Has Hume commented on this Kerfuffle? It seems to me that all he'd have to do is say he misspoke and meant to say "supplimented" not "supplanted" (a completly reasonable slip of the tongue) and all this (such as it is) goes away.

I don't think Hume needs to comment on this, although he can if he wishes. He doesn't even have to use your formula Eric. Hume could just say that other interpretations of FDR's speech were reasonable.

As for FDR being a "liar", not in this debate. But it isn't hard to find accounts of FDR's dishonesty in his terms as President. Harry Truman himself described FDR as a "fakir".

Bill,

Thanks for the link, and I apologize for not making myself more clear.

I wasn't comparing FDR's original statement with the final bill - I was comparing his statement with the FDR's original bill, introduced the same day FDR made his statement.

So yes, the statement makes it sound as if FDR was endorsing private accounts and a "self-sustaining" annuity fund, but as far as I can tell from the original bill, FDR always intended that both the "self-sustaining" fund and any additional contributions be invested in US treasury bonds, which is basically the system we have today.

Ah. Perhaps I was unclear in my interpretation. My bad.

What's interesting is that the recommendations of the Committee on Economic Security (CES), which formed the basis for FDR's statement, mirrored the mild diversity of investments proposed by Bush, on vehicles that did a lot better than Treasury Bonds.

I'll update with a direction to read your comment.

I agree completely with you on this one, Bill. I don’t think Hume did anything that should even require any further mention on his part.

Maybe he could have been a tad clearer. But this isn’t a topic that lends itself well to explanation in less than 3 or 4 paragraphs. And that’s written text. Trying to communicate something like this verbally magnifies the difficulty many times.

I do a lot of writing on complex, technical issues, and I often convert my writing into oral presentations. With presentations, the audience can’t stop and re-read complex sections, or refer back to earlier sections to help establish context. So the communication challenges for both a presenter and a listener, are greater than those facing a writer and a reader.

I can see how the lefties could come to their conclusions. But by taking the time to analyze the written transcripts, I can also see how they are wrong in their interpretation.

I appreciate you taking the time to write it up in this manner. But based on the ridiculous calls for Hume’s resignation, and real or feigned outrage over this, I suspect few lefties will take the time to sift through the facts. The heard what they wanted to hear.

I may well be out to lunch on this but I still don't think Bill has it quite right.

1. FDR's initial proposal did in fact call for private accounts to be a complementary portion of Social Security.

I take this to mean that everyone who contributes to Social Security gets x dollars. If you want more than x dollars then you can contribute over and above the compulsory amount and receive a complementary or supplemental payoff. I stand to be corrected of course but that's how it appears to me.

The private account proposal appears to divert some of the compulsory contribution and steers it into the voluntary component. It's really not so voluntary any more and in fact is not complementary or supplemantary to the compulsory annuity as suggested by FDR. It replaces part of the mandatory annuity. Am I wrong?

If I am then I'm hurting my head for nothing but if I'm right then I think that the criticism of Hume is justified. Not a fireable offence mind you and not necessarily misleading in any intentional manner but misleading nonetheless.

Mike -

I take this to mean that everyone who contributes to Social Security gets x dollars. If you want more than x dollars then you can contribute over and above the compulsory amount and receive a complementary or supplemental payoff. I stand to be corrected of course but that's how it appears to me.

The private account proposal appears to divert some of the compulsory contribution and steers it into the voluntary component. It's really not so voluntary any more and in fact is not complementary or supplemantary to the compulsory annuity as suggested by FDR. It replaces part of the mandatory annuity. Am I wrong?

no, you are not wrong. You are correct, and perhaps I'm loose with the interpretation of the term "complementary;" there IS a fundamental structural difference, as Roosevelt's plan called for a voluntary portion that was above and beyond the compulsory portion, whereas Bush's plan maintains the overall compulsory collection, but cuts back on the government's control of the compulsory annuity and sets up more flexible private accounts vaguely similar to FDR's voluntary addendum.

BUT there's also a catch to this difference; a philosophical argument that brings the two plans closer into line: as Jane Galt noted, apparently FDR et al never intended for the compulsory ratio to be quite so generous ...

By the time the mandatory annuities were paid out, they'd actually been made more generous than what FDR had proposed, as you'll read in the above link. How generous? The average benefit for a male worker was $22.71, which translates into a whopping $287.64 in 2003 dollars. The actual average benefit in 2003? $895.00. Even with a sizeable clawback, Bush's plan will be far more generous on the mandatory side than FDR's, plus the voluntary annuity that FDR wanted, but never got (though the details of the financing of the annuities differ, the result seems substantially the same: Americans have the choice of putting aside savings with which to buy annuities when they retire).

So Brit Hume's implication that FDR supported a plan like Bush's seems to me to be pretty accurate. I've got better things to waste my outrage on.

They aren't structurally equivalent - really in the sense that Bush is cutting back on the govt controlled compulsory contribution, whereas FDR's "private accounts" were an addition, but the plans are similar in intent, and these ratios between voluntary and conmpulsory, or the new "govt controlled compulsory" and private account compulsory," are rather arbitrary and subjective anyway.

But if you're measuring by FDR's intent, they're certainly not dissimilar.

And as I mention above, the more detailed description of the plan by the Committee on Economic Security highlighted limited investment choices for the voluntary annuities that had a higher potential rate of return and were more flexible than just Treasury Bills.

Bottom line: if I drew out the structure of both plans on a chalkboard, FDR's proposal mentioned by Hume would be more similar to Bush's proposal than the current system as we know it (with the difference that Bush's requires MORE compulsory contribution than FDR's original intent).

I hope that some of this convoluted comment makes sense.

Hey Bill and everyone,

One thing I noticed reading through FDRs original language, and something I think is perhaps being misconstrued is the whole privatization angle. FDR said, basically, that people could put additional, optional money in for higher retirement benefits...but he didn't say "into the private sector". I think he meant, put more optional (the voluntary portion, or third arm of SS) money into the government-run system, for an optional higher retirement payout.

To my mind, the essential differences are:
1. SS never became a "self-sustaining" operation
2. Since SS never became a self-sustaining operation, FDRs idea to let people put MORE voluntary contributions into SS for higher benefits is even more of a pyramid scam than the current system.
3. Partial privatization, while not not part of FDRs proposal, makes sense in light of private industry always being able to do things cheaper, better, and more efficiently than the government. (Think, your retirement account run by the DMV)

The problem that I have with the lefty interpretation of the FDR remarks, it seems like they're saying that FDR wanted to start with one taxpayer-funded program to later be replaced with another taxpayer-funded program, which just makes no sense.

And if the current program is the "self-sustaining" one, then why has the tax rate grown from 2%, to 9.9%, to 12.4%--and in need of another adjustment?

Mike:

I think you are correct in your interpretation of FDR’s quote. However, I think you are wrong about Hume. Hume didn’t say that FDR’s plan and Bush’s plan were identical or even similar.

He simply said that FDR planned to include private accounts as part of the Social Security program.

A link to his spiel:
http://www.foxnews.com/story/0,2933,146409,00.html

I see no dishonesty or misinterpretation there.

Mark -

your comments may also be more accurate than mine:

1. While the private accounst aren't govt. run, they aren't really technically totally private either, as the govt would severely limits the choices and flexibility to "safer" investment vehicles. Though you are right, it was originally an encapsulated govt administered voluntary annuity.

2. While a later version of the voluntary proposal included: "The bonds were to return no more than a 3% investment yield," which would match up with the whole crappy govt T-Bond vehicle, I could have sworn that I read that the voluntary options were initially more flexible with regard to vehicles. I'll look for it, but I very well could be wrong.

3. You are right, the biggest contradiction is the use of the language of "self-supporting annuity plans," when in reality the demographic structure and rates of return of the program were designed to eventually go bust without constantly upping the taxes (as Joe points out).

One thing that tends to get ignored in this debate is that #2 has gradually morphed into #1 because of the lack of actuarial adjustment. It has become a de facto pension subsidized by current payers, and so Brit is right and Drum is wrong.

Also, the Social Security "surplus" has been spent by the general fund all along and amounts to an income tax. Just consider what kind of havoc another $5 trillion (I believe this is the cumulative total in IOUs) would wreak on the bond markets. This would roughly double our public debt and push it from 62% of GDP to around 110%. Instead, the gov't "borrowed" from Soc Sec's "surplus." We've been financing massive overspending for decades with this shadow income tax.

http://www.cia.gov/cia/publications/factbook/rankorder/2186rank.html

Had Social Security been set up honestly with actuarial adjustments, the retirement age would be around 75 (where it should be by the 1940s standards under which if you could work you worked, with apologies to those currently in their 60s and 70s) and there would be no crisis.

Appreciate the responses but I'm afraid this is too much American SS for one day. I suspect that the argument is moot anyway...it would help immensely if FDR wasn't in the grave but it is an interesting exercise. The important issue is how the program shakes out now. Have a nice weekend all.

The left can rant and rave until the cows come home. The right can defend just as long. Both sides can parse FDR and Hume until the ink is gone from the paper and the magnetic particles wear off the tape. FDR said this, FDR meant that, Hume implied this, Hume muddled the quote, ad nauseum.

Brit Hume is NOT in a position to submit legislation and NOT in a position to influence legislation. What Hume says doesn't impact the debate one iota.

The best thing those of us on the right can do is say we're finished blathering about this and go on to something useful. Let the left quibble and complain and do whatever is is they think they are doing, we can do something better with our time.

I saw a sign in front of a church on the way to my office this morning: 'Be kind to your enemies it will drive them crazy.'

The thing I don't get is how the outrageously generous State pensions affect Social Security payments.

Here's an example of a Calif. employee who gets
117% of her salary if she STOPS working. Presumably, the state is paying here this huge chunk ON TOP of any SS payments she gets.

http://www.sacbee.com/static/weblogs/insider/archives/001733.html

At the expense of flogging the dead horse, I still don't accept the notion that FDR's plan and Bush's plan are similar in intent if one uses FDR's three principle paragraph and Hume's original statement as posted at Fox.

Hume states that Roosevelt favors government funding being supplanted by self-supporting annuity plans. I still interpret this to mean that the principle #1 pensions would be supplanted by self-supporting annuity plans, the like of which you have now. Bush's plan takes money from the principle #2 self-supporting annuity plans and switches it to the principle #3 self-supporting annuity plans. Principle #2 plans are characterised by mandatory contributions while principle #3 plans are characterised by voluntary contributions. I fail to find anything in Roosevelt's comments that support this transfer in funding and that is why I believe Hume's statement is misleading.

This isn't to say that FDR wouldn't change his mind were he alive today and it's not to say that Bush's plan is necessarily wrong. It is wrong to cite FDR's 3 principles as supporting the Bush plan however and I can't see Bill's intent argument as supportable by FDR's statement either.

I don't know whether Hume attempted to deceive his viewers or not...I would be very surprised if he did and I chalk up his statement to a misinterpretation of Roosevelt's words. I certainly wouldn't fire him but his comment was wrong and I don't see anything wrong with calling him on it. Politely of course.

I think it is fair to draw analogies between what FDR originally described, what Bush is considering, and the current system.

Reading that into Humes comment is a stretch though. Hume's comment drew attention to an unimplemented portion of FDR's plan and implied that was in some sense like a private account.

I have since read that was supposed to be similar to a commercial annuity only backed by the same T-bills as Social Security.

Clearly a commercial annuity is a private investment, and there's no question that a 401K with government bonds is still a private account, so I think it is fair to describe FDR's voluntary investment plan that way.