February 2005

A Couple Things About Social Security

The most disturbing argument to date I heard on Diane Rehm the other day from David Keene of the American Conservative Union. Keene tried to argue that the money in the trust fund was a problem in paying back itself.

Now, this is a significant issue of confusion for most people. The money in the trust fund simply holds the money that is over and above what is being paid out now, but is the safest investment you can make. Make no mistake about it, most of the current expenditures in SS come from current payees into the system. The extra is then invested in government bonds.

Keene suggested that money couldn’t be paid back without deep affect on the federal budget–but that is grossly stupid to say unless one expects the federal government to default on its debt.

Federal bonds are sold to finance federal debt. Bond holders can be the guy down the street or foreign investors who take the bond as a safe investment because no one expects the US Government to default on its debt or devalue its currency so greatly that dollars become worthless. The dollar is now like gold was in years past.

So the extra money in the system is invested in bonds. To recover that money the federal government has to either pay back bonds without reissuing new ones or just issue new ones.

If they federal government cannot pay back bonds or issue new ones for social security, the country would be defaulting on its public debt which would have catastrophic implications for the global economy.

It does mean that when those bonds begin to be used for social security that if they can’t be retired–as a huge deficit has ensured is likely to be the case, then other borrowers must be found. Right now that isn’t a problem and other than having to adjust the rate paid to bondholders to loan the US money, it shouldn’t be a problem in the future.

Keene completely misunderstands or misrepresented this basic idea of how the government pays its debt. If the President is indeed suggesting that debt is not good as Keene did, that would be impeachable. Those who suggest the Trust Fund is illusory are proposing something that is unimaginable to the US economy.

Keene is economically incompetent or purposefully misleading people. Dionne let’s him off the hook too easily in the bit.

Many Reasons to Oppose Social Security Privatization

Atrios has a couple good posts for those who gloss over at the discussion of actuarial predictions, but I’ll introduce a different reason.

The many economic problems created by social security privatization aren’t nearly as bad as the likely political problem created by social security privatization. No system of private accounts can guarantee the same level of support for beneficiaries as the current system can. At best, such a system will be uneven, as is the basis of any system with increased risk. But what happens when retirees find that they don’t have enough to pay bills?

Two things to think about here.

1) Who votes?

Answer: Old people

2) Who else votes?

Answer: Middle aged people who really don’t want their elderly parents moving in.

So what does any government elected from the two groups above do?

Answer: Make them happy.

So when a bunch of bad decisions are made by private account holders or the government depending on the mechanism and there isn’t enough to support seniors how seniors were supported previously, the logic of political action is that the government will move to make benefits similar to those before and hence, blow a hole in the budget again and regulate the investment mechanisms being used then more.

So if you want the government more involved in the stock markets and how they operate beyond fixing information assymetries, push a privatization plan and wait to become more like France.

Mike Kelleher Headed to Georgia

No, not Atlanta, but T?bilisi. He’ll be working for the National Democratic Institute (NDI) for International Affairs. He’ll be training civic leaders in the institutions and processes of democracy.

NDI has done a great job in Eastern Europe and someone like Mike will be a great fit. Robin Carnahan, now Missouri’s Secretary of State, was involved in NDI. In addition, it was a critical voice during the recent elections in the Ukraine.

Best of luck to the Kellehers.

You Better Watch It…

Or I’ll close down a bridge that’s been closed for over 3 years.

The Officer threatens the powers that be on minority contractors and says if you don’t listen to him, he just might shut down the McKinley Bridge if enough contracts don’t go to minority firms.

The problem is identified in the last paragraph of the story:

“We simply will not tolerate this vast sum of public money being spent right here in the heart of our economically deprived communities and our residents being shut out of work,” Officer said in a written statement. “If necessary, we will shut down the McKinley Bridge.”

Mary Lamie, regional engineer for the transportation department, said her agency was working closely with Halverson on hiring subcontractors.

Illinois closed the 95-year-old toll bridge in October 2001 for safety reasons.

When Lack of Regulation Inhibits Freedom

One of the great mistakes by those who often claim to be for free markets is that they don’t seem to realize that all sorts of market conditions lead to markets not being free.

Example numero uno: Enron

In the brash language that has become a familiar coda to the electricity crunch, Enron traders and others were captured discussing in e-mail messages and telephone conversations how they could profit from the state’s problems.

In one transcript released Thursday, an Enron trader identified only as Bill called it “a good plan” to shut down a small Las Vegas power plant on Jan. 17, 2001, under the guise of “checkin’ a switch on the steam turbine.” Enron employees also suggested that their plans to exploit Western energy markets predated the meltdown of 2000 and 2001, which brought record electricity prices and emergency blackouts.

Being for deregulation often results in less free markets though it is pro-business in terms of the business with the control. Democrats have let this escape as a theme in the last couple years, but the reality is that capitalism requires a referee that can make sure no one is gaming the system.

Describing an unfettered market as free is like describing a state of anarchy as free. That freedom only exists until someone uses a club to create a hierarchy and Enron had that club.

I Love It When a Plan Comes Together

I mean, who could have thought we could create a giant block of Shiite authority right in the middle of the oil producing Middle East?

For those who think it’s pretty cool to show off their purple thumbs, the foreign policy problems created by having a friendly government to Tehran in Baghdad should give you pause.

Even more troubling is that the non-Kurdish Sunnis are certain to be underrepresented. While the grand talk of democracy is great, it might have been a good idea to try and put in a circuit breaker in the institutional design that guaranteed a proportion of seats based on the block of voters in the general population.

You know, like a Electoral College or something.

No one knows where this is heading, but I’m not terribly comforted by the thought of Iran gaining a huge ally in the region at the same time some countries are trying to force its hand on nuclear weapons.

Outing Republicans

The right wing threatened it in the Leader, Petey LaBarbera takes it a step further by ‘outing’ Dan Rutherford. Is Dan gay? Well, we don’t know though rumors have long held that he is. But don’t let that unconfirmed rumor stop you from using him in your attack on gays.

In November, I wrote Mr. Rutherford asking him to answer the widely assumed questions surrounding his sexuality, and he never responded. Here is the text of my e-mail letter to him, dated 11-18:

Dear Sen. Rutherford: There is an awful lot of speculation…

…about you being a homosexual. In the interest of full disclosure, I’d like to know if it’s true, so that your constituents and others in Illinois can be better informed about you.

I believe in this day and age, this issue should not be something that is relegated to secret discussions and gossip. Indeed, the other day I had a conversation with Mike Rogers, a homosexual activist in Washington, D.C., who is in the business of “outing” any perceived homosexuals who are NOT sufficiently supporting the “gay rights” agenda (e.g., opposing “gay marriage”). Interestingly, he and his friends seek to expose only those “homosexuals” who are voting or acting publicly IN OPPOSITION to “gay rights.” This strikes me as tantamount to political blackmail, but they are forcing the issue: “homosexual” legislators now know that they could be exposed if they speak out against homosexual agenda goals. Clearly, it is not fair to a legislator’s constituents if, unbeknownst to them, he or she could be subjected to such political pressures from liberal militants.

Even I disagree with the other side’s tactics, it seems that due to an array of factors the days of “closeted” homosexuality are coming to a close. Perhaps this is best given that so many on the “gay” side seem intent on making this such a public matter.

Some time ago, Dem operatives claimed they had footage of Dan coming out of a gay bar. Now, even if such footage existed, it doesn’t make him gay. I suggested that such a move to out him was against the values of the Democratic Party. At the time, I never expected idiots like LaBarbera to pull this kind of crap, but here you go.

Dan Rutherford is smart, ambitious and clean in terms of corruption. He’s more conservative on issues like choice than I prefer, but he’s a decent guy. He deserves every consideration for statewide office. Who he loves is absolutely irrelevant to any of those jobs.

As a side note, I have put off discussing this for some time because I think it’s irrelevant to Rutherford’s public career. Given this move by LaBarbera it seems the dam has been broken and I think the focus should stay squarely on the jackass who brought it up, not on a decent office holder.

Obama Speech Voting No On Gonzalez

Floor Statement from Senator Barack Obama on the Nomination of
Alberto Gonzales for Attorney General

Thursday, February 3, 2005
Remarks as Prepared for Delivery
Thursday, February 3, 2005

A few days ago, the world watched as the seeds of democracy began to
take root in Iraq. As a result of the sheer courage of the Iraqi
people and the untold sacrifices of American soldiers, the success of
the elections showed just how far people will go to achieve self-
government and rule of law.

As Americans, we can take pride in the fact that this kind of courage
has been inspired by our own struggle for freedom…by the tradition
of democratic law secured by our forefathers and enshrined in our
Constitution.

It’s a tradition that says all men are created equal under the law –
and that no one is above it.

That’s why, even within the Executive Branch, there is an office
dedicated to enforcing the laws of the land and applying them to
people and Presidents alike.

In this sense, the Attorney General is not like the other Cabinet
posts. Unlike the Secretary of State, who is the public face of the
President’s foreign policy, or the Secretary of Education, whose job
it is to carry out the President’s education policy, the Attorney
General’s job is not just to enforce the President’s laws. It is to
tell the President what the law is. The job is not simply to
facilitate the President’s power, it is to speak truth to that power
as well.

The job is to protect and defend the laws and the freedoms for which
so many have sacrificed so much.

The President is not the Attorney General’s client – the people are.
And so the true test of an Attorney General nominee is whether that
person is ready to put the Constitution of the people before the
political agenda of the President. As such, I cannot approach this
nomination the same way I approached that of Secretary of State Rice
or VA Secretary Nicholson or any other Cabinet position. The standard
is simply higher.

I wanted to give Alberto Gonzales the benefit of the doubt when we
began this process. His story is inspiring – especially for so many
of us who have shared in achieving his American Dream. And I have no
question that, as White House counsel, he has served his President
and his country to the best of his ability. But, in my judgment,
these positive qualities alone are not sufficient to warrant
confirmation as the top law enforcement officer in the land.

I had hoped that during his hearings Judge Gonzales would ease my
concerns about some of the legal advice he gave to the President. And
I had hoped he would prove that he has the ability to distance
himself from his role as the President’s lawyer so that he could
perform his new role as the people’s lawyer.

Sadly, rather than full explanations during these hearings, I heard
equivocation. Rather than independence, I heard an unyielding
insistence on protecting the President’s prerogative.

I did not hear Mr. Gonzales repudiate two and a half years of
official U.S. policy which has defined torture so narrowly that only
organ failure and death would qualify. A policy that he himself
appears to have helped develop the dubious legal rationale for.
Imagine that. If the entire world accepted the definition contained
in the Department of Justice memos, we can only imagine what
atrocities might befall our American POWs. How, in a world without
such basic constraints would we feel about sending our sons and
daughters to war? How, if we are willing to rationalize torture
through legalisms and semantics, can we claim to our children, and
the children of the world, that America is different, and represents
a higher moral standard?

This policy isn’t just a moral failure, it’s a violation of half a
century of international law. Yet while Mr. Gonzales’ job was White
House Counsel, he said nothing to the President.

He showed no ability to speak with responsible moral clarity then,
and he’s indicated that he still has no intention to speak such
truths now. During his recent testimony, he refused to refute a
conclusion of the torture memo which stated that the President has
the power to override our laws when acting as Commander-in-Chief.
Think about that — the nation’s top law enforcement officer telling
its most powerful citizen that if the situation warrants, he can
break the law from time to time.

The truth is, Mr. Gonzales has raised serious doubts about whether,
given the choice between the Constitution and the President’s
political agenda, he would put our Constitution first. And that is
why I simply cannot support his nomination for Attorney General.

I understand that Judge Gonzales will most likely be confirmed
anyway, and I look forward to working together with him in that new
role. But I also hope that once in office, he’ll take the lessons of
this debate to heart.

You know, before serving in this distinguished body, I had the
privilege of teaching law for ten years at the University of Chicago.
And among the brilliant minds to leave that institution for
government service was a former Dean of the Law School named Edward
Levi. A man of impeccable integrity who was committed to the rule of
law before politics, Levi was chosen by President Ford to serve as
Attorney General in the wake of Watergate. The President courageously
chose to appoint him not because Dean Levi was a yes man, not because
he was a loyal political soldier, but so that he could restore the
public’s confidence in a badly damaged Justice Department – so that
he could restore the public’s trust in the ability of our leaders to
follow the law.

While he has raised serious doubts about his ability to follow this
example, Judge Gonzales can still choose to restore our trust. He can
still choose to put the Constitution first. I hope for our country’s
sake, he will. To start with, he should take these three steps upon
assuming his new role:

1. He can immediately repudiate the terror memos and ensure that the
Department of Defense is not using any of its recommendations to
craft interrogation policy.

2. He can restore the credibility of his former position as Legal
Counsel by appointing an independent-minded, universally respected
lawyer to the post.

3. And he can provide Congress regular, detailed reports on his
efforts to live up to the President’s stated zero-tolerance policy
toward torture.

Today, we are engaged in a deadly global struggle with those who
would intimidate, torture, and murder people for exercising the most
basic freedoms. If we are to win this struggle and spread those
freedoms, we must keep our own moral compass pointed in a true
direction. The Attorney General is one figure charged with doing
this, but to do it well he must demonstrate a higher loyalty than to
just the President. He must demonstrate a loyalty to the ideals that
continue to inspire a nation, and hopefully, the world.