"Of course we would all like those who disagree with us in major debates to simply disregard their arguments and accept what we are saying as true," their blogger writes. "But most of us just don't possess the power to force our opponents to concede the truth of our position, even when if we use ad hominems to belittle their arguments":McArdle is a Mean Girl and habitually uses insults to intimidate her targets. One must go with one's strengths however and when knowledge, reason and honesty are one's weaknesses, venom and propagandist repetition are all that is left.
Baker pointed out that the government is going to pay out Social Security just as the government is going to pay out on other bonds. McArdle quoted Baker saying:
McArdle tells us that bonds purchased with prior years' surpluses don't matter, the government still has to cough up the money in the current year. The same logic applies to the bonds held by rich people like Peter Peterson. The government has to cough up the money to pay him the interest this year on whatever bonds he holds.Of course McArdle is trying to convince people that Social Security will go under. Randians do not like Social Security because it is theft from the young to the old in their twisted philosophy. She has said in the past:
If McArdle wants to declare it "supremely irrelevant" that the payments for Social Security come from bonds held by the trust fund, then with equal validity we can declare it supremely irrelevant that Peterson paid for the bonds he owns. After all, this would just get us into tired old arguments about moral obligations to bondholders.
It was nice that a combination of rising life expectancy and broader pension coverage allowed a large segment of American workers to take what amounted to a multi-decade vacation. (Though this was never quite as widespread as people now "remember"). But this was never going to be sustainable.
As for [increasing Social Security benefits] with taxes, Social Security is expected to stabilize at around 6% of GDP. What sort of boost are we talking about? Enough to make up for the fact that our national savings rate has fallen from about 10% of income in 1980 to 2.5% now? That would be a huge increase, not a small one. It would have quite noticeable effects on the economy, and on the living standards of the younger, poorer workers that we are asking to transfer money to older, wealthier ones. One of those noticeable impacts would be a further decline in labor force participation by those in their early sixties. Another might well be a further decline in the private savings rate.
Of course, we could give everyone smaller increases. And I imagine they could find uses for the money. But the same could be said for millions of non-elderly people who are stretched thin. I'm not sure I see a strong case here for taking even more money from young people and transferring it to people who decided not to save enough.It probably doesn't hurt that the New America Foundation, funded in part by Pete Peterson, who is trying to eliminate Social Security, gave McArdle a $25,000 fellowship. (The page at the New America Fellowship that listed McArdle as one of its recipients has been scrubbed.) For 25 grand a lot of people would be very much against anything you care to mention. But that money was gravy, not graft. McArdle already believed that nobody should help anyone ever if it cost her money or if she thought it would cost her money.
McArdle's response to Baker is nonsensical, of course. She pretends that the government cannot print money and that we would have to cut the budget to pay for any benefits increases because her arguments would disappear in a puff of smoke if she did not. She also pretends we could never raise taxes for the same reason. These deceptions would not fool a small child or his dog but they give her audience what the audience wants to hear and they keep those fat paychecks a-coming, so McArdle gets to work spreading deception and delusion.
So if we're looking at fiscal policy -- and I'm afraid we'll have to, however much you pound the table about the sacred moral obligations embedded in special-purpose government bonds -- the correct answer to any discussion of the trust fund is "who cares?" Whatever the legal and accounting conventions, from the perspective of the government and the taxpayer, Social Security is no longer self-financing; its benefit payments exceed the revenue it collects from its dedicated taxes. If we want to continue to pay those benefits, we are going to have to find another source for that money: cutting spending elsewhere, raising taxes, or borrowing money in the financial markets (which will itself eventually have to be repaid by either cutting spending or raising taxes). Large and growing sums will be needed. Where shall we get them? Or shall we cut benefits to future retirees?
Recourses to the sacred moral foundations of the Social Security trust fund are generally an attempt to dodge those questions by people who don't want to consider benefit cuts and aren't brave enough to ask the middle class for hundreds of billions in extra tax revenue, and presumably think that if we just let things go on until the benefit cuts are imminent, we'll have to raise taxes instead of trimming benefits.
For years, this tactic worked; nothing was done. But now Social Security's dedicated revenue is no longer enough to pay its costs. The taxpayer is going to have to find some extra money or agree to cut spending somewhere (such as benefits for future retirees), or, more probably, both. The Day of Judgment is at hand, and we will not delay it by so much as a minute by squabbling about the ritual status of the Social Security Administration.
McArdle accuses Baker of pounding the table instead of addressing the issue which is of course ridiculous, but she also very carefully accuses him of lying. From Twitter:
Baker responded to her response, basically repeating that the government will make good on its responsibilities.
McArdle will continue to pretend that she makes her own reality and everyone else must live in it. Why not? Her lavish and slavish support for billionaires is making her rich, proving that money does indeed trickle down as long as you are willing to lie and deceive to get it.
Of course Congress could change the law, as McArdle says, and not pay these benefits. I have not heard many members of Congress suggest that they want to default on the bonds held by the trust fund, but they have the constitutional power to do so. Of course Congress also has the constitutional power to raise the tax rate that Peter Peterson pays on the interest from his government bonds by 40 percentage points. It is unlikely it would impose this sort of tax increase, but it is not constitutionally prevented from doing so.
But McArdle wants us to focus on the fact that the government needs money to pay the interest and principle on the bonds held by the Social Security trust fund. This is true, just like it needs money to pay the interest and principle on the bonds held by Peter Peterson. There is no logical reason why the former should be any more a problem for Social Security than the latter is a problem for Peter Peterson.
The bizarre aspect of this discussion is that it comes at a time when the economy is still operating well below its potential level of output, even using the very conservative estimates of the Congressional Budget Office. This means that the government effectively faces no real budget constraint. If it spent more money (either borrowed or printed) it would lead to more output and employment, not a drain of resources from other sectors of the economy. That situation may change in the future (i.e. we may be at or near potential GDP), but those predicting a quick bounce back from the recession have been proven wrong for a long time.
Anyhow, if McArdle wants to claim that we need to have the money from some source other than current Social Security taxes to repay the interest and principle on the bonds held by the trust fund, this is of course true. The hard part is understanding why anyone should care.
UPDATE: See also RJ Eskow's excellent summation of the event. He mentions McArdle's use of the opening line of Pride and Prejudice, something I found amusing considering the circumstances.