Tag: ronald reagan

Liberal Dogma on Social Security Redux

Liberal posturing on Social Security reform continues unabated – betraying nervousness that Obama’s Deficit Reduction Commission will recommend Social Security benefit cuts. 

Left-wing voices also continue to repeat the mantra that introducing private Social Security accounts would be a bad idea. Ronald Brownstein’s recent recent column in the National Journal is a case in point. However, Brownstein’s readers may come away thinking that he believes breaking promises is a good idea.

Brownstein concedes that “Social Security indeed faces a long-term imbalance between expected revenue and promised benefits.” I consider this to be progress — at least relative to the erstwhile “there’s nothing wrong and nothing to fix” mantra adopted by liberal adherents of the status quo on Social Security.

Notice Brownstein’s use of the term “promised benefits.”  A promise implies a commitment and obligation to make good on future benefit payments.  But the solution that Mr. Brownstein points to is as follows:

Instead [of private accounts], Obama argued, the two parties could emulate the Reagan model and arrive at a sensible solution… [T]he program’s long-term shortfall could be eliminated just by trimming benefits for the top half of earners [JG note: breaking the Social Security benefit promise here], linking the retirement age to lengthening life spans [JG note: breaking the promise here too], and imposing a partial payroll tax on earnings above $250,000 [JG note: that is, promise more benefits by expanding the definition of covered earnings and increasing payroll taxes on high earners].”

But all that the last element may achieve is to stave of the program’s insolvency for a few more years. 

My comment:  Please don’t drag Reagan into this “solution.”  The 1983 reforms were implemented under the gun, at a time when there was no way out of Social Security’s imminent revenue shortfall. If President Reagan had enjoyed the luxury of a couple more years to plan changes to Social Security, he would have adopted a different approach, and be much better off today. According to broad market indexes such as the S&P 500, total returns averaged well above 10 percent per year during the 1980s and 90s – so, well above inflation. (The first decade of the 2000s yielded a negative 1 percent return.)

Finally, Brownstein writes:

[T]he gap between the system’s revenues and obligations, relatively speaking, isn’t that daunting–less than 1 percent of the economy’s expected output over the next 75 years. 

Does Mr. Brownstein really appreciate how large that is? In present value terms, the Social Security actuaries report that the present value of Social Security’s shortfall over the next 75-years equals $5.4 trillion. That’s one-third of current annual GDP. In other words we have to devote that sum to earning interest each year for 75 years to cover Social Security’s financial gap.

Alternatively, since payrolls equal only one-half of national output, it means that payroll taxes would have to increase by an average of about 2.0 percent per year if they are levied over all wage earners.  However, the tax increase is to be levied only on those earning $250,000 or more.  There are about 3 million U.S. taxpayers with incomes above $250,000, with average income of about $500,000. (I’m rounding up based on information for 2006 available here.)  That makes a tax base of $1.5 trillion. (Actually, this is likely to be too large because I’m counting total income, not taxable income, which would be much smaller.) Raising the equivalent amount of revenues from these high earners (who face the highest marginal income tax rates already and are likely to alter their work effort in response to still higher taxes) would imply increasing their average tax rates by almost 11 percentage points. Of course, because some of the adjustment will be through benefit cuts and indexing the retirement age to increasing longevity, the tax increases that must be levied on high earners would be smaller. 

But are those benefit cuts politically realistic? Americans already face a normal retirement age of 66, and it is scheduled to increase to 67 in little more than a decade. Extrapolating from the French response to increasing their pensionable age from just 60 to 62, Americans’ would probably end up opening a third war front to resist further increases in Social Security’s retirement ages – a “generational war” here at home.

So where do we go from here?  One answer may be to first introduce “add-on” personal accounts using the 2.0 percentage points of payrolls – the amount required to plug Social Security’s current shortfall. This would not be a “tax” as the funds would be invested in personal accounts – and it would enable low earners an opportunity to partake in the long-term wealth creation mechanism that they have heretofore been unable to exploit.  As I have argued here, if this amount is effectively saved and invested – by insuring that the government does not borrow and spend those savings – it would create space for a “carve-out” addition to the “add on” personal accounts, increasing retirement wealth even more.  Finally, with the stock markets relatively stable and current P/E ratios of broad market indexes close to historical averages, now would be the right time to begin such a reform program for Social Security. 

Would liberal policymakers and analysts take on this approach?  No prizes for guessing the answer.

What Was That Ronald Reagan Line Again?

The Washington Post editorializes this morning on the “Google-Verizon” proposal for government regulation of the Internet:

For more than a decade, “net neutrality” — a commitment not to discriminate in the transmission of Internet content — has been a rule tacitly understood by Internet users and providers alike.

But in April, a court ruled that the Federal Communications Commission has no regulatory authority over Internet service providers. For many, this put the status quo in jeopardy. Without the threat of enforcement, might service providers start shaping the flow of traffic in ways that threaten the online meritocracy, in which new and established Web sites are equally accessible and sites rise or fall on the basis of their ability to attract viewers?

What a Washington-centric view of the world, to think that net neutrality has been maintained all this time by the fear of an FCC clubbing. Deviations from net neutrality haven’t happened because neutrality is the best, most durable engineering principle for the Internet, and because neutral is the way consumers want their Internet service.

Should it be cast in stone by regulation, locking in the pro-Google-and-Verizon status quo? No. The way the Internet works should continue to evolve, experiments with non-neutrality failing one after another … until perhaps one comes along that serves consumers better! The FCC would be nothing but a drag on innovation and a bulwark protecting Google and Verizon’s currently happy competitive circumstances.

I’ll give the Post one thing: It represents Washington, D.C. eminently well. The Internet should be regulated because it’s not regulated.

“If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

The Public Isn’t Buying

Today POLITICO Arena asks:

Angry Left Obama’s bête noir?

My response:

Would the president help himself by making a clearer ideological declaration – as many on the “professional left” are asking him to do? Hardly. POLITICO tells us this morning that those “professionals” lament “the president’s reluctance to be a Democratic version of Ronald Reagan, who spoke without apology about his vaulting ideological ambitions.” One of those professionals, Robert Reich, urges Obama to present “a clear and convincing narrative into which all the various initiatives neatly fit, so that the public can make sense of everything that’s done.”

The public is quite capable of making sense of everything that’s been done. It’s doing it, and it doesn’t like what it sees. Reagan spoke boldly about his vision because it arose directly from fundamental American principles – individual liberty, free markets, and limited constitutional government. Obama avoids presenting “a clear and convincing narrative” because if he stated his vision more clearly it would be even less convincing than it already is.

Thus, White House press secretary Robert Gibbs was right to complain about the criticism’s coming from members of the professional left, who spend their lives cloistered in academia, the mainstream media, and other such redoubts, talking to each other. But Gibbs’s problem is deeper: It’s the product, not the pitch.

Libertarian Politics in the Media

Peter Wallsten of the Wall Street Journal writes, “Libertarianism is enjoying a recent renaissance in the Republican Party.” He cites Ron Paul’s winning the presidential straw poll earlier this year at the Conservative Political Action Conference, Rand Paul’s upset victory in the Kentucky senatorial primary, and former governor Gary Johnson’s evident interest in a libertarian-leaning presidential campaign. Johnson tells Wallsten in an interview that he’ll campaign on spending cuts – including military spending, on entitlements reform, and on a rational approach to drug policy.

Meanwhile, on the same day, Rand Paul had a major op-ed in USA Today discussing whether he’s a libertarian. Not quite, he says. But sort of:

In my mind, the word “libertarian” has become an emotionally charged, and often misunderstood, word in our current political climate. But, I would argue very strongly that the vast coalition of Americans — including independents, moderates, Republicans, conservatives and “Tea Party” activists — share many libertarian points of view, as do I.

I choose to use a different phrase to describe my beliefs — I consider myself a constitutional conservative, which I take to mean a conservative who actually believes in smaller government and more individual freedom. The libertarian principles of limited government, self-reliance and respect for the Constitution are embedded within my constitutional conservatism, and in the views of countless Americans from across the political spectrum.

Our Founding Fathers were clearly libertarians, and constructed a Republic with strict limits on government power designed to protect the rights and freedom of the citizens above all else.

And he appeals to the authority of Ronald Reagan:

Liberty is our heritage; it’s the thing constitutional conservatives like myself wish to preserve, which is why Ronald Reagan declared in 1975, “I believe the very heart and soul of conservatism is libertarianism.”

Reagan said that several times, including in a Reason magazine interview and in a 1975 speech at Vanderbilt University that I attended. A lot of libertarians complained that he should stop confusing libertarianism and conservatism. And once he began his presidential campaign that fall, he doesn’t seem to have used the term any more.

You can see in both the Paul op-ed and the Johnson interview that major-party politicians are nervous about being tagged with a label that seems to imply a rigorous and radical platform covering a wide range of issues. But if you can call yourself a conservative without necessarily endorsing everything that William F. Buckley Jr. and the Heritage Foundation – or Jerry Falwell and Mike Huckabee – believe, then a politician should be able to be a moderate libertarian or a libertarian-leaning candidate. I wrote a book outlining the full libertarian perspective. But I’ve also coauthored studies on libertarian voters, in which I assume that you’re a libertarian voter if you favor free enterprise and social tolerance, even if you don’t embrace the full libertarian philosophy. At any rate, it’s good to see major officials, candidates, and newspapers talking about libertarian ideas and their relevance to our current problems.

Reagan-Appointed Judge Strikes Down Gay Marriage Ban

Chuck Donovan of the Heritage Foundation denounces Judge Vaughn Walker for “extreme judicial activism” and “judicial tyranny” in striking down California’s Proposition 8, which barred gay people from marrying. And of course he doesn’t fail to note that Judge Walker sits in … San Francisco. Robert Knight of Coral Ridge Ministries ups the ante: Judge Walker has “contempt for the rule of law” and is part of “the criminalization of not only Christianity but of the foundational values of civilization itself.” National Review allows the head of the National Organization for Marriage to mutter about the judge’s “personal bias.” Blog commenters rail against the “left-wing liberal judge.”

In fact, Judge Walker was first appointed to the federal bench by President Ronald Reagan in 1987, at the recommendation of Attorney General Edwin Meese III (now the Ronald Reagan Distinguished Fellow in Public Policy and Chairman of the Center for Legal and Judicial Studies at the Heritage Foundation). Democratic opposition led by Sen. Alan Cranston (D-CA) prevented the nomination from coming to a vote during Reagan’s term. Walker was renominated by President George H. W. Bush in February 1989. Again the Democratic Senate refused to act on the nomination. Finally Bush renominated Walker in August, and the Senate confirmed him in December.

What was the hold-up? Two issues, basically. Like many accomplished men of the time, he was a member of an all-male club, the Olympic Club. Many so-called liberals said that should disqualify him for the federal bench. People for the American Way, for instance, said in a letter to Judiciary Committee chair Joe Biden, “The time has come to send a clear signal that there is no place on the federal bench for an individual who has, for years maintained membership in a discriminatory club and taken no meaningful steps to change the club’s practices.”

The second issue was that as a lawyer in private practice he had represented the U.S. Olympic Committee in a suit that prevented a Bay Area group from calling its athletic competition the Gay Olympics.

Because of those issues, coalitions including such groups as the NAACP, the National Organization for Women, the Human Rights Campaign, the Lambda Legal Defense Fund, and the National Gay and Lesbian Task Force worked to block the nomination.

In other words, this “liberal San Francisco judge” was recommended by Ed Meese, appointed by Ronald Reagan, and opposed by Alan Cranston, Nancy Pelosi, Edward Kennedy, and the leading gay activist groups. It’s a good thing for advocates of marriage equality that those forces were only able to block Walker twice.

Josh Green of the Atlantic notes a pattern: the federal judge in Boston who struck down a significant portion of the Defense of Marriage Act, ruling that it denied gay and lesbian couples the federal benefits afforded to straight couples, was appointed to the bench by President Richard Nixon. And the chief judge of the Iowa Supreme Court who wrote the unanimous decision striking down that state’s marriage ban was appointed by Republican governor Terry Branstad, who was just renominated for governor by Iowa Republican voters. Of course, Nixon and Branstad don’t have the conservative cred of Reagan and Meese.

Who Were the Best Presidents?

At Politico Arena, the question of the day is:

A new Siena College poll ranks Barack Obama as the 15th best U.S. president (landing him below Bill Clinton, ahead of Ronald Reagan). Franklin Delano Roosevelt earned top honors, while Andrew Johnson was last. Pollsters say Obama is high on imagination, communication and intelligence, but weak on background. On your list of best presidents, where would President Obama land? Who was the best president, and who was the worst?

I responded:

Of course Obama ought to be given an incomplete. But he got a Nobel Peace Prize purely on spec. He does now have 18 months of presidential action, and he has already done many things that establishment political scientists like. Presidential scholars love presidents who expand the size, scope and power of government. Thus they put the Roosevelts at the top of the list. And they rate Woodrow Wilson – the anti-Madisonian president who gave us the entirely unnecessary World War I, which led to communism, National Socialism, World War II, and the Cold War – 8th. Now there’s a record for President Obama to aspire to! Create a century of war and terrorism, and you can move up from 15th to 8th.

George Washington, who made real the Founders’ dreams of a free republic, should surely be rated first. That he is not speaks volumes about the interests and values underlying this survey.

In his book Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, Ivan Eland gives high grades to presidents who left the American people alone to enjoy peace and prosperity, such as Grover Cleveland, Martin Van Buren, and Rutherford B. Hayes. The fact that you can’t remember what any of those presidents did is a plus. At the bottom he places Wilson, Truman, McKinley, Polk, and George W. Bush. Bush is also rated near the bottom by the Siena poll. But when current passions have faded, and the next generation’s establishment presidential scholars reflect on Bush’s expansion of federal power and executive power, Bush will start rising in the rankings.

I’m also amused by the presidential scholars’ ranking of Lyndon Johnson 1st in the category of relations with Congress. LBJ was known for his vulgar, arm-twisting, threatening, corrupt manipulation of a huge congressional majority. One would hope that congressional scholars might rate higher a president who recognized the constitutional limitations of the executive branch.

Forget Freedom. The UK Poll Is All About ‘Fairness’

Britain may have given the world freedom as we understand it (see The Liberty of Ancients Compared with that of Moderns by Benjamin Constant), but you would not know it from the last prime ministerial debate that took place last Thursday. The candidates (Conservative David Cameron, Labour’s Gordon Brown and Liberal Democrat Nick Clegg) used the word “freedom” only 2 times. They said the word “free” 5 times, but all in the context of the supposedly “free” goodies, which they promised to lavish on the electorate. Words “responsible” and “responsibility” fared somewhat better (4 times). But the winning words were “fair” and “fairness” that were mentioned 22 times – almost always in connection with taxing the rich. Here is a typical example:

Brown: “But I come back to the central question about fairness that has been raised by our questioner. How can David [Cameron] possibly justify an inheritance tax cut for millionaires at a time when he wants to cut Child Tax Credits? Let’s be honest. The inheritance tax threshold for couples is £650,000, if your house is worth less than that you pay no inheritance tax. What David [Cameron] is doing is giving 3,000 people, the richest people in the country, he’s going to give them £200,000 each a year. That is simply unfair.”

It was Gordon Brown, the current Prime Minister, who increased the top rate of income tax to 50%. Neither Clegg nor the supposedly business-friendly Cameron have proposed to cut that rate. Indeed, “fairness” in British politics seems to amount to little more than taxing the most productive members of society “until the pipes squeak.” Those words were uttered by Denis Healy who was the Chancellor of the Exchequer in the 1970s. It was under his leadership that the UK ran out of money and had to borrow billions from the IMF. It turns out that when you tax the rich too much, they will work less or leave for a more hospitable jurisdiction. Margaret Thatcher and Ronald Reagan understood it. Messrs Cameron, Clegg and Brown do not.