Jon Stewart can be a very good interviewer when he knows his subject. His interview with Betsy McCaughey about the ACA always comes to mind. However, when he hasn't read up on a subject, misinformation can win the day. Social insurance is often one of such topics for misinformation.
Thanks to Digby, I noticed that Charles Krauthammer was peddling lies about social insurance on The Daily Show the other day, with Jon Stewart seemingly buying into everything he was saying.
Here's the key exchange:
CHARLES KRAUTHAMMER: Ted Cruz is not the official spokesman for American conservatism. If you want somebody who has been out there, who has offered an alternative, the person who offered an alternative for example is Paul Ryan. But, let me start with his assumption. His assumption is not that government doesn't have a role. His assumption is that the welfare state as established with great success by liberals has now reached a point where it no longer fits.
With the new demographics and with the higher technology and medicine, we will simply become insolvent unless we radically reform. I’ll give you one fact. When Social Security was instituted, the age of longevity was 62. Today life expectancy is 80. So what you have is a huge change in the demographics. And when you look to Europe, which is the social democratic state where we’re headed which has all the entitlements and the government activities which a liberal would want and to with which American liberalism is headed. It became insolvent because it never adapted to the change in demographics and the change in technology, and it has had a rude awakening.
JON STEWART: If it was ever presented in that fashion, in the way that you just presented it, I think the conversation we would be having in this country would be very different. But the way it is presented by—
So, Krauthammer just lied to Stewart, repeating the same canards (and framing) peddled by Paul Ryan. And Stewart just thanked him for his civility, reasonableness, and thoughfulness?
When someone talking about Social Security or Medicare speaks of "life expectancy" rather "life expectancy at age 65," guard your wallet.
Life expectancy at birth will be influenced by factors like the infant mortality rate, which has dropped significantly since the 1930s.
The better focus, as the Social Security Administration explains, is the life expectancy at 65. How much longer past 65 would those who begin receiving Social Security live?
Here, we see a different story. Between 1940 and 1990, the life expectancy at age 65 for women went up by 4.9 years, and the life expectancy at 65 for men increased by only 2.6 years. If we look at the period from 1970 to 1990 (for Medicare), life expectancy at 65 for men rose only 1.5 years--for women, 1 year.
If we look at the most recent data from the OECD about life expectancy at age 65, we find that the numbers have only increased slightly since 1990. Male life expectancy at age 65 is now at 17.7 years, only 5 years higher than it was in 1940 and 3.9 years higher than it was in 1970. Female life expectancy at age 65 is now 20.3 years, only 5.6 years higher than it was in 1940 and 1.7 years higher than it was in 1970.
These increases, however, have been uneven. As you can see in the chart below, the life expectancy at age 65 for the bottom half of all male earners has barely increased since 1977, rising perhaps a year compared to the 6+ years for the top half of earners.
And with regard to Social Security, Krauthammer ignores the fact that the real retirement age is 70. I'll let Alice Munnell of Market Watch explain:
Before 1972, maximum monthly Social Security benefits were paid at 65, and monthly benefits were not increased for claiming later. In 1972, Congress introduced a Delayed Retirement Credit, which increased benefits by 1% of the full retirement age benefit for each year of delay. The result was that those who retired later got a little bonus for delaying. But a 1% credit did not come close to compensating for the fact that late claimers had to wait and would get benefits over fewer years. In 1983, the adjustment was raised to 3% and that percentage was increased gradually to 8% in 2008. At this point, the adjustment provided by the Delayed Retirement Credit is actuarially fair – that is, it keeps lifetime benefits constant for those who claim after the full retirement age. In doing so, the Delayed Retirement Credit has rendered the full retirement age a largely meaningless concept. It does not describe the age when benefits are first available. That is age 62. It does not describe the age when monthly benefits are at their maximum. That is age 70. It really does not have any meaning in terms of an official retirement age.
This wasn't, unfortunately, the only time we've seen nonsense about social insurance on The Daily Show. I was immediately reminded of an exchange between Jon Stewart and Robert Reich in an interview last month:
REICH: The latest research shows that the top 1% are now taking home almost 23% of total income in this country. It’s a new record. All of the, 95% of the gains—
STEWART: So why not change the tax structure to be more progressive? Why end the Social Security tax at—Why not keep going? Why not means-test some of these benefits?
REICH: I’m with you.
Stewart just lumped three policies together: (1) a more steeply graduated income tax structure, (2) an elimination of the payroll tax cap, and (3) means-testing Social Security (and perhaps Medicare). One of these is not like the others, and I think it's easy to tell which.
Let's go through each one.
(1) A more steeply graduated income tax structure
The marginal tax rate in the top income bracket is quite low in the U.S. in historical perspective, as the chart below will attest. The marginal tax rate was at its highest at the end of World War II, when FDR was able to get a top rate of 94%. This only lasted a few years; however, the top rate was 91% from 1946 to 1964. It didn't fall below 70% until Reagan and is now just over half of what it was when Reagan took office.
Economists Emanuel Saez and Thomas Piketty have argued that the revenue-maximizing marginal tax rate would be 83%, far higher than the current 39.6% in the U.S.:
Naturally, cross-country comparisons are bound to be fragile; exact results vary with the specification, years, and countries. But the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. By our calculations about the response of top earners to top tax rate cuts being due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% (as opposed to the 57% allowed by the pure supply-side model).
Until the 1970s, policy-makers and public opinion probably considered – rightly or wrongly – that at the very top of the income ladder, pay increases reflected mostly greed rather than productive work effort. This is why governments were able to set marginal tax rates as high as 80% in the US and the UK. The Reagan/Thatcher revolution has succeeded in making such top tax rate levels "unthinkable" since then.
Now, however, we have seen decades of increasing income concentration that have brought about mediocre growth since the 1970s. And with the Great Recession that was triggered by financial sector excesses, a rethink of the Reagan and Thatcher revolutions is underway.
The United Kingdom increased its top income tax rate from 40% to 50% in 2010, in part to curb top pay excesses. In the United States, the Occupy Wall Street movement and its famous "We are the 99%" slogan also reflects a view that the top 1% has gained at the expense of the 99% – a view endorsed by our findings about the highly unequal distribution of income gains during the recovery.
In the end, the future of top tax rates depends on what the public believes about whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence both social beliefs (through thinktanks and media) and policies (through lobbying), thereby creating some "reverse causality" between income inequality, perceptions, and policies.
The job of economists should be to make a top rate tax level of 80% at least "thinkable" again.
(2) Raising the payroll tax cap
The payroll tax cap for Social Security currently stands at $113,700. That means that all income in excess of $113,700 is not subject to the SS payroll tax. Because of this, the payroll tax is fairly regressive. Someone making over a million dollars still only has to pay FICA on the first $113,700.
In the 1980s, under Reagan, 90% of wages were covered by the Social Security tax. Today, only 83% are.
Raising the payroll tax cap would help strengthen Social Security. Bernie Sanders, for instance, his bill that would continue the payroll tax on all income in excess of $250,000 (allowing the president to keep his promise of not raising taxes on incomes below that number).
(3) Means-testing benefits
This is the one that doesn't quite look like the others. #1 and #2 are clearly progressive policies that would help the government to run programs more effectively and enduringly. Means testing, on the other hand, is not.
The uselessness of means testing Social Security or expanding the means testing of Medicare (Part A is not means-tested, but Part B is) can be explained by very simple math.
The number of rich people is small. (That's why you hear the mantra of the 99% versus the 1%). However, their total income or wealth is large. If you want to shore up a program, would you target the small number or the large amount of money? It doesn't take a genius to figure it out.
If you wanted to save money via means testing universal benefits, then, as the Center for Economic and Policy Research has shown, you would have to push that income threshold down to the point where the means-testing affects people who are very much middle-class. There just aren't enough affluent seniors to make means-testing effective:
The data show that over 75 percent of social security benefits go to individuals with non-Social Security income of less than $20,000 and 90 percent goes to those with non-Social Security income of less than $40,000 a year as of 2009. If means testing that phased out benefits at 10 percent were applied to those who make $100,000 a year and assuming no change in behavior, it would only save Social Security 0.74 percent of its outlays. At a 20 percent rate, this would only yield savings equal to 1.33 percent of costs. If the phase out were dropped down to $40,000, hardly wealthy by any standard, the overall savings would just be 2.77 percent of costs at the 10 percent rate and only 4.65 percent of costs at the 20 percent rate. ..f
Mean testing would also raise the cost of the program. The retirement program currently has very low costs. If the administrative expenses rose to the level of the disability portion of the Social Security program, the higher costs would likely exceed any savings from a means test.
Means-testing also takes away from the universality of social insurance programs like Social Security and Medicare, which is one of the main drivers of their enduring popularity. Universality is a central principle in the vision of a social contract embedded in both, and universality builds the constituency for the program so that there are more people who benefit or know that they will benefit in the future. Means-testing would create a "welfarization" of Social Security and Medicare, making them more susceptible to budget cuts as people see them as only programs for the poor.
Robert Reich has even pointed this out himself, so it is strange that he did not bother to challenge Stewart on it.
When discussing misinformation about social insurance, there will likely always be a Simpson or a Bowles. I've said before that after a nuclear holocaust, there will be three survivors: cockroaches, Cher, and a new Simpson-Bowles plan even more regressive than the previous ones.
Back in December, amidst the "fiscal cliff" negotiations, Jon Stewart had Alan Simpson on the show in what was quite the softball interview. Stewart also apparently found Simpson important enough to merit a three-part interview, with the latter two segments being online-only.
Stewart set the tone of the interview early on by flattering Alan Simpson as a great sage of Washington: "Two years later, as we stand on the precipice of a cliff, suddenly this plan is seen as the most reasonable thing in town, and people are coming to you to find out your sage advice." The people who derided Simpson-Bowles in 2010 still derided it in 2012 (Well, except for Nancy Pelosi, in a bout of hypocrisy). Those who supported it--your professional centrists of the Beltway press and your corporate class--still supported it.
He also plays along with Simpson's "pox on both your houses" professional centrism:
SIMPSON: And for God’s sake, the reason that we were so successful was that we effectively pissed off everybody in America.”
STEWART: Congratulations, sir. Kudos to you. [Audience applause]
Many times in the interview, Jon Stewart showed that his lack of contextual knowledge allows him to be played quite easily. Alan Simpson was able to lie or evade questions without challenges. And I got the impression that Stewart had never actually read the Simpson-Bowles plan---or its future even more regressive iterations.
Take, for example, this line:
And we got five Democrats, five Republicans—a range from Dick Durbin from Illinois, a great progressive Democrat, and Coburn of Oklahoma, a progressive conservative—five Democrats, five Republicans, 1 Independent, and that’s a supermajority.
Dick Durbin, who
laughs at the powerlessness of Medicaid recipients and wants to cut Social Security, is no progressive. “Progressive conservative” sounds strange, and I can’t decide whether I think Simpson meant “conservative Republican” or not. Simpson is also lying about the definition of “supermajority.” The
Deficit Commission, by design, needed 12 out of 18 (2/3) to pass a plan. It only got 11. That’s not a supermajority. Simpson's framing implies that the Simpson-Bowles plan passed. It did not.
Stewart also lets Simpson evade his question on corporate tax rates. Stewart, to his credit, challenges Simpson at first, but then he lets his question die as Simpson angles the conversation away.
STEWART: In Simpson Bowles, there’s a lot of talk about corporate tax rates and lowering them and making them more competitive. In my eye, corporations have had over these last 20 years, the run of the place. If you look at it factually, corporate profits are at an all-time high…..Worker wages have stagnated even as productivity has gone up. So I guess I’m confused as to why we are chasing their favor when they seem to have had such a good run over these past twenty or thirty years.
SIMPSON: Our corporate tax rate is the highest in the world.
STEWART Not actually.
SIMPSON: Well, 36% is where we’re at. We did—we took away all of these tax expenditures, all of these deductions—these are just earmarks by any other name, and it’s spending by any other name…And only 20% of Americans are using 80% of the stuff in that tax code. Does that give you the wakeup call of who’s gimmying the system?...So we said give the American people from 0 to $70,000, they pay 8%. From $70,000 to $210,000, they pay 14%. Everything over that, they pay 23%. Take the corporate rate to 26% from 36% and not tax them twice when they bring it back. And when they bring it back, the Democrats—as Erskine says, a Democrat—the Democrats will just say, “Well, they’ll just use it to pay dividends and to buy stock.” And he said, “Well, hell, at least they’ll be using it in the United States of America instead of sticking it over there and leaving it.”
STEWART And they could also use it for bonuses or whatever…
Stewart also seemed to embrace Alan Simpson's beliefs on Social Security. He did, to his credit, present a challenge on the question of the retirement age, but then--again--he got played by Alan Simpson because of his lack of knowledge on the issue.
STEWART: What was your Social Security fix?
SIMPSON: Take the bottom 20% of the American people and give them 125% of the poverty, and that’ll cost you something. Take the 80 to 85 and give them an extra 1% kick. Change the wages subject to the tax to $190,000.
STEWART: Make it higher.
SIMPSON: Keep going as far as I’m concerned.
STEWART: There you go.
SIMPSON: Change the cost of living index allowance to something more productive. 10,000 a day, people are turning 65. And then take the retirement age, which is going to be 67 in the year 2027.
STEWART: Right.
SIMPSON: Take the retirement age to 68 by the year 2050. And then the AARP says [crudely mocking tone], “How will the old people ever be able to pay that out.” (audience laughs) I said, “Well, if they can’t figure that out, we’ve got these young people are going to get hosed.”
STEWART: I like everything in that plan. I like making it more responsive to those at the lower end of the economic scale. And more of what it was intended for, a poverty-fighting plan for the elderly. To make sure that they are not—one of the biggest successes that we’ve ever had. The only thing about raising the retirement age—
SIMPSON: By year 2050?
STEWART: Well, the only reason I was going to say this is that if you are at the lower strata of the economic scale, aren’t the chances of your life being longer less? Doesn’t raising that age really hurt the little people that you’re talking about in that span? Isn’t it that the people at the higher end of the economic span who have access to medical plans, who have doctors, they, for better or for worse, live longer?
SIMPSON: We’re very careful. We don’t say anything about retiring at 62 for the guy that’s all broken down working in the steel mill. We don’t change that at all.
STEWART: Okay, so manual—so certain jobs—
SIMPSON: No changes.
STEWART: Economic—
SIMPSON: Nothing.
STEWART: Who pushes back against means-testing? Who pushes back against raising the cap?
SIMPSON: Seniors groups are organized. Business groups are organized. But young people have no organization whatsoever beside The Can Kicks Back. … Let me tell you, man, the senior citizens, the AARP, the Committee for the Preservation of Social Security, Social Security Works, Grey Panthers, Silver-Haired Panthers, Pink Panthers—hell—
(Emphases added)
Simpson is lying to Stewart about the effects on those who retire at 62 because of manual labor. As you can see in the chart I included earlier, those who retire at 62 get reduced benefits, and full benefits don't kick in until age 70. If the retirement age is raised, that will be pushed back even further.
Simpson's line "Change the cost of living index allowance to something more productive" is a cleverly deceptive way of speaking about the benefit cut of chained CPI. Describing a COLA as "productive" is simply incoherent. A COLA can be described by the words generous, stingy, or sufficient--or any synonym of those. Because the word "productive" sounds good--and because Stewart seemingly hasn't read the Simpson-Bowles plan (which is unfortunate because he would have been a better interviewer if he had done so), he doesn't even follow up on that point.
Also, Stewart again lumps in means testing with raising the cap as his idea of a progressive policy to help the little guy. And again, as I already explained, he is misinformed.
Simpson's hatred of AARP is also somewhat strange considering AARP has actually endorsed benefit cuts in the past, betraying its constituency/membership. But it serves Alan Simpson's purposes better to paint himself as a noble David against the Goliath of AARP.
All throughout the interview, Stewart jokes along with Simpson and, more dangerously given the audience, never challenges him on his fallacious claims about generational warfare and his description of corporate front The Can Kicks Back as a genuine youth movement. (What kind of grassroots youth movement would be making videos with Alan Simpson and Alice Rivlin?) Simpson tries to reframe class warfare as generational warfare, painting himself as a noble defender of future generations. And Stewart lets him get away with it.