This article was published by The McAlvany Intelligence Advisor on Monday, June 6, 2016:
Following President Obama’s statement last Wednesday that Social Security benefits ought to be expanded and made more “generous,” someone at the Washington Post thought it would be a good idea to tout the wonders of that welfare state program. Rather than pick someone with some credentials as an economist, even a liberal one, the Post instead picked Jared Bernstein (above) to do the honors. Which he did:
– Social Security provides a guaranteed, progressive, inflation-adjusted benefit,
– More than 40 percent of the elderly would be poor without Social Security; with it, 10 percent are poor,
– Social Security is a highly efficient program, with administration costs of 0.7 percent of annual benefits,
– Its benefits are already modest, both in absolute terms and relative to those of other advanced economies, and
– Social Security provides particularly needed support for minorities.
How someone can look at a program which is insolvent, is increasingly eating up its reserves in order to pay current beneficiaries, part of which (the Disability Income fund) will run out of money in October, and explain that the program is working just fine, that it’s “efficient,” that it provides support for the poor, the middle class, and minorities, and can be paid for by raising the taxes on the super-rich by removing the present $118,500 annual income cap altogether, can only be explained by using someone who has no real world experience, has been educated beyond his intellect, or who has been selected for his ability to write rather than his ability to think.
Bernstein fits in there somewhere. Educationally, his formal education consists of a Bachelor’s degree in Fine Arts from the Manhattan School of Music where he played the Double Bass, a Master’s degree in Social Work from the Hunter College School of Social Work, another Master’s degree from Columbia University in Philosophy, along with a Ph.D. in Social Welfare. In other words he spent not one credit hour studying anything that looked like real-world economics.
Experientially, upon graduation he started teaching economics at Howard, Columbia, and New York Universities on such topics as “the middle class squeeze,” “income equality” and “poverty.” After that he joined the left-wing Economic Policy Institute (EPI) as a senior official. For a couple of years Bernstein served as Deputy Chief Economist at the Labor Department and then joined Vice President Joe Biden’s staff as Chief Economist and Economic Advisor. At no point, in other words, did Bernstein spend a single day in the private sector learning how things work in the real world, nor did he ever have a brush with anything other than Keynesian economics.
But Bernstein has lots of company. Liberal-left progressives celebrated Obama’s about-face on Social Security as a huge victory. Three years ago Obama had the audacity to suggest that possibly, maybe, perhaps the Cost of Living Adjustment (COLA) was a little too generous, and that, in its stead, something called the “chained-CPI” be used instead. Liberals went crazy, inundating the White House with petitions containing millions of signatures and calling him a turncoat. The “chained-CPI” was very quickly dropped down George Orwell’s Memory Hole.
Clinton tweeted: “We can never let Republicans cut or privatize Social Security – we should protect and expand it. Thanks, @POTUS.”
Bernie Sanders was even more enthusiastic: “I applaud President Obama for making it clear that it is time to expand Social Security benefits. Millions of seniors, disabled veterans and people with disabilities are falling further and further behind on $10,000 or $11,000 a year [from] Social Security.”
The reality, of course, is vastly different. The program is insolvent. Even its trustees say so, pointing out in their latest report that it is underfunded by a staggering $24.5 trillion. But that is only Social Security. According to Boston University Professor Laurence Kotlikoff, when all the government’s promises, including Social Security, are added together, the “fiscal gap” – the difference in present value terms between the government’s expected revenues and its financial commitments – is instead a towering $210 trillion. According to Kotlikoff, a modest tweaking of taxes on the rich simply isn’t going to cut it. He wrote:
Eliminating [the fiscal gap] would require an immediate, permanent 59 percent increase in federal tax revenue [or] an immediate, permanent 38 percent cut in federal spending….
Kotlikoff has the credentials that Bernstein lacks. He is the William Warren Fairfield Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a Fellow of the Econometric Society, a former Senior Economist, and served on President Reagan’s Council of Economic Advisers.
Only an economic dunce without a lick of real world experience or any brush with common sense economic thinking could defend a program that perfectly exemplifies Margaret Thatcher’s position on Socialism. Passing Obama’s dream will only hasten its end.
Talking Points Memo: President Obama Proposes Expanding Social Security Benefits
Huffington Post: President Barack Obama Backs Expanding Social Security
Professor Laurence Kotlikoff: America’s Hidden Credit Card Bill
Margaret Thatcher quote: The problem with socialism is that you eventually run out of other people’s money.