Paul Krugman’s column is a must-read today. First, he quotes conventional wisdom on Social Security, which continues to boggle the mind:
Mr. Russert: “Everyone knows Social Security, as it’s constructed, is not going to be in the same place it’s going to be for the next generation, Democrats, Republicans, liberals, conservatives.”
Mr. Matthews: “It’s a bad Ponzi scheme, at this point.”
Mr. Russert: “Yes.”
Wow. It’s almost as though those guys worked for the Bush administration circa 2005, peddling nonsense about Social Security in order to advance an ideologically-driven privatization scheme. We know that is not true. Everyone who has looked at the numbers in any kind of fair-minded way (including the Social Security trustees) says so. So let’s just come off it, please.
Krugman’s point, though, is that Obama seems to have fallen for it, at least to some degree. Here’s Krugman’s diagnosis as to why that happened:
Lately, Barack Obama has been saying that major action is needed to avert what he keeps calling a “crisis” in Social Security – most recently in an interview with The National Journal. Progressives who fought hard and successfully against the Bush administration’s attempt to panic America into privatizing the New Deal’s crown jewel are outraged, and rightly so.
But Mr. Obama’s Social Security mistake was, in fact, exactly what you’d expect from a candidate who promises to transcend partisanship in an age when that’s neither possible nor desirable. …
I don’t believe Mr. Obama is a closet privatizer. He is, however, someone who keeps insisting that he can transcend the partisanship of our times – and in this case, that turned him into a sucker.
Sometimes, you see, partisanship is a good thing — because one party is wrong, and it’s helpful to have another party to stand up to what otherwise could be a juggernaut. That’s what happened with Social Security in 2005. BushCo and its congressional enablers were peddling a mountain of malarkey in an effort to dismantle a program that an important part of their “base” has always detested. But the Democrats stood firm, and eventually even the mainstream media were persuaded that enough of what Bush was saying was actually demonstrably false that they simply could not avoid calling him on it. And then the proposal collapsed.
Krugman’s right about the state of Social Security:
Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders.
And, if you think you want a less “partisan” Washington, be careful what you wish for.
[O]n Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want. We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists – which is the case for many issues today – you end up being played for a fool. And that’s what has just happened to Mr. Obama.
A very interesting take, IMHO.
Not much content to this Krugman piece – we’re supposed to think that Obama is capitulating to something, but what exactly? It’s just innuendo. Obama isn’t for privatization or for dismantling the current system, and he’s absolutely correct that the current system cannot pay its obligations without a fix. He was clear about his preferred solution in the debate last night – raising the cap on income subject to social security tax above the current $97.5K limit. Hard to see how that makes him a “sucker” to the right wing (surely it’s not their preferred solution) or a “fool.”
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Would that HRC was half as forthright and clear on her plan.
Would you mind providing a cite for that comment? Because the fact is that, if nothing is done, the system can pay 100% of its current obligations until 2041, according to the Social Security trustees’ conservative projections. I’ll say that again: until 2041. I’d say there are many more pressing issues to deal with — I mean, come on — tell me another government program that’s all set until 2041. Sure, something should be done to shore it up. But it’s hardly a critical issue, and it’s far from urgent.
But here’s what Obama told MyDD’s Jonathan Singer on the issue.
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I think it is ridiculous to criticize Obama for making Social Security an issue. He has not been hysterical about it. He’s been proactive. Sometimes I fear that progressives feel we should just sit around a play defense on protecting our legacy. But that is nuts. If we don’t pursue reforms – the other side will and when they do it, its gonna be a helluva lot worse. We should seize the day to update and improve the social safety net we built and not sit on our hands hoping the other side never gets their way.
If their reserves are sufficient to pay off policies through 2041, who cares about people who the actuaries predict will be with us after that? I mean, really, making sure they take in enough money to pay obligations after 2041 is hardly a critical issue, far from urgent.
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Same thing with global warming – the really big problems won’t be noticeable until much later in the century, so why bother to do anything about it now? I mean, who cares about the people who live in Bangladesh or Miami or Tuvalu, anyway? There’s plenty of time to relocate them in the next thirty-four years.
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And road and bridge repairs – the same philosophy applies there as well. No need to spread out repairs and maintenance over time, to help keep them affordable and the infrastructure in good shape. It’s not a crisis now, so who cares? Makes much more sense to just defer maintenance until things actually fail. Hey, statistically, I’m probably dead by 2041, so what do I care if all the bills come due around then?
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of how social security actually works, and what its issues really are, let’s continue this conversation. It will be a great deal more productive at that time because you’ll be able to avoid false analogies. Here’s a good place to start.
that I didn’t already know. But thanks for the good laugh you gave me with your attempt to claim that life insurance is a false analogy!
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A financial fix is needed for the social security system to meet its projected obligations, your own post acknowledges it, as do all reputable projections. Perhaps you should review what the American Academy of Actuaries has to say on the subject, and then you could comment more meaningfully on the topic.
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Is it a crisis? Not if we take action to adjust the system such as reducing benefits, raising the retirement age, means-testing eligibility, raising the tax rate, or (the option I’d favor) increasing the income level subject to social security tax.
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I’m for those who would plan ahead, review the options and make the needed adjustments rather than pretend there’s no problem. A CEO of a life insurance company that failed to respond to actuarial projections would be fired in disgrace. I don’t think we should expect less from our politicians.
I think the underlying assumption here is that if we make no changes now, the taxes will need to be hiked dramatically when the Trust Fund is exhausted.
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p>But check out this from Bruce Web:
The only reason to raise the cap would be fairness, not “solvency.”
The key dates:
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2017: SS is projected to pay out more than it receives. Where will it get the excess? From the general fund.
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2027: An arbitrary date in reality, but some say, it’s the date that SS will have to tap into its principal to make payments (i.e. SS currently takes in cash, and lends the excess cash — cash in excess of payments — to the general fund. SS receives accrued interest on that loan. In 2027, SS will have to demand return of the principal.)
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2041: All the principal on those loans will have been returned to SS and absent adjustments, SS will afford on 75% of the promised benefits.
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But, to say there’s not a current problem is just wrong. The budget problem isn’t in 2041 or 2027, or even 2017.
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Next year–conveniently an election year–boomers ramp up the retiring biz, and the Social Security surplus will shrink, which will, pressure the budget. Remember? The excess cash is being loaned to the general fund.
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That excess SS cash will begin to drop in 2008. By 2017, the only thing on our collective minds will be where to find the money to pay for the whining Blue-haired boomers.
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That’s the current math. So, when to worry ? Not 2040, ’cause I’m sure you’ll agree, that’s too late. How about, oh, say 2008, when the general fund begins to lose excess cash, or 2009 when the general fund begins to lose more SS cash, or 2010, when it loses even more.
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Where’s your line in the sand?
…In 2027, SS will have to demand return of the principal.
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2041: All the principal on those loans will have been returned to SS…
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strike me as a bit incomplete. What happened to the accumulated interest? I recognize that the interest rate on amounts loaned by the SS system to the general treasury was fraudulenly low (thank you, Alan Greenspan), but the treasury should be required to return not only the principal, but also pay the accumulated interest.
At least Obama has been rather bold in advocating a position on raising the cap. Clinton weasels out of having any SS plan at all although she calls it a critical issue. She proposes a bipartisan commission to solve the problem. Does that make her a sucker too?
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Obama says we can find common ground – but what I think he means is that he can explain to Red State America the merits of his progressive ideas and win some folks over as opposed to Clinton, who because she is so villified by the right, could never do.
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CLINTON IS A SHREWD TACTICIAN – BUT SHE HAS NO COMPELLING VISION OF A BETTER WORLD.
Thanks for the link, David.
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You raise a number of points. And I agree that some of the social security saber rattling is overdone.
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One point is whether this is a Ponzi scheme. You object to the word.
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That quote is Paul Krugman in 1996.
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Certainly social security did not have the fraudulent intent of a true Ponzi scheme. But it has the characteristics: early contributors get more money than they put in, and the late contributors (“the screwed”) get less and subsidize the first group. It can be a Ponzi scheme and still not necessarily a “big” problem.
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By the way, Krugman also says
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So in 1996, he likes individual retirement accounts.
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Guess he changed his mind.
is also mischaracterizing Obama’s position. Obama is just proposing an increase in the cap. You can agree or disagree with Obama’s position but he is not catastrophizing about Social Security. They all agree Meicare is the big looming time bomb.
In my mind “crisis” does not mean “small problem that we have plenty of time to solve”.
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It means “Panic and vote for me now!”
If he used “crisis” in a speech or debate – ok probably not the best word to use. I didnt hear it but it wouldnt surprise me. The word “crisis” does get thrown around too much. I give him kudos for being willing to say this even though it is controversial. He is questioning the payroll tax cap. I personally agree with him. I think most Dems agree that it pales in comparison to the problem of Medicare obligations – which I consider to be a crisis.
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This is just cut and pasted from his web site–not news.
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p> “Barack Obama will only advocate reforms that truly strengthen Social Security. That’s why he’ll continue his long record of opposing the privatization of Social Security, which has dominated the debate in Washington for too long. Privatization tears the fabric of Social Security – the idea of mutual responsibility – by subjecting a secure retirement to the whims of the market, and that is not an acceptable way to strengthen this program.
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Obama believes that the first place to look for ways to strengthen Social Security is the payroll tax system. Currently, the Social Security payroll tax applies to only the first $97,500 a worker makes. Obama supports increasing the maximum amount of earnings covered by Social Security and he will work with Congress and the American people to choose a payroll tax reform package that will keep Social Security completely solvent for at least the next half century. ”
But the election of 2008 has not happened yet, and while it offers the potential (and I don’t want to count chickens before they’ve hatched) for a Democratic landslide, Congress still has a narrow Democratic majority, and it seems that Senate rules & traditions seem rigged against the will of the majority of voters.
Republicans still have much leverage to get their will done, and the media are on their side on Social Security. Obama should just let it drop.
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Oh, wouldn’t you say that the wording, “Privatization… is not an acceptable way to strengthen the program,” lends credibility to the idea that privatization could strengthen Social Security? I think it would be more realistic if Obama’s copy said “Privatization will weaken social security.”
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I just want him to pick a different issue to make himself look like he’s rising above the fray.
Is it more pragmatic maybe to never say anything about Social Security until the election? Maybe – I really dont know. My instinct is that I dont think that is possible and I like the fact that Obama addresses his stance on privatization up front. If fiscal issues ever become prominent in the 08 campaign Social Security is going to get mentioned. I could be wrong for sure.
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Even though Obama can be maddenly cautious sometimes he just says and does things that no one else would dare. I cant picture anyone, except maybe Gravel, saying what Obama did about why he does nor wear a flag in his lapel.
Yes the payroll tax cap is not fair
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…yes, it is, once you recognize the fact that the SS system is neither an insurance system nor a welfare system, but instead is an income replacement system. In large part to induce older workers to leave the work force to make way for younger workers.
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If you want to increase the amount of income replaced by SS on retirement, feel free to increase the payroll tax cap. But I doubt very seriously that you would really want to do that.
And it’s one of the reasons I think Krugman is beacon in our political discourse, as opposed to columnists like Mickey Kaus or Gregg Easterbrook, who don’t even care if what they write is factual or not.
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I can not recommend enough, GGW, reading the introduction to The Great Unraveling. In short, until the drastic changes wrought by Bush and his GOP Congress, Krugman didn’t realize the Conservative Movement wanted to undo every Democratic reform since 1932. And one key tool to getting the people’s permission to undo the New Deal was rhetoric, like calling Social Security a Ponzi Scheme. Republicans rely on ‘Ponzi Scheme’ subtly convincing voters that Social Security has a criminal intent behind it (“Grandma is cheating you college students!”), as opposed to its real intent to prevent abject poverty among the aged. Krugman has admitted that he was oblivious in the Nineties to the goals and capabilities of the Republican Revolution.
Obama really needs to stop repeating this line because he’s going to lend credibility to the Republican (and DC Media Establishment) attempt to undo Social Security, AND he’s going to deprive healthcare reform of the time it deserves in the spotlight. Krugman is a 100% right.
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Up until Obama started playing footsy with this rightwing idea, I was largely fine with him. He wasn’t my first choice, but I could believe his judgment was largely good. If Obama stops this line of rhetoric, I’ll quit opposing him and chalk it up as a minor political misstep in an attempt to rally young voters and caucus-goers, who are very tough to motivate & organize.
i followed your link then amazon cut me off. do i have to buy the thing?
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i used to like all 3 writers b/c they were unpredictable and would challenge conventional wisdom — kaus, krugman, and easterbrook. i like that even when they drive me crazy, like easterbrook’s ongoing rant against the patriots and spygate.
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krugman has 2 things going, 1 is good, 1 is bad.
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he correctly recognized that bush and co were radical. that’s good. and he rails against that.
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however, he has simplified himself so that EVERYTHING from that side of the aisle is now bad. his nyt reader base loves him for it. it’s so easy to look at the world: all things republican are the wrong idea.
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we see that among on BMG among folks of all stripes. some clearly enjoy the give and take of debate, while some can’t handle any “take”….evidence which contradicts their point is ALWAYS ignored, twisted, buried, shouted down. some people never speak the words “hmm, good point, hadn’t realized that.” (i certainly count you in the former group, those that enjoy legit debate).
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krugman used to write more for the former group; now he writes more for the latter group.
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and unlike kaus, who laughs about his own opinion changes and mocks himself, krugman takes himself Very Seriously.
and read the intro while you enjoy a coffee. I’d lend you my copy, but it’s in Chapel Hill, North Carolina with an old college roommate.
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Look, I, too, think that it would be fair to remove the cap, if our debate is limited only to the merits of payroll taxes & fairness. I also think we should have a millionaire surtax, and I think we need to go back and shift the balance of payroll taxes and income taxes more toward what we had before Reagan and Congress did that deal in 1983. I just think what Obama says opens the door to Republicans getting leverage to privatize Social Security… and we’d worked so hard to shut that door. Hillary Clinton shows a commendable discipline when she says she has a million ideas but she has to focus on 3 or 4 to get them done. (She’s not commendable in voting for the Kyl-Lieberman amendment, nor the AUMF)
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I hear what you are saying about the importance of being open-minded. It’s just that in recent years, especially after reading The Republican War On Science, I’ve seen that many writers treasure “open-mindedness” to the point of ignoring evidence (which Easterbrook does in politics, economics, science and sports), as well as pushing ideas that have no solid evidence behind them–like when Kaus kept pushing the single-sourced, anonymously-sourced rumor that Edwards had an affair. What good is being open-minded if you are not going to be scrupulous about what the evidence is, and what the evidence means? I think the evidence principle is more fundamental than the open-mindedness principle.
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And the thing about Krugman is that he’s very good about the evidence he includes in his columns. Kaus might think it was funny what he did to Edwards, and he might have laughed at the left’s response. But Kaus is forgetting that a lot of bad reporting in the 90’s about Whitewater helped to derail several good ideas that Clinton and the Democrats were trying to pass through Congress.
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I remember you telling me you don’t forgive Edwards’ AUMF vote because he should have known better and his apology/reversal don’t cut the mustard. I respect that. Likewise, on a smaller level, Kaus’ hackery shouldn’t get laughed off. The media’s behavior, especially that of mainstream columnists like Kaus, has been part of our problems (i.e. the war, the bad tax policy, lax environmental regulation). Serious damage has been done.
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Did I say that? Was I drunk again? Doesn’t sound like me, but that doesn’t mean it wasn’t….
So maybe you still had something leftover in your system.
If they all agree with a bad idea then they are all wrong. The time to scape that particular whipping was 12 years ago when Newt Gingrich was their posterboy.
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Has Krugman simplified himself, or have the Republicans done it for him? I mean, we all know over-simplifications are bad, but is it Krugman doing it or the rubber-stamp, lockstep, myna birds of the GOP?
Just look at how ready Republicans are to filibuster in the Senate. Since the House takeover in 1994, Republican majorities — and minorities too — have tried to deny legislative achievements to Democratic Administrations and majorities regardless of the merits.
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This is known and on the record, too.
…doesn’t mean he is playing footsy with the right. That is a massive stretch especially given his progressive position on the payroll tax cap. Krugman, whom I really like, has got this all wrong and blown the use of a term into much more than it is. And all those who are trying to find something they don’t like about Obama have seized on it like he has just endorsed torture or something.
Bob Somerby goes further than Krugman, pointing out Obama’s take on SS in Audacity of Hope is more sanguine than it is now. Somerby sez Obama’s use of it now is a campaign tactic that borrows a GOP talking point, and in doing so carries on the tradition of Bill Bradley in 2000, who, under cover of pundit-bestowed straight-talker rep, smeared Gore, in ways the GOP would capitalize on in the general.
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I can agree it’s dangerous to go anywhere near DC/GOP insanity on SS, but I don’t think the analogy holds. The fact is Obama’s policy proposal here is a tax hike on the rich. Is that what “conservatives … want,” Mr. Krugman? Is that equivalent to blaming Gore for the Willie Horton ads, Mr. Somerby? In and of itself there is nothing wrong with proposing to bolster SS funding by raising the cap. I don’t see Obama using sky-is-falling rhetoric or suggesting it’s a top priority. Just a plank.
is for everyone to agree that Social Security is in crisis; is on the verge of bankruptcy; won’t be there for you; choose your preferred phrase. Once that’s established, their job is much, much easier.
They got their butts kicked on the privatization effort already. It’s clear Americans like, love — desperately need — SS as guaranteed income. If they are susceptible to the idea that it is at risk, I think raising the cap is the most politically feasible move, because it preserves guaranteed benefits. If the GOP candidate throws up some complicated personal account plan against the Dem’s simple cap-raise, we win the issue.
…why are two Jack Welch (Bahston Irish Catholic) proteges (also Irish Catholic) from the Bahston area being quoted by Klugman? It strikes me that Welch hired Russert and Matthews to lie to us.
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And, it’s been reported that Welch wants to buy the Bahston Glob, probably so he can lie to us even more.
are a prime example of DC Media players who influence the public discourse. They play up being from blue collar families (“Oh, Tim Russert’s dad was just great!“), but they overwhelmingly reinforce the goals of the Conservative Movement. Such “independents” with their “bipartisanship” are key to making sure Democrats don’t get to enact policies that help ordinary people and make Jack Welch’s Nantucket beachfront set pay their fair share of taxes.
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But another reason Krugman uses them is that the DC Media currently loves Obama and hates Hillary. I can’t fault Obama for wanting to take advantage of the DC Media’s love for him–he’s in it to win it, of course–but does he have to play footsy with them on this issue?
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Oh, and you can only say Russert and Matthews “lie to us” if you assume they call what the facts are. They’re just bullsh*tting us.
Oh, and you can only say Russert and Matthews “lie to us” if you assume they call what the facts are. They’re just bullsh*tting us.
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…someone in their position who repeats a purported fact that turns out to be untrue, without (as is most likely the case, trying to check out whether the purported fact is, in fact true) is a liar. A person who indiscriminately repeat lies is just as much a liar as the person who originates them.
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Otherwise, no disagreement.
getting more money in the mind of any liberal. Simple: just tax the rich.
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Total and permanent lack of understanding of scarcity, seems like to me.
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that rich people have it unfairly easier under Bush’s tax code than under President Clinton–and conservatives are lying to themselves acting as if borrowing the money for this war won’t end up being taxes on their children.