Why is Obama putting a Social Security privatizer in charge of the Commerce Department?
Yes, Obama's going to nominate Gregg this morning. So let's look at Gregg. From the Heritage Foundation, Gregg and a Blue Dog introduced legislation for Social Security "carveouts"* back in 2000:
The other alternative is to fund an individual Social Security account by diverting, or "carving out," some portion of the 10.6 percent of income (including the part that an employer pays on behalf of the employee) that Americans now pay for Social Security retirement benefits. In the legislation introduced by Representatives Jim Kolbe (R-AZ) and Charles Stenholm (D-TX), 16 and that introduced by Senators Judd Gregg (R-NH) and John Breaux (D-LA), 17 8.6 percent of income continues to go to Social Security, while an amount equal to 2 percent of income funds a personal retirement account.
I guess, back in 2000, that might have looked pretty good to somebody who wasn't paying attention. See Dean Baker in 1998 on Gregg's problems with the numbers:
We initiated this exchange by requesting projections on the components of stock returns (dividends and capital gains) for Social Security's seventy-five year planning horizon, because you are supporting a Social Security reform plan which will make workers' benefits dependent on stock returns. Now you indicate to us that:
"If your paper [on eliminating the projected Social Security funding shortfall] succeeds in detailing the size and form of the tax increases required to pay off the Trust Fund during the 'drawdown' period, and shows that retirees wind up with more income under the traditional system than our plan when all relevant factors are taken into account, I would be pleased to circulate it among my colleagues, and to forward an accounting of stock return rates in short order [emphasis added]."
In other words, you will only make such projections available to the general public – projections crucial to your own proposal to change Social Security – on certain conditions.
While we are happy to engage you and your colleagues in the larger debate on Social Security and budgetary policy in general, it is hard to believe that you are making our participation in this debate a condition of giving out information about the assumptions behind your proposal. As you know, the Social Security trustees produce very detailed accounts giving year by projections on wage growth, unemployment rates, life expectancy and other relevant economic and demographic variables. The proponents of plans that rely on stock market returns have made no similarly detailed set of projections.**
The point here is very simple: if a Social Security plan relies on stock returns to pay benefits, then the public is entitled to the same sort of detailed projections of stock returns as it can get from the Social Security trustees for all the other relevant economic and demographic variables. We trust that your colleagues in the House and Senate will agree with this simple proposition.
So, Gregg was advocating Social Security privatization based on numbers he would only publish on certain conditions. In retrospect, it's easy to see why***, isn't it? His response to Baker's challenge? An unsupported claim of 7% returns -- again, not looking so good these days.
Anyhow, to try to answer my own question, I'm sure this must be the bestest Machiavellian move EVAH by Obama, but can somebody explain to me why? Great to see WKJM all over this, though. Oh, wait....
NOTE * I love how the Heritage Foundation calls their propaganda "research." It's so precious.
NOTE ** See this hilarious Heritage Foundation series of projections based on "ultra-safe blue chip investments." Bwa-ha-ha-ha!
NOTE *** And see the Howler for a case study in Gregg-inspired Social Security disinformation. Fred Hiatt is such a tool.