Friday, March 18, 2005

What divides us.

Last night I was in Nashville working on a project with a vendor. One of the partners met us at the airport and took us out to dinner. The conversation soon devolved to a discussion of the current political environment.

The vendor has long experience in the politics of Tennessee. He also has long experience in higher education. Not surprisingly, he does not share my political beliefs. His last direct involvement in politics was as an unsuccessful candidate for congress – in 1974 when democrats did not lose. He is a thoughtful guy. We have compared values and grandchildren.

We started the discussion as a result of my inherent distrust of the probity of the legacy media. The conversation got around to Iraq and Social Security. In both cases he believes, I think, that a) the president has at best misrepresented his position and that b) the position he is advancing will not aid the nation. I disagree.

Our discussion about Iraq was interesting. I argued that WMDs were part of the rationale for invading Iraq but not the entire rationale and that, at the time, everyone’s intelligence suggested that Iraq held some WMDs. I also argued that the news media had substantially and conscientiously misrepresented what has happened in the middle east – often ignoring stories that would disprove their bias and emphasizing those stories that reinforced their point of view. My friend came back to two questions – first, is the effort there worth the human and economic cost – I think yes – but the discussions about the priorities could probably have been done better. I am convinced that had we waited for the Europeans to act in concert we would have never moved. But the second question was equally important. My friend lives in Brentwood, Tennessee – a place of wealth. There he argued, in his second point, that there is little, if any evidence of sacrifice. He remembers the time in WWII and soon after where the nation was pulled together by its common purpose and sacrifice. Obviously, this effort, to date, has not involved a significant percentage of the GDP that WWII did – but even with that difference, the question is worth asking.

The second area we discussed related to the President’s attempt to partially privatize Social Security. I am bothered that the President has not been more successful here. In graduate school I did a couple of major papers on alternatives for Social Security – this was a few years before the “fix” that was done in the early 1980s – I’ve always thought of that as not a fix but as a prolonging. There are three elements to Social Security – and the democrats to date have lumped them together. The first is the OA part of OASDI – that is a pensioning system that is funded with budgetary kerfluffle and not much more. A trust fund without any real trust. The second part is the SDI – survivors and disability. Fundamentally it is a mix between welfare system and social insurance system to take care of predictable but unforeseen events in life that happen. Finally, there is an old age health insurance program.

The OA part of the system is an increasingly set of false promises. It is a defined benefit program with an increasingly adverse financing mechanism. The reasons for this deterioration are IMHO twofold – demography and political grandstanding. The formulas for the program are overly generous and the coverage of workers to beneficiaries is increasingly narrow. A second problem with the existing OA system is that it is a classic Ponzi design – the early players got paid off handsomely while current and future “beneficiaries” are making an increasingly lousy investment. The president’s idea of private accounts would correct those problems – but even with those changes there probably need to be more changes. The benefits of creating private accounts are obvious – people would own an asset that could help to build both national and personal wealth.

The S,DI program is fundamentally something different. Fundamentally, decisions here are conditioned on how much we should mandate these kinds of costs. These are decisions that our political system makes pretty intelligently.

Finally there is the senior citizens health program. Here both the democrats and the republicans sold all of us a bill of goods. Sure seniors are living longer. Sure new drugs cost a lot. But is increasing an already underfunded program the way to make it better? Does the federal government have any proven expertise in managing costs?

What we came down to is a wish from both of us that the level of public discourse on issues like Iraq and Social Security would be elevated a bit. Politicians often believe they must treat us like children. In the short term that wins elections but in the long term that lowers trust in our civil and political systems. My friend commented that many of the organizations he grew up with – his church, his political party, and other things that were important to him are places where he is no longer comfortable. On that we could agree.

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