Saturday, February 07, 2004

Political Survey Part 5-
Social Security,  War on Terrorism, Judicial Nominees

This is part five of my response to Representative Nick Smith's survey of his constituency.  The first one contained comments about the methodology of the survey.  Since then, i have been looking at one or two questions at a time, not responding just responding to the limited choices, but providing a more detailed response along with the rationale.  And throwing in a little political commentary. 

Social Security

The Social Security trustees expect benefit payments to exceed tax revenues by 2017. Reforms will be necessary to keep this important program solvent.

6. What is the best approach?
Raise payroll taxes.
Find ways to reduce benefits, such as increasing the retirement age or limiting cost-of-living increases to inflation.
Raise returns on Social Security funds by having government invest in private bond and equity markets.
Allow workers to own a portion of their payroll taxes for investment in safe and diversified bond and equity funds.

I am a little biased in this, having read Suskind's book, The Price of Loyalty.  Paul O'Neill argues persuasively that some investment in equities would be extremely helpful.  His calculations indicate, though, that there would be a substantial up-front cost to fund the transition.  Substantial as in a trillion dollars, if I remember correctly.  There are many reviews of this subject available online.  One from the CATO Institute raises some important issues, although the paper itself in mostly a polemic against Leiberman and Daschle.  The most important point they raise is that the current system is not going to work and something has to be done.  The CBO published on this subject in 1998.  The date is important because it was written before the 43rd President took office.  The CBO paper does not estimate the transition cost, but it does pose the vexing question of how the transition cost should be apportioned among the generational cohorts who are are who are to be Social Security Recipients. 

Because of the deficit in the federal budget, it is not clear that we can afford the transition cost.  This no doubt is one reason that Nick Smith and many others are upset about the current Administration's fiscal policy. 

Assuming that the deficit problem is solved in time for a transition to a fully or partly privatized Social Security system, I would support such a move.  Exactly how to do this would require more expertise than I have, but of course I do have some opinions on the matter.  I have grave concerns about the wisdom of having the US government make massive investments in the private bond and equities markets.  There would be a high risk for insider trading, political favoritism, and various other scandals.  Such a scandal could devastate the market, not to mention the economy of the entire planet.  Allowing workers to own a part of their social security, and for the individual to direct the investments, also poses serious risks.  In the latter scenario, though, the risks are to the individual, not so much for the entire world.  Therefore, I would favor the last option in the list.  This would entail two major sources of risk.

For one, knowing human nature as I do, I would bet that there already are people who are scheming about how they would take advantage of (read: rip off) the system if a major change is made in Social Security.  Therefore, whatever path is chosen, it would be crucial to enact preemptive legislation and regulations.  As distasteful as it would be to write more rules and regulations, this would be an essential part of the process.

The general concept is this: money tends to flow along certain paths, say, from A to B.  If you change the path so that money flows from A to C, you can bet that there will be crowd of people trying to figure out how to step in between A and C to rake in some profits. 

The second source of risk is more abstract.  Social Security never has been privatized before.  I am sure that any economist could come up with projections to show how privatization would alter the world economy.  But all of them would be guessing.  The fact is, we do not know what it would do to the market in the US, and the overall world economy.  My guess is that it would be beneficial.  More people would have to take a direct interest in the state of the economy in general, and the health of businesses in particular.  If more people care, fewer bad things should happen.  It very well could lead to an increase in the pro-business proclivities of the population.  So long as that leads to greater social good (retirement security), that would be a good thing.  If it leads to an overall abandonment of environmental protections and SEC oversight, that would be a bad thing.  My hope would be that most people would choose to invest in broadly-diversified index funds.  If so, there should not be too much risk of people in general becoming overly avid in their pro-business, short-term-profit-minded attitudes. 

War on Terrorism

Since the attacks of September 11, the government has taken a number of steps to fight terrorism, including higher security at vulnerable locations in the U.S., invasions of Afghanistan and Iraq, increased military and intelligence gathering efforts targeting terrorism, greater international collaboration on intelligence and operations to control terrorism, stricter immigration standards, and greater law enforcement and surveillance efforts inside the U.S.

7. As a result of these efforts, do you think that we're:
Winning the war on terrorism and feel safer.
Losing the war on terrorism and feel less safe.
About the same.

8. In the Middle East, what should be the most important priority?
Establishing a democratic Iraq.
Reducing U.S. responsibility and control in Iraq by securing greater United Nations and international cooperation.
Withdrawal from Iraq as soon as possible.
Continue aggressive U.S. effort to hunt down terrorists.
Securing peace between Israel and Palestine to reduce Islamic unrest.

First, number 7.  I feel a little more safe, but not very much.  There are too many points of vulnerability for us to protect everything.  Take last summer's widespread power outage.  That demonstrates that a few sticks of dynamite, set on several major power transmission towers around the country, detonated all at once, could take down most of the power grid.  Or the mad cow thing.  If someone got a hold of BSE prions and spread them around to just a few widely-separated ranches, it could take out an entire industry.  These sorts of things would take some significant technical expertise to pull off successfully.  It also would take someone who is both smart enough to know how to do it, and dumb enough to actually try.  As for whether we are winning the war on terrorism, well, we've one the battles so far, but we're going to loose one sooner or later.  This gets back to the issue of sound fiscal policy.   We need to have a strong economy, with no deficit, in order to be able to absorb the economic impact of the next major attack.

The online version of question 8 allows for only one response: the highest priority one. The mailed version asks the respondent to rank the risks in order from 1 to 5.  I think the first priority is the establishment of a democratic government in Iraq.  This is my opinion, because now that we have gone in and taken out the government, we have a moral responsibility to clean up the mess.  The second priority is to hunt down terrorists.  The third is to get greater UN participation, to help assure stability when we withdraw from Iraq.  The next priority is to withdraw from Iraq. 

I do not like the last option, so I am not going to rank it.  First, there is no guarantee that securing peace in the Levant will reduce "Islamic unrest."  The ongoing conflict often is cited by militants as a reason for their militancy, but it probably is just an excuse.  Even if it gets to the point that Sharon and Arafat are drinking buddies, people who want to be militant will find some rationale for their antisocial behavior.  That is the nature of antisocial persons.  Furthermore, one could argue that the problem for the US is not so much the amount of militant activity, it is the amount of such activity that is directed against us.  If we adopted an even-handed approach, favoring Israel and Palestine equally, the militants would not be able to use the conflict as a rationale to attack us.  However, I do not think it is politically possible for us to have an even-handed approach; besides, I don't really think it would make any difference.  Having said that, if there is some way we can promote peace in the Middle East -- or anywhere else, for that matter -- it would be wise for us to do so, just on general humanitarian principles.

I believe that the peace process has saved many lives, even though it is pretty much at a standstill right now.  I also think there still is hope.  Look at Northern Ireland.  Things have not really been resolved there, but lives have been saved, and there is light at the end of the tunnel.  The United States played an important role in that. 

Judicial Nominees

Our Senators are now blocking votes on all of President Bush's nominees to represent Michigan on the 6th Circuit Court of Appeals (covering Michigan, Ohio, Kentucky, and Tennessee). Because these seats remain unfilled, Michigan has less representation on the court and cases are backlogged.

9. Should the Senate change its procedure for considering judicial nominees?
No. Senators should be able to prevent a vote.
Yes. The Senate should vote to either approve or reject the President's nominees.

Question nine.  Our senators are blocking "all the votes."  That is true, sort of; the ones they did not block have already been decided.  The only ones left are the ones that are being blocked. 

One of the most fundamental principles in the structure of our Government is the concept of checks and balances.  As annoying as it is sometimes, I think it would be a big mistake to tamper with such a fundamental aspect of our system.   To use a medical analogy, that would be like giving an immunosuppressant drug.  It might be OK to do sometimes; but in general, it is a mistake.   You only do it if you absolutely have to.   Although I would like for Michigan to have greater judicial representation, and I feel bad for the people whose legal cases are backlogged, neither of these facts is sufficiently compelling for us to tamper with checks and balances.  

Unfortunately, the operation of checks and balances now serves two purposes.  Originally, it was intended to balance the power among the three branches of government.  Now, it also serves to help prevent the establishment of a de facto one-party system.  That is too important to mess around with.  It doesn't matter which party is being impeded.  There always must be mechanisms in place to keep any one party from gaining too much power.  That is why it is not satisfactory to say that the Senate should vote to either approve or reject the nominees.  Although that would retain the check that Congress has over the Judiciary, it would not serve the purpose of having one party check the other.