Brendan Nyhan

US News is carrying this gossip item in its latest issue:

Here’s the long shot of the year: Congressional Democrats will OK a constitutional amendment allowing naturalized citizens like California Gov. Arnold Schwarzenegger to run for president if Republicans help kill the 22nd Amendment barring third terms, thus clearing the way for another bid by Bill Clinton and, presumably, President Bush. Right now it’s the talk among political strategists, but look for it to spread on Capitol Hill when Sen. Orrin Hatch reintroduces his plan to let naturalized citizens run for president after 20 years.

Now, there’s no question that this is unlikely to happen. But it’s still worth reiterating why it’s such a stupid idea. The calcification of the American political system is a serious problem. Family-based ties have become more important in recent years both in Congress and at the presidential level. Bush or Clinton family dynasties are bad for the country; the system needs to be continually infused with new leaders and new ideas. The last thing we need is the same person holding the presidency for 12 or 16 years — even if they can get the votes. We have a larger societal interest in a dynamic political system. Just say no.

(I’m still a huge supporter of amending the Constitution to let naturalized citizens for president, but the deal to make it happen needs to get done a different way, such as having the amendment not take effect for a certain number of years.)

I try to ignore Maureen Dowd’s inanities as much as possible, but reported $675,000 advance for Bushworld on a decent ghostwriter?

Update 2/14: If you’re coming here from Google, make sure to check out our Spinsanity archive of criticism of Dowd. It’s a winner.

Here’s encouraging news that Congressional Democrats might stop being so stupid on defense issues:

It’s a Senate tradition for the two political parties to advertise their priorities by revealing their top 10 pieces of legislation with a flourish at the beginning of a new Congress.

…Democrats intend to make an increase in the size of the armed forces their top bill, according to several officials who spoke on condition of anonymity. More prescription drug coverage under the new Medicare law is also on the list, as is education legislation.

Democratic presidential candidate John Kerry campaigned for a 30,000-member increase in the size of the military last year. Senate Democrats have been thinking about raising that to 40,000.

Hallelujah! The active-duty military is severely overstretched and the Guard and Reserves are being ground down by repeated, prolonged deployments. This is one area where Kerry and Bill Kristol agree. Let’s get it done.

Rep. Bill “Dead Horse” Thomas, the California Republican who chairs the House Ways and Means Committee, appeared on “Meet the Press” with Tim Russert this morning to discuss Social Security.

There were a couple of good things about the appearance that are worth noting. First, Thomas joined the growing list of conservatives (including Chuck Hagel, Newt Gingrich and George Will) who admit that there is no “crisis” in Social Security, which has a 75-year shortfall that is far smaller than the cost of either making Bush’s tax cuts permanent or the Medicare prescription drug bill:

MR. RUSSERT:  President Bush has said Social Security is in a crisis. Democrats say hold on, not so fast, it’s not a crisis.  Is it?

REP. THOMAS:  Well, couple of weeks ago, the president had one of his forums in Washington, and if you’ll look at what he said actually at that Washington forum, he used the term “problem” 27 times.  He used crisis zero.  I think problem really is what we’re dealing with.

(Of course, Bush said that the Social Security “crisis is here” during his Dec. 20 press conference – see WashingtonPost.com’s Dan Froomkin January 12 column for more on the recent switch toward the “problem” terminology. Let’s hope Thomas can help solidify the shift to more appropriate language.)

The second good thing about the interview was that Thomas’ rambling, often incoherent answers at least made clear to viewers how complicated the Social Security debate is. He didn’t have the guts to stand behind all of his statements, but Thomas identified a number of the complicated tradeoffs that policymakers face, and suggested that politically painful steps like increasing revenue or decreasing benefits need to be part of the discussion. That’s progress.

All that said, this question from Tim Russert was really annoying:

MR. RUSSERT:  Right now we have a cost-of-living increase, a COLA increase, that is tied more to wages than actual inflation.  It is inaccurate by everyone’s estimation.  Should that be adjusted in order to be accurate and specifically related to inflation?

The way benefits are calculated using wages rather than prices is not simply a matter of “accuracy.” This is Russert buying into the Washington establishment’s obsession with curtailing entitlements. There are real value choices at stake in the debate over how to calculate benefits. Wage indexing costs more over time (since wages generally grow faster than prices), but it expresses the belief that seniors should benefit from the improved standard of living enjoyed by the rest of society. As Matt Yglesias wrote in The American Prospect Online:

Social Security benefits grow in real terms over time so that senior citizens have the opportunity to share in the increased prosperity that was made possible by their hard work in earlier years. Today, thanks to wage-indexing, the living members of the much-heralded Greatest Generation enjoy a standard of living befitting the early 21st century. If we’d implemented a price index from the beginning, they’d currently be stuck at the much lower standard of living enjoyed in their youth — a time when many Americans lacked telephones and electricity.

There’s a real policy question at stake here. To describe it as simply a matter of accuracy is ridiculous.

Update 2/3: Josh Marshall correctly pointed out that Russert is also conflating two issues – how initial benefits are calculated, and how they’re adjusted for changes in the cost of living.

Paul Krugman’s columns are hardly perfect. But his critics cry wolf so often, and make such sloppy arguments, that they shouldn’t be surprised when they’re not taken seriously.

Most accusations of dishonesty against Krugman take the form of (1) starting from a different premise than him and then bashing him for (unsurprisingly) reaching a different conclusion or (2) citing evidence he doesn’t deal with and criticizing him for not including it. As a general rule, neither is particularly convincing to people who don’t share the critics’ ideological preconceptions, but they just keep cranking this stuff out.

A case in point is a Tom Maguire post about Krugman’s latest column that Glenn Reynolds approvingly linked to today. In it, Maguire criticizes this quote from Krugman:

[I]f we take into account realistic estimates of the fees that mutual funds will charge – remember, in Britain those fees reduce workers’ nest eggs by 20 to 30 percent – privatization turns into a lose-lose proposition.

Krugman’s statement is quite clear. He says he is discussing the fees that “mutual funds” will charge, and says that fees for similar funds in Britain “reduce workers’ nest eggs by 20 to 30 percent.” The assumption is clear: workers with private accounts will be able to choose from a relatively wide range of investment options, including actively managed mutual funds, some of which have high fees that reduce payouts quite dramatically over time. Moreover, the estimate from the UK appears to be accurate — see Peter Orszag’s 1999 analysis of the British private pension system, for instance, which found an average annual administration and management fee of 1.43% from 1989-1998. Over a 40 year career, that fee would reduce the account balance for a worker at retirement by 28%.

Maguire, however, proceeds from a different assumption than Krugman. This necessarily leads to a different conclusion, but he pretends Krugman is being dishonest instead. Using the 0.3% annual fee assumed by CBO in their July 2004 analysis of the President’s Commission to Strengthen Social Security’s Plan #2, he finds that the final account balance for private accounts would be reduced much less than 20-30% by administrative fees. This is, of course, true, which leads Maguire to celebratory snark:

But hold on!  Didn’t Paul Krugman just ask for a “reasonable” estimate, and throw out 20% to 30% in Britain as a comparison?  Based on the CBO number and some mental math, we came to 7%, which was quickly confirmed by a more elaborate calculation.  Why, oh why is Prof. Krugman off by a factor of 300% to 400%?  How can it be that he is misrepresenting the intelligence and hyping his case?

You’ve got me.  Possible answers might include: (a) this was too complicated a calculation for a prospective Nobel Laureate; (b) this was an easy calculation but not a helpful result for polemical purposes; or (c) his beer was warm, and all the folks in Princeton speak English, so he thought he was in Britain.

Enjoy the weekend – pick (a), and put yourself up for a Nobel Prize.

However, the 0.3 percent cost figure assumes an extremely limited range of index funds are available. See table 1-1 of an earlier, more detailed CBO analysis of administrative costs for private accounts. Mutual funds do indeed reduce assets at retirement by 23 percent on average according to the CBO estimate in the table. The only retirement systems with administrative costs as low as CBO assumes are the current Social Security system and the Federal Thrift Savings Plan that Maguire cites as a model. And as CBO explains elsewhere in the same report, TSP allows workers to invest in only five index-type equity and bond funds, none of which are actively managed mutual funds of the type that Krugman was referring to.

Once again, different premise, different conclusion. Krugman should have been more clear that a TSP-type system could offer lower fees, and we can certainly debate his assumption that a wide range of investment options would be offered under private accounts (it seems inevitable to me). But those are different arguments altogether.

Update 1/24: Crazed socialist Irwin Seltzer uses a management fee estimate of one percent in the Weekly Standard, though he notes that former Bush economic adviser Larry Lindsey thinks this is much too high.

Don’t miss this extremely valuable story in the Economist on inequality and social mobility in the US. The magazine — which is no bastion of bleeding heart liberalism — has issued an important warning:

A growing body of evidence suggests that the meritocratic ideal is in trouble in America. Income inequality is growing to levels not seen since the Gilded Age, around the 1880s. But social mobility is not increasing at anything like the same pace: would-be Horatio Algers are finding it no easier to climb from rags to riches, while the children of the privileged have a greater chance of staying at the top of the social heap. The United States risks calcifying into a European-style class-based society.

The evidence on social mobility is hardly encouraging to those who believe that every American has a solid chance to pull themselves up by their bootstraps:

[M]ore and more evidence from social scientists suggests that American society is much “stickier” than most Americans assume. Some researchers claim that social mobility is actually declining. A classic social survey in 1978 found that 23% of adult men who had been born in the bottom fifth of the population (as ranked by social and economic status) had made it into the top fifth. Earl Wysong of Indiana University and two colleagues recently decided to update the study. They compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70% of the sons in 1998 had remained either at the same level or were doing worse than their fathers in 1979. The biggest increase in mobility had been at the top of society, with affluent sons moving upwards more often than their fathers had. They found that only 10% of the adult men born in the bottom quarter had made it to the top quarter.

The Economic Policy Institute also argues that social mobility has declined since the 1970s. In the 1990s 36% of those who started in the second-poorest 20% stayed put, compared with 28% in the 1970s and 32% in the 1980s. In the 1970s 12% of the population moved from the bottom fifth to either the fourth or the top fifth. In the 1980s and 1990s the figures shrank to below 11% for both decades. The figure for those who stayed in the top fifth increased slightly but steadily over the three decades, reinforcing the sense of diminished social mobility.

Not all social scientists accept the conclusion that mobility is declining. Gary Solon, of the University of Michigan, argues that there is no evidence of any change in social-mobility rates, down or up. But, at the least, most people agree that the dramatic increase in income inequality over the past two decades has not been accompanied by an equally dramatic increase in social mobility.

Take the study carried out by Thomas Hertz, an economist at American University in Washington, DC, who studied a representative sample of 6,273 American families (both black and white) over 32 years or two generations. He found that 42% of those born into the poorest fifth ended up where they started—at the bottom. Another 24% moved up slightly to the next-to-bottom group. Only 6% made it to the top fifth. Upward mobility was particularly low for black families. On the other hand, 37% of those born into the top fifth remained there, whereas barely 7% of those born into the top 20% ended up in the bottom fifth. A person born into the top fifth is over five times as likely to end up at the top as a person born into the bottom fifth.

Jonathan Fisher and David Johnson, two economists at the Bureau of Labour Statistics, looked at inequality and social mobility using measures of both income and consumption. They found that mobility “slightly decreased” in the 1990s. In 1984-90, 56% and 54% of households changed their rankings in terms of income and consumption respectively. In 1994-99, only 52% and 49% changed their rankings.

Two economists at the Federal Reserve Bank of Boston analysed family incomes over three decades. They found that 40% of families remained stuck in the same income bracket in the 1990s, compared with 37% of families in the 1980s and 36% in the 1970s. Aaron Bernstein of Business Week points out that, even though the 1990s boom lifted pay rates for low-earners, it did not help them to get better jobs.

And, unfortunately, as the Economist points out, there are few signs of a reform movement, a substantial change from the 1880s, when growing inequality and class stratification sparked efforts to improve education, create an estate tax to prevent the concentration of wealth, bust monopolies, and so forth. It’s time for that to change before the American meritocracy becomes an empty myth.

Update 1/25: David Brooks has more on this in the New York Times today. It’s a good thing when a prominent conservative commentator takes concerns over inequality and social mobility seriously. Let’s hope he’s not the only one to pick up on this.

Writing in the Weekly Standard, Fred Barnes suggests that the greater length of Bush’s second inaugural address compared to his first is proof that the President’s agenda has expanded:

It’s amazing how much the president has expanded his agenda from his initial days in office. His 2001 inaugural address took 14 minutes. His speech last week was 21 minutes long. In 2001, Bush said, “America remains engaged in the world by history and by choice, shaping a balance of power that favors freedom.” In 2005, he upped the ante dramatically. “America, in this young century, proclaims liberty throughout all the world, and to all the inhabitants thereof,” he declared at the end of his second inaugural speech. “Renewed in our strength–tested, but not weary–we are ready for the greatest achievements in the history of freedom.”

Of course, Abraham Lincoln gave the greatest second inaugural address in American history, and it was far shorter than his first even though Lincoln’s agenda had expanded just a bit during the Civil War.

This is what happens when you get up at 4 AM every day (courtesy of the Weekly Standard):

Couric: I’m Katie Couric, here with Lester Holt, Ann Curry, and Al Roker…

Curry: Also ahead, a controversial new book is out today that may be trying to rewrite American history. In it, sex researcher C.A. Tripp–it claims that President Clinton may have been gay.

Couric: No, no, no. Lincoln.

Roker: Lincoln.

Curry: Lincoln, President Lincoln. [Laughter.]

Roker: Wow!

Curry: Never have a woman come back from–I am so jet lagged.

Roker: Wow!

Curry: President Lincoln may have been gay.

Couric: Hillary’s on the phone for you.

Curry: I know. So sorry, Mr. Clinton. I’m so sorry, Mr. President.

I’m a little late to this one, but I can’t let it go by. Nicolle Devenish, the new White House communications director, offered this bon mot to the New York Times a couple of weeks ago:

Whether [improving relations between the administration and the media] can happen is an open question, since the relationship between any White House and the press corps is contentious. The current “don’t ask us we won’t tell you” press policy is in any case set by Bush, who distrusts the press and still blames it for his father’s defeat.

Devenish, who was the communications director for Bush’s re-election campaign, begs to differ about his attitude toward the press. “I don’t think the president keeps the press at arm’s length, and I think the president has a healthy respect for the press that covers him,” she said.

Let’s go to the tape (well, All the President’s Spin). Here’s White House Chief of Staff Andrew Card speaking to the New Yorker in a classic expression of the administration’s view of the press:

They [the media] don’t represent the public any more than other people do. In our democracy, the people who represent the public stood for election… I don’t believe [the press has] a check-and-balance function.”

And Bush has demonstrated his disdain for the media by holding very few press conferences. As of January 1, 2004, the grand total was 11, significantly fewer than his modern predecessors at the same point in their term, including Reagan (21), Clinton (38) and his father (71).

See the book for lots more on this subject. But one thing is clear — with disingenuous statements like these, it looks like Devenish is ready to follow in Ari Fleischer’s footsteps.

More Democratic nonsense on Social Security — here’s Terry McAuliffe in an email to supporters today:

We will fight President Bush and his Republican cronies as they try to:

…Undermine Social Security for today’s seniors and future generations of retirees by privatizing the system.

Of course, no one, including President Bush or leading Republicans, is talking about reducing benefits for today’s seniors. They are politically sacrosanct and will get their checks regardless of what happens with private accounts. But McAuliffe wants to scare you — and them — into believing otherwise.