Anti-Social Security

Dean Baker of the Center for Economic and Policy Research has an article in a recent issue of The Nation about the benefit cuts that will form a part of Bush's Social Security reform plan. Bush wants us to believe that payouts from private accounts will make up for these rather steep cuts, but the evidence doesn't point that way:

The President's main pitch is that these accounts will yield higher returns than Social Security does. The pitch also includes rhetoric about the accounts being "your money," and giving every worker a stake in the "ownership society." These claims are mostly bad math, faulty logic and deception. Advocates of private accounts assume that the stock market will give the same returns in the future as it has in the past, even though price-to-earnings ratios in the stock market are far higher now than in the past, and the Social Security trustees project that profits will grow at about half the rate they did in the past. None of the proponents of privatization have yet passed the "no economist left behind test," which asks them to show the set of dividend yields and stock price increases that add up to the stock returns they assume in their analysis.

Elsewhere, Baker and David Rosnik quantify the shortfall that workers can expect with Bush's plan:

The proposal that President Bush is using as the basis for his plan phases in cuts over time. A worker who is 45 today can expect to see a cut in guaranteed benefits of around 15 percent. A worker who is age 35 can expect to see a cut in the guaranteed benefit of approximately 25 percent. A 15 year old who is just entering the work force can expect a benefit cut of close to 40 percent. For a 15 year old, this cut would mean a loss of close to $160,000 in Social Security benefits over the course of their retirement.

Private accounts will allow workers to earn back only a small fraction of this amount. For example, a 15 year-old can expect to make back approximately $50,000 from the $160,000 cut with the earnings on a private account. If this worker retires when the market is in a slump, then it could make their loss even bigger.

Anyone who claims that Bush's plan will "save Social Security" just isn't paying attention. Josh Marshall is right: Bush's plan only makes sense if your goal is the destruction of the program.

Faith-Based Missile Defense

Things didn't go so well out on the test range yesterday.

The Bush administration's effort to build a system for defending the country against ballistic missile attack suffered an embarrassing setback yesterday when an interceptor missile failed to launch during the first flight test of the system in two years.

Pentagon officials could not immediately explain the reason for the failure. They said some kind of anomaly prompted the automatic shutdown of the launch sequence just 23 seconds before the interceptor was due to take off from the Marshall Islands in the Pacific. Plans had called for the interceptor to soar into space and knock down a mock warhead fired from Kodiak Island in Alaska about 16 minutes earlier.

Let's cut to the chase. The interceptor system is fundamentally flawed and subject to simple and effective countermeasures. The system has been unable to pass a series of tests that are so dumbed down that even a passing grade would give us little reason to believe that the system would actually work in the real world. Yesterday's test was delayed for months while the Missile Defense Agency tweaked the system, and even that wasn't enough to insure success. In the end, missile defense costs us $10 billion per year, and after decades of research and development, we have almost nothing to show for it.

Faced with these facts, you might expect that policy makers would just scrap the whole thing. You'd be wrong: missile defense is getting an increase in appropriations next year. Maybe you would expect the installation of the system would be delayed until all the bugs were worked out and it was sufficiently tested. You'd be wrong again: the system was installed earlier this year, just in time for Bush to take credit for it before the election. You might then expect that yesterday's failed test would delay the decision to make the system operational. Wrong again:

For weeks, Pentagon officials have described the facility as going through a "shakedown" phase and have insisted that the decision to declare it operational would be made independent of the outcome of the flight test. Lawrence Di Rita, the Pentagon's top spokesman, reiterated yesterday that "the test was not connected to any decisions about operational capability."

This is our faith-based administration at work: it's decisions are made "independent" of the facts. We could be buying a lot of reality-based security each year with those billions of dollars. As it is, we're just wasting money and ignoring opportunities.