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Rep. Wu at Social Security Town Hall Meeting
On July 7th I attended a town hall meeting organized by the Congressman from my district, Rep. David Wu (D-OR), on the topic of Social Security reform. This is the third event I've attended on this subject; the earlier ones were to see Treasury Secretary Snow and former Congressman Tim Penny (D-MN).
The meeting was at the Hillsboro Senior Center at 4:00pm. These logistics predictably packed the room with seniors. I had to leave work early in order to attend, and I was the only young person in the audience. I expected the crowd to be hostile to Social Security reform and supportive of Rep. Wu — I expect most of them, like me, learned about the meeting through his advertising — but I was surprised by the magnitude of both.
The meeting lasted 1 hour (and was refreshingly punctual at begin and end) and was primarily a Q&A session. Rep. Wu did not make a speech, but he did invite two speakers who were both brief. The first was an AARP volunteer whose name I didn't get written down. I believe his last name was Moore, but this may be incorrect. The second speaker, Jim Davis, was caught in traffic and arrived during the Q&A.
The first speaker (Moore?) opposed privatization on the grounds that it would "cut promised benefits", create a "mountain of debt", and "pass on the bill to future generations." He distributed AARP materials at the end and signed people up who wanted to be more involved. (Yes, I signed up. Know thy enemy and all that.)
In his short statement, he listed three essential criteria for Social Security reform: (1) Guaranteed benefits, (2) Fair to everyone, (3) Dignity and independence. (He and I have drastically different notions of fairness, dignity, and independence — I believe Social Security undercuts all three.)
The discussion questions and responses below are all paraphrased. I took three full pages of notes in the pursuit of accuracy, but can't write quickly enough to record quotes.
1) The questioner thanked Rep. Wu for not falling for the "phony crisis", then stated that we used to use the Social Security surplus to pay down the federal debt but now we're spending it on the Iraq rathole. Also asked how to get Senator Gordon (R-OR) to vote against Iraq spending.
Wu said that he personally (and therefore Gordon implicitly) genuinely listens to constituents. Make your wishes known — attend meetings, write letters, etc. He'll pay attention to community input.
Cap'n's take: The Social Security surplus merely allows the rest of the government to spend more than it otherwise could by reducing the amount of borrowing. It doesn't pay down the federal debt because the general fund is in deficit. Iraq isn't a rathole, it's the focal point in the war against terrorism. I would sooner cut Social Security payments than Iraq war funding.
2) The questioner asked her granddaughter (9 years old) what she would say if she was able to attend. The message from the granddaughter was that Bush was sending bills that she would have to pay back, and that Bush was giving money to the rich and taking it from the poor.
Wu said he appreciated the sentiment and stated that there are differences in opinions among different age groups. Of people in their 20s, 70+% believe Social Security won't be there when they retire — but the age-related differences in opinions have always existed, it's not recent.
Cap'n's take: I won't criticize a 9-year-old. But I will criticize her family for teaching her such crap. I thought Wu's segue was appropriate and that it would have been in poor taste to respond directly to the girl's thoughts. The information about the consistency of the age-related opinion differences was useful and I referenced it later when I eventually asked a question.
3) A question about the trust fund. Could the surplus be set aside so it couldn't be spent?
Wu responded that accountability is important and that privatization plans don't address solvency, and in fact they make it worse. They also expose individuals to market risk.
Cap'n's take: No, the surplus cannot be set aside as long as it remains in government hands. Money is fungible. The surplus has to be put somewhere. If it's treasury bills, the money becomes available for the general fund. Personal accounts, of course, put that money in the hands of individuals and are actually a form of "lockbox" that works. The fact that personal accounts are a "lockbox" is the reason that they would increase government borrowing, which reform opponents are quick to note as a reason to oppose personal accounts. Of course, this is trying to have it both ways — any effective lockbox must, by its nature, increase government borrowing because to be a lockbox means it has to make the Social Security surplus unavailable to the general fund!
4) This question was about the Social Security notch, a topic I don't know about and didn't care to take notes on.
5) Why aren't Democrats more forward about lifting the income cap and taxing unearned income?
Wu responded that that's not his plan, and that the "crisis" might not even come. If economic growth is better than the Trustees' conservative forecast, there would be no crisis.
Cap'n's take: I was extremely offended by the question. I do not want to pay more taxes, I pay enough taxes already. Raising the cap on income subject to Social Security tax would impact me personally; subjecting unearned income to Social Security tax would impact me personally. I am not a teat for others to suck on. Keep your hands out of my wallet! I would be especially upset if I had to pay extra taxes but my own Social Security benefits were not correspondingly increased. It's not fair to take more of my money and give me nothing in return. That's undignified, and the loss of those funds makes me less independent.
I'm happy Wu had a cold response to that question. He knows that his district, the so-called Silicon Forest, includes significant numbers of high-income individuals who would be affected by such tax increases.
6) This question was about the worth of the trust fund bonds. As asked it included a swipe about the Chinese government that I don't think is worthy of repetition.
Wu said that the trust fund bonds are worth something to the same extent that a dollar bill is. They're backed by the full faith and credit of the United States Government.
Cap'n's take: I wanted to snicker and I wanted to roll my eyes at the same time. Wu's response admitted that a dollar bill isn't itself worth anything, a point that advocates of the gold standard are fond of mentioning. In this sense the bonds are equivalent to dollars, worthless. But in another sense he's wrong. While a dollar bill can be exchanged for goods, these trust fund bonds are non-marketable. Because the government owes them to itself, they have exactly zero economic value. As I've explained before, the assets and liabilities cancel exactly and the trust fund bonds have no economic reality.
7) A statement (not a question) that people like me don't know how to invest in the stock market.
Wu said that Social Security should be the bedrock of retirement income, and using the famous stool analogy, the other two legs are pensions (whether defined benefit or defined contribution) and personal savings.
Cap'n's take: I took this as a very veiled suggestion that people ought to learn how to invest. And that, certainly, I agree with. Further, I'm irritated at the notion that because uneducated investors exist, I shouldn't be able to invest my Social Security contributions. No, no, no. People who aren't comfortable with investing can stay where they are, and people who are comfortable with investing should be able to do so. President Bush's angle on this matter is correct: give people the choice. One size does not fit all. Voluntarism is the way to go. (Of course I'd go much farther and make the entire Social Security program voluntary.)
At this point, Jim Davis had arrived and was ready to give his short speech. He called privatization a "very very dangerous proposal" and that we're not in a crisis. He said that the $90,000 payroll tax cap should be higher — and received wild applause. He said Bush is pushing privatization to benefit his buddies on Wall Street — and received wild applause. It wasn't until this point that I realized just how partisan the audience actually was. For a moment I physically felt unsafe; that the atmosphere in the room was an assault on my values. These people would enthusiastically steal from me and wouldn't feel at all guilty about it. The "buddies on Wall Street" portion was sickening, a clear example of emotional imputed-motive thinking. Of course Bush isn't pushing personal accounts because he honestly believes it's better for young people, he's doing it to benefit his "buddies on Wall Street"! Nevermind the fact that personal accounts are actually popular among the young. It's really all about Bush's anonymous buddies. What baseless rubbish. It's mind-boggling that people are taken in by that sort of thing.
Jim Davis is helping to organize a grassroots organization, "Oregonians United for the Preservation of Social Security". I will be keeping an eye on it.
8) A two-part statement (not a question). The government should quit taking money out of Social Security [basically #3 again], and we need leadership who knows what it's like not to be able to pay the electric bill.
Cap'n's take: Personal accounts would prevent the government from spending (that) money, and I don't think many destitute people have strong leadership skills. I'm repulsed by the idea that leaders need to "feel your pain" in order to help you. No, usually they emphatically should not, because I want decisions to be based on reason rather than on emotion.
9) What happened to the lockbox Al Gore was talking about?
Wu said that the lockbox idea has come up many times and has actually been passed, but then not respected. Wu advocates running the Social Security system closer to break-even all the time to minimize the magnitude of any surplus or deficit.
Cap'n's take: I wish he had been more specific about previous lockbox implementations and what happened to them. I believe the fungibility of money implies that there are no lockboxes except when the funds are used to purchase non-government assets. (And I strongly oppose the government owning private-sector investments. Personal accounts would be okay because they would be owned by individuals, but I have other gripes about them.)
10) Raising the income cap is a good way to fix Social Security's solvency. Why aren't Democrats pushing this more?
Davis responded to this, saying that he'd like to increase the cap gradually. Solvency will be paid for by those who can afford to make up the difference. He compared the Social Security shortfall with the Bush tax cuts as a way to say that the amount of money required is not that large.
Cap'n's take: This is the stereotypical soak-the-rich attitude. I feel insulted every time someone compares the shortfall with the tax cuts: Social Security has and has always had intentionally separate accounting from the rest of the government. The Bush tax cuts did not affect Social Security solvency and it is irresponsible to imply otherwise. The two are orthogonal. Under current law, even if (say) income taxes were doubled the Social Security shortfall would be unaffected. When the trust fund is exhausted, benefits must be cut. Even if the rest of the budget has a huge surplus! To pay for Social Security benefits out of the general fund instead of the trust fund would require a legislative change.
This is another example of trying to have it both ways. If you view Social Security funds as commingled with general funds, you must recognize the value of the trust fund as precisely $0, but you could argue that raising income taxes could fix solvency. On the other hand, if you view Social Security funds separately from the general funds, you could talk about the trust fund having value, but you must recognize that the shortfall must be fixed by adjusting Social Security taxes and benefits alone (in particular, you must hold harmless Bush's tax cuts.)
11) Greenspan wants to cut Social Security. He said the COLAs are too high. They're not.
Davis responded to this, simply saying that he agrees — the COLAs are not too high.
Cap'n's take: There's no such thing as a tax increase or benefit increase that's large enough to satisfy this man. My intuition is that he's a socialist, but I didn't hear enough to be able to know for sure.
12) There was a treaty signed in June allowing illegal Mexican immigrants to get Social Security benefits. What is congress planning to do about this? Why isn't it covered more in the media?
Wu said that he believed Congress voted down the treaty, so it's void.
13) Is a more optimistic rate of growth (2%, rather than the Trustees' 1.5%) possible?
Wu said that the country is underinvesting in research and development and that we need to increase the savings rate. The answer amounted to a qualified yes.
14) A question about the politics of Wu's district. Is Social Security a significant issue for your reelection?
Wu said he plans to do what he believes is right for the country, and he'll let the chips fall when it's time for reelection.
15) This was my question. As he called on me he said that I had been very patient. This is a close paraphrase of what I asked:
Wu said that he would be opposed to that. He's heard of some groups opting out but didn't know offhand how well they had done. [They've done well.] He said that Social Security has been successful in reducing the poverty rate among the elderly, and positioned the program as something that society has decided to do for everyone. You don't have an option on not paying your taxes.
Cap'n's take: I was surprised by the softness of his response. When I asked the Treasury Secretary about it, for example, he was curt and dismissive. Wu actually seemed to consider the idea, and I thought this was a very good sign. My crusade has been to raise the visibility of individual opt-out and to get politicians thinking about it. In this case I think I've succeeded, although I don't expect Wu to change his mind about opposing it. I think it helped that my question connected to something he had earlier brought up, and that asking about individual opt-out is orthogonal to the matter of personal accounts (so I couldn't be pigeonholed as a supporter or an opponent of Wu's).
As for his point that taxes are involuntary, that's exactly what I'm trying to change. I want Social Security to be a voluntary program, not a forced program. The facts that it has separate accounting and tracks benefits at the level of individuals actually help to make an individual opt-out implementable!
16) This question was about No Child Left Behind. I'm reporting on Social Security, so I'll skip this. (The town hall meeting was explicitly open to other topics, but most questions were about Social Security.)
17) A statement (not a question) that Social Security is the best insurance young couples can have. I believe this was a reference to survivor's benefits. Rhetorically asked if there was some way to get Bush to understand that fact.
Cap'n's take: It seems presumptuous to presume that Bush is unaware of, or doesn't value, survivor's benefits. In any case, I don't understand the supposed advantage over a life insurance policy.
18) This question was about pensions, so I'll skip it.
Wu gave short closing remarks, and addressed me in them. I was flattered. He said that he believes we (meaning government) can make the proper decisions regarding Social Security, although "I know that faith is not shared in certain circles" [smiling and pointing to me]. That's very accurate. I don't trust the government. I think it's a lot less risky to take care of my own retirement than to entrust the government with that task.
As people were leaving, I went over to the first speaker (the AARP volunteer) to ask him why the AARP was so involved in the Social Security issue, given that none of the proposals affect the system for those already retired. He said that AARP's concern is for children and grandchildren of retirees and that they want to make sure the Social Security system is still there for them. This is a fair answer, but I'm still uncomfortable with the AARP's prominent position in the debate. If it's really about children and grandchildren, shouldn't the opinions of those children and grandchildren be given priority over the opinions of current retirees?
I talked with three members of the audience on the way out. The first was hostile to me but then apologized after making a comment he regretted. It was an "if you don't like it, leave the country" type of comment. I wasn't offended by it, but he retracted it anyway. Mighty polite of him.
The second was a lady who said she agrees with me about the issue of political risk and has thought about what that in connection with her grandchildren. I didn't get the impression she liked individual opt-out, though.
The third was in the parking lot. I talked for a few minutes with a lady who turned out to be an Intel retiree and who was strongly opposed to tax increases and was upset with the soak-the-rich attitude among the audience. She was quiet at this town hall meeting, but said she had spoken a lot at a meeting several months ago.
Talking with these nice and polite people cured my earlier sour attitude about the audience. Yes, there were a lot of people there who saw me as a mere piggy bank. But there were also people there who were keeping a low profile and were sympathetic to the young.