From the NY Times:

Worse Than Fiction

By PAUL KRUGMAN

've been thinking of writing a political novel. It will be a bad novel because there won't be any nuance: the villains won't just espouse an ideology I disagree with - they'll be hypocrites, cranks and scoundrels.

In my bad novel, a famous moralist who demanded national outrage over an affair and writes best-selling books about virtue will turn out to be hiding an expensive gambling habit. A talk radio host who advocates harsh penalties for drug violators will turn out to be hiding his own drug addiction.

In my bad novel, crusaders for moral values will be driven by strange obsessions. One senator's diatribe against gay marriage will link it to "man on dog" sex. Another will rant about the dangers of lesbians in high school bathrooms.

In my bad novel, the president will choose as head of homeland security a "good man" who turns out to have been the subject of an arrest warrant, who turned an apartment set aside for rescue workers into his personal love nest and who stalked at least one of his ex-lovers.

In my bad novel, a TV personality who claims to stand up for regular Americans against the elite will pay a large settlement in a sexual harassment case, in which he used his position of power to - on second thought, that story is too embarrassing even for a bad novel.

In my bad novel, apologists for the administration will charge foreign policy critics with anti-Semitism. But they will be silent when a prominent conservative declares that "Hollywood is controlled by secular Jews who hate Christianity in general and Catholicism in particular."

In my bad novel the administration will use the slogan "support the troops" to suppress criticism of its war policy. But it will ignore repeated complaints that the troops lack armor.

The secretary of defense - another "good man," according to the president - won't even bother signing letters to the families of soldiers killed in action.

Last but not least, in my bad novel the president, who portrays himself as the defender of good against evil, will preside over the widespread use of torture.

How did we find ourselves living in a bad novel? It was not ever thus. Hypocrites, cranks and scoundrels have always been with us, on both sides of the aisle. But 9/11 created an environment some liberals summarize with the acronym Iokiyar: it's O.K. if you're a Republican.

The public became unwilling to believe bad things about those who claim to be defending the nation against terrorism. And the hypocrites, cranks and scoundrels of the right, empowered by the public's credulity, have come out in unprecedented force.

Apologists for the administration would like us to forget all about the Kerik affair, but Bernard Kerik perfectly symbolizes the times we live in. Like Rudolph Giuliani and, yes, President Bush, he wasn't a hero of 9/11, but he played one on TV. And like Mr. Giuliani, he was quick to cash in, literally, on his undeserved reputation.

Once the New York newspapers began digging, it became clear that Mr. Kerik is, professionally and personally, a real piece of work. But that's not unusual these days among people who successfully pass themselves off as patriots and defenders of moral values. Mr. Kerik must still be wondering why he, unlike so many others, didn't get away with it.

And Alberto Gonzales must be hoping that senators don't bring up the subject.

The principal objection to making Mr. Gonzales attorney general is that doing so will tell the world that America thinks it's acceptable to torture people. But his confirmation will also be a statement about ethics.

As White House counsel, Mr. Gonzales was charged with vetting Mr. Kerik. He must have realized what kind of man he was dealing with - yet he declared Mr. Kerik fit to oversee homeland security.

Did Mr. Gonzales defer to the wishes of a president who wanted Mr. Kerik anyway, or did he decide that his boss wouldn't want to know? (The Nelson Report, a respected newsletter, reports that Mr. Bush has made it clear to his subordinates that he doesn't want to hear bad news about Iraq.)

Either way, when the Senate confirms Mr. Gonzales, it will mean that Iokiyar remains in effect, that the basic rules of ethics don't apply to people aligned with the ruling party. And reality will continue to be worse than any fiction I could write.

From the NY Times:

The Social Security Fear Factor

f you've lent even one ear to the administration's recent comments on Social Security, you have no doubt heard President Bush and his aides asserting that a $10 trillion shortfall threatens the retirement system - and the economy itself. That $10 trillion hole is the basis of the president's claim last month that "the [Social Security] crisis is now." It's also the basis of the administration's claim that the cost of doing nothing to reform the system would be far greater than the cost of acting now.

Well, the $10 trillion figure is the closest you can get to pulling a number out of the air. Make that the ether. Starting last year, as the groundwork was being set for the emerging debate, the Social Security trustees took the liberty of projecting the system's solvency over infinity, rather than sticking to the traditional 75-year time horizon. That world-without-end assumption generates the scary $10 trillion estimate, and with it, Mr. Bush's putative rationale for dismantling Social Security in favor of a system centered on private savings accounts. The American Academy of Actuaries, the profession's premier trade association, objected to the change. In a letter to the trustees, the actuaries wrote that infinite projections provide "little if any useful information about the program's long-range finances and indeed are likely to mislead any [nonexpert] into believing that the program is in far worse financial condition than is actually indicated."

As it often does with dissenting professional opinion, the administration is ignoring the actuaries. But that doesn't alter the facts or common sense. If the $10 trillion figure is essentially bogus, so is the claim that Social Security is in crisis. The assertion that doing nothing would be costlier than enacting a privatization plan also turns out to be wrong, by the estimates of Congress's own budget agency.

Over a 75-year time frame, Social Security's shortfall is estimated by the Congressional Budget Office at $2 trillion and by the Social Security trustees at $3.7 trillion, a manageable sliver of the economy in each case. If the shortfall is on the low side, Social Security will be in the black until 2052, when it will be able to pay out 80 percent of the promised benefits. If it is on the high side, the system will pay full benefits until 2042, when it will cover 70 percent.

Contrary to Mr. Bush's frequent assertion that Social Security is constantly imperiled by political meddling, it has in fact been preserved and improved by political intervention throughout its 70-year history, most significantly in 1983. The system could - and should - be strengthened again by a modest package of benefit cuts and tax increases phased in over decades.

Instead, the administration wants workers to divert some of the payroll taxes that currently pay for Social Security into private investment accounts, in exchange for a much-reduced government benefit. To replace the taxes it would otherwise have collected - money it needs to pay benefits to current and near retirees - the government would borrow an estimated $2 trillion over the next 10 years or so and even more thereafter.

In effect, the administration's plan would get rid of the financial burden of Social Security by getting rid of Social Security. The plan shifts the financial risk of growing old onto each individual and off of the government - where it is dispersed among a very large population, as with any sensible insurance policy. In a privatized system, you may do fine, but your fellow retirees may not, or vice versa.

In any event, doing well under privatization is relative. Congress's budget agency analyzed the privatized plan that is widely regarded as the template for future legislation and found that total retirement benefits - including payouts from the private account plus the government subsidy - would be less than under the present system. The amount available from the privatized system was less even after midcentury, when the current system is projected to come up short.

It should come as no shock that individual investors might not do as well as hoped. The stock market's historical returns - some 7 percent a year - are predicated on a hypothetical investor who bought an array of stocks in the past, reinvested all dividends, never cashed in and never paid commissions or fees. That's not how investing works in the real world. An especially grave danger is that investors would withdraw their funds before retirement, a pattern that is pronounced in 401(k) plans. It would be politically very difficult to refuse people access to accounts that were sold to them on the premise that they - not the government - would own them.

The Congressional Budget Office analysis also likely understates the costs to individuals of privatizing Social Security. The borrowing that would be needed to establish private accounts could lead to higher interest rates, a weaker dollar and slower economic growth. It is also likely that future tax hikes would be required to cover the interest payments on the additional national debt.

The only hands-down winner would be Wall Street, as fees to manage millions of accounts poured in. (Those fees, not incidentally, would come out of your return.) Current stockholders would also stand to benefit, as increased demand pushed up stock prices, giving existing owners a gain at the expense of newcomers who would be forced to buy high. The affluent, who could afford professional investing advice, would also be advantaged, even though everyone would be taking the same risks.

The zeal over privatization is fueled by the belief of Mr. Bush and his supporters that free-market fixes are appropriate for virtually every problem. That faith is misguided. For a society to be functional and humane, it's not enough that some people have a chance to be rich in old age. Rather, all old people must have the dignity of financial security, and that requires universal coverage.

Social Security is the core tier of old-age support, replacing about a third of preretirement income for a typical retiree and providing inflation-proof income for life - a feature not available in private accounts. Its purpose is not to supplant other retirement investing, but to provide a crucial safety net. Anyone who wants to maintain his or her standard of living into old age must also amass substantial personal savings and investments. To introduce the same risk into the core tier of benefits that already exists for the bulk of one's retirement savings would be as unfair as it is unwise.

If Mr. Bush were not so serious about privatizing Social Security, his urgency would be silly. Compared with other challenges looming for the government, it's a non-problem. The shortfall in the Medicare hospital insurance fund is two to three times the size of the Social Security shortfall, and that fund is projected to be insolvent some two to three decades before Social Security. Taken together, the costs of the Medicare prescription benefit and of making the tax cuts permanent - Mr. Bush's two main domestic initiatives - are 5 to 8.5 times larger. And his hair is on fire over Social Security?

One of the most distressing aspects of the debate over Social Security privatization is that it distracts from more pressing issues and obscures better solutions to the problem of secure retirement. A future editorial will discuss new strategies to increase private savings outside of Social Security that draw on market theory and behavioral economics and are more promising than rehashing the same tired formula of tax-sheltered savings accounts. In the meantime, however, Mr. Bush and his supporters will be pursuing their idée fixe of privatization. It's bad policy. And it's bad politics, too, driven by reflex, ideology and special interests, and sustained by conformism that masquerades as party discipline. Lawmakers who still value their right and obligation to think for themselves - and to act in the best interest of their constituents - must champion solutions that will build on Social Security, not undermine it.