Tuesday, January 06, 2009

Are Economic Arguments just Beards for Ideology?

Right now the United States is either near the trough of a recession that will yield to recovery sometime at the end of this year, or it is just at the beginning of a multi-year recession not much different than other post-war ones, or it is on the verge of a Second Great Depression. And if you are not worried about which of these paths the country is on then you just are not paying attention because it is really important that we get this right. So why would anyone even be concerned about a government program that is currently in surplus and whose problems (if any) are ten to twenty years down the road? Yet against all odds the issue of Social Security 'crisis' simply refuses to die, you think you have driven a stake through its heart and it just rises again.

In the wake of the "There is no Social Security crisis" struggle of 2005 a commenter at DeLong asked this question in re Social Security 'reform'
"What puzzles me is energy and persistence of this propaganda campaign with scant positive results."
. Well I made a stab at answering that question in that much different economic environment: Why are they so insistent? and then made the same case at greater length at AB with What does Lenin have to do with it? in May 2008. Yet in comments on my previous AB post Social Security Monthly Balances, a dry as dust reporting of some not really interesting numbers, the whole argument blew up again this time in the context of a dollar meltdown. Those interested can follow the more heat than light discussion which rapidly broke down (as almost always) in ad homs and accusations of ad homs. Personally I would advise you not to waste your time. But it does raise the same question posed by that commenter at DeLong's three-plus years ago. Of all of the possible political and economic crises that we are well and truly facing why would anyone (except obsessives like me) even enter in on a discussion of Social Security? Well I suggest it is for many of the same reasons that Congressional Republicans are threatening to derail the current stimulus package in the face of near consensus from both left and right economists that something needs to be done and that currently the federal government is the only entity with the means (and hopefully the will) to do that something. These people would rather lose the battle and take all of the resulting collateral damage than give up the war.

What follows below the fold is just a reprise of my May 'What does Lenin' post, and really just is intended as a case study to illustrate the following question. Can we ever truly separate an economic argument from the underlying ideologies? Or are we doomed to simply fight the old politico-ideological battles in new economic uniforms? Or you could ask a parallel question. Why is Amity Shlaes et all still trying to beat up on FDR?

What does Lenin have to do with it?
It is clear to me that most of the people who are pushing privatization are fundamentally opposed to Social Democratic solutions generally. There is a large group of people who never liked the New Deal, continue to argue against historical evidence that it was a fundamental failure, they hated Social Security from the start, and indeed ran against it as their central platform plank in the election of 1936. They expected it would fail, they see the various rounds of tax increases over the years as proof that it will fail. The 1983 reform was particularly bitter to them, to the point that they gathered all the anti-Social Security folk to a conference in DC organized by Cato. The results of that conference were published in the Fall 1983 issue of Cato Journal under the title Social Security: Continuing Crisis or Real Reform but which might as well been called "Never again! We'll get you next time FDR!"

You can get a flavor of this by reading through the introduction. There is zero interest expressed in the idea that worker retirement be in any sense a social responsibility long term, instead Social Security is described entirely in terms of diluting investment and retirement planning and of increasing the ratio of labor costs to capital. Most telling is point 2 of their 8 point conclusion:
"2. Social Security is ultimately a manifestation of the welfare state. Real reform, therefore, may require constitutional change that effectively limits the taxing and spending powers of government."
The Cato types see it as welfare, they disagree with government welfare programs in general, and would like to see all of them vanish over time. To use the words of Newt Gingrich to see them "wither on the vine"

Now in reading this from 1983 you can see that these people, while a little bitter at missing their shot in 1982 when Social Security crisis hit, were convinced they would get another shot at some point. But they also saw they needed more than hope. They needed an alternative vehicle and they needed a plan. They had the alternative vehicle, the IRA-the Individual Retirement Account, and they got busy pushing those. But they also understood they needed to win the message war, and so they turned to strategy crafted by Stuart Germanis and Peter Butler. On the title page of the journal the article title was softened somewhat by prefacing it with 'Social Security Reform: but the article itself's title page was more blunt Achieving a "Leninist" Strategy. While they had the minimal grace to put Leninist in scare quotes a reading of the whole article revels that they meant it. At a certain risk to free use doctrine I am going to quote at some length.
Marx believed that capitalism was doomed by its inherent contradictions, and that it would inevitably collapse—to he replaced by the next stage on the ladder leading to the socialist Utopia.
Lenin also believed that capitalism was doomed by its inherent contradictions, and would inevitably collapse. But just to be on the safe side, he sought to mobilize the working class, in alliance with other key elements in political society, both to hasten the collapse and to ensure that the result conformed with his interpretation of the proletarian state. Unlike many other socialists at the time, Lenin recognized that fundamental change is contingent both upon a movement’s ability to create a focused political coalition and upon its success in isolating and weakening its opponents.

As we contemplate basic reform of the Social Security system, we would do well to draw a few lessons from the Leninist strategy. Many critics of the present system believe, as Marx and Lenin did of capitalism, that the system’s days are numbered because of its contra dictory objectives of attempting to provide both welfare and insureance. All that really needs to be done, they contend, is to point out these inherent flaws to the taxpayers and to show them that Social Security would be vastly improved if it were restructured into a predominantly private system. Convinced by the undeniable facts
and logic, individuals supposedly would then rise up and demand that their representatives make the appropriate reforms.

While this may indeed happen, the public’s reaction last year against politicians who simply noted the deep problems of the system, and the absence of even a recognition of the underlying problems during this spring’s Social Security “reform,” suggest that it will be a long time before citizen indignation will cause radical change to take place. Therefore, if we are to achieve basic changes in the system, we must first prepare the political ground so that the
fiasco of the last 18 months is not repeated

1. Create a political movement
2. Weaken and isolate your opponents
3. Prepare the public ground
Oh and make it clear that the 1983 Reform was in fact from your perspective a "fiasco"

I would urge anyone really interested in Social Security to read the plan in full. Because you will see that the Economic Right followed it to the hilt, for example you hear clear echoes of Butler and Germanis in every speech Bush has made on this. I am not sure that everyone that draws from the messaging plan created at that 1983 conference is as directly and openly cynical about means and motives as these two. Operationally it doesn't matter much. Butler and Germanis' is a hugely successful marketing scheme and it worked. Brilliantly. The old were reassured, the economic stakeholders were drawn on board, the young were convinced that Social Security just wouldn't be there for them, and all blame conveniently placed on the Boomers. Evil genius to be sure, but marketing genius none the less.

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