Atlas Shrugged: The Mocking

Saturday, September 11, 2010

You Get What You Pay For

"Without Social Security benefits, 52.6 percent of elderly women would have had incomes below the poverty line in 1997. Social Security reduced the poverty rate for elderly women to 14.7 percent."

Last month the Center on Budget and Policy Priorities published a report called What the 2010 Trustees’ Report Shows about Social Security. To encourage Congress to improve the solvency of the agency, the Center compared the cost of the Bush tax cuts to the cost of the Social Security shortfall.

The 75-year Social Security shortfall is about the same size as the cost, over that period, of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans (those with incomes above $250,000 a year). Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat.

And they added a handy little graph.

Megan McArdle looked at the graph, presumably read the report, and went on a week-long assault on that little graph that has progressively grown both more complex and much more funny. McArdle doesn't like Social Security. She has stated that Social Security doesn't really exist because the government is only promising to pay it out and might just decide to stop paying out benefits at some time in the future, the little scamps. It and Medicare are just "meaningless accounting devices."

There's no evidence that public debt markets treat the social security bonds the way they treat debt held by the public, so in fact, they almost certainly could default without anyone much caring. But they don't have to. There's no mandate that the SSA spend the money on payments; they could slash payments right now, the SSA would technically continue to get its interest and lend it back to the government, and everything would be copacetic. Technically, anyway.

In fact, McArdle has many problems with SS. Fixing it will require a tax hike of 15% on the rich, she said, which will raise their tax rate to 55% and drive the rich to take their investment balls and Go Galt. Won't the liberals be sorry then! And the program is old anyway. How could work today when it was implemented in 1935? Not only is it old, it's going into deficit. McArdle mentioned the steps taken to compensate and said that the problems with Social Security are too large to correct.

Eliminate the ceiling on payroll taxes. Someone I was talking to recently informed me that this was "all we have to do". All? That's a 12.5% marginal tax increase on a whole lot of income. This is on top of the now-planned reversion to the Clinton tax rates of 39.5% for that income, and the various tax hikes on the rich that have been bandied about to pay for other things. Tack on state and local taxes in high-wage states, and you're looking at many people having marginal tax rates in the 60-65% range.

That's too high. To me, it's too high morally--no one should work more hours for the government than for themselves. It's also too high practically. I've long said that the Laffer Curve doesn't apply at US rates--but that's because we don't have people paying taxes at a greater than 60% rate. You'll get Laffer effects from people deciding to work less, but also because with a 65% tax rate, it really pays to shelter your income, transform it into capital gains, or move. You simply cannot hike tax rates by almost 20 percentage points in a few years with no war to stir the patriotic spirit, and expect it to go well.

McArdle does not mention that the tax rate was above 60% until Reagan took office. Ignoring contradictory evidence is one of her strongest persuasive techniques.

Oddly enough, McArdle also said that the funding problems aren't too bad, but it is politically impossible to overcome them.

I'll agree with the liberals on this: the numbers are large, but they are not, economically speaking, catastrophically large. It is theoretically possible to pay for the program.

But I'll disagree with them on this: Social Security is an immense problem. But the problem is not the cash outflow of benefits draining the economy; it is political risk, and structural inefficiency.

The political risk is that whatever the economic theory, we will not politically be able to continue benefits at planned levels. People who counted on those benefits will thereby be made much worse off, because they will have saved too little on the assumption that the benefits would be there.).

She did not explain why it would be politically impossible to pay lower benefits but it would be politically possible to eliminate all benefits.

Why does McArdle dislike Social Security so much? It steals from the young to give to the old.

Assuming, arguendo, that we believe in making social-justice-enhancing forced transfers, I'm not sure that this particular transfer meets the needs of social justice. One might argue that the transfer should flow to those whose need is greater, but as a class, the old and sick are wealthier than the young and healthy. They have more assets, many have a guaranteed income, and few have children to support. Moreover, a need-based transfer would argue for some sort of means-tested programme, not an indiscriminate giveaway to anyone who happens to be sick.

Moreover, as a class, the old and sick have some culpability in their ill health. They didn't eat right or excercise; they smoked; they didn't go to the doctor as often as they ought; they drank to much, or took drugs, or sped, or engaged in dangerous sports. Again, in individual cases this will not be true; but as a class, the old and sick bear some of the responsibility for their own ill health, while younger, healthier people have almost no causal role in the ill-health of others.

Perhaps they deserve it by virtue of suffering? But again, most of them are suffering because they have gotten old, often in high style. The young of today have two possible outcomes:

1) They will be old and sick too, in which case they are no less deserving of our concern than today's old and sick
2) They won't ever get to be old and sick, which is even worse than being old and sick.

As a class, the old and sick are already luckier than the young and healthy. Again, for individuals within that class--those with desperate congenital conditions, for example--this is not the case. But I'm not sure it's terribly compelling to argue that we should massively disadvantage a large group of people in order to massively advantage another, equally large group of people, all to help out the few who are needy, or deserving, or unlucky.

When McArdle was young she deeply resented being forced to spend her clothing and entertainment money on health care insurance.

As it happens, high deductible insurance is exactly what this consumer wants -- and what I am not allowed to get due to New York State's byzantine health insurance regulations. Instead, I must pay $350/month for a horrible HMO that I don't want and which will come nowhere near to paying for itself. While the New York Times no doubt politely applauds the state for protecting the sick, I have to live at home because half my take home must go to insurance and student loans -- insurance, by the way, that won't cover my pulmonologist or any of the services I actually want, like decent physical therapy.

So in her eagerness to trash Social Security, she made a foolish leap to criticize the CBPP report.

Similarly, while it is perhaps true that you could "pay for" the Social Security shortfall by rescinding the Bush tax cuts on the rich, that would leave a gaping budget deficit that would then have to be paid for in some other way. This is effectively exactly the same thing as, say, funding the Social Security shortfall with a massive new tax increase on someone else. In the face of the sizeable deficits we are projecting into the foreseeable future even after all the Bush tax cuts expire (not just the ones on the wealthy), the "point" made by this chart seems kind of actively misleading--especially for an organization that has spent the last decade criticizing Bush for the effect his tax cuts have had on the deficit. The CBPP is right to complain about Republicans arguing that extending the tax cuts is fiscally responsible; it isn't. But publishing a graph like this seems to simply urge the same fiscal irresponsibility, in the opposite direction: avoiding the unpleasant process of controlling our spending.

One of the authors of the report responded:

Despite what McArdle implies, the Center has not suggested that “you could ‘pay for’ the Social Security shortfall by rescinding the Bush tax cuts on the rich.” We have made quite clear that President Obama and Congress should let the upper-income tax cuts expire and devote the proceeds to deficit reduction. At the same time, as Kathy and I wrote, we have consistently argued that Congress should enact revenue and benefit changes that would place Social Security on a sound long-term financial footing.

In comparing the high-income tax cuts to the Social Security shortfall, we wanted to illustrate the hypocrisy of Members of Congress who argue that the tax cuts are affordable but Social Security is not, even though their cost is about the same.

McArdle responded by stating that the Center's mathematics is incorrect. We will not examine that argument because we are utterly confident that McArdle didn't understand the math. She also says:

The best you can say about presenting the numbers this way is that they represent an iffy sort of time arbitrage; the relative sums only match up because the coming tax increases generate relatively steady revenues, while the social security deficits don't start until 2017 and don't reach their full height until 2030. It is not true that at any given point in time, you can generate enough money with the one, to pay for the other--or rather, it is true for a time so brief as to be meaningless in the context of the 75-year forecast period that they chose.

The CBPP says it's not actually making that last claim--it's just trying to make a point about extending the tax cut versus "fixing" social security--about Republican hypocrisy. Well, I've already seen at least one blogger, and more commenters, take it to mean that the tax cuts could be used to pay for the shortfall. However they intended it, it's clearly misleading some people. Which is not surprising to me, given how its labeled. If you release a graph indicating that the social security shortfall is the same size as the Bush tax cuts, people are going to assume that we could therefore use the one to pay for the other.

Republicans are indeed being very silly and hypocritical about the tax cuts (just as many on the left are being very silly and hypocritical on the spending side. I believe I may have mentioned that almost nobody really cares about the deficit). But this graph does not seem like a good way to make that point.

McArdle used a similar method of obfuscation when assessing Elizabeth Warren's work. She iinsisted that Warren's report was misleading because it discussed the percentage of medical bankruptcies (which was rising) instead of the number of medical bankruptcies (which was falling). Since Warren discussed her point instead of McArdle's, that proved that Warren (and now the CBPP) are dishonest. The Center patiently responds again:

The Atlantic’s Megan McArdle has written another post about our comparison over the next 75 years of the Social Security shortfall and the cost of the Bush-era tax cuts for high-income taxpayers. The gist of Ms. McArdle’s argument seems to be that we’re not computing the present value of these two policies in the same way. That’s simply incorrect.

Our figure for the Social Security shortfall comes straight from the 2010 Social Security Trustees’ Report. The report estimates that the program’s shortfall over the long term (which the trustees define as the next 75 years) is equivalent to 1.92 percent of payroll subject to Social Security tax, or 0.7 percent of gross domestic product (GDP). (See Table IV.B5 on page 63 and Table VI.F4 on page 187.)

Note that the trustees don’t define the shortfall as simply the difference between the present value of the taxes Social Security will collect and the benefits it will pay out over the next 75 years. The trustees also take into account the current amount of the Social Security trust funds — something that Ms. McArdle has omitted.

We estimated the 75-year cost of the high-income tax cuts in a comparable manner. On Tuesday I listed the estimate’s three components, which total $837 billion (0.43 percent of GDP) over the 2011-2020 period and $120 billion (0.5 percent of GDP) in 2020 alone, according to the Treasury Department and Congress’s Joint Committee on Taxation.

We projected the cost of the tax cuts for another 65 years using their average rate of growth for 2017-2020, discounted the costs back to the present using a discount rate that averages about 5.25 percent, and expressed them as a percentage of GDP.

Ms. McArdle says that the tax law won’t stay the same for 75 years. That’s true, but Social Security law won’t stay the same for 75 years either. The whole point of projecting the long-term cost of policies is to help policymakers decide whether to continue or alter them. And our analysis showing that the Social Security shortfall is much smaller—and the cost of the high-income tax cuts is much larger—than they are often portrayed is designed to inform coming debates over the future of both policies.

Ms. McArdle also says that the Social Security shortfall eventually exceeds the cost of the high-income tax cuts. That’s true, too. But the cumulative amounts are about the same for the next 75 years, which is not “a time so brief as to be meaningless.”[quoting McArdle]

McArdle wisely did not try to correct their number again, handing over that task to the Committee for a Responsible Federal Budget. That Committee is funded by the Peter G. Peterson Foundation and Pew Charitable Trusts, among others. It is "housed" at the New American Foundation, which Peterson also funds, and which paid McArdle $25,000.00 for a fellowship and is fighting for debt reduction through eliminating Social Security. McArdle did not mention that both she and her source are being paid by Peterson organizations. No doubt she would say that there is no conflict of interest because everyone must be paid by someone.

Any attempt to make McArdle understand the point of the comparison of the Bush tax cuts and Social Security shortfalls were in vain. At this point McArdle was forced to walk back what she said about the dishonesty of the CBPP but once again insisted that the Center was attempting to encourage "more than one blogger to mistake the graph's message as "we could fix Social Security by repealing the Bush tax cuts on the wealthy".

And this simply isn't true. Imagine that we somehow magically made the whole rest of the budget balance, including the Bush tax cuts. Then imagine that we were simply deciding how to pay for our remaining Social Security deficit, and someone said, "Hey, I know! Let's repeal the Bush tax cuts on high earners, as outlined in this CBPP graph!" Would the budget balance?

Not even if the US government used every dollar from the tax increases to retire its debt; not as long as Treasuries yield less than 4% a year. Even in a best case scenario, our interest savings would be less than $30 billion a year, far less than the difference between the extra tax revenue in their scenario (1.1% of GDP) and the Social Security deficit (1.4% of GDP). And, of course if you use less optimistic forecasts of tax revenue, those numbers are even farther apart.

Given that fact, I don't see how it can be meaningful to call the two cash flows equivalent.

I don't mean to say that the CBPP was deliberately misleading. But I think it's clear that their graph did mislead some people, and also, that their result is heavily sensitive to their starting assumptions, the inclusion of the trust fund in a unified budget comparison, and their decision to compare present value rather than cash flows.

Now, this is where the fun started. Brad DeLong noticed what McArdle wrote:

Did this person really graduate from a business school?

Either she needs her tuition back because they did not teach her what present value is for, or the business school needs to revoke her degree to get its reputation back because its graduates do not know what present value is for, or both.

When you want to compare two streams of cash flows to see which is more valuable--to sum up how much you should be willing to pay for it in one number--you compute present values.

That is what they are there for.

That is what they do.

That is the only reason they were developed.

That is the only reason that they exist.

Why oh why can't we have a better press corps?

McArdle tried to paper over her errors in DeLong's comments with many, many arbitrary words that explained nothing but amused many. McArdle kinda-sorta replied to DeLong on her blog as well:

A last thought on my previous post: the CBPP could have made the case that the Bush tax cuts would be more expensive--if they'd limited the forecast period to ten years. Unfortunately, then the numbers wouldn't be the same size, because the cost of the tax cuts would be much, much bigger than this decade's relatively dainty Social Security deficits. I think our political discourse has an unhealthy fetish for comparing similarly-sized numbers, even when they have little to do with each other.

Meanwhile Paul Krugman did a little noticing as well.

Brad DeLong has some fun with Megan McArdle acting as if using present values to compare costs at different dates were some weird leftist idea. But it actually gets funnier: she asserts that

the only reason the two numbers look even remotely similar is that they’re using a present value calculation and a very long time frame

which is right, but not in the way she thinks: if you use a shorter time frame, say 25 years, there isn’t any Social Security shortfall at all!

There’s also the bit about how

the government doesn’t really have any mechanism to save

except for, you know, running smaller deficits so that it doesn’t run up as much debt.

But there’s an issue here a lot broader than Ms. McArdle, involving time horizons and the convenient way they shift among those on the right.

The basic position here is that people on the right favor high-end tax cuts that will worsen the deficit, while at the same time demanding both immediate fiscal austerity and cuts to Social Security, in the name of deficit reduction.

They justify their tax cuts/austerity position by arguing that what’s important is holding down current deficit numbers, never mind the 10-year outlook.

Meanwhile, they declare that it’s urgent that we act now to lock in cuts in Social Security benefits that won’t take place for decades.

Why, it’s almost as if they’re grabbing any argument at hand to justify spending cuts for the middle class and tax cuts for the rich, regardless of the inconsistency.


McArdle's response was to say that Krugman misunderstand her becasue he didn't read what she wrote. The commenters unsuccessfully attempted to correct McArdle, but we already know those attemps will be futile. She is being paid far too much money to be dishonest to change now. She will never be old and poor, and that is all that matters.


Lurking Canadian said...

If McArdle's goal is to sow confusion and chaff among her enemies, she has certainly succeeded at least with me.

I know how present value works, so that part didn't confuse me, but I now feel like I need somebody to explain, with small words and charts drawn in crayon, what the Social Security Trust Fund is and whether or not it is real money. Is the government double counting the money or not? Do bonds issued by the Trust Fund count as US government debt or not? I'm just baffled by the whole thing.

Anonymous said...

People like this odious creature make me sick. There are plenty of people just scraping by and Social Security is the difference between a roof over their head & living under a bridge.

We are taught that if we work hard and are honest that the rest -- a good, decent life -- will happen by magic. Sometimes that does not happen. Sometimes illness derails those plans and only in America, of all developed nations, is the safety net deemed unnecessary because of the way it tilts in favor of the poor (ie, those most in need).

We drive the same roads, walk the same sidewalks, drink the same water, breathe the same air. We are in this together. I realize that sort of statement sets off all sorts of warning bells amongst the fascists & psychopaths on the right, but there we are. (I would not at all object to their going Galt, preferably by leaving the country altogether, and preferably yesterday. I should also mention that I'm one of the many folks who will never subscribe to the formerly good Atlantic Mag as long as that cretinous fool is nominally employed by them.)

Also -- Eisenhower taxed the rich and big business to the tune of 90-plus percent. (yes yes, it's hard to believe -- we taxed businesses back in those heady days.) He oversaw a period of unparalleled prosperity despite all the masters of the universe fleeing to Galt's Gulch. He also oversaw expansion to the existing framework of Social Security put in place by FDR.

Every single time one of these silly fools mentions that a couple percentage points of further taxation to the already obscenely rich rich will somehow bring about Armageddon, I wish someone had the balls & basic knowledge to clue them into our history.

Selfish horrors like McArdle refuse to understand that a nation already starved for funds needs more revenue not less. Every single non-partisan review of the Bush Tax Cuts I've seen has shown clearly their ruinous effect on our nation & on the disparity between the rich & the poor.

People like McArdle clearly lack the necessary empathy to care whether another living creature lives or dies with dignity. She's sickening.

Syz said...

The Social Security program is designed to be self-funded. Social Security taxes are collected and held in trust to pay benefits. However, Congress likes to dip into the Trust Fund to pay other obligations. They remove the cash and replace it with government bonds.

Right wingers believe that since these bonds are both issued by and held by the government, they are some sort of "trick." In reality, it is no different than what corporations do internally, using "cost centers" and "accounting codes" to reallocate resources. The only way the Social Security bonds are worthless is if the US economy collapses.

In addition, the revenue stream does not have to match the payments exactly. This is by design. In boom years, the trust fund carries a surplus and in poor economic times, it can dip. McMegan likes to pretend that because at the moment we are spending more than we are receiving, that Social Security has "defaulted." Of course, this is a complete misrepresentation of how the program works.

aimai said...

I don't see what the problem is with high earners " going galt" because they don't want to work so hard if their top marginal rate goes up. I mean--take dentists (since they appeared in earlier debates as examples of frequently right wing/anti taxers). Say my dentist goes on strike and doesn't work as hard? Won't the free market just throw up dozens more Dentists who *are* willing to work as hard, or harder, to crack that top marginal rate ceiling? Or say a banker decides to go galt and stop overselling bonds to, say, San Diego? Is it in fact the case that some jumped up mailroom boy won't arise to take his place? 'Cause if there were a lot more holes at the top I'd scab those jobs.


Susan of Texas said...

The whole argument is so dishonest and divorced from reality.

You can always count on McArdle to leave the reader confused. I think she's saying that if we pretend the Social Security Trust fund is part of the general fund, she's right. Wikipedia says that if the government raises spending because they can and do use SS funds, it's an accounting fiction like McArdle says. If they don't, it's real. Since she also says that the government (actually, Congress; the president can't repudiate the bonds) might just refuse to pay out the funds, it's not too surprising that she chooses to believe the fund is an accounting fiction.

Lurking Canadian said...

Well, here's the part I don't understand. Let's take a historical example: the Clinton balanced budget. The government is taking in X dollars in social security taxes and Y dollars in other taxes, while paying out A dollars in social security/Medicare payments and B dollars for everything else.

I get the impression that what happened was X+Y=A+B, so they said the budget was balanced. But that is misleading, because what really happened was that the "everything else" budget had a (B-Y) shortfall, which was covered by loans of (X-A) made by the social security program. As I understand it, though, those (X-A) in loans don't count as "national debt", which is why Clinton got to claim the budget was balanced.

Of course all of this is orthogonal to the real questions of whether the government should keep paying SS benefits (yes) and levy other taxes to pay for them if necessary (also, yes), but it does look very much to me like the money was essentially stolen by some shady accounting. Maybe my understanding is wrong. That's why I need the crayon version. :)

Bruce Webb said...

Lurking there is an entire cottage industry devoted to arguing that the Special Treasuries in the SS Trust Funds are somehow less real than regular Treasuries. This is legal, historical and practical bullshit. The SS Trust Funds were cash flow negative more years than not from 1957 to 1982 and persistently so from 1971 as the Treasury simply honored the bonds in the TF right down to the next to the last dollar. Similarly the DI (Disability) Trust Fund (the smaller of the two that make up 'THE' SS Trust Fund) started drawing on its interest in 2006 and its principal in 2009 as Treasury simply recognized its legal obligation. Neither the 2006 or 2009 bend points caused a single ripple in the bond markets which by all evidence don't see the kind of default McAddled suggests as even possible in light of current law and past historical practice. DI is on track to cashing in $23 billion of those 'phony IOUs' this year, more than 10% of its total accumulated assets, and it all adds up to a non-event: treasury bonds mature, get paid off or rolled over. Nothing changes whether the holder of those bonds is the Managing Trustee of Social Security (whose other hat is Treasury Secretary) or the head of the Chinese Central Bank. Full Faith and Credit of the U.S. backs both equally.

And to answer your last question. The Bureau of Public Debt uses the following equation:
Debt Held by the Public + Intragovernmental Holdings (mostly the Trust Funds) = Public Debt. So yes the $13 trillion figure for the latter does include $4.5 tn in Intragovernmental Holdings of which $2.6 trillion are in the two Social Security Trust Funds.

Bruce Webb said...

Lurking on your second post.

In FY 2000 both the General Fund and Social Security ran cash surpluses, in your terms X > A AND Y > B. But via a weird twist in those circumstances 'debt' and 'deficit' can and did move in opposite directions. As it happened the increase in Intragovernmental Holdings via the SS surplus was a little bit more than the reduction in Debt Held by Public so even though our positions in the bond market improved markedly (which is basically what the 'unified deficit/surplus' tracks) total Public Debt as scored on the Debt Clock still continued to tick up.

(BTW if I ever find the genius who decided to make both 'Public Debt' and 'Debt Held by the Public' into technical terms of art pointing at two different things with two different totals there might be violence. Because business reporters and even top flight economists tend to use the terms interchangeably and it results in exactly the kind of confusion seen here.)

Lurking Canadian said...

Bruce, thank you. I am now well armed, should it ever come up again.

Bruce Webb said...

And on Susan's point.

In the end Full Faith and Credit of the U.S. doesn't rest on Congress at all, not until or unless they simply abolish popular democracy altogether. The question of whether a Special Treasury in the Trust Fund is 'real' is the same question that applies to that Benjamin in your wallet (these days more likely a couple of Washingtons and a tattered Lincoln, but I digress). The powers of Congress and the Federal Government are in theory almost limitless. For example they can and have made the holding of gold bullion by Americans illegal and then reversed that decision. Under precedent set by Kelo v New London they can take your house and give it to Donald Trump to build a new casino. Or the Administration could conspire with the Fed to hyper-inflate the dollar. And Paultards spend nights sleepless worrying about all three.

The only final restraint on any of that is the ballot box, Social Security is just as real or as unreal as the political will of the American political majority. And efforts like those of McMegan to cast doubt on Full Faith and Credit are edging pretty close to sedition. (Good thing for her that we still have that First Amendment thingy going, in other times and places similar efforts at undermining faith in the government might find you being a number in some labor camp in Siberia or Xinxiang.)

Syz said...

Here is Krugman on the alleged Social Security crisis:

The bigger problem for those who want to see a crisis in Social Security’s future is this: if Social Security is just part of the federal budget, with no budget or trust fund of its own, then, well, it’s just part of the federal budget: there can’t be a Social Security crisis. All you can have is a general budget crisis. Rising Social Security benefit payments might be one reason for that crisis, but it’s hard to make the case that it will be central.

But those who insist that we face a Social Security crisis want to have it both ways. Having invoked the concept of a unified budget to reject the existence of a trust fund, they refuse to accept the implications of that unified budget going forward. Instead, having changed the rules to make the trust fund meaningless, they want to change the rules back around 15 years from now: today, when the payroll tax takes in more revenue than SS benefits, they say that’s meaningless, but when – in 2018 or later – benefits start to exceed the payroll tax, why, that’s a crisis. Huh?

Bruce Webb said...

One more and then I go away. Promise.

SYZ: "However, Congress likes to dip into the Trust Fund to pay other obligations. They remove the cash and replace it with government bonds."

Congress has no choice. Under the Social Security Act of 1935 any surplus funds have to be placed in "securities fully guaranteed as to principal and interest by the Federal government". That is even if Social Security had some physical ability to pile up Benjamins in a warehouse in Bethesda or the desire to set up a $2.6 trillion Christmas Account at the local credit union current law would prevent them.

In some ways the Special Treasuries in the Trust Fund are better than either cash dollars or regular Treasuries. First they earn interest at the average rate of the latter while being fully callable at par like the former. For example in 2009 Social Security found it necessary to redeem a bunch of bonds in the DI Trust Fund with 2010 maturities. And unlike a holder of regular Treasuries in the same position (hi Chinese Central banker!) was fully sheltered from price fluctuations in the public markets in doing so. What McMegan McAddled sees as a weakness in Special Treasuries, that is the fact that they are not marketable, is actually a value shelter, they will always be worth precisely their face value and will yield precisely the interest rate under which they were issued. Try that with your regular bond portfolio.

See ya later. And Susan keep reading McM McA so I don't have too. Thanks for all your work.

aimai said...

Whew! Thank you Bruce Webb! That was fascinating. Also, I'd like to lead another round of quiet internet applause for Susan of Texas whose sterling work makes all this snark possible. Thank you Susan!


Kathy said...

If her employers think she's a liability, she'll be dumbt. I mean dumped. Alas, she'll quickly find another sinecure; she's shown her eagerness to state any lie she's instructed to tell, and to doggedly insist the lie is truth no matter who corrects her, and for a very long time. That's a valuable trait/ability.

The Center's report was clear and easy to understand. It would be easy to take the numbers and say "Hey, lets just apply the tax-cuts to Social Security!" but I doubt many people thought that the Center was suggesting that, or believe its a solution to the decades-away-possible-shortfall.

Kathy said...

Thank you, Bruce Webb! I have bookmarked your blog.

brad said...

This is one of those cases when the fallacy of ad hominem fails. While I lack the economic literacy to understand the issues being debated, I know Megan well enough to know she is wrong and/or lying, and that's sufficient info in this case.
People like Krugman and Surowieki can take complex issues and make them comprehensible to the layman because they actually comprehend those issues. Megan has an agenda and the ability to parrot jargon, but not comprehension. I think it gives her too much credit to say she's being willfully obtuse on occasions such as these. She genuinely doesn't understand what she's talking about, she just clings to her own poor restatement of the summary of whatever position paper she's parroting. She reminds me of Bush at times like this, and how when he talked slowly and condescendingly you knew he didn't understand what he was saying, but thought repeating what someone smarter told him to say proved something.

nanute said...

It is just too easy picking on poor Ms. McArdle. Why isn't anyone picking on this guy?

Batocchio said...

Wow, I was thinking of posting on this one, but why bother now? As I wrote at the other post, even if McMegan had been correct about the math, her point was irrelevant – the hypocrisy charge (the main point of the chart) was still directly on target.

As noted upthread, the top marginal rate has topped 90% in the United States, and funny, the economy was still robust. McMegan's fairly efficient in her bullshit there – first she changes 39.5% to 60-65% (not showing her work of course), and then pretends that a top marginal rate is the effective tax rate. What about the famous example from Warren Buffet, that he paid a lower effective tax rate than his secretary? Oh, and of course paying "the government" never benefits an individual in any way, at any point. (Funny how Social Security completely refutes that, huh?)

And hey, Bruce Webb, thanks especially for that 'Public Debt' and 'Debt Held by the Public' bit.

Batocchio said...

"the old and sick are already luckier than the young and healthy"

I think this was the first McArdle piece I ever saw, when Sadly, No ripped it apart. I remember reading her full piece, trying to discern any sort coherence beneath her blunderbuss, shit-on-the-wall-let's-see-what-sticks approach. Even the most charitable interpretation was: patently ridiculous argument, following by a relentless stream of other crappy arguments, in a flailing attempt to confuse, distract, or simply wear down the reader. Little did I know then that McArdle could sink to such depths so often, and inspire an cottage industry of blogs devoted to ripping her apart with style and relish.

Good times.

Susan of Texas said...

Thanks for the information Bruce Webb, and thanks to everyone for the appreciation.