. But, predicts Barnes, "achieving Republican unity is possible. It's also necessary."
Baker targets benefits reductions as "a necessary but unmentioned part of the White House's privatization plan" for Social Security. But his real complaint is with the creation of individual investment accounts:
The president's main pitch is that these accounts will yield higher returns than Social Security does. The pitch also includes rhetoric about the accounts being "your money," and giving every worker a stake in the "ownership society." These claims are mostly bad math, faulty logic and deception. Advocates of private accounts assume that the stock market will give the same returns in the future as it has in the past, even though price-to-earnings ratios in the stock market are far higher now than in the past, and the Social Security trustees project that profits will grow at about half the rate they did in the past. None of the proponents of privatization have yet passed the "no economist left behind test," which asks them to show the set of dividend yields and stock price increases that add up to the stock returns they assume in their analysis.
Furthermore, private accounts will have high administrative costs, notes Baker:
When the administrative costs are combined with real numbers on stock returns, the individual accounts will provide no better returns on average than the government bonds currently held by the Social Security trust fund. The accounts just add risk -- individuals may invest poorly or retire during a market downturn, leaving them with much less money than they'd have under the current system.
In this week's New Yorker, George Packer writes that George Bush wants "democratization to be his legacy."
While some may argue that the White House's commitment to "democracy" is a front for its true love -- "neoconservatism" in disguise -- Packer warns skeptics that such a position won't hold water, "either morally or politically."
The best role for critics in the president's second term will be not to scoff at the idea of spreading freedom but to take it seriously -- to hold him to his own talk. The hard question isn't whether America should try to enlarge the democratic order but how. It's a question that the administration seems to have thought about very little, yet it makes a big difference.
To make his case, Packer compares recent events in Ukraine and Iraq. Unbeknownst to most Americans, writes Packer, the U.S. and its European allies for years have worked to build political parties and educate voters in the former Soviet republic, gearing up for the day when free elections would be held. It was this behind-the-scenes investment of time, money and training that created the grassroots opposition which demanded a new presidential election in the wake of massive fraud. "In other words," Packer argues, "the United States did in Ukraine exactly what it failed to do in Iraq: it upheld international standards in conjunction with democratic allies. The consequences of this failure in Iraq will always haunt the American effort there."
Among those filling the streets of Kiev were many non-Ukrainians, writes Masha Gessen in The New Republic:
Virtually every liberal I know in Moscow is positively green with Orange Envy, envy of the orange-wearing demonstrators in Kiev. At the height of the orange protests, in fact, the streets of Kiev were full of Russians -- liberal politicians, young political activists, journalists, and others who wanted to breathe the air of protest.
