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“Social Security: Is It Really A Crisis?” A Debate w/ Paul Krugman, Michael Tanner, Josh Michah Marshall

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We play excerpts from a recent debate on social security between New York Times columnist and Princeton economist Paul Krugman, Michael Tanner of the CATO Institute and Josh Micah Marshall of [includes rush transcript]

President Bush’s approval rating has reached an all-time low in his presidency. And he has made 2 major miscalculations in the last month. One is his involvement with the Schiavo case where it turns out the overwhelming majority of people are opposed to congressional intervention which Bush approved, flying back in the middle of the night from vacation in Crawford to sign off on Congress’ legislation. Add to that social security and his ill-fated 60-city tour, his ratings are at an all-time low. The Schiavo case was clearly a serious miscalculation for Bush, and the majority of Americans do not buy his social security privatization plan. A Washington Post/ABC News poll found that 55% percent of Americans oppose his plan. Recently in New York, a debate was held at the New York Society for Ethical Culture. It was called “Social Security: Is it Really a Crises?” It featured New York Times columnist Paul Krugman, author of “The Great Unravelling: Losing Our Way in the New Century,” as well as Josh Micah Marshall who runs the website We begin with Michael Tanner from the CATO Institute. Under his direction, CATO launched the Project on Social Security Choice, advocating privatizing social security.

  • Michael Tanner, directs research on new, market-based approaches to health, welfare, and other entitlements at the CATO Institute. Under Tanner’s direction, CATO launched the Project on Social Security Choice, widely considered the leading impetus for transforming the current system into a private savings program.
  • Paul Krugman, professor of economics and international affairs at Princeton University. He is a columnist for the New York Times and author of 20 books, including “The Great Unravelling: Losing Our Way in the New Century.”
  • Josh Michah Marshall, he is a contributing writer for the Washington Monthly, a columnist for The Hill, and runs a website,

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: Recently, in New York, a debate was held at the New York Society for Ethical Culture. It was called “Social Security: Is It Really a Crisis?” It featured New York Times columnist, Paul Krugman, author of The Great Unraveling: Losing our Way in the New Century, as well as Josh Michah Marshall, who runs the website, It began with Michael Tanner from the CATO Institute. Under his direction, CATO has launched the Project on Social Security Choice, advocating privatizing Social Security.

MICHAEL TANNER: Social Security debate is clearly one of the most important public policy issues to face our country in a long time. I think we have reached the point in this debate where any reasonable person understands that Social Security reform is not an option, but a necessity. The simple facts are these: in less than 15 years, Social Security will begin to run a deficit. That is spending more money on benefits than it takes in in revenue. Overall, Social Security is facing unfunded obligations of close to $12 trillion. That’s trillion with a t. That’s real money, even in Washington. Now, we can have semantic debates forever about whether or not this constitutes a crisis or simply a big problem. We’ll probably hear such a debate tonight, but I would like to suggest that that is not what we’re really talking about, neither a crisis nor a problem, but rather, an opportunity, an opportunity to create a new and a better retirement program for America’s future. A program that would give America’s workers ownership and control over their money. I think most people don’t understand that under the current Social Security system, you have no legal property or contractual right to your benefits whatsoever. The Supreme Court ruled in a case called Fleming v. Nestor that Social Security taxes are simply a tax like all other taxes, and the benefits provided by the Social Security system are simply a government spending program like all government spending programs, and that there is no connection whatsoever between the two. Congress is free to change your benefits, reduce them or take them away, and in fact, Social Security turns us all into supplicants, that if we work hard, play by the rules, pay our taxes, then when we get to be age 65 or 67, we can go hat in hand to 535 politicians in Washington and ask them to give us some money to retire on, and we’re asking them to do this in a system that is nearly $12 trillion in debt. This is a system under which workers, because they have no ownership of their money, if they die prematurely, they cannot pass that money on to their heirs. So, think of the single mother working maybe two jobs to try to make ends meet, paying 12.5% of her income in Social Security taxes, and at age 59 or 60, she dies, and her children are over the age of 18, so they’re not eligible for survivors benefits, what happens to all of the money that she has paid in to Social Security over the course of her lifetime? It’s simply gone. Lost. None of that money is passed on to her children, that they could use to go to college or start a small business. We have a system today in which middle and low income people cannot accumulate a nest egg of real inheritable wealth. But we have a proposal now before us which would change Social Security and make it a better system, a system in which workers own and control their money, in which their benefits are not at the whims of politicians, and which no politician can ever take away. That’s the stark choice that we face when we talk about Social Security reform, because if all we care about is solvency, I’m sure we can raise taxes yet again as we have done some 40 times since the program began, or we can cut benefits yet again as we have done repeatedly. And we can make young people pay more and get less. But if we really care about our children and our grandchildren, and we really want a better future for all working Americans, then we should give workers ownership and control over their money, because it is their money, not the government’s, and it belongs to them, and it should belong to them now and in the future.

AMY GOODMAN: Michael Tanner of the CATO Institute in a debate at the New York Society for Ethical Culture. When we come back, Paul Krugman of The New York Times responds followed by Josh Marshall.


AMY GOODMAN: We return to the debate at the New York Society for Ethical Culture, around Social Security. After Michael Tanner of the CATO Institute spoke, Paul Krugman followed, Professor of Economics and International Affairs at Princeton University, columnist for The New York Times, author of 20 books, including The Great Unraveling: Losing Our Way in the New Century. Paul Krugman.

PAUL KRUGMAN: Let me just first say what Social Security is, and just repeat — it is not a pension fund. It is not an investment project. It’s a social insurance program. It is a — it’s something that is there to protect people against misfortune. Now, it’s a big social insurance program. It is in fact the principle source of retirement income for many, many people in the United States. But it’s — you need to think of it always as, in fact, being social insurance. Now, it fulfills that function very well. Michael Tanner talks about the 59-year-old person whose children are adult who receives nothing if she doesn’t — if she passes away, and this is true. There’s a reason for that, which is those are 18 — those are children who are working age. They can take care of themselves. We might like them to have more, but, you know, this is not what the program is for. Think, instead, about the 35-year-old working man with a traditional family, wife hasn’t worked, hasn’t paid into the system, several, maybe many children, is hit by a bus. Social Security provides a lot of benefits for that person. It provides a lot of insurance for the kind of person who is — who is really in need. Or worse yet, the 35-year-old working man who is not killed, but hurt, and Social Security is a disability program. It’s worth pointing out, survivors in disability benefits are very crucial. No program that is basically about accumulating wealth for yourself is going to provide the survivors and disability benefits. By the way, we do not have a clear explanation of what will happen to those. One of the important things to point out is that there is no plan. At least, there is no public plan. We have not been given any details. We’re sort of trying to guess. The President says he won’t negotiate with himself. Well, you know, I — it makes you wonder why there’s a demand that the Democrats produce a plan when the Administration won’t tell us what its plan is.

Second thing to say, Social Security’s funding, what is the scale of the problem? Well, now, this is a social insurance program that is paid for by a dedicated tax. There are a certain number of government programs, the Highway Trust Fund. The highways are paid for by specific dedicated revenues. There are always two way to think about that. One is you can think about it as a stand-alone project, in which case there is a problem, crisis, whatever you wanted to call it, if the dedicated tax is not bringing in enough to pay for the program, and the other is you can just think of it as part of the Federal Budget as a whole and say, look, it’s all part of the same thing. Both views have meaning. As long as Social Security by itself is taking in enough money and has enough money in the trust fund, then there is no action-forcing event. Then you don’t have to do anything to keep it going. And if we look at that, well, we say Social Security on the very conservative estimates of the Social Security Administration is good until 2042, on that basis. But the Congressional Budget Office says ten years more. The point is that the program in itself is not — there is a problem, perhaps a long-term problem, in the funding but it’s not particularly — it’s not particularly large. On the scale of things, let’s just remember that if we believe the Social Security Administration’s rather downbeat forecast, in 2042, the Social Security — the payroll tax will be taking in only 73 cents for every dollar of promised benefits. Right now, the Federal Government, actually, fiscal 2004, the Federal Government outside of Social Security, was taking in 68 cents of revenue for every dollar of spending. So I don’t think we can get really upset about the notion that — yes, you get the point. I guess I don’t need to finish that sentence.

There’s also — the broader issue, of course, is well, you know, but this is — of course, the Trust Fund is a claim by one part of the government on the rest, and there can be a problem even if Social Security has money in the Trust Fund, if the Federal Government as a whole is bankrupt, then we have a problem. We have a fiscal crisis. We have a fiscal crisis. But that doesn’t make any sense to call it a Social Security crisis. In fact, if your view is it’s just a Federal Budget, then it’s just a Federal Budget. We don’t talk about the deficit of the Defense Department. It’s just part of the whole thing. We are very much at risk of having a fiscal crisis, but — and the rising payments to retirees is a small piece of the reasons to be concerned, but it’s a small piece. It’s dominated by, first of all, the deficit we’re running right now, which has nothing to do with Social Security. Secondly, by the problem of medical cost, and that’s a whole different debate where I think we are probably ideologically incapable of talking about a sensible solution, and retirement is a really, really distant third in that whole issue. So, it’s just — it’s just as no Social Security crisis.

Now, just the last thing to say here, I think, is that this is not a debate about the solvency of the program. The — in fact, I — actually, I’m rather relieved. Michael Tanner has given a talk that allows us to have a more intelligent discussion than we might otherwise have. The whole crisis — the system is unsustainable, disaster thing — is all aside from being, I think, wrong, is also a — it’s a bait and switch operation in terms of this discussion, because the issue on the table, which is whether we’re going to privatize this thing, has nothing to do with solvency. It’s all about are we going to convert this from a system of social insurance to a system which is really just a big 401(K), which has a lot of problems along the way, and we may get into those, but this is really a debate about whether you want to eliminate the role of government as providing a sort of basic level of retirement income, basic level of disability benefits, basic level of survivor benefits. I think there’s a reason why that is not the way it’s usually phrased, because if you put it that way, the fact is the public will say no, will say no to the change, will say this system has worked, that they do not want to change it to something different, which is, I think, what we’re finding right now. But in any case the point is let’s talk about what the real issue is, let’s talk about, as our moderator said, let’s talk about what kind of society we want to be. Thanks.

AMY GOODMAN: New York Times columnist, Paul Krugman. The final speaker in the Social Security debate was Josh Michah Marshall, a contributing writer for The Washington Monthly and columnist for The Hill, and runs a website called This is Josh Marshall.

JOSH MICHAH MARSHALL: What happened? The President was just re-elected. He has expanded majorities in both Houses of Congress. Michael’s former colleagues are hived in all over the Executive Branch and the Social Security Administration and at the White House, and Paul is a voice crying out in the wilderness on The New York Times Op-Ed page. So, what happened? We heard about this political capital, and yet, if you look at where this debate is right now, Social Security privatization isn’t dead, but it is — because it’s really not dead until the President says it’s dead, but it’s about as close as it could be without being dead. So, what — so what happened? And why did the White House go down this path, if it is faring so poorly? I think what happened — the first thing that happened is that Karl Rove and President Bush did the thing — allowed the thing to happen that is most dangerous in politics, which is you fall for your own spin. Over the years, I think that many Republicans, and President Bush particularly, decided that this was a popular reform, and the way they did that was by doing basically what Michael just did: put the best case forward for what you get. You have ownership. You can pass, you know, equity you build up to your heirs and so forth. Michael never mentioned benefit cuts, cuts in your guaranteed benefits. And when you say that, support for the whole thing drops, drops rapidly. I think what happened is basically the White House really fooled themselves into thinking this would be far easier than indeed it would be. They still knew they would have to rush it through, but they basically — that’s the first thing. The second thing is, and Democrats did this very quickly, is their party unity took away all of the political cover, and it was really going to be up to Republicans to make privatization an entirely Republican enterprise, and they were too afraid to do it, because a lot of those representatives could see how their constituents were going to react and so forth.

And the final problem they hit or misapprehension they had, is that the White House’s political interests in this debate are very different from the Congressional Republicans’ political interests in this debate. Here’s what I mean. President Bush isn’t running for office again. Obviously. If he can — but if he can do this, if he can pass Social Security privatization, that really will be — that will make him a, if not in the evaluative sense, in a descriptive sense, one of the great presidents in terms of influence, in terms of the effect that he has had on this country, if he were able to do this. So, for him, for the White House, the stakes — the upside of success in Social Security privatization in terms of the conservative movement, conservative ideology and so forth, and just ego, the Bush Presidency, the upsides are boundless. The downside is also almost bottomless, but high stakes on both sides. For Democrats, similar. Everything is on the line for ideological reasons for Democrats. On the other hand, if they can stop him in his tracks, you know, it’s very good for them. The problem is, and I think this is another problem the White House didn’t figure on, is that the stakes are very different for the Congressional Republicans. For them, it’s basically like this. They have a good thing going. They have majorities in both Houses of Congress. They have a money machine built up that makes it very hard to displace those majorities. If the President succeeds with privatization, you know, that’s fine. That’s great. They’re into it at some level of political belief. But it’s not going to really change the good thing that they have going politically. If it goes badly, they could lose everything, and so you have again a situation where the two primary opponents here, the Democrats and the White House, very high-stakes gambit on both sides. The group that the White House needs to carry the water for it, to vote for this, to actually make it happen, nothing to gain and tons to lose. And I think those three things together have really brought it to the point that we’re at now. Paul made the point, people like this program. I don’t think — I think in this audience, I probably would get a lot of hands if I said, who likes the Social Security program, but I think I could go all across the United States, and as long as I wasn’t at a Federalist Society meeting or something like that, I would get the same thing. And that’s really what it comes down to. This is not a popular reform when it’s explained in a complete and straightforward way. That’s why it’s at the moment at least on life support.

AMY GOODMAN: Josh Michah Marshall, contributing writer for The Hill, and as well, The Washington Monthly. And he runs a website called He was following Paul Krugman and Michael Tanner, debating Social Security at the New York Society for Ethical Culture.

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