Which Side Are You On? Alice Rivlin and the Wall Street Bailout King, or Social Security?

There's a battle going on between those who are defending Social Security - that is to say, the "good guys" - and those like economist Alice Rivlin and Wall Street banker/giveaway king Neel Kashkari, who would cut it. The attackers pretend to see nuances that don't exist, slanting their arguments to make benefits reductions seem inevitable and even humane. True to form, Rivlin frightens Americans with the idea that we need to "save" Social Security, then proposes to "reassure" them ... by cutting it.

Fortunately the defenders are getting reinforcements. A new coalition of organizations is uniting under the "Strengthen Social Security [1]" banner, including major unions like the AFL-CIO, SEIU, and AFSCME, the National Organization of Women, MoveOn, and the National Education Association, as well as 60-plus other organizations representing over 30 million Americans. (Note: I am associated with that coalition through my affiliation with the Campaign for America's Future [2].)

In this corner, hailing from the great state of Nevada ...

Harry Reid told attendees at the Netroots Nation conference that "Social Security is the most successful social program in the history of the world," while condemning the "fear tactics of those who say Social Security is going broke. It's not." That's a good start. Nancy Pelosi was even stronger, and considerably more specific, telling conference attendees that she opposes raising the retirement age. Pelosi added:

"To change Social Security in order to balance the budget, they aren't the same thing in my view. When you talk about reducing the deficit and Social Security, you're talking about apples and oranges."

Alice Rivlin is one of those leading the apples-as-oranges charge, arguing against logic and evidence that Social Security should be on the operating table and that the Deficit Commission (of which she is a member) should hold the scalpel. Her recent memo on the subject sets its alarmist tone in the title: "The Right Reason for Saving Social Security [3]." Social Security doesn't need to be "saved." Even the most alarmist forecasts (which she uses) show that it's sound for at least 27 more years and could pay 75% of its benefits beyond that with no changes at all.

About that title: Has anybody proposed "wrong" reasons for Social Security? As becomes obvious in her opening paragraphs, what Rivlin is really describing are what she considers "the right reasons for cutting Social Security." Her implication is that benefits cuts must be made, and soon, but that they should be administered by wise and kind people like ... well, like Alice Rivlin. (And apparently by her colleagues on the Commission, too - like Alan Simpson, famous for calling retired people "greedy geezers.")

While Rivlin allows that "tax increases can be part of the solution," she conspicuously fails to mention the most obvious tax-based solution: Raising the $106,000 cap on Social Security contributions. Apparently she has no good argument against raising the cap, which would restore the system to complete long-term stability ... so she just pretends it isn't there. Maybe that shouldn't be surprising from a former Alan Greenspan protégé - she once said that Greenspan was a "skillful fine-tuner who steered the economy through a series of shocks" - but frankly I expected better.

The emotional tone of Rivlin's memo oscillates between "We're only doing this for your own good" and "This hurts me more than it hurts you." But despite its resonance of world-weary regret, Rivlin's message is clear: Tax increases, including raising the cap, are out. Benefits must be cut. And we have to show those legendary investors, who watch us from on high like Olympian Gods, that we're "serious about budget cuts." (Paul Krugman calls those vaporous shades the "invisible bond vigilantes," and continues to point out that they seem to like the US government's prospects just fine [4].)

Rivlin add this: "That such action (benefit cutting) will make a modest contribution to reducing long run deficits is a serendipitous by-product, not the central motivation." That raises the obvious question: Why should Social Security's future be decided by a commission that's tasked with handling the deficit, not the fiscal soundness of social programs? The Deficit Commission's experience with social insurance ranges from slim to none, and its packed with people who have a history of hostility toward Social Security. Worse, they're acting behind closed doors where the American people can't see them. That's not very "reassuring."

Faced with this overwhelming logic, Rivlin offers only flimsy arguments for turning Social Security's fate over to her Commission: "Polls," she writes, "indicate that many (younger workers) do not believe they will ever collect a Social Security paycheck." (Hmm, could that be because there's so much talk about needing to "save Social Security"?) She then raises the specter of a "Greek-style debacle" at some point in the far future, adding that changing Social Security would be "particularly attractive as a signal to the markets." (Ah, yes, those all-wise markets, so revered by the Greenspan Cult.) Lastly, Rivlin raises the issue of "an aging population with rising health care spending."

That's three arguments for giving the Deficit Commission the ability to decide Social Security's fate. What do all three of them have in common? None of them explain why the Deficit Commission should decide Social Security's fate! If Social Security needs to be stabilized financially, why aren't we simply raising the cap? As for medical spending - yes, let's address it, by all means. (I must've missed Rivlin's many speeches and papers pushing for the public option, which would have reduced costs.) But that still doesn't explain what Social Security has to do with a Deficit Commission, other than the fact that "greedy geezers" (also know as "Mom, "Dad," and "the future you and me") incur the lion's share of both costs.

And as for Greece -- really? Greece? Where some people can retire at 58 and others at 61? The "Greek-style debacle" is just a bogeyman, and I suspect Rivlin knows it. The market gods seem happy enough at the moment, and propitiating them by other means that deficit-cutting is outside her commission's scope.

Rivlin's not above a little genteel generation-baiting, either. "The fact that programs for seniors are driving projected spending increases doesn't mean they should bear the brunt of the cuts" - (Oh, good. We were getting ready to send them out to die on ice floes) - "... but neither should (they) be immune ... do we want to allow rapid growth in programs supporting seniors (including Social Security) to drive out spending for education" - get it, young folks? That's you and your kids! - "or scientific research or improving infrastructure ..." (etc. etc.)

There's only one problem with the argument that Social Security spending "drives out" education and other budget items: Those aging people have paid into a self-sustaining program for their entire working lives. Rivlin's question should be rephrased: "Do we want to subsidize other forms of spending by breaking a lifelong social contract with entire generations at their time of greatest need?"

Rivlin assures us that it's "absurdly unlikely" we'll see benefit cuts for "widows living on the edge of subsistence." But God only knows what Rivlin and Company consider "subsistence," given that older women on Social Security only receive an average of $11,800 in benefits today. (And why is anybody on Social Security "living on the edge of subsistence"?)

Alice Rivlin's contingent got a new ally this week in former Goldman Sachs banker Neel Kashkari. Remember him? He's the guy with the shaved head who doled out billions to his fellow big bankers during his time in Bush's Bush Treasury Department. Since he forked out the loot without any conditions, bankers promptly gave themselves billions in bonuses, as everyone knew they would.

Kashkari, who would make a perfect movie villain in almost anyone's eyes, actually argued in the Washington Post [5]

that retired people who rely on Social Security have a greedy "me first" attitude. (To be fair, he did not say it in a Dr. Evil voice, nor did he add: "And the nations of the world must send me one trillion dollars!") "Me firstism" is bad thing when the elderly have it, said Kashkari, although it actually serves the greater good when people like Neel Kashkari have it. Yes, he really said that: "A 'me first' mentality usually makes markets more efficient," Kashkari wrote, but "cutting entitlement spending requires us to think beyond what is in our own immediate self-interest."

In other words, Neel Kashkari - who's back on Wall Street - is both Alan Simpson's soulmate and a living exemplar of the Greenspan philosophy. If you want to entrust the financial security of your final years to the mentality he represents, then Alice Rivlin and the Deficit Commission are for you. The rest of us need to be "reassured" that Social Security can be saved ... from them.