Social Security: A Daring Leap

Social Security: A Daring Leap
President Bush makes his proposed private accounts sound like the opportunity of a lifetime. But the fine print shows they pose great risk for you—and the nation
By Allan Sloan
Newsweek

Feb. 14 issue - You've got to give President Bush an A-plus for the way he marketed the Social Security proposals in his State of the Union address last week. "If you've got children in their 20s, as some of us do, the idea of Social Security collapsing before they retire does not seem like a small matter," he said—a sentiment with which even a skeptic like me, who has twenty- and thirtysomething kids, totally agrees. "We must ensure that lower-income Americans get the help they need to have dignity and peace of mind in their retirement," he added. Then, with a twinkle in his eye, he talked about making Social Security "a better deal" for younger workers—a clever allusion to the New Deal of Franklin Delano Roosevelt, father of Social Security. You could almost feel the Democrats gnashing their teeth.

You can't argue with Bush's stated goals of making Social Security financially sound to allow Americans a secure retirement. "I will listen to anyone who has a good idea to offer," he said. But the conditions he laid down in the rest of the speech—demanding private accounts and no new payroll taxes—indicate that his mind's pretty much closed. For obvious reasons, he quickly skimmed over the sacrifices required to make any new system work, attributing the ideas to Democrats, such as former senator John Breaux. But in fact, so many details of Bush's plan have emerged that we can use some back-of-the-envelope math to see if they make sense. The short answer is that many of them don't—and I'll show you why. Don't worry, my envelope's bipartisan: there's plenty the Democrats aren't telling you, either. Bush is pretending Social Security's about to collapse and go broke, which isn't true. The Dems are telling you that it can continue as is for more than 30 years without a problem—and that's not true, either.

Yes, I know that by now, you're loaded to the eyeballs with Social Security analyses. You've seen so many numbers your teeth hurt and your brain has reached statistical overload. Please bear with me. Based on my decade of deep-diving into Social Security's workings, I'll filter out the political junk, spare you all but the essential numbers and stick to economics.

Let me start by saying it would be great if Bush's (seriously flawed) proposals lead to a reasonable compromise to adapt Social Security to the 21st century. Bush would be a statesman for the ages. Hey, I don't have a knee-jerk bias against private Social Security accounts. I'm all in favor of them, properly structured. But Bush's aren't.

Now to the details. The Bush proposals are based on something called Plan 2 that was proffered as a solution to Social Security's woes by a commission Bush set up in 2001. A Wednesday press briefing by Chuck Blahous, the White House's Social Security point man who was executive director of the commission, makes it clear the Bushies are proposing Plan 2, with a few modifications.

The current system is clearly unsustainable, despite what Democrats say about it being sound until the 2040s. Today's workers support current Social Security retirees, and the next generation is supposed to support them. The ratio of workers to recipients has fallen from 16-1 to the current 3-1, and will fall to a future 2-1. Keeping the current system afloat would require some combination of cutbacks in future benefits, more money from workers or taxpayers, or both. Given that Bush doesn't want to increase taxes, all that's left—if he prevails—is benefit cutbacks. And Plan 2 has serious cutbacks. An average worker retiring in 2075, for instance, would get a benefit 46 percent below the current formula. Later cuts would be even deeper. The plan does this by using a benefit formula based on inflation rather than on wages, which are roughly 1 percent a year higher. A few decades of compounding 1 percents sure adds up.

The one tax on income that Bush hasn't cut as president is the Social Security wage tax, which costs 80 percent of American workers more than federal income tax does. By keeping the tax the same and reducing future benefits, Bush is like a candymaker that cuts 46 percent off a chocolate bar but charges the same 75 cents for it. In other words, his plan would effectively increase the Social Security tax. Sure, the current formula's unsustainable—but, as we'll see, there are other ways to fix things.

Now, watch this. Bush's private accounts don't make Social Security financially sound—the benefit cuts do. The private accounts are something Bush insists on, not something Social Security needs to regain its long-term financial footing.

Shifting to private accounts, under Bush's plan, would lead to massive borrowing by the federal government, adding to our already huge deficits. Under the current system, your Social Security taxes go to pay Ma and Pa and Grandma and Grandpa, plus disabled people and survivors. If your money is going into a private account instead, how will Uncle Sam pay Ma and Pa? The same way Bush has paid for everything, be it tax cuts, wars or his Medicare prescription-drug benefit: borrowing.

In the first 10 years of private accounts, according to the Center on Budget and Policy Priorities, a Washington think tank, the government would have to borrow $1.3 trillion (including interest) to make up for wage taxes no longer available to pay Social Security benefits. (This assumes two thirds of eligible workers opt for the accounts.) Over the first 20 years, borrowings would total $4.5 trillion. This is serious jack. The Bushies like to compare these borrowings with what they claim is a $10.4 trillion gap between Social Security's obligations and the resources available to pay them. But the shortfall—let's not quibble about its size—would be eliminated by cutting the benefit formula. We'd be borrowing trillions to cover bets in the stock and bond markets for a system with "security" in its name. Given that foreigners are financing almost all our budget deficit, we'd be hocking ourselves even more to lenders—such as the central banks of Japan and China—whose long-term interests may not be the same as ours. I think that would be a terribly serious mistake for us to make.

This brings us to the Democrats, who keep clinging to the idea that Social Security's accumulated surpluses—known as the "trust fund"—will protect benefits under the current system until 2042. Plenty of people share that opinion. But they're wrong. Let me show you why, unless we change things, Social Security will become an incredible cash drain on the rest of the government a decade or two down the road. My analysis, incidentally, is the same as Chuck Blahous's—and we've arrived at it totally independently.

Look at the chart on page 42 of the magazine. You see that Social Security is now taking in more cash than it spends. The accumulated surplus is approaching $2 trillion. But there's a big problem here, fans. The money isn't being saved. Instead, one part of the government, the Treasury, is writing IOUs to another part, Social Security. The Treasury borrows Social Security's surplus cash and gives it IOUs in return. It pays interest on the trust fund's IOUs with additional IOUs rather than cash. So you've got a big pile of government promises to itself. Nothing's been saved. It's as if you wrote IOUs to yourself, stuck them in a coffee can and called them savings. When you needed cash, you'd reach into the can, but all you'd find are IOUs. You'd have to bring in more money or spend less or borrow—just as if there were nothing in the can but coffee.

OK, let's fast-forward to 2018, when Social Security is projected to take in $23 billion less cash than it spends. By then, the trust fund would have more than $5 trillion of Treasury IOUs in it. So it would be a piece of cake to cover a crummy $23 billion, right? Wrong. No matter how many Treasury securities the trust fund has, Treasury would still need $23 billion of cash to cover Social Security's bills. The Treasury can trim other expenses, bring in more money or borrow 23 billion bucks. But these options are exactly the same as they'd be if there were no Social Security trust fund. By 2027, Social Security would be taking in almost $400 billion less than it spends, requiring huge cash influxes. The trust fund—on paper—would still be getting bigger. In the real world, though, Social Security's cash deficit would be seriously squeezing the rest of the government. Finally, as the cash deficit nears half a trillion dollars annually, the trust fund starts to shrink, then melts away. But the fund's irrelevant, folks. It's an accounting entry, not real money. How the Democrats can cling to the trust fund with a straight face is beyond me. Maybe it's because they don't want to shatter Social Security's myths, or let people see how expensive Social Security really is.

Now, look. These numbers show there's a problem if something doesn't change. But it's no crisis. If you want a crisis, look at the totally unfunded Medicare prescription-drug program that Bush shoved down Congress's throat in 2003. The same people who calculate that Social Security has a $10.4 trillion shortfall place the drug program's at $17 trillion. Social Security can cover its own expenses for a dozen years. The drug program—which isn't even good insurance, being riddled with coverage holes and assorted problems—starts chewing through money next year. Which is the bigger problem? Hint: not Social Security.

Now it's time to look at how Bush's private Social Security accounts would work. And who'd win and lose. Under Plan 2 in its current incarnation, you'd almost certainly want to sign up for these accounts if you're younger than 55. Yes, you'd have to accept a smaller guaranteed benefit. But you'd come out ahead if your account produced an annual return—cash income and price gains—of more than 3 percent above inflation. That's not a slam-dunk, but it ought to be attainable because you would have a choice among a handful of high-grade, very-low-cost, very diversified mutual funds. But there's a catch. You would own the account, sort of, but you wouldn't control it. And you'd have to fork over the aforementioned 3 percent return—by taking a smaller benefit—when you cash in your account.

Bush, brilliantly, is marketing these accounts as empowering people who'd have no other assets. But I don't think things would work out well for these folks. There would be strict limitations on the accounts—you couldn't take money out of them before you retire, or even borrow against them. And the odds of a low-income person's being able to leave a significant account to her heirs—one of Bush's major selling points—strike me as remote.

Here's why. When it's retirement time, low-income people would likely have to convert most or all of their private account into an annuity to have enough money to live on, or to meet requirements that their guaranteed benefit plus annuity income would exceed certain levels. If you had to convert your entire account into an annuity, there would be nothing left for your heirs when you died. Higher-paid people, by definition, would have bigger private Social Security accounts and less need for annuity income than lower-income people would. This gives them a far greater chance of having something left to hand down to their heirs, and gives lower-paid people less chance. Not to be snotty, but we higher-income types hardly need additional breaks. We've already got plenty.

Staying power matters big time, too—and higher-income people have more of it than lower-income people do. Although stocks tend to rise over the long term, you'd have to cash in some or all of your retirement account to buy an annuity when you retire. That puts you at the mercy of events. Consider the following, produced at my request by the Center on Budget and Policy Priorities. Say you retired in March of 2000, with a private account that held $100,000 of stock in an SP 500 Index fund. (Index funds match the performance of a benchmark; they don't try to beat the market.) Your inflation-adjusted annuity would have been $7,558 a year—about $630 a month—by the center's calculation. But if you had the same number of shares in your account and instead retired in October of 2002, your account would have had less than $60,000 in it. Your annuity: $3,352 a year, or $279 a month. The combination of lower values and lower interest rates is a double whammy. You see the problem? You can get much less—or much more—than someone who's saved at the same rate as you, but retired a little earlier or later.

If you've got financial staying power, you could wait for better days, or buy the smallest annuity the government will permit. If you don't have staying power, you have to take what the market gives you. Higher-paid people thus have a big advantage. The guaranteed Social Security benefit, by contrast, is tilted toward lower-income people, with a benefit of about 56 percent of Social Security-covered wages for a minimum-wage earner, 30 percent for folks like me who've reached the Social Security maximum every year. You're swapping benefits skewed toward lower-income people for investment opportunities skewed toward higher-income people.

I'm in favor of private accounts constructed along the lines that Bush suggested. But the accounts ought to be in addition to the basic benefit, not as a replacement for about half of it. Democrats are crazy to oppose private accounts. They really do empower you. The current generation is used to investing, and is understandably skeptical about government promises. This isn't the 1930s, when only a handful of people bought stocks, and many of them came to regret it. It's the oughts, guys, get with it. FDR's been dead for 60 years. The world has changed.

If the president really wants to fix Social Security rather than pick a political fight—and the Democrats feel the same—it wouldn't be difficult. They'd compromise by putting more money into the system by raising wage taxes a tad, taking less out by increasing the retirement age and trimming benefit formulas and setting up private accounts funded by wage earners, not by government borrowings. Put a few willing negotiators in a room and a deal's done in a month. I won't hold my breath, though.

Bush has marketed the pants off the Democrats by setting the terms of debate. Do you want to pay higher taxes or lower taxes? Clearly, lower. Do you want to pay estate tax or not? Do you want private accounts, or don't you? He's done a fabulous job of showing the goodies—and of hiding the costs. People, naturally, have opted for the goodies. The Bushies are in full sales mode, including sticking recordings on Social Security's phone lines preaching that the system has to change. In the name of empowering my kids, he's asking them to pay full freight for my retirement and for trillions in new borrowings, while forking over the same wage taxes for lower benefits. If he can sell this one, the Marketing Hall of Fame should start planning his induction ceremony.

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Lobbying war hits airwaves

Lobbying war hits airwaves
By Oren Dorell, USA TODAY
WASHINGTON — Powerful combatants in the fight over President Bush's plan to overhaul Social Security have launched a lobbying war that's turning into the biggest since the battle over health care in 1994.

Just days after Bush unveiled part of his proposal, tens of millions of dollars are being raised and spent on ads, including some that begin Monday. The battle pits business and conservative groups against seniors, organized labor and liberals.

"People are going to be surprised at the level of organization on both sides," says Derrick Max, director of the Alliance for Worker Retirement Security, a business group aligned with the White House.

Bush wants to give workers born in 1950 or later the option of diverting one-third of the payroll taxes they and their employers pay to private investment accounts. He says that would give them the chance to earn more money than guaranteed Social Security benefits provide. Opponents say a retiree who chose the account would get a smaller government check and investments might not make up for it.

Among those backing Bush, in addition to the business group:

•Progress for America, which calls itself a "conservative truth squad," starts running its second ad today on CNN and Fox News Channel. Brian McCabe, its president, says its budget is $20 million.

•Club for Growth, which promotes "free market" conservative candidates and boasts 29,000 members, plans to spend more than $10 million. It's airing ads in Michigan, New York and Rhode Island urging voters to contact undecided Republican lawmakers.

•For Our Grandchildren, financed largely by window and door manufacturer Richard Wendt of Klamath Falls, Ore., employs a handful of lobbyists.

Groups opposing Bush include:

•AARP, the over-50 group with 35 million members, plans to use its four publications and conduct forums, letter-writing campaigns and meetings with lawmakers. It's spending $5 million now on ads.

•Campaign for America's Future, a liberal group whose mission is to "empower workers," hopes to raise $30 million. Roger Hickey, its co-director, says the group drew thousands of people to rallies during Bush's trip last week to pressure key Democrats in five states.

•MoveOn.org, another liberal group, is running TV and print ads warning that Bush's plan will lead to "the working retirement." It plans to spend at least $1 million.

The lobbying effort resembles the fight over President Clinton's proposed overhaul of the nation's health care delivery system a decade ago. Nearly $100 million was spent by outside groups; the plan was ultimately defeated.

"It's an epic battle," Hickey says. "If Bush succeeds here, he's changed the whole paradigm of what government is out to do."

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Bush's Big Bet: Risking His Capital

Bush's Big Bet: Risking His Capital
He got the ball rolling at the State of the Union. But it's no ordinary fight. On trial: America's core belief in the social contract, and its faith in the private sector
By Howard Fineman
Newsweek

Feb. 14 issue - In the abbreviated genealogy of wristband empathy, "Live Strong" yellow was first, followed by pink for breast cancer, blue for tsunami relief and olive green for the troops in Iraq. Now Rock the Vote, a youth-oriented grass-roots group, hopes to make a new jewelry statement. The color is unchosen but the message is settled: "I [Heart] Social Security." In tandem with AARP, the seniors' lobby, Rock the Vote wants to rally youth to defend Social Security as it is—and block President George W. Bush's sweeping plan to change it. Known for using pop stars to glitterize voter registration, Rock the Vote has forged an intergenerational bond with AARP to sponsor town halls, missions to Capitol Hill, an ad campaign—and, perhaps, a concert or two by retirement-age rockers. Think, say, the Eagles, not taking it easy. "We have great brand compatibility with the AARP," says Rock the Vote's Hans Riemer. Both groups, he says, see the president's plan as too risky, and the wristband slogan—like Social Security itself—as "retro chic."

Which, of course, is the question. Is Social Security a retro but still cool program that needs only minor tinkering? Or is it an outmoded and actuarially unsound one that can be rescued only by an infusion of 21st-century market-based thinking? Searching for a higher yield, how much risk are Americans willing to tolerate in a program whose very name invokes the security of shared obligation? How much political risk is the president, or the Congress, willing to take in dealing with the grand-daddy of all entitlements?

In a forceful State of the Union address last week, the president won applause from the whole chamber when he called the 70-year-old program "a great moral success of the 20th century." But he divided the House into Republican applause and Democratic boos when he declared the "system, on its current path, is headed toward bankruptcy." If it is—a controversial assumption—how does Bush plan to "save" it? Well, if pain is required, he did not mention it. He ruled out an increase in payroll taxes. He tiptoed around the fact that benefit cuts would inevitably be needed. Instead, in a radical departure from Social Security orthodoxy, he suggested that retirees could earn bigger pension payouts by investing a portion of their payroll taxes in individual, private savings accounts, similar to familiar 401(k)s. There was risk in such stock and bond accounts, he admitted, but a greater one—given the looming retirement of the baby boomers—in relying solely on the transfer of tax revenue from one generation to the next.

Bush and Karl Rove love to push on the Democrats' unlocked doors, and this one might be slightly ajar. The new NEWSWEEK Poll contains evidence of the generational divide AARP and Rock the Vote are hoping to bridge. A whopping 75 percent of voters under 35 think that Social Security is "facing a funding crisis"—while only 52 percent of voters 55 and older agree. A majority of the older voters believe that they will get all their scheduled benefits; only 32 percent of young voters do. These younger people—three generations away from the Depression and with a greater tolerance for risk—think that retirement accounts would strengthen the Social Security system; older voters do not. Yet even younger voters, so far, are ambivalent about Bush's proposal, and are evenly divided on the question of whether "investing Social Security money in the stock market is too big a risk." And, as is the case with all Americans, young voters want their free lunch: 73 percent say the government should protect them if their accounts go bust—the highest percentage of any age group.

If Bush wanted to unite his opposition at the start of the new Congress, he's succeeded. The watchmen are racing to the towers of Castle Roosevelt, invoking the memory of FDR and the hard-times compact he made in 1935 between the citizens and the state: if you worked, you'd get a pension. Harry Reid of Nevada, the Democratic leader in the Senate, claimed to have won a pledge from all 43 of his party colleagues to oppose the president's plan. In fact, there were a couple of holdouts, but Reid needs only 41 votes to block a Bush bill—and the senator will likely find at least one or two moderate Republican allies. The rejectionist front may get an infusion of energy next week, if, as expected, the fire-breathing Howard Dean becomes party chairman.

Shrewdly, Reid is tapping into the blogosphere, hiring a "director of Internet communication" to stay in touch with influential blogs, such as Talking Points Memo and Daily Kos. The talking points are clear: that Bush is manufacturing a "crisis"; that his real aim is to attack the New Deal concept of government; and that, to the extent there is a problem, it can be repaired by raising the ceiling on taxable income, and, perhaps, by adjustments in cost-of-living indices. Bush's goal, Democrats say, is to do what much of corporate America has done: convert a "defined benefit" (a.k.a. a pension) into a "defined contribution."

While the Dems work the blogosphere, Bush works the stratosphere—in Air Force One. Last week he was busily schmoozing midcabin with members of Congress and promising the over-55 locals on the ground that they will be untouched by any changes he's proposing. The president and Rove are betting that history is on their side. Indeed, their proposal is the domestic capstone of the modern conservative movement, which surfaced in 1963 with what was then regarded (rightly) as a suicidal attack on Social Security by Sen. Barry Goldwater, and continued through the Reagan Revolution in 1980 and the Newt Gingrich victory of 1994.

But the tides of history won't necessarily sweep along wary Republicans who face reelection next year—let alone deeply suspicious Democrats. On a flight to Fargo, N.D., last week, Bush fenced jovially with Democratic Sen. Kent Conrad, a fiscal watchdog with an accounting degree from Stanford. "It was polite persuasion, a lot of friendly arm-twisting," the senator told NEWSWEEK later. But it was "no sale." There would have to be "major adjustments," Conrad told the president. In fact, Bush's GOP allies are moving cautiously. They won't even try, Hill sources tell NEWSWEEK, to unify behind a particular bill until the fall—hoping to lure Democrats to make a counterproposal first. That will leave plenty of time for more talk, more campaigning, more blogging—and rock concerts.

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Bush Budget Raises Drug Prices for Many Veterans

The New York Times
February 7, 2005
Bush Budget Raises Drug Prices for Many Veterans
By ROBERT PEAR and CARL HULSE

WASHINGTON, Feb. 6 - President Bush's budget would more than double the co-payment charged to many veterans for prescription drugs and would require some to pay a new fee of $250 a year for the privilege of using government health care, administration officials said Sunday.

The proposals, they said, are in the $2.5 trillion budget that Mr. Bush plans to unveil on Monday. White House officials said the budget advanced his goal of cutting the deficit, which hit a record last year.

"We are being tight," Vice President Dick Cheney said on "Fox News Sunday." "This is the tightest budget that has been submitted since we got here."

The proposals to increase charges to veterans face stiff opposition from veterans organizations, Democratic members of Congress and some Republicans.

Mr. Cheney said the White House had judiciously identified scores of domestic programs to be cut or eliminated. "It's not something we've done with a meat ax, nor are we suddenly turning our backs on the most needy people in our society."

The proposals could provoke months of furious debate on Capitol Hill. Democrats have already indicated that they are poised to pounce on any sign that the Bush administration is stinting on veterans' benefits.

Over all, the president is seeking $70.8 billion for the Department of Veterans Affairs in the fiscal year that begins Oct. 1, say Congressional aides who have seen budget documents from the agency.

The total consists of $33.4 billion in discretionary spending, which is subject to annual appropriation by Congress, and $37.4 billion for entitlements, like disability compensation, survivor benefits and pensions, which are authorized under prior laws.

Health care accounts for almost all of the agency's discretionary spending. Mr. Bush is seeking an increase of 2.7 percent, or $880 million, in such spending.

The president would increase the co-payment for a month's supply of a prescription drug to $15, from the current $7. The administration says the co-payment and the $250 "user fee" would apply mainly to veterans in lower-priority categories, who have higher incomes and do not have service-related disabilities.

The government had no immediate estimate of how many veterans would be affected if the user fee and co-payment proposals were adopted. But veterans' groups said that hundreds of thousands of people would end up paying more and that many would be affected by both changes.

Veterans groups attacked the proposals. Richard B. Fuller, legislative director of the Paralyzed Veterans of America, said: "The proposed increase in health spending is not sufficient at a time when the number of patients is increasing and there has been a huge increase in health care costs. It will not cover the need. The enrollment fee is a health care tax, designed to raise revenue and to discourage people from enrolling."

Mr. Fuller added that the budget would force veterans hospitals and clinics to limit services. "We are already seeing an increase in waiting lists, even for some Iraq veterans," he said.

In Michigan, for example, thousands of veterans are on waiting lists for medical services, and some reservists returning from Iraq say they have been unable to obtain the care they were promised. A veterans clinic in Pontiac, Mich., put a limit on new enrollment. Cutbacks at a veterans hospital in Altoona, Pa., are forcing some veterans to seek treatment elsewhere.

But Cynthia R. Church, a spokeswoman for the Department of Veterans Affairs, defended the administration's record. "Our budget increase from 2001 to 2005 for health care alone has been more than 40 percent," Ms. Church said. "President Bush has kept his commitment to veterans."

The department expects to care for five million people at its hospitals and clinics this year. Under the new budget, the agency will focus on what officials describe as their "core constituency," including veterans with service-related disabilities or low incomes.

The budget also advances previously announced plans to close or scale back some veterans hospitals. Money spent on underused buildings and excess land could be better spent providing care to veterans, the agency said.

Veterans groups want a $3.5 billion increase in the department's health care budget next year, but Congressional aides said the request was unrealistic.

Other budget details came to light over the weekend as well. Sifting through documents, Tobin L. Smith, a policy analyst at the Association of American Universities, which represents 60 large research universities, found a shift in priorities at the Pentagon.

"In the budget request for 2006," Mr. Smith said, "Defense Department spending for science and technology is significantly reduced, while the budget for development, testing and evaluation of major weapons systems increases."

The Pentagon budget provides $10.5 billion for science and technology in 2006, a reduction of $2.5 billion from this year's level, he said.

"We are concerned about that change because it means the Defense Department will be providing less support for university research," Mr. Smith said. "Engineering and computer science will be particularly hard hit."

The new budget will not show the costs of the president's top domestic priority, revamping Social Security to let people divert some of their payroll taxes to individual investment accounts.

To finance the change, Mr. Cheney said, the federal government would need to borrow $750 billion in the next 10 years and "trillions more after that." But, he said, "the personal accounts will themselves provide a significant return for those who hold them, so that they'll get a better deal."

Any effort to restrain spending on veterans programs is sure to provoke strong criticism from Democrats, who contend that the Republican-led Congress and the Bush administration have already shortchanged current and former members of the military.

In recent years, Democrats have been trying to emphasize their support of veterans programs, taking aim at a constituency that has been seen as reliably Republican. The administration's effort has caused some discomfort for Republicans.

In early January, House leaders ousted the chairman of the Veterans Affairs Committee, Representative Christopher H. Smith, Republican of New Jersey, who was seen as a strong advocate of veterans programs and higher spending. Mr. Smith was replaced by Representative Steve Buyer, Republican of Indiana.

Jim Nicholson, the new secretary of veterans affairs, heard many concerns about veterans' health care when he had his confirmation hearing before a Senate committee last month.

Senator Larry E. Craig, Republican of Idaho, chairman of the panel, the Committee on Veterans Affairs, told Mr. Nicholson, "The fiscal environment that you inherit will be considerably less friendly than the relatively flush times the V.A. has enjoyed over the last four years."

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Trim Deficit? Only if Bush Uses Magic

The New York Times
February 7, 2005

Trim Deficit? Only if Bush Uses Magic
By EDMUND L. ANDREWS

WASHINGTON, Feb. 6 - The economy is growing. Tax revenues are climbing. But can these factors rescue President Bush from a federal deficit that seems stuck above $400 billion?

The answer, unfortunately, is almost certainly no, analysts say.

For all the programs that Mr. Bush is expected to slash in his budget proposal on Monday - from health care and housing aid to Amtrak - the cuts would total less than $15 billion next year and barely dent the deficit.

By far the biggest parts of the budget - Medicare, Social Security and military spending - would be immune from cuts and are expected to grow rapidly for years to come.

On top of that, Mr. Bush's plan to replace part of Social Security with private savings accounts could require additional trillions of dollars in borrowing over the next several decades.

The cornerstone of Mr. Bush's budget strategy is a belief that vigorous economic growth, spurred by supply-side tax cuts that were designed to provide incentives for upper-income Americans to produce more wealth, will generate big jumps in tax revenue that gradually reduce the deficit.

At first glance, he would seem to have grounds for optimism. After all, surging tax revenue did come to Washington's rescue during the economic boom of the 1990's, pushing the budget from the red to the black. Republican and Democratic budget analysts, however, say that such an event is much less likely this time around. The contrasts are stark:

¶Through most of the 1990's, government spending grew at a snail's pace. But government spending soared during President Bush's first term and is expected to keep growing rapidly as the nation's baby boomers start to claim old-age benefits.

¶In the 1990's, the biggest jump in revenues came from high-income taxpayers who made enormous profits in the stock market bubble that ended in 2000. But Mr. Bush's tax cuts of 2001 and 2003 reduced rates on the wealthiest taxpayers and cut in half the taxes on dividends and capital gains, making it all but impossible for revenues to rise at a substantially faster pace than economic growth.

¶Mr. Bush's own projections leave out the cost of rolling back the alternative minimum tax, a parallel tax that is expected to ensnare tens of millions of middle-income households as incomes rise with inflation. Republicans and Democrats both want to prevent such a trap, but a fix would cost roughly $500 billion over the next 10 years.

"I don't think we are likely to see a repeat of the 1990's," said Douglas Holtz-Eakin, the Republican-appointed director of the Congressional Budget Office. "We can't grow our way out of this."

When Mr. Bush unveils his budget plan on Monday, White House officials hope to focus public attention on his proposals to cut scores of domestic programs: Medicaid, housing programs and Amtrak subsidies, among others. But while many of those cuts would be severe, their impact on the deficit would be small.

Administration officials have proposed changes they say would reduce Medicaid spending by $60 billion over 10 years, or about $6 billion a year. Mr. Bush would cut spending on community development programs, consolidating 18 programs into 2 and reducing annual outlays from $5.6 billion to $3.7 billion.

Eliminating operating subsidies for Amtrak, which would face intense opposition in Congress, would save about $1.2 billion a year.

In all, Mr. Bush has vowed to cut or eliminate 150 government programs. But Republican Congressional analysts predicted on Friday that those cuts would be unlikely to save more than $15 billion. And even those savings may not materialize.

Last year, Mr. Bush called for cutting or eliminating 65 programs, for a total projected saving of $4.8 billion. But Congress agreed to eliminate only four of those programs, for a savings of less than $200 million.

The other side of Mr. Bush's equation - higher tax revenues that result from faster growth - is unlikely to fill the gap. Despite strong economic growth and soaring corporate profits last year, federal tax revenues amounted to only 16.3 percent of the total economy, comparable with levels in the 1950's and far below the level of 21 percent reached during the stock market bubble in 2000.

"What's unrealistic is that they are trying to fund a government with today's demands on a 1950's stream of revenue," said Robert Bixby, executive director of the Concord Coalition, a research group that advocates fiscal discipline by the government.

Tax revenues soared far beyond expectations during the economic boom and stock market bubble of the late 1990's, but budget analysts say there is little likelihood of repeating that feat in this decade.

One reason is that Mr. Bush's tax cuts of 2001 and 2003 went largely to the nation's wealthiest taxpayers, the same people who accounted for the unexpected flood of tax revenue last time around. White House officials are already counting on tax revenues to surge by at least $200 billion this year, an increase of about 10 percent, and to climb more gradually after that.

But even Mr. Bush's conservative allies have warned that those inflows will not be enough to cover the continued growth in overall government spending. Brian Riedl, budget analyst at the Heritage Foundation, a conservative research group here, estimated that deficits would remain around $400 billion through 2009 if current spending trends on Iraq and major benefit programs continued.

For Mr. Bush to fulfill his promise of cutting the deficit in half by 2009, Mr. Riedl said, the president would have to cut $200 billion from domestic programs that now cost less than $500 billion a year.

"There is no way you can reach that goal by cutting only discretionary spending," Mr. Riedl said. "You have to go after entitlements as well."

About two-thirds of the $2.3 trillion federal budget now goes to entitlement programs. The Congressional Budget Office estimates that costs for Medicare will rise $55 billion in 2005, to $380 billion. Social Security outlays are expected to rise to $540 billion, from $517 billion.

But Mr. Bush has focused almost all of his budget cuts on discretionary domestic programs costing a total of $466 billion last year. Freezing spending at current levels on the vast array of programs Washington supports - thus allowing them to grow simply at the rate of inflation - would save about $10 billion next year, according to the Congressional Budget Office; a politically difficult reduction of 1 percent would save about $15 billion.

Senator Judd Gregg, Republican of New Hampshire and chairman of the Senate Budget Committee, said neither Mr. Bush's spending cuts nor his hope of strong economic growth would be enough to close the gap.

"You can't get there from here unless you look at entitlements," Mr. Gregg said last Thursday. "It's for the same reason that Willy Sutton said he robbed banks: Because that's where the money is."

Chad Kolton, a spokesman for the White House Office of Management and Budget, said Mr. Bush was on track to cut the deficit by half over the next five years. "We have a two-pillar approach for getting the budget deficit down by half," Mr. Kolton said, "by restraining the growth in government spending and encouraging greater economic growth that leads to higher tax revenues."

But even if rising tax revenues do help reduce the deficit over the next five years, the subsequent five years are likely to be far more difficult.

For starters, Mr. Bush wants to permanently extend his tax cuts rather than allow them to expire by 2011. That would cost about $1.8 trillion over the next decade, and most of the cost would occur after 2009.

If Congress prevents an expansion of the alternative minimum tax, which Mr. Bush has said he wants, the cost would be $500 billion over the next decade and well over half of those costs would in the second five years.

Those blows would be hitting the budget at the same time that the costs of the new Medicare prescription drug programs approach $100 billion a year and as the flood of baby boomers start to claim Social Security and Medicare entitlements.

By that time, however, Mr. Bush will no longer be in office.

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State of the Union

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Preemption has its own logic

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Not to worry

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The Year of Living Indecently

The New York Times
February 6, 2005
FRANK RICH
The Year of Living Indecently

LET us be grateful that Janet Jackson did not bare both breasts.

On the first anniversary of the Super Bowl wardrobe malfunction that shook the world, it's clear that just one was big enough to wreak havoc. The ensuing Washington indecency crusade has unleashed a wave of self-censorship on American television unrivaled since the McCarthy era, with everyone from the dying D-Day heroes in "Saving Private Ryan" to cuddly animated animals on daytime television getting the ax. Even NBC's presentation of the Olympics last summer, in which actors donned body suits to simulate "nude" ancient Greek statues, is currently under federal investigation.

Public television is now so fearful of crossing its government patrons that it is flirting with self-immolation. Having disowned lesbians in the children's show "Postcards From Buster" and stripped suspect language from "Prime Suspect" on "Masterpiece Theater," PBS is editing its Feb. 23 broadcast of "Dirty War," the HBO-BBC film about a terrorist attack, to remove a glimpse of female nudity in a scene depicting nuclear detoxification. Next thing you know they'll be snipping lascivious flesh out of a documentary about Auschwitz.

This repressive cultural environment was officially ratified on Nov. 2, when Ms. Jackson's breast pulled off its greatest coup of all: the re-election of President Bush. Or so it was decreed by the media horde that retroactively declared "moral values" the campaign's decisive issue and the Super Bowl the blue states' Waterloo. The political bosses of "family" organizations, well aware that TV's collective wisdom becomes reality whether true or not, have been emboldened ever since. They are spending their political capital like drunken sailors, redoubling their demands that the Bush administration marginalize gay people, stamp out sex education and turn pop culture into a continuous loop of "Rebecca of Sunnybrook Farm."

With Sunday's Super Bowl, their crusade has scored a touchdown. MTV has been replaced as halftime producer by Don Mischer, the go-to guy for a guaranteed snoozefest; his credits include the Tony Awards, the Kennedy Center Honors and the 2004 Democratic National Convention at which the balloons failed to drop. (His subsequent cursing was heard on CNN, but escaped government sanction because no Republicans were watching.) Fox Sports Net has changed the title of its signature program "Best Damn Sports Show Period" to "Best Darn Super Bowl Road Show Period." The commercials, too, will "be careful" and in "good taste," according to the head of marketing for Anheuser-Busch. Fox, which recently pixilated the bottom of a cartoon toddler in a rerun of the series "Family Guy," now has someone on full-time rear-end alert: it rejected a comic spot for Airborne, a cold remedy, showing the backside of the 84-year-old Mickey Rooney as he leaves a sauna.

This might all be laughable were the government not expanding its role as cultural cop. But it is. The departures of Michael Powell, the Savonarola of the Federal Communications Commission, and John Ashcroft, whose parallel right-breast fixation was stimulated by a statue in the Justice Department, are red herrings. "Thank God he's gone, but God help us with what's next," said Howard Stern upon learning of Mr. Powell's imminent exit. He's right. After all, L. Brent Bozell of the Parents Television Council condemned Mr. Powell for "four years of failed leadership" in fighting indecency. (Mr. Powell's commission had the temerity to actually reject some Parents Television Council jeremiads, which are distinguished by their inordinate obsession with the penis.) Mr. Bozell, whose organization has been second to none in increasing the number of annual indecency complaints from 111 in 2000 to a million-plus last year, is angling for a tougher successor and may well get one.

His wish has in effect been granted even before Mr. Powell's chair is filled. The second Bush term began with the installation of a powerful new government censor in another big job, Secretary of Education. Margaret Spellings hadn't even been officially sworn into the cabinet when she took on "Postcards From Buster," threatening PBS with decreased financing because one episode had the show's eponymous animated rabbit hobnobbing with actual lesbian moms while visiting Vermont to learn how maple syrup is made. Though Buster had in previous installments visited Muslims, Mormons, Orthodox Jews and Pentecostal Christians, gay couples (even when not identified as such on camera) are verboten to our new Secretary of Education. "Many parents would not want their young children exposed to the lifestyles portrayed in this episode," Ms. Spellings wrote in her threatening letter to Pat Mitchell, the C.E.O. of PBS.

The letter, as it happened, was unnecessary: Public broadcasting says that it had decreed on its own only a few hours earlier that it would not distribute the offending show - the most alarming example yet of just how cowardly it has become and how chilling the Janet Jackson effect has been. (Since then, some two dozen member stations out of a total of 349 have rebeled and decided to broadcast the episode anyway.) But the story won't end with this one incident. Ms. Spellings' threats against PBS are only the latest chapter in a continuing saga at an education department that increasingly resembles an authoritarian government's ministry of information.

A month before the election, The Los Angeles Times reported on its front page that the department had quietly destroyed more than 300,000 copies of "a booklet designed for parents to help their children learn history" after Lynne Cheney, who has no official government role, complained about its contents. The booklet burning occurred under the watch of Rod Paige, the education secretary who, we would later learn, was simultaneously complicit in another sub rosa exercise in heavy-handed government information management: the payment of $240,000 in taxpayers' funds to Armstrong Williams, a talking head and columnist, to plug Bush administration policies on radio and TV.

Mr. Paige fled his post last month without adequately explaining what he knew about these scandals. Enter Ms. Spellings, previously a White House aide who by some accounts had been a shadow administrator of the education department during Mr. Paige's out-to-lunch tenure. With all the other troubles in public education, why would she focus on a single episode of a single children's program on her second day in the job? We don't yet know. But her act was nothing if not ideologically synergistic with still another freshly uncovered Bush propaganda effort. Just as Ms. Spellings busted Buster, two more syndicated columnists copped to receiving taxpayers' dollars, this time siphoned through the Department of Health and Human Services, to help craft propaganda for a Bush "healthy marriage initiative" that disdains same-sex couples as fervently as Ms. Spellings did in her letter to PBS.

What makes this story more insidious still is the glaring reality that the most prominent Republican lesbians in America are Mary Cheney, a former gay and lesbian marketing liaison for Coors beer, and her partner, Heather Poe, who appeared as a couple in public and on TV during the presidential campaign. That Ms. Spellings would gratuitously go after this specific "lifestyle" right after taking office is so provocative it smells like payback specifically pitched at those "pro-family" watchdogs who snarled at the mention of Ms. Cheney's sexual orientation during the campaign whether it was by John Kerry or anyone else. Surely Ms. Spellings doesn't believe in discrimination against nontraditional families: by her own account, she was a single mother who had to park her 13-year-old and 8-year-old children in Austin when she first went to work at the White House. Then again, President Bush went on record last month as saying that "studies have shown that the ideal is where a child is being raised by a man and a woman" (even though, as The New York Times reported, "there is no scientific evidence that children raised by gay couples do any worse").

That our government is now both intimidating PBS and awarding public money to pundits to enforce "moral values" agendas demonizing certain families is the ugliest fallout of the campaign against indecency. That campaign cannot really banish salaciousness from pop culture, a rank impossibility in a market economy where red and blue customers are united in their infatuation with "Desperate Housewives." But it can create public policy that discriminates against anyone on the hit list of moral values zealots. Inane as it may seem that Ms. Spellings is conducting a witch hunt against Buster or that James Dobson has taken aim at SpongeBob SquarePants, there's a method to their seeming idiocy: the cartoon surrogates are deliberately chosen to camouflage the harshness of their assault on nonanimated, flesh-and-blood people.

This, too, has its antecedent in the McCarthy era. In his novel "The Amazing Adventures of Kavalier and Clay," Michael Chabon was extrapolating from actual history when one of his heroes, a gay comic book artist, is hauled before Congress to testify about pairing up "strapping young fellows in tight trousers" as superheroes. A Senate committee of the time did investigate the comics. Its guiding force was the psychiatrist Fredric Wertham's fear-mongering 1954 tome "Seduction of the Innocent," which posited that Batman and Robin could corrupt children by inducing a "wish dream of two homosexuals living together." The decency cops of that day, exemplified by closeted gay right-wingers like J. Edgar Hoover and Roy Cohn, escalated a culture war into one with human costs by conflating homosexuality with the criminality of treason.

One big difference between that America and ours is that the culture industry, public broadcasting not included, has gained much more power since then. Should Sunday's Super Bowl falter in the ratings, its creators will lure that missing audience back next year with wardrobe malfunctions that haven't even been invented yet.

But gay parents whose "lifestyle" is vilified by a cabinet officer don't have that power. They're vulnerable even in a state like Vermont that respects their civil rights. "I feel sick about it," Karen Pike of Hinesburg, Vt., told The Burlington Free Press, after learning that PBS had orphaned the "Buster" episode showing her, her partner and their three children. "I understand they get public funding, but they should be the one station we feel confident in, in knowing that what we see there represents our country."

No one had told her that some stories are no longer welcome. You have to wonder if anyone has told Mary Cheney: Focus on the Family could not have been pleased to read last week's New York Post report that she has hired Bill Clinton's high-powered literary dealmaker to peddle her own story as a book.

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Wherefore Art Thou, Clint?

The New York Times
February 6, 2005

Wherefore Art Thou, Clint?
By MAUREEN DOWD

WASHINGTON

A friend of mine e-mailed me Friday to see if I wanted to go to the Folger Theater production of "Romeo and Juliet."

I e-mailed him back, fretting: Doesn't that play promote suicide?

What's the 411 on those Elizabethan teenagers? Were they friends with benefits who recklessly scarfed down unsafe substances and romanticized death?

Surely, the Apothecary is guilty of assisted suicide, selling the distraught Romeo a dram of poison and instructing him: "Put this in any liquid thing you will/And drink if off, and if you had the strength/Of twenty men, it would dispatch you straight."

My friend suggested we skip the play and go out to dinner, where we could promote assisted gluttony. In this hypermoralistic atmosphere, you can't be too careful, even when a Friar is on hand to warn "violent delights have violent ends." I don't want to get on the wrong side of the Savonarolas.

I saw "Million Dollar Baby" and was dazzled. But then Rush Limbaugh, Michael Medved and other conservatives howled that Dirty Harry playing Dr. Kevorkian sends a positive message about euthanasia.

The culture cops are unmoved that Clint Eastwood's crepuscular boxing manager, Frankie, is a Catholic who goes to Mass every day and agonizes about the morality of his actions.

Mr. Medved wrote that the Oscar nominations for "Million Dollar Baby" and "The Sea Inside," which feature plots about assisted suicide, combined with snubs for "The Passion of the Christ," "illustrate Hollywood's profound, almost pathological discomfort with the traditional religiosity embraced by most of its mass audience."

I guess Shakespeare is pretty much out from now on. Ophelia drowns herself; Cleopatra kills herself with an assist from two asps; Lear's wretched daughter Goneril does herself in, as does Lady Macbeth. Brutus kills himself by running onto a sword held by his servant Strato (another assisted suicide), and his wife, Portia, dies by swallowing a burning coal; Othello stabs himself. And don't even start with the lurid family values in Greek drama and myth, rife with patricide, matricide, fratricide and incest.

It's funny that the moviemaker stirring up the fuss is an icon of the right, a man the president's father aped when he said, "Read my lips: No new taxes." When I interviewed Mr. Eastwood in 1995, he said he thought his party was onto something with its nostalgia for the old values. But he also said he was more libertarian than conservative: "The less you mess around with people, the better off people are." That attitude is passé in the Republican Party. The Christian right thinks that the more you mess around with people, the better off people are. It is eager to dictate social, cultural and marital behavior, with an assist from the man whom it boasts it put back in the White House.

The Virginia House of Delegates last week endorsed license plates reading "Traditional Marriage," featuring a red heart with interlocking gold wedding bands. (A married pal of mine joked that for verisimilitude, the plates should also feature a man and a woman looking miserable.)

But the Bard was more interested in untraditional marriage - like that lurid family dinner in "Titus Andronicus," when Titus serves Tamora meat pies made from the bodies of her two sons, who have raped and mutiliated Titus's daughter in revenge for Titus slaying Tamora's oldest son before her eyes. (Capped by him murdering Tamora and mercy-killing his daughter.)

Just because it's not "Ozzie and Harriet," does it have to be bowdlerized, or Medvedized - "Unmixed with anything that could raise a blush on the cheek of modesty," as Dr. Bowdler bragged about his eviscerated Shakespeare?

Michael Moore and Mel Gibson aside, the purpose of art is not always to send messages. More often, it's just to tell a story, move people and provoke ideas. Mr. Eastwood's critics don't even understand what art is. Politics - not art - is about finding consensus with the majority of the audience. Art is not about avoiding controversy or ensuring that everyone leaves feeling morally uplifted.

What I love about movies and plays is seeing fictional characters behaving in ends-justify-the-means ways I never would. What I hate about politics is seeing real officials behaving in ends-justify-the-means ways on the W.M.D. "crisis" in Iraq, the Social Security "crisis," and the spread of federal disinformation from paid "journalists." Now that's worth howling about.

E-mail: liberties@nytimes.com

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Read the Fine Print

The New York Times
February 6, 2005

Read the Fine Print

The more we learn, the worse it gets.

Last Wednesday, as President Bush prepped for his State of the Union address, a White House official gave reporters a background briefing on some of the details of Mr. Bush's Social Security privatization plan. Almost point for point, whatever the president said that sounded good sounded bad when the details were filled in.

For instance, Mr. Bush said, "Personal accounts are a better deal," because "your money will grow, over time, at a greater rate than anything the current system can deliver." But the privatized system actually contains hidden costs that could leave retirees with less. Your Social Security benefit would be reduced, dollar for dollar, by the amount of money you deposit into your private account and an additional charge amounting to 3 percent plus the rate of inflation. All the money that is drained off would presumably go to pay for the enormous upfront government borrowing - $4.5 trillion over the next 20 years - that privatization would require.

That means people whose private accounts steadily earned three percentage points over inflation throughout their working lives would wind up with exactly what they would have gotten if Social Security remained untouched. Anyone who earned less than that would end up with less than is offered by the current system. When asked what would happen to the people who would not have enough income to avoid poverty, the administration official said, "I'm not sure if I'm understanding your question."

The benefit cut is only the beginning. There is still the problem of strengthening Social Security's finances. On its own, establishing private accounts does nothing to solve the long-term shortfall in the system. The president alluded to this fact when he said, "We must pass reforms that solve the financial problems of Social Security." He dutifully listed various benefit cuts that would do the trick, without taking the politically risky step of endorsing any of them.

Neither the president nor his aides have been willing to acknowledge the extent of benefit cuts that would be needed. And no wonder: All in all, they would leave the average worker with a government benefit worth only about 10 percent of his or her preretirement earnings. (Currently, Social Security replaces about 35 percent, on average.)

Various proposals to strengthen the current system's solvency via modest tax increases and benefit cuts - without resorting to costly private accounts - could guarantee a government benefit that replaces about 30 percent of preretirement income on average. But for all his talk about "an open, candid review of the options," the president refuses to consider any plan that excludes private accounts or includes tax increases, no matter how small. His stance makes severe benefit cuts unavoidable.

Even the feel-good tidbits in the president's speech really fail to stand up to close examination. Mr. Bush assured listeners that the government would prevent people from making bad decisions by restricting their investments to a conservative mix of stocks and bonds. But the more restrictions there are, the harder it would be for people to achieve the outsized returns that the administration has generally promoted to sell the public on private accounts.

And the much-touted promise that the private accounts could be passed on to one's heirs, as it turns out, is also less than it seems. That works entirely only if you die before you retire. Under a scheme that is going to take a while for the public to digest, the White House wants to require new retirees to use their private accounts to buy annuities large enough to keep them above the poverty line for the rest of their lives. The most they could leave to heirs, then, would be what is left over after the annuities are purchased.

Mr. Bush is expending tremendous energy to sell his plan - daily impairing his own credibility and shredding whatever confidence remains in the country's fiscal outlook. Members of Congress would do him - and their constituents - a favor by reining him in and moving on to more pressing matters.

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The Thinker

washingtonpost.com
The Thinker

By Michael Kinsley

Sunday, February 6, 2005; Page B07

The strangest aspect of President Bush's new War on Tyranny is the connection he draws between tyranny and terrorism. It's not the connection you would suspect, or the one Bush was making during his first term. When Saddam Hussein was still in charge of Iraq, it was enough to say that bad guys are bad guys. A sadistic dictator is just the type of person who would also harbor terrorists and stockpile weapons of mass destruction.

But now Bush says that terrorists are actually the victims of tyranny. In his inaugural address, this seemed like a bit of transitory, use-once-and-discard highfalutinism. But Bush returned to the theme in his State of the Union address Wednesday. "In the long term," he said, "the peace we seek will only be achieved by eliminating the conditions that feed radicalism and ideologies of murder. If whole regions of the world remain in despair and grow in hatred, they will be the recruiting grounds for terror, and that terror will stalk America. . . . "

The legendary anarchist writer Emma Goldman said much the same thing in a 1917 essay, "The Psychology of Political Violence." It is "the despair millions of people are daily made to endure" that drives some of them to acts of terror. Can one question the tremendous, revolutionizing effect on human character exerted by great social iniquities?" She quotes a pamphlet from British-ruled India: "Terrorism . . . is inevitable as long as . . . tyranny continues, for it is not the terrorists that are to be blamed, but the tyrants who are responsible for it."

Bush does not say that tyranny excuses terrorism. But he does say that tyranny explains terrorism. This is new. One of Bush's big themes in the months after the Sept. 11, 2001, attacks was that terrorism is "evil," pure and simple. Former Commissioner of Virtue William Bennett ground out a quickie bestseller on this theme, criticizing efforts to understand why someone might become a suicide bomber as a refusal to look evil in the face.

Conservative thought has long rated the notion of "root causes" -- explaining antisocial behavior as a consequence of social conditions -- as a major heresy. Neoconservatives have especially enjoyed burning witches over this doctrinal deviation. This makes it all the more remarkable that a president thought to be in the thrall of neocons should sink so eloquently into deep doctrinal error. Not only does he blame terrorism on social conditions -- he says point-blank that "only . . . by eliminating [these] conditions" can the terrorist threat be eliminated. He sounds less like a Republican than a dorm-room Marxist. And good for him. Who says the '60s passed this fellow by?

Our president appears to be on some kind of intellectual journey. The idea of an evolution in George W. Bush's thinking is about as hard to accept for Bush's opponents as evolution itself is for some of his supporters. Nevertheless, there is evidence. I thought I had our president pegged as a man who made the great leap of faith at age 40 and has used that as his intellectual model ever since. Decide what you want to believe, believe it and cross it off your to-do list. But this assessment may have been an injustice.

Bush may come to regret his descent from the heights of certitude to the swamps of doubt. The old George W. wasn't expected to have thought through his policies and pronouncements. Now he will lie awake at night pondering questions like these, raised by his State of the Union address:

What does it mean that "one of the main differences between us and our enemies" is that we have "no desire and no intention to impose our form of government on anyone else"? Bush talks more about "freedom" than "democracy," but can there even be freedom in a totalitarian theocracy? Can people freely choose a society where freedom is severely limited, and if so, what does the Bush Doctrine say about that? Approving words on Wednesday about "governments that . . . reflect their own cultures" were probably intended to allow for ayatollocracies in the Middle East. If so, what is left of the War on Tyranny? If not, what is left of the idea that we don't wish to impose our form of government on anyone else?

If Bush's Social Security plan doesn't reduce the total amount government borrows or increase the total amount people save -- and there is no reason to expect either -- what difference does it make if some, most or even all the participants are better off than they would have been under Social Security Classic? And if society is no wealthier as a result of this new system, where is the bonus that Bush is promising future retirees supposed to come from?

Bush said Wednesday he "will work with Congress to ensure that human embryos are not created for experimentation or grown for body parts." This sounds like a welcome willingness to compromise his stringent restrictions on stem-cell research. But Bush has never proposed restrictions on the work of fertility clinics, which routinely create embryos and discard most of them to help people conceive children. Why is using embryos for this purpose okay if using them to save lives is not?

Thinking. It's enough to drive a fellow back to drinking.

The writer is editorial and opinion editor of the Los Angeles Times.

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Training Iraqis: the Facts

washingtonpost.com
Training Iraqis: the Facts

By Joseph R. Biden Jr.

Sunday, February 6, 2005; Page B07

Before we can begin to responsibly disengage from Iraq, two conditions must be met. First, an elected Iraqi government and constitution considered legitimate by the country's main factions must emerge. Second, that government must develop the capacity to provide law and order, deliver basic services and, most important, defeat the insurgency. Last Sunday's elections were an important step toward meeting the first condition, but they did little to advance the second.

During Secretary of State Condoleezza Rice's confirmation, much was made of the dueling numbers she and I advanced regarding Iraq's security forces. Rice said there are about 125,000 trained Iraqi security forces. I maintained that the real number was between 4,000 and 18,000. What explains the discrepancy?

By one measure the Bush administration is right: As of today, there are about 136,000 "trained and equipped" Iraqis. But that measure is meaningless. Indeed, a year ago, Defense Secretary Donald Rumsfeld boasted of 210,000 Iraqis in uniform and called it "an amazing accomplishment."

We should focus on real standards, not raw numbers. The real standard is straightforward: Can an Iraqi soldier or policeman do what we ask American soldiers to do -- provide law and order, protect the infrastructure, defend the borders and, above all, defeat the insurgency? There are nowhere near 136,000 Iraqis capable of accomplishing these goals. Here are the facts:

Police: According to the administration, there are 57,290 trained Iraqi police. The key word is "trained." Those who served in the old Iraqi police force receive a three-week "refresher" course. Yet holdovers from the Saddam Hussein era possess none of the skills we expect from our police -- from investigation techniques to crowd control to a basic understanding of human rights.

New recruits get eight weeks in the classroom, compared with 16 to 24 weeks in most developed countries. Many arrive at the academy with minimal vetting and lack basic skills in reading and driving. After their classroom time, new recruits were to receive a 24-week field training course, working with U.S. and international trainers, but that was never implemented because of security concerns and a shortage of field trainers.

Imagine an American city giving a rookie cop minimal classroom training, then sending him to patrol a neighborhood infested by drug dealers, street gangs, violent criminals and terrorists without even the benefit of an experienced partner, much less an armored vehicle, secure police stations and adequate weaponry. Is it any surprise that nearly the entire police force in Mosul deserted in November under an insurgent onslaught?

National Guard: As of Jan. 19 the administration listed 36,827 guard members on duty. The Iraqis have since integrated the guard into the army, which now totals 56,284. The guard was expected to be the tip of the counterinsurgency spear. Its members receive six to seven weeks of training, but there is minimal focus on counterinsurgency skills.

The guard has taken heavy casualties, been plagued by high absenteeism -- the result of an effective intimidation campaign -- and been infiltrated by insurgents. At best, the guard can handle fixed-point security -- as it did with the police and army for last week's elections -- but only if it has heavy U.S. combat and logistical support.

The police and guard make up 94,000 of the 136,000 "trained and equipped" Iraqis. The army, border enforcement units and specialized forces make up the rest. Yet despite their courage few can operate independently against the insurgency. Their ability to take on other key missions, such as providing basic law and order, is unproven.

After more than a year of drift, the administration took a critical step in the right direction: It put Gen. David Petraeus in charge of the security training. He has added counterinsurgency to the police curriculum, emphasized leadership skills and building cohesive units, and developed special forces with much longer training times. As a result some Iraqis are starting to get the equipment, training and leadership skills they need to fight the insurgency. They include police commandos (about 5,000), special intervention forces (about 9,000), SWAT teams and other specialized forces (about 4,000). These forces total some 18,000 men.

But that is far short of the administration's 136,000 estimate. And of those 18,000, many are rookies with little experience. Indeed, in testimony Thursday before the Senate Armed Services Committee, senior administration officials couldn't say how many Iraqi forces can operate independently against the insurgency. That's why I believe the number of Iraqis prepared to take on the insurgency is somewhere between 4,000 and 18,000.

The administration must build on this counterinsurgency foundation. It should embed U.S. officers with Iraqi units to develop their operational skills. Other countries should be pressed to support and open training academies outside Iraq. We also must accelerate the effort to train police to provide basic law and order in the parts of Iraq that are not under siege by insurgents but that are plagued by violence.

At home, we need the administration to level with us about the challenges in Iraq, including the time it will take to develop security forces that can operate independently. Overselling the size or capability of those forces -- and leaving a false impression with the American people -- is guaranteed to produce a failed policy.

The writer is a senator from Delaware and the ranking Democrat on the Senate Foreign Relations Committee.

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Shiite Ticket Has Big Lead in Iraq Vote

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Shiite Ticket Has Big Lead in Iraq Vote

By MARIAM FAM
February 4, 2005

BAGHDAD, Iraq (AP) - U.S.-backed Prime Minister Ayad Allawi was trailing a Shiite ticket with ties to Iran in Iraq's historic election, according to partial returns released Friday. One U.S. soldier was killed and seven wounded in the north, and gunmen seized an Italian journalist in Baghdad.

The United Iraqi Alliance, endorsed by Iraq's top Shiite clerics, captured more than two-thirds of the 3.3 million votes counted so far, the election commission said. The ticket headed by Allawi, a secular Shiite, had about 18 percent - or more than 579,700 votes.

Those latest partial figures from Sunday's contest for 275 National Assembly seats came from 10 of Iraq's 18 provinces, said Hamdiyah al-Husseini, an election commission official. All 10 provinces have heavy Shiite populations, and the Alliance had been expected to do well there. So far, 45 percent of the vote has been counted in Baghdad, with varying percentages tallied in the other nine provinces.

Nevertheless, the huge lead that the Shiites were rolling up among their core constituency in the Shiite heartland of southern Iraq pointed to the likelihood of a tremendous victory. An Alliance win would seal the Shiite majority's bid to claim power after centuries of domination by Sunni Arabs, including years of oppression by Saddam Hussein's Sunni-led regime.

No returns have been released from the Kurdish provinces of the north or mainly Sunni provinces north and west of the capital. Many Sunni Arabs, who comprise an estimated 20 percent of Iraq's 26 million people, are believed to have stayed away from the polls - either out of fear of retaliation or anger at a vote held while U.S. troops are in the country.

The Shiite ticket was also running strong among Iraqis who voted in 14 foreign countries. The International Organization for Migration, which supervised the expatriate vote, said the Shiite Alliance won about 36 percent of the 263,685 absentee ballots. The Kurdish Alliance List took nearly 30 percent, and Allawi's ticket was third with about 9 percent.

Allawi, who lived in exile in Britain during Saddam's rule, had been expected to draw support from many voters outside Iraq.

Seats in the National Assembly will be apportioned according to each faction's percentage of the nationwide vote. A two-thirds majority in the assembly - possibly in a coalition with Kurds and others - would enable the cleric-backed ticket to wield considerable influence in drafting the new constitution and shaping a democratic Iraq.

The leader of the Shiite ticket, Abdul-Aziz al-Hakim, has promised an inclusive government and a role for the Sunnis and others in drafting the constitution - the major task of the new assembly.

Al-Hakim and other figures in the Alliance spent years in exile in mainly Shiite Iran, but they insist they have no intention of transforming Iraq into a clerical-run state. The ticket was endorsed by Iraq's most revered top Shiite cleric, the Iranian-born Grand Ayatollah Ali al-Sistani.

The signs of a strong Shiite victory have sparked fears that the Sunni Arab minority will not accept any new government that emerges from the election, fueling the mainly Sunni insurgency.

The terror group al-Qaida in Iraq vowed new attacks against military targets in the coming days in an Internet statement posted Friday. The group promised ``victories, qualitative operations and the killing of the heads of the infidels and apostates.''

The statement alleged to be from al-Qaida in Iraq but the authenticity of online statements cannot be verified.

In the latest insurgent attacks, one American soldier was killed Friday and seven others were wounded by a roadside bomb outside Beiji, 155 miles north of Baghdad, the U.S. command said. Another American soldier died Thursday when a U.S. Army Stryker combat vehicle detonated anti-tank mines in Mosul.

At least 1,443 American military personnel have died in Iraq since the war began in March 2003.

Meanwhile, gunmen seized Giuliana Sgrena, a journalist for the Italian newspaper Il Manifesto, in a hail of gunfire after blocking her car near the Baghdad University compound. She had gone to interview refugees from Fallujah and to attend Friday prayers at a nearby mosque, according to Italian radio journalist Barbara Schiavulli.

Italian Interior Minister Giuseppe Pisanu said Sgrena may have been taken by a Sunni gang ``who shot at our martyrs of Nasiriyah,'' referring to the November 2003 bombing of Italian paramilitary barracks in a southern Shiite city.

The 56-year-old Sgrena is the second Italian journalist kidnapped in Iraq, and at least the ninth Italian seized here in recent months. Freelance Italian journalist Enzo Baldoni was abducted and killed in August.

Schiavulli said she received a call from Sgrena's cell phone as the kidnapping was under way. ``I couldn't hear anyone talking.

I heard people shooting,'' Schiavulli said. ``I kept saying, 'Giuliana, Giuliana,' and no answer.''

Later, a statement posted on two Islamic militant Web sites in the name of the little-known Islamic Jihad Organization claimed responsibility for the kidnapping and gave Italy 72 hours to withdraw its troops from Iraq. It did not say what would happen after the time passed.

The statement included no picture of the victim or other evidence that the claim was genuine. An official at the Italian Foreign Ministry said authorities were looking into the claim but said they were ``far from taking it too seriously'' at this stage.

More than 190 foreigners have been abducted in Iraq over the past year. At least 13 remain missing - including a French woman reporter seized last month. More than 30 were killed and the rest were freed or escaped.

U.S. military planners hope that building up Iraqi security forces will help bring stability to the country and allow the Americans to hand over responsibility for fighting the insurgents.

``Our ticket out of here is not going to be written through constant combat operations - we'd be here forever doing that,'' Brig. Gen. Jeffery Hammond, deputy commander of the U.S. Army's 1st Cavalry Division, told The Associated Press. ``Our ticket out of here is the Iraqi security forces.''

Lt. Gen. David Petraeus, the U.S. commander of the training effort, praised the Iraqi security forces' performance during the election and promised that ``in the months ahead we'll see the addition of a good number of adviser teams that will work with Iraqi elements'' in training programs.

There are currently 136,000 members of the Iraqi security forces and military, he told reporters at the Pentagon.

Associated Press writers Ellen Knickmeyer, Sameer N. Yacoub and Jason Keyser contributed to this report.

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New York-Bound Flights Get Hijack Threats

New York-Bound Flights Get Hijack Threats
February 4, 2005

NEW YORK (Reuters) - Two Delta Air Lines Inc. flights received hijacking threats on Friday, but both landed in New York without incident, federal authorities said.

Delta Flight 119 from Paris, which originated in Bombay, and Delta Flight 81 from Amsterdam were both bound for John F. Kennedy International Airport, said spokesmen for the Transportation Security Administration and the Department of Homeland Security.

At least one of the threats was called into an embassy, the Homeland Security official said, and the caller claimed there were hijackers on board.

It was unclear how the other threat was made.

Both cockpits remained secure during the flights, the TSA said.

An aviation source in Washington said authorities received "non-specific threats" about flights coming to the United States from overseas.

There was no incident aboard either plane, the airline crews followed all proper procedures and there was no attempt to divert either aircraft, the source said.

Port Authority police and the FBI met the planes in New York. No arrests were immediate, but no one was being allowed off the planes until everyone could be questioned, authorities said.

NBC reported that both planes had hijacked threats called in, one through the TSA and the other through a U.S. Embassy.

The television station showed overhead pictures of both planes on the ground being checked out by local and federal law enforcement.

The planes were being held in a confined area at the airport while the investigations were going on.

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Fact Check: Bush's State of the Union: Social Security "Bankruptcy?"

factcheck.org

Bush's State of the Union: Social Security "Bankruptcy?"

That term could give the wrong idea. Bush also makes private accounts sound like a sure thing, which they are not.

February 3, 2005

Summary

In his State of the Union Address, President Bush said again that the Social Security system is headed for "bankruptcy," a term that could give the wrong idea. Actually, even if it goes "bankrupt" a few decades from now, the system would still be able to pay about three-quarters of the benefits now promised.

Bush also made his proposed private Social Security accounts sound like a sure thing, which they are not. He said they "will" grow fast enough to provide a better return than the present system. History suggests that will be so, but nobody can predict what stock and bond markets will do in the future.

Bush left out any mention of what workers would have to give up to get those private acounts -- a proportional reduction or offset in guaranteed Social Security retirement benefits. He also glossed over the fact that money in private accounts would be "owned" by workers only in a very limited sense -- under strict conditions which the President referred to as "guidelines." Many retirees, and possibly the vast majority, wouldn't be able to touch their Social Security nest egg directly, even after retirement, because the government would take some or all of it back and convert it to a stream of payments guaranteed for life.

Analysis

Bush made Social Security the centerpiece of his Feb. 3 State of the Union address. He gave more details of how he proposes to change the system -- but left out facts that don't help his case.

Social Security "Headed Toward Bankruptcy?"

The President painted a dire picture of Social Security's finances:

Bush: The system, however, on its current path, is headed toward bankruptcy . And so we must join together to strengthen and save Social Security.

"Bankruptcy" is a scary term that Democrats have used too, when it suited them, but it could easily give the wrong idea. Nobody is predicting that Social Security will go out of business the way a bankrupt business does. It would continue to pay benefits -- just not as many.

The President was a little more specific about that later in his address, while repeating the word "bankrupt":

Bush: By the year 2042, the entire system would be exhausted and bankrupt . If steps are not taken to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs.

But how severe would those benefit cuts be? In fact there are two official projections -- one by the Social Security Administration (SSA) and a somewhat less pessimistic projection by the Congressional Budget Office (CBO). The President referred to the SSA projection, which calculates that the system's trust fund will be depleted in 2042. After that, the system would have legal authority to pay only 73 percent of currently promised benefits -- and that figure would decline each year after, reaching 68 percent in the year 2075.

The CBO doesn't project trust-fund depletion until a decade later, in 2052, and figures that the benefits cuts wouldn't be so severe, a reduction to 78% of promised benefits. But either way, even a "bankrupt" system would continue to provide most of what's promised currently.

Furthermore, the President did not specify what he would do to fix the problem. He again urged creation of private Social Security accounts. But those would be of no help whatsoever in shoring up the system's finances, as acknowledged earlier in the day by a senior Bush administration official who briefed reporters on condition of anonymity:

"Senior Administration Official:" So in a long-term sense, the personal accounts would have a net neutral effect on the fiscal situation of the Social Security and on the federal government.

And that "net neutral effect" is just over the long term, 75 years or more. In the shorter term, creation of private accounts would require heavy federal borrowing to finance the payment of benefits to current retirees while some portion of payroll taxes is being diverted to workers' private accounts. The administration projects it will borrow $754 billion (including interest) through 2015 to finance the initial phase-in of the accounts, and much more thereafter. The liberal Center on Budget and Policy Priorities -- which opposes Bush's proposal -- projected that $4.5 trillion (with a "t") would be required to finance the first 20 years of the accounts after they start to be phased in in 2009.

Private Accounts: A Sure Thing?

The President made those private accounts -- which he now prefers to call "personal" accounts -- sound like a sure bet:

Bush: Here's why the personal accounts are a better deal. Your money will grow, over time, at a greater rate than anything the current system can deliver -- and your account will provide money for retirement over and above the check you will receive from Social Security.

History suggests that the President is correct -- the stock market has averaged a 6.8 percent "real" rate of return (adjusted for inflation) over the past two centuries, according to Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School. The administration says a conservative mix of stocks, corporate bonds and government bonds would return 4.6 percent, even after inflation and administrative costs. And the administration also figures that private accounts would need to generate only a 3 percent rate of return to beat what Social Security provides.

But there's no guarantee that history will repeat itself. Markets are inherently unpredictable and volatile. At present, for example, all major stock-market indexes are still well below where they were five years ago.

Benefit Offsets

The President made no mention of one crucial aspect of the proposed accounts -- anyone choosing one would also have to give up an offsetting portion of their future guaranteed retirement benefits. If their investments in private accounts returned more than 3 percent annually over the years, they would end up better off than under the current formula. But if those investments did worse, they wouldn't make up for the portion of benefits that were given up, and the owner of an account would end up worse off. The President didn't explain that trade-off.

"The Money is Yours?"

The President also glossed over some severely restrictive aspects of the accounts he is proposing, saying flatly "the money is yours."

Bush: In addition, you'll be able to pass along the money that accumulates in your personal account, if you wish, to your children and -- or grandchildren. And best of all, the money in the account is yours, and the government can never take it away .

That's not exactly true.

As described by the "senior administration official," the owners of personal accounts wouldn't be able to touch the money while they are working, not even to borrow. The money would remain in the hands of the federal government, which would administer the personal accounts for a fee which the official said would be about 30 cents per year for every $100 invested.

And even at retirement, the government would control what becomes of the money. First, the government would automatically take back a portion of the money at retirment and convert it to a guaranteed stream of payments for life -- an annuity. The amount taken back -- called the "clawback," descriptively enough -- would depend on the amount of money the retiree requires to remain above the official poverty guideline. That's currently $12,490 for a couple or $9,310 for a single person. Only after the combination of traditional Social Security benefits and the mandatory annuity payments from the private account equal the poverty level would any remaining portion in the account be "yours."

"Senior Administration Official:" They would be permitted to leave those (leftover) funds in the account to continue to appreciate; they could withdraw those amounts as lump sums to deal with a pressing financial need -- and, obviously, any additional accumulations in the accounts could be left as an inheritance. But the main restriction, again, to repeat, is that people would not be permitted to withdraw money from the accounts to such a degree that by doing so they would spend themselves below the poverty line.

The President didn't mention the "clawback" or the mandatory nature of these restrictions, calling them only "guidelines" and describing them only in positive terms:

Bush: (W)e will set careful guidelines for personal accounts. We'll make sure the money can only go into a conservative mix of bonds and stock funds. We'll make sure that your earnings are not eaten up by hidden Wall Street fees. We'll make sure there are good options to protect your investments from sudden market swings on the eve of your retirement. We'll make sure a personal account cannot be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits. And we'll make sure this plan is fiscally responsible, by starting personal retirement accounts gradually, and raising the yearly limits on contributions over time, eventually permitting all workers to set aside four percentage points of their payroll taxes in their accounts.

Sources

George W. Bush, "State of the Union Address ," The White House, 2 Feb 2004.

"The Short- and Long-Term Outlook for Stocks," Knowledge@Wharton website, The Wharton School, University of Pennsyvania: 2 June 2004. (Free subscription required.)

White House Office of the Press Secretary, "Background Press Briefing on Social Security," press release, 2 Feb 2005.

US Department of Health and Human Services, "Annual Update of the HHS Poverty Guidelines," Federal Register 13 Feb 2004: 7336.

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2018

2018
By Mark Weisbrot
Knight-Ridder Newspapers

Thursday 03 February 2005

Sometimes a number can take on great significance as a symbol. The number on a famous athlete's uniform, or the date of an historic event. Anniversaries, the turn of a century, or fears associated with such events -- remember the Y2K scare?

"Thirteen years from now, in 2018, Social Security will be paying out more than it takes in," declared President Bush in his State of the Union speech.

President Bush, along with others who want to cut Social Security benefits and partially privatize the program, wants Americans to believe that 2018 has some significance for the Social Security system. But according to the numbers that the President is using -- from the Social Security Trustees -- it doesn't.

What President Bush is saying is that in 2018, Social Security will have to pay out more in benefits than it receives in payroll taxes. About $16 billion more, according to his (Social Security Trustees) estimates. What he did not say is that the Social Security Trust Fund in 2018 will have more than $3.6 trillion in assets, as well as $206 billion in interest income that year. (All numbers are expressed in today's dollars).

So even if Social Security cruises along on auto-pilot for the next 13 years, 2018 will arrive and depart quietly and without notice. In 2018 a small fraction of Social Security's interest income will be used to pay benefits.

According to President Bush's numbers, the program can pay all promised benefits until 2042, using its interest income and assets, as well as payroll taxes. According to the non-partisan Congressional Budget Office, it's 2052. This is exactly what was intended when our Congress raised the payroll tax in 1983. The idea was to accumulate a surplus (currently more than $1.6 trillion and rising) in order to help finance the retirement of the baby boom generation. By law, the Social Security Trust Fund can only invest in U.S. Treasury obligations.

But 2042 and 2052 are much too far away for those who want to create the impression of a Social Security "crisis." Hence the tricks that have been used to move the program's potential shortfall forward to 2018.

Over the years, I have confronted these tricks hundreds of times on talk shows. They haven't changed at all. The bonds held by the Social Security Trust Fund are dismissed as "I.O.U.'s" or "pieces of paper," as if the credit of the U.S. Treasury, which has never defaulted in the history of this country, is something rather shaky.

"The Trust Fund money's been spent!" they exclaim, as if exposing some kind of scam. Guess what: So has the $720 billion that Japan loaned to the U.S. Treasury. The Japanese government will be repaid, interest and principal. And so will Social Security.

"But where will the money come from to repay the Trust Fund?" they demand. But this is another subject altogether. Where will we get the money to pay the Chinese and Japanese governments or other creditors as they collect interest payments and redeem their Treasury bonds and notes? Mostly we will borrow, but that's not their problem. To blame Social Security for any future debt problems we may face as a country is like blaming your credit card company for your oversized spending habits. If you want to blame the 2001 and 2003 tax cuts or the war spending, that makes some sense; but Social Security is the lender here, not the spender.

Of course 2018 is only one of several tricks that Social Security's detractors have successfully deployed. These devices get plenty of unchallenged play in the media -- especially the broadcast media. No wonder most Americans are so confused. The latest Zogby poll shows 61 percent believe the system faces "serious problems" and 14 percent think it's "in crisis." In fact it is financially stronger than it has been throughout most of its history, according to the Trustees' (President Bush's) numbers.

Conspicuously absent from the Social Security portion of the President's speech was the word "crisis," which has provoked a backlash as a symbol of the Administration's exaggeration. The year 2018 is every bit as misleading as the word "crisis" in the debate over Social Security. It's time to retire that number.
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Mark Weisbrot is co-director of the Center for Economic and Policy Research and co-author, with Dean Baker, of Social Security: the Phony Crisis (2000, University of Chicago Press).

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Only One Side Told in Bush Social Security Pitch

Only One Side Told in Bush Social Security Pitch
By Calvin Woodward
The Assoicated Press

Wednesday 02 February 2005

WASHINGTON (AP) - The devil was in the missing details Wednesday night when President Bush showcased his Social Security plan and claimed advances on jobs and against terrorism that don't tell the full story.

Bush explained in detail how, under his proposal, younger workers would be able to divert some of their Social Security payroll taxes into private accounts "so you can build a nest egg for your own future."

Nowhere in his State of the Union speech did he give the other side of the equation - that Social Security benefits for those workers would be reduced as a result. He stated "your account will provide money for retirement over and above the check you will receive from Social Security," without explaining that check would be smaller.

Moreover, he seemed to issue a guaranteed return on investment for people putting some of their retirement money in the market, saying: "Your money will grow, over time, at a greater rate than anything the current system can deliver."

Although his plan promises checks and balances to ensure such money isn't frittered away on risky investments, it does not come with a guarantee of performance exceeding benefits of the current system.

Declaring Social Security will go broke if nothing is done, Bush said that by 2042, "the entire system would be exhausted and bankrupt."

In fact, the nonpartisan Congressional Budget Office forecasts Social Security as it is would be able to pay 73 percent of benefits in 2042 and stay solvent for 10 years beyond that.

In a portion of his speech dealing with economic progress in the last four years, Bush trumpeted the addition of 2.3 million jobs "in the last year alone," as if he's delivered a succession of job gains.

His number was correct for the year in question, but he left out that there was an overall job loss in those four years. He remains about 300,000 jobs short of closing that jobs deficit.

Even in a policy-packed address like a State of the Union, nuances are lost and Wednesday's speech was no exception.

Bush called Iraq "free and sovereign," an arguably premature definition in light of the relentless violence from insurgents and the overwhelming presence of U.S. troops.

He also said Iraq was "a vital front on the war on terror" and Americans "are fighting terrorists in Iraq so we do not have to face them here at home."

The terrorist link that the United States most worried about when it invaded Iraq - an alleged relationship with the al-Qaida network behind the Sept. 11, 2001, attacks - came to little.

Close to home, Bush credited the No Child Left Behind law with improving school achievement and test scores, but many educators say they are struggling to meet the law's requirements because of a lack of money and because some requirements are inflexible.

The law demands yearly progress from all groups of students and penalizes many schools that fall short. Bush also talked about increasing Pell grants; the administration has not explained in detail how it will find the money to make that happen.
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Associated Press writer Sam Hananel contributed to this report.

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Bush Declares War on the Poor

Bush Declares War on the Poor
By Jacques Coubard
L'Humanité

Thursday 03 February 2005

Social Security privatization guts the ultimate social protections for the most destitute inherited from the New Deal.

He promised it during his electoral campaign; he does it. Bush will launch his great social security reform, taking the system back seventy years to before President Roosevelt's 1935 establishment of social protection, "welfare," designed to curb the extreme poverty of the elderly during the Great Depression.

The plan Bush and his ultraconservative advisors are promoting sends the present redistribution system down the trapdoor to progressively substitute a capitalization that forces wage-earners to dedicate a portion of their contribution to the purchase of stocks or bonds that would supposedly provide a better return. The argument the authors of this project once again use as a club is fear. Fear of an abysmal deficit that would strike at social security, about to be overwhelmed by the arrival of the new generations, the baby boomers, in 2018. The federal budget will no longer suffice to save retirements, taken here at age 65. On the other hand, they would be indexed from then on to inflation and not to salaries, which always lag behind price rises. The reduction in benefits(1)will consequently be felt immediately in a country where it is common to see men and women work past the official retirement age in order to pay their bills or quite simply in order to live with dignity while poverty continues to extend ever further in a society that enjoys one of the lowest savings rates.

The consequences of the reform have provoked critical reactions even among the ranks of Republican Senators, less concerned about the workers than about the aggravation of the budget deficit the reform will provoke by depriving Social Security of contributions.

Unions, various associations, and Democrats reject this rupture of the social contract. How will low salaries be able to allow the purchase of shares when for the lowest paid workers they barely allow the minimum necessary for survival? As for other workers, they will be penalized without any guarantee of a stable and dependable income.(2) The increase in bankruptcies of the Enron or WorldCom variety has demonstrated all that is risky about the great Wall Street casino game. Tens of thousands of employees who had purchased their employers' shares or contributed to company pension funds found themselves without either savings or pensions.

In the name of his "ownership society" concept, Bush applies ultraconservative dogmas to the letter: always less government, always more privatization, always less taxes (for the wealthiest), so as to make the individual more independent, more free to determine his destiny. In fact, using the deficit as blackmail, he is proceeding to a redistribution of national wealth for the benefit of the brokers, banks, and insurance companies who will profit even from the borrowing aspect of the proposals launched by the White House. People from ... good companies, who have poured abundantly into the Bush electoral campaign coffers.

Bill Paterson, investment specialist for the AFL-CIO, sees this change as "a dangerous collusion between industry and the ideologues of the right." The retired person's association, AARP, has published ads in 50 newspapers denouncing the "social insecurity" the privatization introduces. They all draw attention to the failures of similar privatizations in Chile and Great Britain, which have proven to be more costly (with private companies taking a significant portion of the funds and their administrative management becoming much heavier). Counterproposals have been launched that rest primarily on a gentle increase in wage-earners' contributions.

Bush's success in the presidential elections and his majority in Congress give the means to accomplish his project. The future will tell whether those forces aligned with social solidarity will be able to unite to challenge it. Following the ravages of successive recessions, Kennedy, then Lyndon Johnson, claimed to declare "war on poverty." Now with Bush comes the war on the poor.

(1) In 2003, according to the latest statistics available, 10.2% of retirees lived below the poverty level.
(2) According to an official report, scheduled reductions in payouts will be 0.9 % in 2012, 25.7 % in 2032, and 45.9 % in 2075.

Translation: t r u t h o u t French language correspondent Leslie Thatcher.

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U.S. Condoned Iraq Oil Smuggling

U.S. Condoned Iraq Oil Smuggling
By Elise Labott and Phil Hirschkorn
CNN

Thursday 03 February 2005

Trade was an open secret in administration, U.N.

Documents obtained by CNN reveal the United States knew about, and even condoned, embargo-breaking oil sales by Saddam Hussein's regime, and did so to shore up alliances with Iraq's neighbors.

The oil trade with countries such as Turkey and Jordan appears to have been an open secret inside the U.S. government and the United Nations for years.

The unclassified State Department documents sent to congressional committees with oversight of U.S. foreign policy divulge that the United States deemed such sales to be in the "national interest," even though they generated billions of dollars in unmonitored revenue for Saddam's regime.

The trade also generated a needed source of oil and commerce for Iraq's major trading partners, Turkey and Jordan.

"It was in the national security interest, because we depended on the stability in Turkey and the stability in Jordan in order to encircle Saddam Hussein," Edward Walker, a former assistant secretary of state for Near East affairs, told CNN when asked about the memo documents.

"We had a great amount of cooperation with the Jordanians on the intelligence side, and with the Turks as well, so we were getting value out of the relationship," said Walker, who served in both the Clinton and Bush administrations.

The memos obtained by CNN explain why both administrations waived restrictions on U.S. economic aid to those countries for engaging in otherwise prohibited trade with Iraq.

The justifications came at a time when the United States was a staunch backer of U.N. sanctions on Iraq imposed after it invaded Kuwait in 1990.

"Despite United Nations Security Council Resolutions," a 1998 memo signed by President Clinton's deputy secretary of state, Strobe Talbott, said, "Jordan continues to import oil from Iraq."

But Jordan had a "lack of economically viable alternatives" to Iraqi oil, Talbott's memo said.

Talbott's memo lauded Jordan's commitment to the Middle East peace process, citing the late King Hussein's personal efforts to broker a resolution to the Palestinian-Israeli conflict.

"Timely, reliable assistance from the United States fosters the political stability and economic well-being critical to Jordan's continuing role as a regional leader for peace," Talbott said.

Identical language was used four years later in a 2002 memo by Richard Armitage, undersecretary of state under President George W. Bush.

"Jordan has made clear its choice for peace and normalization with Israel," Armitage said, calling Jordan "an important U.S. friend" and citing its 2001 free trade treaty with the United States.

"U.S. assistance provides the Jordanian government needed flexibility to pursue policies that are of critical importance to U.S. national security and to foreign policy objectives in the Middle East," Armitage said.

Economic and military ties to Turkey were cited by Talbott and Armitage in justifying waivers of U.S. penalties to Iraq's northern neighbor. Indeed, their memos advocated hundreds of millions of dollars in aid to the U.S. allies.

Talbott's memo praised Turkey for deploying troops to the peacekeeping mission in the former Yugoslavia, policing heroin trafficking through Turkey, and cooperating with enforcement of the "no-fly" zone in northern Iraq by allowing U.S. and British jets to use Incirlik, Turkey, as a base.

Armitage's memo said Turkey "provides irreplaceable assistance in countering the threat the Baghdad regime poses" and lauded the U.S. ally for sending troops to Afghanistan after the September 11, 2001, attacks.

"The primacy of Turkey's role as a front-line ally in the war on terrorism is expected to assume even greater prominence and urgency as the global war on terrorism continues," Armitage said.

Deputy State Department spokesman Adam Ereli told CNN Tuesday the waivers were given to Jordan and Turkey every year since 1998.

He called both countries "special cases" in which the money Saddam made through the smuggling did not allow him weapons.

"With Jordan and Turkey the circumstances were unique," Ereli said. "We approached them in a way that preserved key alliances and didn't help the regime of Saddam Hussein."

He added that Saddam's smuggling to Syria, which the United States tried to curtail, raised far more concerns because of the possibility of "dual use" goods reaching Iraq.

Illicit Revenue

Estimates of how much revenue Iraq earned from these tolerated side sales of its oil to Jordan and Turkey, as well as to Syria and Egypt, range from $5.7 billion to $13.6 billion.

This illicit revenue far exceeds the estimates of what Saddam pocketed through illegal surcharges on his U.N.-approved oil exports and illegal kickbacks on subsequent Iraqi purchases of food, medicine, and supplies -- $1.7 billion to $4.4 billion -- during the maligned seven-year U.N. oil-for-food program in Iraq.

The Government Accountability Office estimated last July that Iraq earned $5.7 billion from smuggling oil out of the country, especially to Jordan, Turkey, and Syria between 1996 and 2002.

A CIA-backed Iraq Survey Group report by former Iraq weapons inspector Charles Duelfer estimated last October that Saddam acquired $8 billion by smuggling oil to Jordan, Turkey, Syria, and Egypt through 2003, when oil for food ended with the toppling of Saddam.

The Senate Governmental Affairs Permanent Subcommittee on Investigations estimated last November that the Iraqi regime earned $13.6 billion by smuggling oil during the sanctions period it defined as 1991-2003, or five years before oil-for-food started.

The oil-for-food program is being investigated by U.S. congressional committees, the Justice Department, the Securities and Exchange Commission, and a special committee appointed by the United Nations and led by former Federal Reserve Bank Chairman Paul Volcker.

Volcker's committee is to issue an interim report on Thursday.

In an interview last month with the U.S.-based Arabic-language TV station Al Hurrah, Volcker said, "The big figures are smuggling, which took place before the oil-for-food program started, and it continued while the oil-for-food program was in place."

'Either Silent or Complicit'

Rep. Robert Menendez, a New Jersey Democrat on the House International Relations Committee, one of five panels probing the oil-for-food program, told CNN the United States was "complicit in undermining" the U.N. sanctions on Iraq.

"How is it that you stand on a moral footing to go after the U.N. when they're responsible for 15 percent maybe of the ill-gotten gains, and we were part and complicit of him getting 85 percent of the money?" Menendez asked.

"Where was our voice on the committee that was overseeing this on the Security Council?

"The reality is that we were either silent or complicit, and that is fundamentally wrong."

Former State Department diplomat Walker said, "It was almost a 'don't ask, don't tell' kind of policy. It was accepted in the Security Council. No one challenged it."

John Ruggie, a former senior adviser to U.N. Secretary-General Kofi Annan, said U.S. diplomats focused on assuring U.N.-approved shipments to Iraq were free of military components, and the United States felt Jordan and Turkey needed to be compensated for the adverse impact of the sanctions.

Ruggie said, "The secretary of state of the United States said each and every year that those illegal sales were in the national security interest of the United States. So it wasn't just that the U.S. was looking the other way."

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