September 08, 2004

The Dream Team

That is, a bi-partisan, economic dream team to educate voters enough to pass entitlement reform.

Holman Jenkins, Jr. in a WSJ Editorial today (paid site only, sorry!) lays out a roster for this dream team, building on a short Political Diary entry that I blogged last week.

A LOT of education is needed, starting with a realistic look at the problem:

promises made to bondholders show up in the national debt. Promises made to future retirees don't.

Thus the officially recognized national debt is about $3.9 trillion, while the unfunded Social Security obligation alone represents an IOU of $10 trillion in present value. Throw Medicare onto the bonfire and that's another $62 trillion.

Keep in mind these figures represent only the "unfunded" portion, not the part covered by monies already credited to notional federal trust funds or to be collected in payroll taxes from now till eternity. It would take $3.9 trillion today to retire the visible national debt, and $72 trillion today to pay off unfunded promises to retirees. Yet only the first debt is reported to voters.

That's the kind of accounting "oversight" that, in the private sector, leads straight to a cellblock.


He said "hoosegow" in the original story -- I wouldn't have changed it to cellblock. Beyond style, he really does develop a plan to promote reform, starting with the dream team:
So let's recruit Joe Lieberman for Job One, propagandizing on behalf of realistic budgeting. He recently introduced a Senate bill to impose just such "present value" accounting on the federal government. No doubt he would receive enthusiastic support from the Medicare and Social Security trustees, who produced the above estimates. Why is this important? Because suddenly the $1 trillion in "transition costs" to finance the creation of the Bush-touted private retirement accounts for younger workers doesn't seem so outlandish compared to the real federal debt, visible and invisible.

Next up is Job Two, spreading an understanding that such transition borrowing would, in fact, be "refinancing." In effect, Treasury bonds due in 30 years would be sold to investors and the money used to retire Social Security obligations to younger workers, also due in roughly 30 years. The younger workers could reinvest the money in productive assets, for the benefit of themselves and the economy as a whole.

Here, we should call on Suze Orman, Jane Bryant Quinn and the folks at Kiplinger's, accomplished expositors of financial thinking for the general public. It doesn't hurt, too, that many leading opinion makers have just been through the educational experience of refinancing their Nantucket manses.

Job Three: Plenty of work remains for Pete Peterson, the Concord Coalition and other longtime Jeremiahs of the federal budget. The Bushies mean well but there's no doubt that Republican lawmakers will shrink from a deal that asks anything of anybody. Remember, the goal is not just to supplement Social Security but to substitute real ownership of real assets for the current federal Ponzi scheme. That means younger workers should be expected give up some of their future entitlement in return for the right to invest a portion of their payroll taxes today.

Job Four is a toughie. Unreasoning risk aversion is a hallmark of the human mind, and Democrats and their pet economists are already doing all they can to encourage the stand-pattism of certain voting blocs, especially single women and oldsters. John Kerry never tires of frightening these voters with the Satans of Wall Street and Ken Lay. He says instead a "tweak here, tweak there" will tide Social Security over without any "risky" reforms.


There is an entrenched political class that will fight this tooth and nail. We can all hear the commercials and speeches against it in our heads.

Maybe a second term Bush would have a chance at this. We need a lot of statesmanship on both sides -- that portends poorly. But this team is a nice dream.

Posted by jk at September 8, 2004 09:35 AM
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