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November 19, 2007

Posted by Ilan Goldenberg

Clinton, without naming Obama, also continued to blast him for proposing to the lift the cap on the taxing of Social Security benefits, which are currently taxed at 6 percent, but only on the first $97,000 of a person's income.

"We don't need more Republican scare tactics about a 'Social Security crisis,'" Clinton said. "And we don't need a trillion-dollar tax increase that will hit families already facing higher energy, health care and college costs.

As far as I can tell, calling a plan to raise taxes on people making more than $97,000 a year,  trillion-dollar tax increase on families is a text book "Republican scare tactic"  (I really don't know enough about Social Security to have strong feelings or opinions about a specific plan)


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I don't know what this has to do with US foreign policy and global affairs, but here goes. From Paul Krugman:

Why, Barack, why?

The great Social Security debate of 2005 was a seminal moment for American progressives. Conventional fiscal wisdom in the Beltway was that the aging population is THE big problem — when the truth is that grim long-run fiscal projections mainly reflect projected health care costs. And conventional political wisdom was that the Bush administration’s fear-mongering on the issue would work.

But a determined defense by progressives in the media, on the blogs, and in Congress beat back one spurious argument after another, while the American people made it clear that they really want a program that guarantees a basic retirement income that doesn’t depend on the Dow. And Social Security survived.

All of which makes it just incredible that Barack Obama would make obeisance to fashionable but misguided Social Security crisis-mongering a centerpiece of his campaign. It’s a bad omen; it suggests that he is still, despite all that has happened, desperately seeking approval from Beltway insiders.

As Ezra Klein says, Obama is a moron. In fact he said he was a moron, moron, moron.


I understand why people are giving Obama a tough time on this one. And it's absolutely fair, especially when it comes from guys like Krugman and Ezra who are absolutely consistent in their views on this. I'm not saying they shouldn't be giving him a hard time or criticizing him.

All I am saying is that one of the standard Republican attack lines on Democrats is that they want to raise your taxes by some ridiculous trillion dollar sum. And they've always disingenuously used that line to garner votes. So, for Clinton to attack Obama for "Republican scare tactics" for calling social security a "crisis" and in the same sentence to disingenuously accuse him of threatening to raise taxes by $1 trillion is hypocrtical.

This is all a lot of hot air, and typical Clinton duplicity and dodginess. Obama has explicitly said there is no Social Security crisis, and that Social Security is a fundamentally sound system. And like the other Democrats, he is absolutely opposed to privatization. So what's the beef? It all comes down to Obama's proposal to augment Social Security funding by raising the cap on the highly regressive payroll tax, and get wealthier Americans to pay more. Clinton, as is her wont, supports the policy that actually favors the wealthy while dressing her position up as some sort of progressive populism and true believerism.

Once we have to draw on the Social Security trust fund treasury notes just over a decade from now in order to meet the plan's obligations, we will have to redeem those bonds out of the general fund, which will mean either tax increases or benefit cuts or cuts in other programs or borrowing more money. At that time, we can expect enormous pressure to grow once again to reform the system. Once again, the privatization proponents will be out in force, this time with more wealthy allies bent on fighting off tax increases. At this point we will also have an older population who will be more likely than today's population to favor cutting taxes; phasing out or reducing guaranteed benefits or raising the full benefits age while simultaneously grandfathering themselves in; privatization schemes and various other ways of passing the costs, risks and program cutbacks onto the next generation. So I take it Obama wants to get started with a more progressive plan today, to fend off a conservative victory a decade from now.

Is it Clinton's position that we do not have to raise any additional revenues or restructure the current funding system? Hardly. As usual, her tactic is the now tediously common Clinton Dodge: conveniently punting on a concrete proposal for the time being, while saying this is something we will have to "study" in the future after she is president. She wants to pass the buck onto a "bipartisan commission" that will study Social Security once she's in office and tell her what to do. This commission, I think we can safely predict, will like the Greenspan commission in 1983 tell her to raise some revenues. And given that the commission will be bipartisan, I suspect that the revenue enhancement proposals will not be nearly as progressive as Obama's current proposal. So give me a break about Obama's alleged resort to "Republican scare tactics". In the long run, it is Clinton's tactic that will result in a more Republican-friendly set of revenue proposals, by virtue of the Republican representation on her "bipartisan commission."

If we've gotten to the point where we can't even discuss changing the regressive funding structure for Social Security because to do so would be to suggest there is a "crisis", we have truly entered a crazy and irrational political dreamland. That's like saying that we can't consider a proposal to raise highway tolls to fund some ordinary deferred maintenance, because it would be an admission that there is a frightening "highway crisis".

Ilan, I don't understand why Clinton's position is hypocritical. She is criticizing Obama (1) for (like Bush) concocting a social security issue which needlessly jeopardizes it and then (2) for suggesting a tax increase when the Dems are being attacked (as usual) for "tax-and-spend". HRC makes sense to me.

Memories of flip-flop Kerry:
Obama, Oct 30: "I absolutely agree that Social Security is not in crisis. It is a fundamentally sound system, but it does have a problem, long term."

Obama, Nov 8: "You know, Senator Clinton says that she's concerned about Social Security but is not willing to say how she would solve the Social Security crisis, then I think voters aren't going to feel real confident that this is a priority for her."

Obama said that social security is not in crisis before he said that it is. To solve this uncrisis/crisis he would raise taxes when the situation clearly calls for an air strike (Sorry, but I had to display my national security creds).

I don't really see the irony here, either. Clinton thinks Social Security is sound and so she doesn't support a tax increase to fix something that she doesn't think is broken. I mean, raising the cap on social security wages, especially without raising the level of benefits provided, really would be a tax increase. Maybe it's a tax increase on the right people (I happen to think so) but if it's not necssary than why do it?


Clinton, like everyone else, knows that sooner or later we probably have to raise additional revenues to meet Social Security's existing obligations. It's not a question of whether the system is "broken" or in "crisis". It's just that the way the system is financed requires that the US treasury to begin in the next decade to pay off notes that are held by the Social Security trust fund. One could say Clinton "doesn't support a tax increase" in the limited sense that she hasn't put any specific tax proposals on the table. But that's only because she has kicked the decision-making down the road until after the election, when she plans to appoint a bipartisan commission that will make recommendations on the best plan for meeting Social Security's obligations - recommendations that will no doubt include some revenue increases.

Her tactic for answering Social Security questions during the campaign has been to duck the question about long-term challenges by changing the subject back to the broader question of Republican fiscal irresponsibility. Here's what she said at Drexel:

Q: Did you say you would consider lifting the cap perhaps above $200,000?

A: I have said consistently that my plan for Social Security is fiscal responsibility first, then to deal with any long-term challenges. We would have a bipartisan commission. All of these would be considered. I do not want to balance Social Security on the backs of our seniors & middle-class families. We have to move back toward a more fair and progressive tax system, and begin to move toward a balanced budget with a surplus.

That sort of dodgy, scattershot response is typical of her. Whenever some question gets too close for comfort, she tries to use it as a springboard to launch into a non-responsive, generic criticism of the Republicans, throwing red meat at her Democratic audiences in the hope they will get worked up and excited and won't remember what the question was. She also loves the "I don't want to reveal my hand" non-response, which has she used before as her excuse, for example, for not answering questions about dealing with Iran. At Dartmouth, the Social Security exchange went this way:

Q: Would you raise the cap for Social Security tax above the current level of the first $97,500 worth of income, or take that off the table?

A: Well, I take everything off the table until we move toward fiscal responsibility and before we have a bipartisan process. I don't think I should be negotiating about what I would do as president. You know, I want to see what other people come to the table with.

So she is taking it off the table until the magic "bipartisan process" tells her to put it back on the table. At Howard, back in June, she was, however, more willing to explicitly float the idea of raising the payroll cap.

Q: Do you agree that the rich aren't paying their fair share of taxes?

A: Middle-class and working families are paying a much higher percentage of their income. [Billionaires like] Warren Buffett pay about 17%, because don't forget, it's the payroll tax plus the income tax. And when you cut off the contribution at $95,000, that's a lot of money between $95,000 and the $46 million that Warren Buffett made last year. We've got to get back to having those with the most contribute to this country.

I have to say, there is a certain level of hysteria and demagogic foolishness surrounding the Social Security issue on the Democratic side, as though the only two options are (a) crisis requiring radical Republican-style reform and (b) magic and perpetual money flows requiring no adjustments to the funding system.

Senator Obama is being criticized, rightly, for resurrecting a Republican issue (social security) in a Democratic contest. It makes no sense to make the social security system, which will be fiscally sound for thirty-four years, a central campaign issue when the American people are faced right now with a broken health care system, ongoing wars which are fiscally and physically draining, and global warming which could soon be devastating to American farms and communities. And other things, like the trashing of the Constitution by an autocratic president and ongoing international challenges.

Oh, but real issues aren't important. Let's argue about the tax cap on social security even thought here's no problem. It'll get everyone's mind off the real issues, which are difficult ones to win an election on, and allow everyone to focus on a non-issue that some brilliant political spinmeister pulled out of a focus group session somewhere.

If we've gotten to the point where we can't even discuss changing the regressive funding structure for Social Security because to do so would be to suggest there is a "crisis", we have truly entered a crazy and irrational political dreamland. -- Dan

We have and you bloody well know it. The right still controls the debate practically across the board, and this is no time for Obama to be making social security the "centerpiece" of his campaign, as one of his supporters said after the debate.

Clinton and Obama are the top 2 recipients of money from the finance industry. We shouldn't trust either of them.

I wonder that no liberals here (I exempt from that label the sincere "I hate America" types) have thought to consider the fact -- and it is nothing more or less than that -- that the greater the share of tax revenues directed at entitlement programs, including Social Security, the less will be available to fund discretionary federal programs.

This isn't ideology. It's simple math. Of course we can sustain Social Security, without cutting benefits for rich people, as long as we increase taxes on rich people, a little. But we don't have to speculate what this would mean to the discretionary, domestic part of the federal budget. We've seen it already, beginning 20 years ago with the Gramm-Rudman budget controls that placed the whole burden of limiting the growth of federal spending on the discretionary programs outside the Pentagon. Gramm-Rudman didn't touch Social Security, or Medicare, or defense spending, and because it didn't, excess government spending was defined as spending on agencies like the Customs Service, the Housing Department and the Geological Survey.

Is Social Security in crisis? Depends on whether you view the program in isolation. If you do, and assume it should have absolute priority on tax revenues, of course it isn't. If you don't, it may not be in crisis, but it is certainly part of one.


Social Security is not a Republican issue. Social Security privatization is a Republic issue. Social Security itself is and has always been a classic Democratic issue. It remains a Democratic issue because the Democrats have always done the most to assure the public that Social Security will always be there, while Republicans have made worrisome noises about altering or abolishing it. Democrats should continue to step up with proposals to strengthen and perpetuate Social Security, maintain benefit levels, keep the retirement age where it is, etc.

You say that Social Security will be fiscally sound for thirty four years, and therefore it's not an important issue. Well, sure, that's because even after the Social Security tax revenues start to fall short of payments in just over a decade, the fund can make up the difference with moneys that are owed to it. Somebody does indeed owe the government's Social Security trust fund money. The government owes the government money. That doesn't mean there is a crisis. The government has always made good on its bonds, and will make good on these. But the fact that we know the government will pay off its obligations to itself doesn't mean the sources of the revenue stream to pay those obligations already been worked out. They haven't been.

Even more concerning is that once the treasury notes are exhausted in 30 or 40 years, the fund will very likely go quickly into a a major shortfall under reasonable demographic projections. That suggests we need to do something now, like we did in 1983, to plan for that future. Perhaps we need to generate another substantial trust fund surplus so we can purchase more treasury bonds. But according to the Congressional Research Service, if all earnings were subject to the payroll tax, the Social Security trust fund would remain solvent for 75 years.

Maybe 35 years sounds like it's so far in the future, it's not worth doing anything about. It might sound that way to people like me. I'm 48, so 35 years of solvency sounds great to me. But it doesn't sound like much of a plan if you are between 20 and 35. In fact, Social Security is a huge issue among that age group, and not just because they have been taken in by Republican "memes" or "talking points". They actually do know whats going on, and are concerned the boomers are going to stick it to them.

The candidates aren't at all clueless on this issue - at least not as clueless as people like Klein and Krugman would like them to pretend to be. They all have some sort of plan. Obama is hardly the only Democratic candidate talking about raising the payroll cap. Biden wants to do it, Dodd wants to do it, Kucinich wants to do it, and Edwards wants to do it. Here's what Edwards said in September:

Q: Can you grow your way out of the Social Security crisis?

A: No, sir, you cannot. You cannot solve this problem just by setting up a bipartisan commission. All of us are for that. You cannot solve this problem just by growing the economy. All of us are for that. But the American people deserve to hear the truth. They have heard so much politician double-talk on this issue. That's the reason young people don't believe Social Security's going to be there for them. Why would you possibly trust a bunch of politicians who say the same thing over and over--"We're going to grow our way out of this"--but nothing changes. The honest truth is there are hard choices to be made here. The choice I would make as president is on the cap. But I don't understand why somebody who makes $50 million a year pays Social Security tax on the first $97,000, and not all the rest, while somebody who makes $85,000 a year pays Social Security tax on every dime of their income.

Recently, though, Edwards says he wants to have some sort of protective window. People making $97,500 and below are taxed on all their income. Those making between $97,500 and 200,000 are taxed only on the portion below $97,000, and then those above $200,000 are taxed on all of it again. Sounds bizarre to me. There is no real logic to this proposal, and it's not markedly progressive. Why does only the middle group get an exemption on some of its income? I guess this is the modern Democratic party, where the chase for votes from the sacred upper middle class is paramount, and we fund our obligations with regressive taxes on the lower 2/3 of society.

What's Clinton's proposal? She proposes a magic commission that is going to decide for her - and us. Clinton is going to let a panel of Democrats and Republicans decide how to raise the revenues, how to manage the demographic crunch and how to adjust benefits. Of course, that middle of the road commission might decide to cut benefits or raise the retirement age, two thing that Obama has pledged not to do.

Obama is stepping up with a proposal and Clinton is demagoguing the issue, which is unsurprising. Klein and Krugman think the Democrats should continue to demagogue the issue. After all, why tell any voters before an election that you might raise their taxes, when you can just duck the issue and kick it down the road, and then raise their taxes later.

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