Incoherence
Josh already noted this travesty from Matt Bai on the new economic order, but really trying to critique Bai's "argument" is pointless in this case. The whole article is total nonsense from top to bottom. Even the Road Warrior reference doesn't add up, though at least there you can grasp what he's trying to say.
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that we still need SS, the obvious thing that Bai, and the other SS reformers miss is that SS should stay the way it is, and some new form of universal pension program should be put into place.
Having a mobile pension and health insurance program is a good thing, and how we set them up and adminster them should be what we are debating.
December 18, 2005 12:27 PM | Reply | Permalink
Yeah, I couldn't figure out how to send Josh a message, but what I wanted to say to him was: don't waste your time arguing with someone who can't even put up a plausible facade of intellectual honesty.
December 18, 2005 12:56 PM | Reply | Permalink
Bai, like Klein, have a little knowledge about economics and, as the saying goes, a little knowledge is a dangerous thing. That's especially true when it is combined with stupendous personal and institutional arrogance.
December 18, 2005 1:09 PM | Reply | Permalink
December 18, 2005 1:10 PM | Reply | Permalink
I can -- sort of -- make an argument along these lines. In the information age, with cheap trading costs, and the internet as a source of market education, there's no reason more people shouldn't be more involved with running their own retirement money. A knowledgeable investor should be able to easily beat the returns of Treasury bonds, which is what the Social Security Trust Fund invests in.
However...
I worked in the retail investment environment for 7 years, and I can tell you that most investors, even investors who meet the legal definition of the term "sophisticated investor," are not what I would call knowledgeable, and I would say nearly half of the clients I dealt with would have done far better for themselves, emotionally as well as financially, had they just taken their money and socked it away in bonds or a bond fund, and forgotten about it. The family arguments, the losses, the stress associated with watching market fluctuations, some of them quite wild as anyone in the market in the late 90s - early 2000 period knows, aren't the sorts of things everyone is cut out to deal with.
Moreover, the argument that, because pensions are going the way of the dinosaurs means a guaranteed retirement stream like Social Security must as well does not follow. I would argue that, in the absence of something guaranteed like a pension, it makes sense to have one guaranteed income stream, and that should be Social Security. If everyone's money is in the equities market (which is where the vast majority of it would go over time), then one massive crash, as we've seen several times in history, the most recent from 2000 - 2002, when the market lost 49% from its high, means people can go from ready to retire to Wal-Mart greeters in a couple of years. Better to have something you can count on no matter what the market, or your own possibly poor investment decisions, does to the rest of your money, and as things are shaking out, the one thing people can count on is Social Security.
December 18, 2005 1:23 PM | Reply | Permalink
As usual with Bai, he gets a few things spectacularly right and a few things spectacularly wrong.
The SS comments are simultaneously baffling and infuriating, but he does have a nice aside about globalization and health care.
December 18, 2005 1:53 PM | Reply | Permalink
Here is a vastly oversimplified explanation of retirement. The numbers are not right, but the basic concept is.
As a rough approximation a person works about half his life. The rest of the time he is too young or too old. So to provide for the non-working years a person needs to save about half what they earn when they are working.
Now in reality you can't save for your own youth, so the money is paid by your parents, but the effect is the same. This is the intergenerational transfer that is always talked about. At the other end of ones life your living costs are paid by those currently working.
Now "saving" half your earnings is generally unacceptable to most people so politicians try to design ways to minimize the burdern. There are only two.
One, is that in a growing society there will be more people in the future than now, so the work force will be larger and thus, they will be able to support the non-working at a smaller per capita cost. The fear is that the US workforce will age and this will no longer work. See the current panic in Japan over the projections of a falling population.
Two, is the myth of "compound interest." That is you put your money is some magical investment instrument and at the end of some period of time you take out more than you put in. The only sources of growth for invested funds are increases in productivity and inflation. Any other reason would be creating money out of thin air. So, on average, you really only get back what you put in.
Now there is one exception to all of this. The half savings doesn't have to be evenly distributed. We can allocate funds so that some people have a poverty level non-working period and transfer the funds to others. This is what we have done in the US, especially since the Reagan era. Funds have been shifted from the average worker to the stock holding class. The result is the boomers and their children in the middle and working classes will be worse off than their parents were.
The upper class and the super rich will be much better off at their expense. It's really that simple.
Now my number of half is part of the simplification. One may need less during the non-working years, but the idea is the same. To acknowledge that the problem is one of unequal wealth distribution would be to admit that things can be solved by redistribution. Not since the days of the Populists has a politician been willing to discuss that option. So in its place they propose a growth mantra: "A rising tide lifts all ships".
There are many studies around which show that the rate of growth in the developed world has already passed the sustainable level and that there is no way for the undeveloped world to reach even a fraction of the standard of living of the industrialized societies, but to admit this would imply a redistribution among nations and a turn away from the growth paradigm.
One of the most consistent writers on the fallacies of the growth idea is Herman Daly. Here are two online items you can read to get a taste of his ideas:
Essay
and
Lecture Series
I also have several essays on my web site about this and the related issue of Social Security. The link is in my signature.
December 18, 2005 2:00 PM | Reply | Permalink
"Having a mobile pension and health insurance program is a good thing, and how we set them up and adminster them should be what we are debating."
My pet theory about Bai is that he tends to find the right questions and come up with the wrong answers.
What you state is entirely correct.
Organized labor is a wonderful thing and should be encouraged, but we have to accept that it is currently a failed experiment in America.
Come up with a mobile pension and health insurance program, and most of the problems inherent in Wal-Mart's model stop being problems.
December 18, 2005 2:07 PM | Reply | Permalink
December 18, 2005 2:18 PM | Reply | Permalink
I'm just thankful that Bai didn't go into the medical profession. One can imagine how he'd deal with a patient with a broken leg:
"I prescribe amputation..."
December 18, 2005 2:20 PM | Reply | Permalink
Not sure how compound interest counts as a "myth," since it does deliver real returns over inflation. Sure, they're derived from increases in productivity, but since investing capital is the way you get those increases in productivity, that's as it should be.
December 18, 2005 2:46 PM | Reply | Permalink
Regarding his aside on why government should provide health care, see also an opinion piece in the business section, arguing that the tax breaks to businesses for health care so disproportionately favor resonably well-off gainfully employed that universal health care really is affordable. But Krugman's also been more articulate on Bai's point, that health care makes it harder for businesses to survive.
That aside obviously doesn't make Bai's NAF ideal of the Democrats bearable. It does make me wonder why he consistently gets to represent and analyze the Democratic party and liberalism in the magazine section. Where are our voices?
December 18, 2005 3:12 PM | Reply | Permalink
Read Bai and think back to the "Is Fleet Street bad for the Left" posting. If your flagship "liberal" newspaper is going to write this nonsense, roll on its demotion or demise.
December 18, 2005 3:27 PM | Reply | Permalink
I have written at TPM Cafe pretty extensively on Matt Bai, including on the "Bai Lie", his incredibly influential piece in the Oct 10, 2004 New York Times Magazine, falsely portraying Kerry as less willing than Bush, even unwilling, to confront terrorism militarily, as well an extensive posting on his book review of Off Center in the Dec 18, 2005 New York Times Book Review.
I would especially recommend my close and extensive analysis of the book review, as it really gets to the heart of what makes him tick:
http://www.tpmcafe.com/story/2005/12/14/24247/484
The other piece I wrote, about the "Bai Lie" mainly, is at:
http://www.tpmcafe.com/comments/2005/12/9/14913/2712/14#14
The key theme running through both of what I have termed the "Bai Lie" piece, one of the handful of the most influential pieces in the whole 2004 election, and the book review (which trashes a whole range of books about the Democratic Party along with Off Center) is that Bai has made a career -- and quite a good career at that -- at the New York Times by slickly repeating the W Bush Administration talking points about the Democratic Party and putting it forward in smoothly written, supposedly objective prose. As such, as I have said before, his "journalism" overall is a 'sign of the times'.
On this point, the key thing is the way a broad brush article, fairly short by Bai standards, covering a dazzling array of subjects, slips in a totally presumptive statement about the out-of-date Democrats (a meme that runs through all the above-mentioned articles as well as some of his others), hinting at without risking himself by actually advocating, the Repuglican position on Social Security.
After all, if the Democrats are wrong on Social Security, in ways that are characterized without being specified -- something that seemed to frustrate Josh Marshall to no end -- then are the Repuglicans right? And if so, how would shifting to private accounts adapt to the 'changing times'? Well, by only putting forward the spin without the substance of the argument about the Democrats, Bai avoids the really difficult arguments but cultivates a certain cachet, a certain feel about the Democrats, without having to get bogged down in detailed proposals or defenses of his position, or all those nasty little details about how MediCare and Social Security do run, and how he says they should run.
And here is the key to understanding Matt Bai, and what his job is at The New York Times. As in the Oct 10 article about Kerry on terror, Bai journalism is all about the sizzle, and not about the steak. The substance of Kerry's position was simply elided in that article, which was ostensibly about Kerry's position on terror. It was the image of Kerry as soft on terror, spun through quotes about the Bush's military emphasis versus Kerry's focus on 'soft power' that mattered. Bai works from political spin and image, and fits facts, half-truths, and lies into those images; on the issue of terrorism, he had to twist himself into a pretzel to avoid the main point: Kerry, like many terrorism experts including the (rightwing, let's not forget) Dick Clarke, sees the war in Iraq as a distraction from and a hindrance to the war on terrorism, whose military side in the region where Al Qaeda is needs to be stepped up. But that central issue, what a real journalist (which Bai is decidedly not) would focus on, needed to be avoided, in order to put forward, with the appearance of expert journalism, the real work of spinmeistery.
Bai's review of Off Center is also a work of spin-meistery, simply taking as a given the orthodox view of the Democratic Party as 'out of touch' with mainstream America, and then using that as a stick to beat down not only Off Center, but What's The Matter With Kansas, and Don't Think of an Elephant (none of which, confessedly, I've read) as essentially Democratic thumb-sucking literature. But Bai does no real analysis and presents no facts beyond a general reference to greater popular military concerns in the post 9/11 era (the subject of the manipulations in the "Bai Lie"). He simply trashes these books, at root, because they fail to 'get with the program and justify the lying', which, as I conclude, is what Bai is all about.
So the characterization of the Democrats on Social Security and Medicare may seem to require a foundation in a substantive argument, but that misses the point about Bai that the characterization and the stereotyping of the Democrats IS the substantive argument. Bai knows that if he gets the "agenda truth" right, that is, getting with the program, the matters of "fact truth" will take care of themselves. And so far, as far as his career as a "journalist" goes, he has been, in this assessment, spot-on.
December 18, 2005 3:32 PM | Reply | Permalink
And what experience with economics do you have which qualifies you to make such an assessment?
December 18, 2005 4:00 PM | Reply | Permalink
Organized labor is a wonderful thing and should be encouraged, but we have to accept that it is currently a failed experiment in America.
No, organized labor is not a failed experiment, but a resounding success. The single reason we now have 40 hour work weeks, vacations, sick leave, pensions, safe working conditions, etc. is the labor movement. It isn't possible to overestimate the success of that movement.
It is true, however, that Reagan and his successors have largely killed the labor movement, so that it is now much less effective. That is reversible, and reversing the destruction wrought especially by Reagan should be a primary goal of Democrats.
Yes, we most certainly do need universal health care insurance, paid and governed by the federal government. That the Republicans have been successful in convincing us that our desperate need for such a program is not valid is a tribute to the general lack of knowledge and intelligence of our voters. I suppose this is just one more condemnation of our education system.
December 18, 2005 4:12 PM | Reply | Permalink
I don't like Matt Bai's sensibilities. Having said that, let's cut him some slack, here. He thinks he's being even handed; he's criticized Republicans, too -- in this essay for "romanticizing" rugged individualism and for treating what Robert Reich would call the not-"symbols analysts" as expendable.
Is he right, though, that we Democrats don't have an idea in our heads -- okay, maybe universal (single payer?) health care (of course, we've got that already).
If Reich's correct, 80% of the population is competing in a race to the bottom. Before too long that 80% will all be working for Walmart (the meat counter will sell to the cosmetics counter who'll sell to the tire department who'll sell to the shoe department in a magical circle that never ends).
What, if anything, do we Democrats do about it?
December 18, 2005 4:45 PM | Reply | Permalink
Your theory would be of interest if income were distributed anything like evenly (see below), but it isn't. When a nurse is paid $35,000/yr in a health system where the CEO rakes off $600 million/year I really don't see how the nurse is ever going to be able to "save half" (or even 20% if one assumes the remaineder is spent on children).
Below: I once worked for a large entity where for over 100 years the salary structure (in today's dollars) was:
Unskilled hourly 30,000/yr
Skilled hourly 40-50,000/yr
Professional 40-70,000/yr
President 400,000/yr
As I said, that entity existed for 100 years that way during which time it delivered tremendous value to its customers, contributed to hundreds (if not thousands) of technology innovations, helped win two wars, and - oh yeah - returned a steady stream of dividends to its investors.
Today, the company is in essentially the same business and the economic structure of that business hasn't changed (unlike GM). But the hourly have been beaten down to 25k, the professionals are being outsourced to India, and the "CEO" is now paid 25 million/yr. But wait - the stockholders aren't getting any more than they used to. Can one of you economic geniuses explain that one to me? In any case, that sort of cram down + winner-take-all environment absolutely must be considered in any social security debate.
sPh
December 18, 2005 5:41 PM | Reply | Permalink
Not only did the Times run Bai's piece of crap, they're also running a supposedly objective article about health care in which the prescription for fixing the system is doing away with the tax break to employers for providing health coverage (thus destroying it), expanding Medicaid/Medicare to cover all those people who lose employer coverage, and making the rich buy their own health insurance. Besides the fact that this plan is wildly unfeasible politically, it leaves untouched the most regressive, unfair and wasteful parts of our so-called system: rationing access to care by economic class, cherry-picking by insurance companies, and gouging by drug companies. This article presents itself as the solution while admitting it will never happen, thus patting itself on the back for its "rationality"while at the same time contributing nothing real to the discussion.
Why does the Times loathe the idea of universal coverage? It will kowtow slavishly to every other idea that comes down the pike, except for the one that would actually work.
December 19, 2005 7:17 AM | Reply | Permalink
If the new background for Social Security is one of increased job insecurity and reduced opportunities for pension development, then the only thing called for in Social Security is to make it more secure and more generous. Why can't Bai say this?
December 19, 2005 7:56 AM | Reply | Permalink
"No, organized labor is not a failed experiment, but a resounding success. The single reason we now have 40 hour work weeks, vacations, sick leave, pensions, safe working conditions, etc. is the labor movement."
Don't get me wrong. I'm utterly pro-organized labor.
But when you compare the percentage of the workforce that is unionized in America, especially in the private sector, to the percentage in other countries with advanced economies, it's hard to avoid the conclusion that organized labor has failed in America.
"It is true, however, that Reagan and his successors have largely killed the labor movement, so that it is now much less effective. That is reversible, and reversing the destruction wrought especially by Reagan should be a primary goal of Democrats."
No doubt that the post-1980 political environment has been very hard on organized labor, and no doubt that we should work to reverse that environment.
But again, the penetration of organized labor in 1979, especially in the private sector, was anemic.
While we should push for a better political environment for organized labor, we on the left ought to acknowledge that universal pension and health solutions will be better for American labor than piecemeal union contracts.
Take pension and health concerns away from private employers and labor, and unions might find themselves in a better negotiating environment.
December 19, 2005 9:26 AM | Reply | Permalink
More than they do, obviously.
December 20, 2005 11:15 AM | Reply | Permalink
Or maybe: "Don't worry. Market forces will take care of it."
December 20, 2005 5:25 PM | Reply | Permalink