Baseball Crank
Covering the Front and Back Pages of the Newspaper
October 17, 2007
POLITICS: Lake Woebegon Arithmetic

From George Will's column today:

SCHIP is described as serving "poor children" or children of "the working poor." Everyone agrees that it is for "low-income" people. Under the bill that Democrats hope to pass over the president's veto tomorrow, states could extend eligibility to households earning $61,950. But America's median household income is $48,201. How can people above the median income be eligible for a program serving lower-income people?

Incidentally, though there are some very significant differences, Will also notes that Hillary Clinton's 401(k) proposal does contain some crucial concessions to the Right's longstanding arguments for Social Security reform:

Clinton's idea for helping Americans save for retirement is this: Any family that earns less than $60,000 and puts $1,000 into a new 401(k)-type plan would receive a matching $1,000 tax cut. For those earning between $60,000 and $100,000 the government would match half of the first $1,000. She proposes to pay for this by taxing people who will be stoical about this -- dead people -- by freezing the estate tax exemption at its 2009 level.

A conservative case can be made for something like Clinton's proposal. It is a case for reducing the supply of government by reducing demand for it, and doing so by giving people ownership of enlarged private assets as a basis for their security. It is a case for raising the nation's deplorable saving rate and simultaneously encouraging the nation's economic literacy and temperance by giving more people a stake in equities markets.

George W. Bush made this case in his advocacy of personal accounts financed by a portion of individuals' Social Security taxes and invested in funds based on equities and bonds. When he proposed this, Clinton stridently opposed him, and not just because she thought it would undermine Social Security's solvency and political support. She also said it was a dangerous gamble that would make retirement insecure by linking retirement savings to the stock market. Echoing a trope from Al Gore's 2000 presidential campaign, she said investing retirement funds in the stock market was a "risky scheme."

Today her Web site calls her proposal a way to save for "a secure retirement." After an undisclosed epiphany, she belatedly recognizes that 401(k) funds invested in equities are a foundation for security.

Of course, Clinton - as usual - is proposing this in addition to Social Security (while she has been suggesting that Social Security taxes be raised, as well as estate taxes and all the various other things she proposes to pay for with new taxes), and like many Clinton plans it involves careful slicing and dicing of the economy via "targeted" tax cuts. Still, the movement is in the right direction.

The great strategic error that Bush made in 2005 on the Social Security battle was in many ways a reprise of the WMD fiasco in the run-up to the Iraq War: he banked on the wrong arguments and gave short shrift to the better ones. Bush tried to argue that personal, semi-private* accounts were necessary to fix Social Security's projected shortfalls. The problem is, we are already in a hole on Social Security benefits that are owed without the ability to pay for them under current tax/benefit policies, and the personal-accounts system would do nothing to make the hole smaller; all it would do is stop digging new holes for the future. That's a great virtue of the proposal - it would make the system perpetually self-financing, rather than financed on a Ponzi scheme footing of using current receipts to pay current benefits without any necessary connection between the two - but Bush oversold the extent to which it could pay for the massive unfunded debts we already have.

*Semi-private in that the accounts are subject to private control and ultimate ownership; they would still be part of a mandatory government program.

Posted by Baseball Crank at 12:46 PM | Politics 2007 | Comments (6) | TrackBack (0)
Comments

Will does not give enough information for me to be convinced. He does not factor in number of children in the household, differences in the cost of living among states, etc. The median US household income, by itself, is not a conclusive measure.

A family with three children living in NYC an earning $60,000 would qualify as low income in my book.

Posted by: MVH at October 17, 2007 1:28 PM

On the other hand, if you really want to be cynical, you can argue that there are a lot of electoral votes in states with median incomes over $48K!

See http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Posted by: MVH at October 17, 2007 1:33 PM

This is almost a pilpul based argument. That was a discussion among talmudic scholars in 17th and 18th century rabbis, where the points got to be so arcane as to be ridiculous. The real point to be made is that Bush has misread the tealeaves so poorly.

Whether you consider 60K a year to be enough to thrive on for a family of 4-5 or not (and sadly enough, it's marginal these days--college tuition and medical insurance will kill that family), the Democrats have neatly done to the Republicans what was done to them. Take a key issue, reduce it to a few simple points, and make you, to take that original phrase, pro-life or not. They've put much of the House, up for re-election in 2008, to the point where they vote for insuring poor children or not. And there are a lot of voters who can't pay insurance.

And Bush led them right into that trap. How do you like them apples?

Posted by: Daryl Rosenblatt at October 17, 2007 5:40 PM

Actually - and honestly I was surprised at this myself - several of the latest polls as well as the buzz from DC indicates that the Democratic position on SCHIP hasn't really turned out to be all that popular with voters. Especially the kind of voters who thought the problem with the GOP Congress was that it spent too damn much taxpayer money.

Anyway, Daryl, this is hardly a new tack for the Ds, they have been doing that on economic issues and entitlements for decades. Think back to the 1982 Congressional campaign.

Posted by: The Crank at October 17, 2007 5:48 PM

It's not an arcane debate if you care to analyze whether the policy in question is good or bad, rather than focus on political strategy. Unfortunately, in his article, Will tried to do both and did a shoddy job on the policy analysis.

That being said, I guess I'm not too surprised that the polls indicate that the Democratic voters are less than enamored with SCHIP. As a fiscally conservative, security-minded, but somewhat reluctant Democrat (I have no problems voting Republican), I think the child health issue is a policy debate best saved for another time and place. And actually, it could backfire on the Democrats if it draws too much attention away from their big voter draw - the war.

Posted by: MVH at October 17, 2007 10:56 PM

It's perfectly possible for "poorer people" to earn more than the median income. The "median" indicates that half earn more and half earn less. It doesn't say anything about buying power. In a country where the distribution of wealth is as skewed as in the USA, and 20 per cent of the population own 85 per cent of the nation's wealth, the rest can indeed be "poorer". And they need help with the cost of health care, by George!

Posted by: Alex Marshall at October 17, 2007 11:26 PM
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