March 30, 2009

Social Security Surpluses Are Near Their End; Bloomberg’s Hassett Notes After Two-Week Media Slumber

SocSecBrokeCard0309.jpgYesterday, in the process of passing on news that bloggers such as Ed Morrissey at Hot Air and outfits like the Heritage Foundation were onto earlier, Bloomberg’s Kevin Hassett delivered a stinging indictment of the establishment media for being asleep at the switch (the sole exception appears to be a video report at PBS). But while he does a good job identifying the problem and indicting journalists for ignoring the news, his prescription for a solution is badly wanting.

The news? The days of Social Security surpluses are over, six to possibly eight years earlier than was thought to be the case just a year ago.

Here are excerpts from Hassett’s commentary (“Recession Bites Into Social Security’s Surplus“). His first word reveals what he thinks of the nation’s political elites, and of the media that are supposed to be watching them:

Criminals know that people who are distracted might forget to keep an eye on their valuables. It’s just happened to us as a nation.

We have all been so busy whining about bonuses at American International Group Inc. and arguing about the so-called card-check legislation that we forgot to watch the Social Security surplus. While we were looking away, that surplus disappeared, eight years ahead of schedule.

Something extraordinarily important was revealed in mid-March and received almost no news coverage. If you typed in the words “Social Security” on Google’s news service last Friday, the top hit was a New York story about a man who kept his dead mother in a freezer ever since she died back in 2007, just so he could continue to collect her benefit checks.

Almost as gruesome is the news about Social Security’s finances. Social Security has for years been the near-term bright spot in the federal budget. Each year the program has raised $50 billion to $100 billion more in payroll taxes than it paid out in benefits (in some years, the surplus was closer to $200 billion; in fiscal 2008 just ended, it was $180 billion — Ed.). Sure, deficits were expected far off in the future, but the current program was on sound financial footing.

Those days are, for the moment at least, behind us. According to the latest Congressional Budget Office estimate, the Social Security surplus will be only $3 billion in 2010. That number is almost surely too rosy, and the actual realization next year will be a big deficit.

….. Opponents of Social Security reform have tried for years to underplay the problem by stating that the program’s finances are fine. Social Security was, in the most recent report by its trustees, expected to run surpluses all the way to 2017. Why bother to reform something now if the crisis is so far off?

….. (in 2007) Hudson Institute scholar Chuck Blahous, who was leading President George W. Bush’s Commission to Strengthen Social Security, made the compelling case that those predicting a Social Security financing crisis were basing that on sensible assumptions. Blahous was pilloried by the left, but we now know he was far more right than even he could have dreamed.

Hassett goes on to say that those who think Social Security will return to a surplus situation if or when the economy recovers are probably dreaming. I believe he’s correct, because that recovery, even if fairly robust, will be starting from an ever-shrinking base.

The Bloomberg columnist, who is also director of economic-policy studies at the American Enterprise Institute, accurately notes that many Americans who are choosing retirement in the current rough economy and beginning to collect Social Security benefits now are not likely to return to the workforce when recovery begins. Hassett didn’t mention that there’s a reason beyond human motivation why that outcome is likely. Unbeknownst to most Americans, who thought the problem was legislated away during the 1990s, the odious Social Security penalty that reduces benefits by up to 50 cents for every dollar earned from work above relatively small amounts is still in place from Age 62 through Full Retirement Age (currently 66 for today’s seniors). Legislation passed in the 1990s only removed the penalty for earnings from work after Full Retirement Age until Age 70.

Hassett’s “solution” is really pathetic:

The only responsible course is to do what reformers have been advocating for at least a decade, a step that worked in 1983: Establish a bipartisan commission to recommend fixes to Social Security, and implement them now. The myth that we can postpone reform because everything is just fine has been exposed as such. The time to act is now.

Hassett should know better. The Greenspan Commission didn’t “work” in 1983. All it did was give political cover to those who wanted to ratchet up the payroll tax rate and its reach into ever-higher incomes, while at the same holding back economic growth from what it could have been. The Greenspan Commission copped out on what would have worked marvelously and would have prevented the sad arrival of huge annual deficits from happening: private accounts. It may very well be that the Left has succeeded in closing the window for full or even partial privatization, but another “bipartisan” commission would be yet another excuse for giant tax increases — as if we aren’t facing enough of them already.

Cross-posted at NewsBusters.org.

The Government Takes Over GM, Complete With a Five-Year Plan

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 4:30 pm

(Somewhat whitewashed background of “five-year plans” is here for those who don’t know the history.)

From Marc Ambinder at the Atlantic, who hasn’t grasped that 2014 minus 2009 equals five:

Legacy costs remain unresolved; the government estimates that GM would need to sell 900,000 more cars per year through 2014 in order to meet its obligation.

Elsewhere, the administration has called on GM to fundamentally change its culture. Better brains need to be brought in. Labor/management practices have to change.

All of this is fine. The government is telling GM to be like Toyota. But what if the industry’s infection is just too widespread? No amount of patient self-care… “clean those wounds better!  Eat your vitamins! Get exercise!” and no amount of antibiotics (the billions government’s pouring in) can arrest the death spiral. Was it totally unrealistic to expect GM to find a way to satisfy the government’s demand for positive cash flow by 2014?

Supporting the validity of the historical comparison: “Obama didn’t ask Congress about ousting Wagoner” –

Obama told the members of Congress that Wagoner needed to resign so that the administration could show the public it was making an effort at a fresh start with helping the auto industry, according to Levin.

That’s a totally substance-free reason — in effect, a purge for the sake of a purge.

But really, why go through the trouble and inconvience of consulting with the Politburo (and, it would appear, GM’s Board of Directors) when Dear Leader can just exercise the power preemptively, and unilaterally?

Lucid Links (033009, Morning)

Filed under: Lucid Links — Tom @ 8:13 am

Noteworthy Net-Worthies:

The Obama administration promised to create “an unprecedented level of openness in Government.” In Obamaland, this means “secret meetings held by subcommittees of President Obama’s economic advisory panel,” including a tax simplification and enforcement ….. panel (that will) “do its work behind closed doors.”

Rick Wagoner has left General Government Motors “at Obama’s behest.” IMO, this was done to make shoveling even more money into one of Detroit’s dying carcasses somehow more palatable. Not that company management did a great job, because they didn’t, but how can the sadly predictable idea of the Punk President and his posse for all practical purposes running things at the country’s largest car manufacturer not be deeply troubling?

Remember that a delegation that reports to Tax Cheat and Proven Liar Tim Geithner first visited GM’s technical center in Warren, Michigan, three weeks ago “to see car and truck models and learn about the technology being developed.” Apparently they learned enough on that trip to be able to run the company. Paraphrasing Instapundit’s sardonic mantra, “GM is in the best of hands.”

On Friday, Bruce Bartlett ripped into the 85 Republicans who supported the 90% AIG-Fan & Fred-TARP money recipients’ bonus taxes. Among them locally, sadly, are Jean Schmidt, Mike Turner, Steve Driehaus and Geoff Davis.

Was Earth Hour, as might be expected, Al Gore’s darkest hour? Not exactly (HT Jeff Poor at NewsBusters).

Code Pink objects to President ‘Prompter’s mini-buildup in what is now “Obama’s War” in Afghanistan-Pakistan. At least Medea Benjamin’s moonbats at Code Pink are consistent. Reports are that MoveOn and others are keeping quiet, not because of any core belief that Afghanistan is “the good war,” but because they don’t want to be seen as impeding Dear Leader. Separately, Michael Yon calls the plan “disappointing.” CBS’s Kim Dozier, who it is great to see working after her serious injuries in Iraq, writes that “no one I’ve spoken to has a clear view of what it actually is, or does. This plan tries to be all things to all people.”

Good news, troubling news — US troop deaths in Iraq, at 7, are as of this morning the lowest in any single month since the war began. This is also true of the number of deaths (4) from hostile action. The previous low was 13 (and 7 from hostile action). The troubling news is that civilian deaths have crept up in the past two months after reaching their lowest point since being tracked by icasualties.org.

Good question — Where was this made?

Needs No Commentary — “(Former DC Mayor Marion) Barry’s Debt to IRS Exceeds $277,000, Prosecutors Say.” I’ll comment anyway: This qualifies Barry to be our next Treasury Secretary.

A Naperville, IL high school is having Obama pal Bill Ayers speak (HT Terry Trippany at NewsBusters). That would be the same Bill Ayers who, along with his wife Bernardine Dohrn, according to the San Francisco police union, are responsible for a “Feb. 16, 1970 ….. bomb placed on a window ledge of Park Station (that) killed Sgt. Brian McDonnell and injured eight other officers.” Phone contacts for the school district are at the link.

Positivity: Teenager who fell unconscious in bath is saved by twin sister’s ‘sixth sense’

Filed under: Positivity — Tom @ 5:56 am

From Atherton, in the UK:

Last updated at 10:16 PM on 23rd March 2009

It is common for twins to tell stories that suggest they share a bond so close it is almost telepathic.

But not many can say their apparent sixth sense helped them save their sibling’s life.

When Gemma Houghton got a feeling that her sister Leanne was in trouble she burst in on the 15-year-old and found her unconscious underwater in the bath.

She dragged her out and managed to revive her using skills she picked up on a first-aid course.

Yesterday Gemma told of how she feels dizzy when her epileptic twin sister suffers a fit.

She believes this subconscious link let her know that Leanne was in danger.

‘I just got this feeling to check on her,’ said Gemma. ‘I went up to the bathroom and she was under the water. At first I thought she was washing her hair or playing a trick.

‘But when I lifted her head out of the water she had turned blue. I knew she had had a fit.’

After Gemma hauled her sister out of the water – ‘She weighed a ton’ – she called an ambulance and, remembering her first-aid training, began trying to resuscitate Leanne.

‘She started making some horrible noises, like a truck, and I knew she was coming round,’ she said.

‘Then she said she was going to be sick.’

Paramedic Steve Pearson said that by the time he arrived at the girls’ mother’s home in Atherton, near Wigan, Leanne was returning to consciousness after her sister had given her chest compressions.

‘It’s quite simple,’ he said. ‘If Gemma hadn’t been there, Leanne would have died. She did an excellent job.’ …..

Go here for the rest of the story.