Thursday, April 28, 2005

Bush's press conference

As I decode Bush's Social Security gabbing at the press conference today, he is saying:
1) Private accounts today, private accounts tomorrow, private accounts forever. Of course, this could just be what he says until it's time to cut a deal. But I think he is digging himself in pretty deep on this one.
2) Other than for current and near retirees, any and all benefit cuts are on the table, so long as they don't make benefits smaller than they are today. In other words, massive cuts relative to the current law baseline are fine with him, but he isn't going to take the lead in proposing any. Indeed, without bipartisan cover all he will propose is the next item, which has the protective coloration of sounding progressive. (We know enough about his views on progressivity to realize that he is only clutching at this reed due to his weak political position.)
3) Again with a bit of code language, he likes the Pozen plan I mentioned two posts ago, in which wage indexing remains at the bottom of the distribution but it shifts up to purely price indexing at the top. I gather that this plan, at least in its present form, is oddly designed such that it hammers the folks in the middle pretty hard, but who's counting.
By the way, the Pozen plan alone would not prevent benefits from rising in both nominal and real terms, because average indexed monthly earnings, the key term in the Social Security benefits formula, will tend to be higher over time for people in the same relative income tier. (E.g., people in the same relative position in the wage distribution as those who average $30,000 today will average more than that in the future, even leaving aside inflation.)
So Bush is conceivably willing to make the benefits formula significantly less generous than it is today, even leaving aside the wage indexing aspect. But needless to say he isn't going to take the lead in saying so, and no one else is going to, so this is a purely academic point.
4) People need "real assets" to have real retirement security. But let's rephrase that more realistically. They need real assets that are bought on margin with real debt. So they need to add a net position to their portfolios that the market values at zero, despite its positive expected return (unless gobbled up by fees), due to its significant downside risk.
Does anyone remember Albert Brooks and the nest egg in "Lost in America"? Bush wants people to bet the nest egg.
All those nauseating fake smiles were hard on me, having just eaten. He has all these exaggerated mannerisms that I guess his TV coaches have given him. And I think his accent turns folksier when he knows he is fibbing more than usual.
I found the best way to watch the press conference was to switch every few seconds between channels 4 and 5 (NBC and Fox), since, in NYC at least, Fox's broadcast was a few seconds behind. So by doing this (although I refrained when he discussed Social Security) I got to hear half of what he said twice, and the other half not at all. If anything, it made more sense that way.
E.g., "I am confident/ I am confident/ As our progress continues/ As our progress continues/ Vladimir assured me/ Vladimir assured me/And we will keep talking/ And we will keep talking/ A murderous dictator/ A murderous dictator/ But it was not working/ It was not working." Etc.
The exaggerated mannerisms were especially rich when you got to see them twice in rapid suggestion. Highly recommended for all audiences.
UPDATE ON THE POZEN PLAN: Click here for Jason Furman's more knowledgeable comments. What a surprise that the Bush "progressive" plan is much more less progressive than advertised, hitting as it does the "well-off," defined as people with earnings over $20,000 per year.


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